Ag-tech Startup Indigo Raises $100 Million

Simone McCarthy reported yesterday at The Christian Science Monitor Online that, “Agriculture is in a tough spot.

“The population is expected to teeter over 9.6 billion in 2050, and feeding this global citizenry will require a staggering 70 percent more food than the world produces now, says the United Nations.

“For agriculture, this means increasing production while also contending with the effects of climate change, which have already caused drought around the world.”

Ms. McCarthy noted that, “This essential dilemma has spurred innovation and investment in the agricultural industry, including a record $100 million in second-round funds for Indigo, an agriculture technology start-up. The money, awarded Thursday, represents the largest single financing round in the history of the private ag-tech sector, says the company.

“This investment points to growing investor interest in the ag-tech industry, particularly companies that are targeting the challenges of 21st century farming.

“In this case, investor interest in Indigo centers around something very, very small: microbes that make seeds more resilient to water shortages – a trait that could help agriculture fight the global trend toward a hotter (and drier) climate in coming decades.”

Yesterday’s article explained that, “Boston-based Indigo plans to see how their reformulated wheat seeds fare this coming fall when they are planted in 20 million acres of water-limited fields in Oklahoma, Kansas, and Colorado, Reuters reports.

“The theory behind the microbe technology is not new: researchers began noting how plant roots interact with bacterial microbes – which can add boons to plant growth like increased nitrogen absorption – decades ago. More recently, scientists’ ability to evaluate the effects of different microbes has vastly improved with DNA sequencing and data processing technology.

“Indigo, along with other ag-tech companies, uses these tools to evaluate different microbes – around 40,000 so far, all logged into a database.”

The Monitor article added that, “Now that investors are on board, the next step is convincing farmers to try the seeds. Indigo is employing a unique business model for this: Instead of asking for any payment up front, the company is betting on its results, taking only a cut of the additional profit from increased yield.”

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Some Startups Use Cooperative Profit-Sharing Concept to Create Greater “Sharing” Potential

Amy Cortese reported in yesterday’s New York Times that, “The arresting images on Stocksy.com are far from the standard fare found on many stock photography sites. Colorful portraits, unexpected compositions and playful shots greet visitors.

“The most distinguishing feature, however, may be the structure of the site’s owner, Stocksy United: It is a cooperative, owned and governed by the photographers who contribute their work. Every Stocksy photographer owns a share of the company, with voting rights. And most of the money from sales of their work goes into their pockets rather than toward the billion-dollar valuations pursued by many venture-backed start-ups.”

Ms. Cortese noted that, “Stocksy is part of a new wave of start-ups that are borrowing the tools of Silicon Valley to create a more genuine ‘sharing’ economy that rewards the individuals generating the value.

“According to a recent Pew poll,72 percent of Americans have used some sort of shared or on-demand service, whether it’s Uber for rides or TaskRabbit for things as diverse as dog walking and household chores. But there has been much criticism that, after the platforms take their cut and the workers pay for expenses, little may trickle down to those doing the actual work.”

Yesterday’s article stated that, “Stocksy is what’s known as a multi-stakeholder cooperative, with three classes of shares: one for executives, one for staff and a third class for photographers. There is no fee to join or annual dues; members pay just $1 for their share of stock. That collaborative approach has helped the upstart thrive in a crowded and competitive market.

“Stocksy’s customers include major media names, such as the magazines Glamour and Elle, as well as start-ups and small businesses.”

The New York Times article added that, “Stocksy’s revenue doubled last year to $7.9 million. More than half, $4.3 million, was paid out in royalties. After that and other operational costs, Stocksy last year generated its first ‘surplus revenue,’ or what is akin to profit at co-ops. This allowed it to pay a dividend to members for the first time, totaling $200,000.

“Stocksy’s success may be a model for other digital cooperatives taking on behemoths in other industries. In San Francisco, Loconomics has started an online cooperative for professional services, from massage to graphic design, comparable to TaskRabbit.

“Others are developing profit-sharing platforms for filmmakers, domestic workers, taxi drivers and musicians.”

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Clean Water Act Violations Result in Prison Sentence for Montana Landowner

DTN writer Todd Neeley reported yesterday that, “A Montana landowner was sentenced on Wednesday to 18 months in federal prison and ordered to pay $130,000 in restitution after a grand jury in April found him guilty on two counts of unauthorized discharge of pollutants into waters of the United States and one count of injury or depredation of United States property.

