Eric Jackson – Doing over 150M in sales of organic grain and soy, started 18mon ago

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Eric Jackson, CEO of Pipeline Foods, about large scale conversion of land to organic farming and what holds farmers back while the demand is growing so rapidly. Covering over 1.5m acres in less than 18months, Eric is building an organic powerhouse.

LISTEN TO THE CONVERSATION ON:

After a career in conventional chemical agriculture and software, Eric could retire but decided to build the missing piece in organic broad acre row crops (grain and soy).

He was triggered by a fascinating statistic: the US is a grain, corn and soy powerhouse but imports 75% of its organic demand.

Why? 
There isn’t enough organic farmland in the US, so Eric started on a journey which led 18 months ago to the founding of Pipeline Foods, to build the infrastructure needed to get organic grain, corn and soy from the farmer to the food processor. Thus giving the farmers certainty and getting more farmers through the difficult transition process.

Why are they focussing on broad acre crops and not livestock, or produce? Because of the scale that they can bring. Broad acre crops cover many many millions of acres and when you can bring them under organic and hopefully soon organic plus/beyond organic management can really have a huge impact on local/regional climate systems, biodiversity and water quality (which we briefly touched upon in the interview)

Listen to the interview to hear why Regenerative Agriculture isn’t a big topic yet for many broad row crop farmers as the market signals aren’t strong enough (yet). Hopefully this changes soon.

We also discussed the role of Impact Investors in the transition and the role investment vehicles and funds might play to help more farmers through the organic transition. An evergreen vehicle or a green bond, helping farmers who want to transition to organic, do so. If you are interested in developing this or now someone who is doing this, please reach out to Eric:)

Pipeline Foods currently works with 1.5M acres in North America, 150k acres in Argentina and is projected to do 150m-175m in sales in 2019.

Some links we discussed:
The paper describing the summer fallow and the impact on the local climate:
How farmers on the Great Plains are changing the local climate 

Indian state using Climate Bonds to switch fully to Natural Zero Budget Farming
Andhra Pradesh to become India’s first Zero Budget Natural Farming state

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TRANSCRIPT OF THE INTERVIEW

SUMMARY KEYWORDS

organic, growers, farmers, agriculture, business, soil, midstream, terms, year, crops, investing, regenerative, people, farm, land, journey, investment, programs, opportunity, bit

SPEAKERS

Eric Jackson, Koen van Seijen

Koen van Seijen 00:00

You're going to listen to an interview with Eric Jackson of Pipeline Foods, where we are discussing large scale conversion of land to organic farming. What holds farmers back while the demand is growing so rapidly? Eric could have retired but decided to dive into regenerative agriculture and get as many acres as possible on the journey to be a positive force instead of a negative one. Learn how he built an organization of over 50 people in 18 months projected to do 150 million in sales this year, enjoy.

Koen van Seijen 00:31

Welcome to another episode of "Investing in Regenerative Agriculture: Investing as if the Planet Mattered", a podcast show where I talk to the pioneers in the regenerative Food and Agriculture space to learn more on how to put our money to work to regenerate soil, people, local communities and ecosystems while making an appropriate and fair return. Why am I focused on soil and regeneration? Because so many of the pressing issues we face today have their roots in how we treat our land, grow our food, and what we eat. And it's time that we as investors, big and small, and consumers, start paying much more attention to the dirt / soil underneath our feet.

Koen van Seijen 01:09

Before we get started, I've been recording these interviews next to my day job and I will definitely continue to do so and release about an episode a month. But at the same time, I would love to take this further, share more interviews, there are many more stories to share on investing in regenerative food and agriculture, more depth, improve the quality, maybe even doing some video series. So I started a Patreon community which makes it easy to support creators like myself. If these podcasts have been of value to you, and if you have the means I invite you to support me and make this happen. For more information, please find the link to my Patreon account in the description below.

Koen van Seijen 01:46

And now without further ado, the interview. Enjoy.

Koen van Seijen 01:51

So welcome to "Investing in Regenerative Agriculture: Investing as if the Planet Mattered". I'm Koen van Seijen your host, and today I'm talking to Eric Jackson, the CEO of Pipeline Foods working to accelerate the availability of organic non-GMO, regenerative grown food to the market, working together with the whole value chain. I have a lot of questions around how they put farmers first, and what regenerative agriculture means to them. So let's not lose time and dive straight in. Welcome, Eric.

Eric Jackson 02:16

Hi. Very nice to be here.

Koen van Seijen 02:17

So to start with a personal question, which I always love, what brings you to building soil, regenerative agriculture and using agriculture as a force for good? Very, very big question I know.

Eric Jackson 02:31

Well, like many of folks my age, who've been in agriculture for a career, when we started in the business, in my case 35 years ago, we were never given any information, and it really wasn't the topic of conversation, about how agriculture and sustainability work could work together. In fact, sustainability have yet to be sort of raised as a business proposition or as a mandate by consumers. So you go through your career in the conventional space and in my case I had the opportunity to retire in 2007, and I took that opportunity to move out of the direct involvement in the agricultural trading business, and get into the carbon sequestration business, through the Chicago Climate Exchange and the programs around cover cropping and grasslands, minimum tillage programs. And it was really through that, the two years or so that I was doing that business, that I started to connect some dots that I didn't really even think about prior to that. So it would be now almost 12 years ago, when we started taking a look at carbon sequestration and the possibilities for using agriculture as a carbon sink. You know, the forest projects had been already been used for quite a while but agriculture, particularly production agriculture, as a carbon sink was something that was relatively new even across the sustainability community at that point in time. You know, I've got a commercial mindset, I'm not I'm not really a scientific person, but I do have a set of personal values that I found that were in alignment with this idea of creating food in a way that also had these secondary and tertiary environmental benefits primarily. There's some social benefits as well but I was, you know, I really got hooked on this notion of linking environmental outcomes to food production.

