Craig Wichner, Farmland LP - There’s $2.7T Worth Of Farmland In The U.S…And That’s The Same Economic Value As All The Apartment Buildings In The U.S Or All The Office Buildings In The U.S. | #276

Episode Summary

Executive Summary: Craig Wichner of Farmland LP explains farmland as an under-accessible, under-managed asset class with strong return potential through organic/regenerative conversion, crop diversification, water rights, and infrastructure investment. He argues the model can improve both investor returns and ecosystem outcomes, while offering a hedge against inflation, dollar weakness, and conventional agriculture’s declining economics.

Main Topics: Farmland as a scalable investment asset class (Priority: 5/5): Wichner frames farmland as a large, inefficiently priced real asset comparable in scale to U.S. commercial real estate, but far less accessible to investors and underrepresented in portfolios. Regenerative and organic transformation model (Priority: 5/5): Farmland LP buys conventional farmland and increases value by improving soil biology, rotating crops, integrating livestock, and converting to certified organic production. Operational structure and farm management (Priority: 4/5): The firm combines direct farming and leasing, uses specialized agronomists and farmers, and manages land as an integrated ecosystem with a 10-year crop rotation plan. Returns, fund performance, and investor access (Priority: 4/5): The discussion covers fund structure, minimums, appreciation-led returns, distributions, and the long-duration nature of farmland value creation. Sustainability and ecosystem services (Priority: 5/5): Wichner emphasizes measurable reductions in pesticides and fertilizer, carbon sequestration, pollinator habitat, and overall ecosystem service benefits as part of the investment thesis. Policy, carbon markets, and incentives (Priority: 4/5): He argues current carbon programs are too complex and low-paying, and suggests simple USDA-backed payments for proven practices like cover cropping. Water rights, climate, and geographic advantage (Priority: 4/5): Water access and rights are treated as a core driver of farmland value, alongside climate and soil quality, with major implications for asset pricing and crop selection.

Key Arguments: Farmland is a large, durable asset class, but most investors cannot access it directly; pooled vehicles can unlock the opportunity. Conventional commodity farming relies too heavily on chemicals and low-diversification rotations, which are biologically and economically unsustainable over time. Improving soil health through diversified rotations and livestock integration can lower input costs, raise yields, and enable organic price premiums. Active management matters: converting land, choosing the right crop mix, and investing in infrastructure can materially increase revenue per acre. The firm’s model is closer to commercial real estate value-add than passive land ownership; it seeks appreciation plus long-term cash flow. Measurable ecosystem benefits can be quantified and should be recognized economically, not treated as a side effect. Carbon incentives should be simplified into a low-friction, check-the-box USDA program for verified practices. Water rights are often undervalued and can dramatically change the worth of farmland; owning land with water access is a strategic hedge. Organic U.S. farmland can serve as a hedge against weaker dollar conditions because international buyers value trusted, high-quality food exports. Vertical farms may be useful niche tools, but they are not substitutes for farmland because their economics are capital-heavy and asset values do not appreciate like land.

Data Points: Assets under management: ~$175 million (rounded to ~$200 million in the intro) - Current scale of Farmland LP discussed during the interview Fund 1 net gain: 69.7% - Net return after conversion costs and management fee on the first fund Ecosystem service gain: 46% net gain - Independent analysis of the ecological value created by fund 1 Ecosystem service harm avoided vs. conventional: $8.5 million harm avoided / $12.5 million benefits created - Comparison of the land’s managed outcome versus conventional farming Organic certification period: 3 years - Time required after the last non-organic compound use on the land Acres managed: 15,000 acres - Total farmland now managed across three states States of operation: 3 - Northern California, Oregon, and Washington Farming/lease split: About one-third farmed directly, two-thirds leased - Operational model for maximizing crop expertise and returns Organic land share in the U.S.: 1% of U.S. farmland - Despite organic food accounting for a much larger share of spending Organic food share of food budget: About 6% - Used to highlight supply-demand mismatch in organic agriculture Price premium for organic: 50% to 200% - Premium range referenced for organic production Lease rate before conversion: $250 per acre - Typical rent on conventional leased farmland Lease rate after conversion: $700 per acre (new leases potentially $800/acre) - Higher rent achievable after organic/regenerative transition Revenue per acre for wine grapes: $8,000 to $10,000 per acre - Example of value-added cropping compared with commodity uses Dryland wheat value: $900 per acre - Example valuation without irrigation on the Washington property Irrigated commodity land value: $12,000 per acre - Estimated value if water enables commodity crop production High-value irrigated land value: $20,000 to $25,000 per acre - Estimated value for land suited to grapes, apples, or blueberries Input cost increase over 30 years: 300% - Farm input costs rose sharply while productivity gains lagged Crop productivity increase over 30 years: 30% - Used to illustrate the squeeze on conventional farmers Commodity farmland economics: $8.5 million land and equipment / ~$250,000 annual income - Average commodity farmer example to show high capital burden and low returns Homestead Act acreage: 160 acres initially, later 320 acres - Historical context for how farmland ownership spread in the U.S. U.S. cropland expansion: 100 million to 500 million acres - Growth over the Homestead Act era U.S. farmland value: $2.7 trillion - Size of the U.S. farmland asset class Leased farmland share: 40% - Significant portion of U.S. farmland is owned absentee and leased out First fund capital base: ~$50 million - Initial farmland base for Fund 1 Second fund assets: $90+ million - Assets already acquired in Fund 2 Distribution from Fund 1: $1.25 million - Amount distributed last year from the first fund Investor minimum: $50,000 - Accredited investor minimum mentioned for the podcast audience Farmland manager staffing: 5 fund management staff / 45 farmland management staff - Operational headcount split Organic blueberry acreage shift: 750 acres to 1,700 acres - Vegetable acreage contracted out increased during the pandemic Potential management scale: $175 million to $1 billion - Growth potential within current geographic footprint USDA grant: $250,000 - Grant used to quantify ecosystem services Potential new grant: $2 million - Asked for to expand ecosystem-service measurement Global/high-quality U.S. farmland share: 25% of world supply - Used to explain export and dollar-hedge appeal China farmland pollution estimate: 70% to 80% - Cited to explain demand for imported U.S. organic food Electricity cost for irrigation pumps: $500,000 per year - Operational cost example from the farm Oil price crash example: About $1/barrel - Historical investing anecdote from Wichner’s earlier career

Pivotal Quotes: "if you get the soil biology right, if you get the healthy soil and healthy ecosystem right, you'll have healthier plants, increased yield, and we can actually get price premiums as well through certified organic or other certifications." — Craig Wichner: Explaining the core regenerative farming thesis and why it improves both revenue and resilience "We basically look at this and say, hey, you know what? We'll buy the farmland. We'll let investors who don't have to live on the farm, don't have to drive a tractor, invest in the farmland that's going to be managed according to principles that they can understand: organic, regenerative agriculture." — Craig Wichner: Describing the Farmland LP ownership and investment model "pay farmers for doing something as simple as putting cover crops on their land for the amount of carbon that they're sequestering according to a model." — Craig Wichner: Policy suggestion for simplifying carbon incentives and rewarding beneficial practices

Implications: For investors, farmland offers a long-duration, inflation-sensitive, impact-oriented diversifier. For agriculture, the conversation points toward more active management, organic transition, and better incentives for soil health and water stewardship.