“Joseph David Robertson, a Basin, Montana, landowner and 77-year-old war veteran, was sentenced in U.S. District Court for the District of Montana in Missoula on Wednesday after years of legal battles on a variety of fronts with the U.S. Environmental Protection Agency and the U.S. Army Corps of Engineers.

“A wetlands scientist who offered to provide expert testimony at Robertson’s sentencing, however, told DTN his offer was turned down even though he says he found no evidence of waters of the U.S. on Robertson’s property.”

The DTN article noted that, “Ray Kagel, owner/operator of Kagel Environmental, LLC, based in Idaho, told DTN he visited the property in question and completed an analysis. Kagel is a former Corps of Engineers wetlands scientist.

“‘Federal Judge (Donald) Molloy refused to see our report and refused Mr. Robertson’s polite request for his sole expert witness to speak on his behalf,’ Kagel said to DTN following the verdict.

“‘His (Robertson’s) public defender refused to even speak to me or accept my report. The EPA and DOJ (U.S. Department of Justice) attorney asked the judge to take Joe into custody immediately, and the public defender had no objection when asked by the judge. U.S. marshals handcuffed Joe and escorted him out of the courtroom…'”

Mr. Neeley explained that, “A grand jury indicted Robertson in May 2015 for allegedly violating the Clean Water Act by building nine ponds on two parcels of land near Basin, Montana — one on Beaverhead-Deerlodge National Forest land and the other on adjacent private property. In filing charges, the U.S. government alleged Robertson had discharged dredged and fill material into a tributary stream and adjacent wetlands, without a federal permit. A jury found Robertson guilty on all charges in April 2016.

“The CWA violation occurred, the government argued, when Robertson built the ponds directly in a stream and wetlands area. Government witnesses provided expert testimony during trial proving a so-called significant nexus existed between Robertson’s property and waters of the U.S.”

The DTN article added that, “Attempts to reach Robertson’s public defender were unsuccessful.

“Kagel told DTN Robertson suffers from post-traumatic stress disorder — something Kagel said government prosecutors recognized in their recommendation for sentencing. Robertson could have faced 15 years in prison.”

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A Closer Look at What is “Community-Supported Agriculture (C.S.A.)”

Julia Moskin reported in today’s New York Times that, “Community-supported agriculture was originally defined by a very particular relationship between a farm and its customers. Starting in the 1980s (earlier in Europe and Japan), members banded together to support a nearby farm with an upfront financial commitment to buy its produce.

“It was a private transaction in which all the money went directly to the farmer. It did not rely on distributors or brick-and-mortar stores, and it gave farmers a crucial infusion of cash for the winter, used to buy seeds, repair equipment and expand into new growing methods.”

Ms. Moskin noted that, “As demand for local and organic produce has ballooned in the last five years, so have other ideas for connecting farmers to customers. Now, online hubs are using sophisticated distribution technology to snap into the food chain, often using ‘C.S.A.’ to describe what they deliver.

“The term is not regulated in most states, so companies can define it as they wish…[A]s the ‘farm share’ concept has spread, the C.S.A. has become just another part of the sprawling, messy modern system of knowing where your food comes from and choosing what you want to eat.

“The opportunity for confusion is of enormous concern to many farmers in the New York region. Depending on how and where these new businesses buy their produce, consumers can receive all the benefits of C.S.A. membership, while the farmers get only a fraction. Some farmers say that after years of steady growth, their C.S.A. memberships have dropped since the arrival of services like Local Roots or Farmigo.”

Today’s article pointed out that, “‘At first it seemed like these services were going to be great for us,’ said Eve Kaplan-Walbrecht, an owner of Garden of Eve farm on the North Fork of Long Island. Some of them supplied software management programs and marketing tools; others offered premium prices close to farmers’ market rates; others picked up the produce instead of requiring farmers to deliver to a central warehouse.

“But the drawbacks can outweigh the benefits. Some say that these hubs have siphoned off their members, partly by offering a more convenient product, but also by blurring the definition of terms like ‘C.S.A.’ and ‘farm share,’ so that customers believe they are directly supporting local farms with their purchases when they might not.”

