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The Leading Voices in Food

E178: A Call to Invest in Agriculture’s Missing Middle

Hosted by: Kelly Brownell
August 24, 2022

We’ve done many podcasts on the topic of regenerative agriculture, which is a conservation and rehabilitation approach to farming and ranching that enriches and restores the environment while also producing more nutrient dense food. Today, we are speaking with Anna Aspenson of the Croatan Institute about the need for financial investment in regional food production, and processing infrastructure, such as meat packing, grain milling and malting and produce canning, or even freezing facilities.

Anna Aspenson is an Associate at Croatan Institute, where her work focuses on place-based agricultural solutions to rebuilding healthy ecosystems and communities. Croatan Institute is an independent, nonprofit research and action institute. Our mission is to build social equity and ecological resilience by leveraging finance to create pathways to a just economy. Before joining Croatan Institute, Aspenson worked as a Program Associate for Food System Policy at Johns Hopkins Center for a Livable Future, where she authored, “‘True’ Costs For Food System Reform: An Overview Of True Cost Accounting Literature And Initiatives” and co-authored, “Essential and in Crisis: A Review of the Public Health Threats Facing Farmworkers in the US.” Her work has also focused on agricultural research and development with ICARDA (CGIAR), as well as project management for community-driven food security initiatives in the highlands of Guatemala. Aspenson holds an MPH from Johns Hopkins Bloomberg School of Public Health and a BA from American University.

Interview Summary

So Anna, a recent report that you and others at the Croatan Institute recently released is entitled Investing in Regenerative Agriculture, Across Value Chains. And I thought this was really interesting. And in this report you argue that there’s a missing middle as you call it in the country’s food processing infrastructure. Can you explain what you mean by this middle infrastructure and why do you advocate for investment there?

Great question, Kelly. When we refer to middle infrastructure, really what we’re talking about is anything between the regenerative farm and the consumer. So that can really be anything from a processing plant that cuts, cleans and packages a product. It’s the storage of that regenerative product. It can be a company that aggregates for larger volumes to reach larger markets and it is marketing regenerative products and distributing to those retail locations. So grocery store to a school, to a hospital and even the customer’s front doorstep.

We talk a lot about the missing middle in agriculture, and that’s referring to mid-scale agriculture. We have smaller farms, we have large, more conventional farms and there isn’t a lot of regenerative farms that are that mid-scale size. So the missing middle of infrastructure is that it’s the infrastructure that helps to widen markets for regenerative farms so that they can reach larger scales. And so that more people can have access to those regenerative products, which are typically flavorful, healthful, and good for the land, good for the environment. We wanted to focus on the investment piece because at Croatan Institute, we focus a lot on pathways to new economies pathways for the economy to work more for human health, for ecological resilience and for social and racial equity.

In 2019, we wrote a report called “Soil Wealth, Investing in Regenerative Agriculture, Across Asset Classes.” And that really looked at how we can move more aligned capital to the regenerative agriculture space. But it’s not just farms. Regenerative is all about systems and it’s all about how farms can work in community and can work for not just the land, but also the general social, relational cultural system that the farms typically lie in, right? We are humans, we live in society, we live in systems. We live in these complex ecological systems. So when we refer to soil wealth, we are talking about soil health, but we’re also talking about community wealth and how we can gain more social benefit, more wealth building from regenerative systems.

So wondering if you wouldn’t mind helping to paint a picture for us of what a farm like this might look like. So how big would in middle size farm be and what would be some examples of things that such a farm might produce?

So we looked at a number of different regenerative infrastructure businesses and capital providers in this space. We looked at over a hundred, we talked to over 30. So there’s tons of examples in the report. But one example that we looked at is a collection of infrastructure businesses in Minnesota. So we looked at companies like Lorentz Meats, Tree Range Chicken, Other Half Processing, and they serve infrastructure for regenerative farms that are grass fed, grass finished ranchers who are creating these regenerative products and need reliable markets to bring those products to consumers. So they all work together in harmony to move those products to the consumer in a way that respects the farmer that makes sure that they’re getting the profit and the revenue that they really need to keep their operations moving and expanding.

People are learning more and more about regenerative agriculture, but don’t understand those steps that occur after the food is produced and you’re helping bring that alive, so I appreciate that. So let me ask another question. So it’s natural for investors to want to reduce their risk as much as possible when they’re making an investment. What are some of the things that investors should take into consideration about this middle infrastructure space and the companies that surround it, especially when thinking about farms or consumer facing product brands?

