Page 2: Finance

There is nothing “top down” about our business model. Our distributed model will be controlled by farmers and ranchers. The basic building blocks are non-profit land trusts and producer-controlled cooperatives. Both are widely used in business and agriculture, but they have not been used together in rural economic development programs for small and medium-income producers.

The land trusts will help producers work with local and regional investors to increase their pasture-based and organic acres without liens on land, equipment or livestock. Our farm development process is tied to real markets, starting with pasture-raised specialty beef. “Impact investment strategies” reduce lender costs and producer credit loads by using tax-advantaged investor funds to increase farm size and profits for selected small and medium-income producers. 

Our co-ops will coordinate production and marketing for groups of farms in participating rural communities. Producers will control the co-ops while local landowners control the trust, within direct input from producers and investors. 

We are planning to incorporate the first land trust and co-op in the Massena, Iowa area where we own a half-section of permanent pasture.

These two entities will support a planned enlargement our farm, and most important, development of other pasture-based organic farms in the Massena area. One farm is not enough. We need truck-load lots in order to maximize farm profits. 

Business Plan

We are applying for grants to organize local producers. Once interested producers have been identified, business plans will be prepared and used to negotiate preliminary (non-binding) lease-purchase agreements with nearby landowners. These agreements will be contingent on financing, as discussed below. Our goal is to lease enough land to support a full-time farmer, and in time, sell this land to a young owner/operator from the Massena area.

Since our pasture is too small to be profitable as a free-standing operation, it is currently rented to a neighbor for his cow-calf operation. In order to build a profitable operation, we need additional land for organic field crops and alfalfa to support a larger beef herd, and in time an organic pork operation. As explained on page 4 on this website, we will use regenerative, pasture-based organic production methods. 

Local Land Trusts and Production Co-ops

Given the long history of low or no profits for most farmers and ranchers, we are proposing that local non-profit land trusts be organized to recapitalize and develop regenerative organic farms and markets.  

The Green Money Journal and the St. Louis Federal Reserve explain how tax-deductible funds can be combined with private risk capital and loans for economic development purposes. Starting in the Massena area, we intend to use these financing methods to develop new farms for regional organic commodity markets.

We will incorporate the “Massena Land Trust” to attract organic farm development funds. This trust will begin work by securing grants and donations to fund educational programs for: 1) Landowners, 2) Farmers, 3) Qualified investors, and 4) Licensed financial advisors. These programs will be designed to attract development funds in the form of grants, loans and risk capital from Omaha, Des Moines and surrounding communities.

Additional information on financing options for new organic farms is available from a group funded by the Kellogg Foundation and on the Investopedia website. 

Producer Responsibility

Except as explained in the next paragraph, the trust will not own land, livestock, buildings or equipment. Farmers who use trust services will be responsible for their own business activities and relationships with investors and lenders.

Trust Assets

However, we anticipate that the Massena trust will hold assets under some circumstances. For example, it could combine grants, donations and investor funds to purchase land when the current owners cannot afford to pass their farms to young family members or neighbors. The trust could also hold farms where the owners do not have children with farming interests. 

In all of these situations, local trusts would hold land for future sale to young producers from the same community, Massena in our case. Investor returns would be linked to increased profits from organic commodity markets, and future retail sales.

Whether the trust owns the land or is simply facilitating a private agreement between the producer and investor(s), all parties must agree to certain conditions.

Trust Conditions 

First, trust-sponsored sale and lease agreements must include a farmland succession plan that is supported by sound a business plan with visible financing. Next, producers who wish to use trust services must agree to supervision by an experienced family member, neighbor or another advisor. Finally, as discussed below, producers must also agree to join or organize a local organic production and marketing cooperative.

The trust board of directors will hire a local accountant, attorney or other professional to oversee trust operations. This individual will coordinate investor education and outreach and conduct annual reviews based on written compliance statements and periodic financial reports.

Production and Marketing Cooperatives

With local land trust support, independent producer-controlled co-ops will help landowners group nearby farms into efficient production units. They will coordinate marketing for the members and arrange for organic farm management and related services such as audit trails and accounting. These services will delivered by local professionals. Until the co-op becomes self supporting, their fees will be covered by grants and donation from the trust.  

The local co-ops will not compete in farmers markets and other direct market venues. Instead, we see them as a path to coordinated, produced-controlled production and marketing of multiple organic commodities for the organic food industry. They will also underpin future retail marketing efforts.

Further, the local co-ops will not managed as profit centers. Their sole purpose is to increase producer income and profits by building wholesale demand, and in time, regional consumer demand.  

Posted: 02-17-2020, Revised 02-28-2020