In her Times article, Ms. Moskin added that: “Now that local food has become big business, Target and Walmart are trying to get a piece of it, and even Amazon is delivering locally grown kale. This new demand has been a boon for many farmers across the country, especially large-scale farmers equipped to sell in bulk; new sales channels have been opened that they could never have accessed independently.

“Small farmers say they have no problem with new markets for local food; they just don’t want them to be called C.S.A.s.

“Paula Lukats is the program director of Just Food, an advocacy and education group for local agriculture in New York State. She confirmed that after a peak in 2010, memberships in community-supported agriculture groups have been going down ‘across the board.’ For the sake of clarity, she said, she wishes that middlemen would stop using the term ‘C.S.A.’ altogether.”

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Cash Rent Considerations for Corn Farmers

DTN Executive Editor Marcia Taylor reported yesterday that, “In the 1980s, bankers defined high-risk borrowers as those with debt-to-asset ratios over 40%. By no coincidence, that segment swept up young farmers or parents who expanded to bring young farmers back to the home farm…[T]his time around, the at-risk farm segments are those who cash rent more than half of the land they farm, ag lenders and ag economists are finding. Some of these likely are young farmers, but some are also established operators who expanded rapidly on the fumes of $8 corn.”

Ms. Taylor indicated that, “Unfortunately, cash rents throughout the Corn Belt haven’t adjusted nearly as quickly after the commodity price crash. Recent Iowa State University surveys show average statewide cash rents have only slipped from a peak of $270 per acre in 2013 to an average $230 per acre by 2016.

“As I mentioned in my last post, University of Illinois economist Gary Schnitkey estimates that a typical Illinois corn producer lost $101 per acre in equity in 2015 on cash rented land while those who owned their land lost about $1/acre.

“Heavy reliance on cash rented acres could be an early indicator of which farms will experience financial stress if corn prices stick under $4, agrees Dwight Raab, a co-author of several other recent studies of Illinois Farm Business Farm Management records. ‘Higher levels of cash rent (as a percent of total acres) has brought on some additional risk to farm operations–more risk than we thought it did,’ he says.”

The DTN update also stated that, “University of Illinois economists point out that corn growers will need to shave $50 per acre off 2017 average budgets (based on trend yields and current price forecasts) just to break even, much of that coming from rents.

“‘Cutting rent is hard to implement in practice, because if you give up land you can’t cash flow, you may never get it back,’ Raab says. ‘And if you try to maintain control with the hope of a profit in the future, you need your lender’s support.'”

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Business Pressure Changing Egg Production, “Animal Welfare” Perceived as Good Branding

David Gelles reported in the business section of Sunday’s New York Times that, “American hens produce more than 83 billion eggs a year. Most hens — more than 285 million in all — are housed in cages not much bigger than a shoe box. Stuck in one of these so-called battery cages, a hen might live her whole life without seeing the sunlight, let alone stretching her wings.

“Pressure from animal rights activists has led many of the biggest food companies in the country to commit to what are being described as more humane alternatives. In recent months, Walmart, Costco, McDonald’s and others have pledged to transition to buying only cage-free eggs in the years to come.”

Mr. Gelles indicated that, “All told, more than 175 major retailers and restaurants have committed to switching to cage-free eggs. Together, they account for more than 90 percent of the domestic egg market.

“A big change is underway. But raising a hen in a ‘cage free’ environment doesn’t mean it will live in a bucolic setting, pecking for bugs in a great green field.

“Instead, the most common large-scale cage-free alternatives are so-called aviaries in which hens roost in close quarters, with row upon row stacked high in enormous barns. A critical difference is that they can move around. And in many aviaries, hens have access to outdoor space, though it is often small and hard to reach.”

After additional analysis, the Times article stated that, “In short, liberating hens from cages — and holding them in aviaries — doesn’t necessarily make them, or the workers who handle them, any healthier. Yet Big Food’s embrace of cage-free eggs has been remarkably thorough and swift.

“What’s more, the shift seems largely driven by businesses, not by consumer tastes, or at least not yet. Cage-free eggs account for less than 10 percent of overall egg sales each year, and demand isn’t growing especially fast. Instead, the corporate world appears to be trying to get ahead of a problem before many consumers push for change.”