Absolutely, part of the reason and the motivation behind this report is that we’ve seen a lot of interest in investing in things like agricultural technology or consumer facing brands. Those are the types of companies that really work well with the venture capital equity model. They might have higher margins, lower capital expenditures, middle infrastructure is almost the opposite. There’s a lot of capital expenditures, lower margins. However, we’re seeing that investors are really opening their eyes to impact and not just profit and revenue, which is extremely essential, but also these other benefits that middle infrastructure can provide. And so, some ways to de-risk those types of transactions that investors might be maybe more wary of or less familiar with is to really meet businesses where they are. So middle infrastructure has a lot of unique business models that focus and really bake in those social and ecological benefits and missions. Though investors can work with those businesses to create new and innovative forms of capital that are patient that focus on the long term and can be flexible with where that business is in their stage of development. So one example is this concept that we call integrated capital, which is a term by RSF social finance. And that essentially means that you’re using various forms of capital to meet different needs of the business. So anything innovative with debt equity or somewhere in between as well as non-financial resources. So technical assistance, business development, workforce development, policy work, anything that can help really build out that system and help that business make more connections and enrich their business models in order to de-risk those transactions.

So I’d like to ask a question, this may beyond the scope of the work you were doing, but I’m just wondering. Are there signs that consumers are showing an interest on products growing in a regenerative way? I mean, certainly people are using farmer’s markets and more people care about organic and things like that. What about the term regenerative in particular? Is it something that consumers know about or people making purchasing decisions based on this?

We certainly have seen an increased interest in regenerative and consumers looking for products that are not just sustainable and good for the environment, but also social and economic benefits of regenerative business. I think that one of the challenges for middle infrastructure is that those farms are really taking in risk and transitioning to regenerative. They’re very complex systems that are very knowledge heavy. There’s a lot of peer and community learning that is necessary for regenerative agriculture brands and middle infrastructure are a great way to show consumers the benefits of those products in order to increase demand and therefore, infrastructure. There’s lots of new labels and brands, and we can expand those markets. Hopefully we’ll have more regenerative farms with rich connected value chains.

Isn’t it also true that if a farmer takes land that hasn’t been used in a regenerative fashion and tries to turn it into a regenerative farm, that that process takes some time and some investment and some risk on the part of the farmer that goes beyond the normal risk of weather and pests and things like that, is that true and is having a solid infrastructure ready for their products once they start getting produced a really important part of the financial security of the farmers?

One thing about risk is that we typically think black and white: this thing is risky and therefore investors might be wary of it because of the lower margins because it’s seen as risky. But we’ve gotten to a point where with climate change and with the increasing challenges and the extremes of climate that we’re seeing, we really need to start looking in the long term. So maybe there is short term risk, but it’s really helpful for investors to understand that risk and to change the way that they’re providing capital in order to think with that long term mindset. The whole purpose of middle infrastructure is to bake in that resilience to increase connections and redundancy so that there is increased resilience.

So in your report, you highlight organizations that have had success as middle infrastructure companies. Can you talk a little bit more about some of these examples?

We highlighted businesses across different types of agricultural crops. East Denver Food Hub, for example, is one that’s been incredibly successful in baking in the missions of regenerative. So for example, in the early months of the pandemic, they were able to maintain purchasing contracts that were essentially their original funding for their business and able to provide healthy nourishing regional products for food boxes in the early months of the pandemic. Another innovative business that we looked at is Seal the Seasons out of North Carolina. So right downtown from you all that works in frozen fruit and frozen vegetables. So really what we keep seeing is these really innovative business models that have a mind to niches, to filling in a space in the value chain and working together with their community. I think at the core of that is this idea of relationships and enhanced business contracts that really build out the value in a reliable way.

You know, it’s interesting that you mentioned Seal The Seasons because I buy their products and that they’re really wonderful. It’s nice to see that they’ve come so far and to see their products out there. And you’re really helping show us that having that infrastructure is so important, actually getting these things out into the marketplace. So let me end with this question. What’s the final take home message you’d like to give for investors wanting to support regenerative agriculture?

Good question, I think at the core of it, we really want and are hoping that investors can jump in, start somewhere. We’ve shown through this report, that these types of businesses, although they’re unique, although they’re innovative, these businesses are profitable and it takes a lot of coordinated effort. But if investors can really embrace that type of cooperative collaborative mindset and start to also work with these businesses in their innovative spaces to create new capital solutions, then we can really start to build these systems that we haven’t really had in the US post colonization. We haven’t had a food system that is coordinated and built around equitable access to quality foods that generate nutrients for communities and the environments we have to start somewhere. So let’s jump in.


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