Concluding, the Times article pointed out that, “If shoppers really want to buy eggs and have clear consciences, they may need to pay extra for pasture-raised, organic eggs, which can cost two, three or even four times as much as conventional eggs. Anything less than that means buying into an industrialized system of mass egg production, be it conventional or cage-free.”

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Wisconsin Case Illustrates Controversy over Livestock Farm Expansion

Lee Bergquist reported yesterday at the Milwaukee Journal Sentinel Online that, “A Dane County judge has ruled the Department of Natural Resources can’t backtrack from an earlier decision and must proceed with imposing environmental protections on a large dairy farm expansion.

“The ruling is the most recent example where the regulatory authority of the DNR has been called into question. The judge said the agency in this case had the power to place limits on farmers to protect public waters.

“The issue is far from settled, and in this instance the owners of the farm say they might appeal the ruling.”

The article noted that, “The court decision is the latest development in a dispute over plans by Kinnard Farms to expand dairy operations by thousands of cows in Kewaunee County, where groundwater contamination has fanned tensions between farmers and non-farmers.

“Dane County Circuit Judge John W. Markson ruled last week the DNR must require Kinnard to install groundwater monitoring equipment and place a cap on the number of cattle the farm could keep. Both requirements are aimed at protecting groundwater.”

Mr. Bergquist included this background that preceded Judge Markson’s ruling: “The case dates back to March 2012 when Kinnard sought permission from the DNR to expand its herd. Environmental groups and others challenged the expansion.

“A state administrative law judge ruled the farm could expand, but said the DNR must require monitoring and a maximum limit on cows.”

The article went on to note that, “Kinnard appealed, and in November 2014, DNR Secretary Cathy Stepp denied the appeal.

“Eight months later, and ‘for reasons that remain obscure,’ [Judge] Markson wrote, the DNR in August 2015 asked the state Justice Department whether the agency had the authority to impose such limits on farms because of a 2011 law, Act 21, that says state agencies can’t dictate requirements on parties unless the power is spelled out in law.

“One day later, the Justice Department issued a legal opinion saying the DNR does not have such authority. In September 2015, the DNR announced it was granting Kinnard a permit. The farm said it would grow from 4,000 to 6,700 milking cows.”

Yesterday’s article added that, “[Judge] Markson said Act 21 must be interpreted in conjunction with other laws that give the DNR the power to govern waste water. He said Stepp’s decision to reverse herself was ‘untimely and beyond her authority, ‘ adding ‘our administrative process (does) not allow an agency to change its mind on a whim or for political purposes.'”

 

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Table-to-Farm Marketing- Authenticity is Key

Jane L. Levere reported in today’s New York Times that, “Jana McClelland is a third-generation dairy farmer in Petaluma, Calif. This October, she expects 600 to 1,200 people to visit her family’s farm.

“She plans to take them to the nursery, the milking parlor and the pastures…[I]t is all part of an outreach strategy from Organic Valley, which bills itself as the largest cooperative of organic farmers in the United States. Call it table-to-farm marketing.”

Today’s article explained that, “These initiatives, which include a new website, are meant to cater to what the Organic Trade Association describes as people’s increasing interest in ‘transparency in the supply chain and to know where food comes from.’

“According to the trade group, sales of organic food and nonfood products in the United States climbed to $44.3 billion in 2015 from $40.4 billion in 2014, which represents the industry’s largest dollar gain ever; $39.7 billion of last year’s total sales were for organic food. The association also said organic food sales rose 10.8 percent in 2015.

“Organic food sales now make up almost 5 percent of the food sold in the United States. According to the trade group, millennial consumers, particularly in urban centers, are driving much of that growth.”

The Times article added that, “Authenticity is ‘the biggest key for consumers,’ said Sarah Z. Masoni, product and process development manager at the Food Innovation Center at Oregon State University. ‘They want to know who’s creating their food. Consumers want to trust the suppliers of their food.'”

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Iowa Farmer Expands Operation by Evolving a Food Hub, vs. Going Out and Investing in More Land

Jim Offner reported recently at the The Waterloo-Cedar Falls Courier (Iowa) that, “There’s strength in numbers, Chad Thomas said.

“That’s why the Waterloo fruit and vegetable grower has cobbled together a ‘food hub’ comprised of a network of 25 to 30 other growers from the Cedar Valley region.

“Instead of providing fruits and vegetables from about 3 acres, now Thomas’ company, A Family Market Place, in Waterloo, supplies area retailers and restaurants with highly prized ‘homegrown’ product from 40 acres on farms 40 to 70 miles out.”

Mr. Offner noted that, “Forming a network of growers – including a number of Mennonite farmers — in the area assures a consistent in-season supply to customers, Thomas said.”

The article stated that, “A Family Market Place started in 2012, with a an 18- by 19-foot garden, Thomas said.

“‘Now, we’re probably going through 30-40 acres of produce a season,’ he said. ‘We kind of made the decision two years ago to try to evolve into a food hub, vs. going out and investing in more land.'”

Meanwhile, Sheila Hagar reported yesterday at the Walla Walla Union-Bulletin (Washington) that, “A fresh idea has grown into a way food banks can procure locally grown fruits and vegetables to deliver to low-income Walla Walla area families.

“One in six Washington residents used their local food pantry last year, according to government data, meaning about 140 million pounds of food went to roughly 8.5 million clients through 500 of the charitable sites.

“Through a collaborative partnership with the state Department of Agriculture and the Rotary First Harvest program, in 2015 six of those free food sites were able to provide farm-fresh produce to their customers — not by luck or happenstance but on a planned, regular basis.”

Ms. Hagar indicated that, “The Farm to Food Pantry program started from seed in 2014 with funds for food banks to contract with local farmers for fresh produce. From a single pilot program, it spread to six communities in 2015. That year proved bountiful and this year the concept was expanded to 12 sites, including Walla Walla’s Blue Mountain Action Council Food Bank.

“Under the program, volunteers have been handing out apples, peaches and lettuce to families lining up for grocery assistance, said Jeff Mathias, BMAC food bank director.

“That lines up with Gov. Jay Inslee’s Results Washington program to make the state’s communities healthier. Launched in 2013, the initiative created statewide goals spanning economy, education, environment, safety, effective government and public health.”

The article explained that, “Specific to Farm to Food Pantry, Inslee’s blueprint called for a 5 percent increase in healthful food options offered to low income families through pantries, farmers markets and meal programs by 2017.

“The plan was financed with existing state food assistance dollars diverted to sustain the new concept. Not only does the program benefit low-income families without requiring additional state money, it benefits farmers and supports agricultural conservation practices, state officials say.”

Recall that Secretary of Agriculture Tom Vilsack, the former Iowa governor, recently challenged governors to invest in rural areas.

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When it Comes to Selling a Business, Think Broadly

Paul Sullivan reported in Saturday’s New York Times that, “The first time Chris Ludwig sold his refrigerant reprocessing company, he said he acted as if the deal was done long before it was. He beefed up inventory, added sales staff and generally increased his expenses.

“But as the buyers delayed, ‘I got myself in a bad position,’ he said, adding, ‘I said, ‘Let’s hurry up and close.’ I didn’t get near as good a deal as I should have.’

“Matt Matich, who ran a trucking distribution company, said he realized during the sale of his business that he and his partner should have consulted a business adviser earlier because they could have expanded the company themselves and sold it for a lot more than they ultimately received.”

The Times article stated that, “The mistakes people make in selling their businesses stay with them long after the check has cleared and their new life has begun. They may have a considerable financial cushion, but because their wealth came from building something from nothing, they had a deep attachment to the company. It was their livelihood and their path to wealth, but it was also a part of who they were. Not managing the sale as best they could continues to gnaw at some of them.

“For small-business owners seeking to sell in what remains a strong environment for mergers and acquisitions, the lessons learned by those who have gone before them can be instructive.

“‘Selling a business is not all about the financial side of it,’ said Terry Mackin, managing director of mergers and acquisitions at Generational Equity, a business brokerage. ‘Most are focused on the dollars, initially. They want us to tell them how much their business is worth. But they find there’s an emotional part to this. Eighty percent of the deals I’ve done have not sold for the best dollar offer.'”

Mr. Sullivan pointed out that, “The first piece of advice is to start running the business as if a buyer will come along at any moment” and added that, “Another piece of advice is not to run the business as if the deal is done before it is.”

“Part of running a business to be sold is regularly reviewing how it is doing relative to its competitors,” Mr. Sullivan said, and added this consideration in his article: “Although the money may be good, the buyer may not be right for the company.”

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