Koen van Seijen 04:39

And do you remember if there was a light bulb moment or a farmer you visited when with your traditional agriculture background you suddenly saw like: wait a minute, it could not just be less bad but actually it could be more positive effects as well. Was there a specific moment? Or was it more like those two years, like you mentioned before?

Koen van Seijen 05:02

Yeah, it was it was it was mostly a slow process. But there were times when I was out in fields in, you know, these enormous fields out in the northern part of the of the US. I grew up in Illinois where everything was black dirt and, you know, the farmers prided themselves on how clean their fields were before they planted them, how clean their fields were during the season through the use of pesticides and herbicides, and it seemed natural to me. Of course, a clean system is, a clean looking system must be a better system. And then I went to these projects in North Dakota and Montana and Wyoming and I started seeing a different type of agriculture.

Koen van Seijen 05:46

Much more messy, this was this was actually not organic that I was looking at at that point in time, but it was this idea of using nature as part of the cycle instead of fighting nature in between the times when we want to use the land to grow a crop and the balance of the year. So you have the fallow period post harvest, and using cover cropping during that post-harvest period, the dirt was healthier, you know, and this was the description of the growers telling me that they noticed that their dirt was getting better as they were using cover crops. The idea of using minimum tillage in concert with nature as opposed to fighting nature every step of the way during the growing season was producing every bit as much yield for these guys as conventional and their cost structure was much lower, because they weren't using they weren't having to buy all these all these inputs. So that was sort of an "aha" moment for me because I was a believer at that point in time that you had to fertilize and you had to hammer the earth with things to keep it in check so that we can do what we wanted to do during the growing season, at least in the Northern Hemisphere. But I would say mostly it wasn't a creative process. I was learning mostly through stories by listening to growers talk about what they were doing, and changes in the face of multi-generational farms, you know, that would do something for a long period of time the same year after year, and then they recognized that some of the things that their grandfather used to do was actually better. But, you know, they had to go through a change in a mindset. Farmers as a rule, I would say have to learn by doing, and they have to be taught through lessons on their own land. But it was really more of an accumulated process of listening to these growers as they went through different changes, tried different things, very experimental, to try to, at the very least earn environmental credit for what they were doing, but then they noticed something good was really happening so it became more than a monetary endeavor and became, you know, more of a missional type endeavor for many of these growers. So I really learned from the farmers the benefits, the much broader set of benefits of doing things, I would say, in the non conventional way.

Koen van Seijen 05:46

A very messy one.

Koen van Seijen 08:25

And then when you, or when basically the market of compensation didn't really take off in the US or North America, what make you - I mean that sort of forced you to switch but you could still retire - what made you found and start Pipeline Foods?

Koen van Seijen 08:42

Well there's actually a chapter in between. So from 2007 to 2009 I was involved in carbon sequestration projects and then I took a another sort of detour and I got involved in the software business. And the idea was to build a business software platform for large scale farmers, part of which was to give them better control over the economics of their business, and part of it was to give them more visibility into how sustainability practices, you know, impacted their bottom line. And then to give them the opportunity through the use of data to be able to participate in sustainability programs, whether they were driven by their buyers, or whether they were driven by governmental or NGO initiatives, either regulatory or non-regulatory. So the thing I was connecting to my head at that point was the data was critical to respond to market forces, some of which would be regulatory in nature, mostly around water quality, and some of them would be market-based in nature, mostly around adressing interests coming from the consumer side in terms of knowing where your food came from, and the practices used to raise that food. So I spent eight years in the software industry building that platform which is called Conservice, and that is still a going business. And that was quite exciting because I learned something new again, that I didn't know really much about technology before I got into that business, and I was the agricultural expert in on the team, and I started to learn a lot about how technology could play a positive role, you know, to the use of data management in terms of exposing best practices, as well as connecting farmers to market opportunities and/or giving them a response to regulatory pressure from their environment.

Eric Jackson 10:48

So that was, that was a long, intermediate chapter of eight years but it was really through that process then again I spent virtually all of that eight years mostly out in the field with growers, and started seeing a whole wide variety of different types of growing schemes, and started bumping in more and more to folks that were, at least diversified into organic row crop production. And so my education of production agriculture, different types of production agriculture continued during those software years. So then I got bored again. There's a common theme here, when I get bored I get dangerous.

Koen van Seijen 11:29

I didn't want to say.

Koen van Seijen 11:32

So in late 2015 I started sort of dreaming about maybe how to get more deeply involved in, specifically in the organic space which I would say - we will talk about this a little bit more later - but organic is one of the ways in which regenerative agriculture might be expressed. I was looking at the marketplace and watching the growth in the industry, you know, double digit growth year over year for many, many years. And again, with my commercial hat on, I was wondering, what was being done in terms of the infrastructure or the supply. So the midstream between the farmer and the consumer, there's a lot of steps that happen, and I was fascinated to try to figure out and see if that infrastructure had been keeping up with it with the whole marketplace. And I found out that it hadn't, it was really an under-invested space. I'm talking about grain elevators, grain processing, feed manufacturing, grain processing for various types of foodstuffs, food ingredients. And really that's a critical link, because neither the demand side or the supply side can function without that midstream. And so I thought: okay, well, maybe my contribution to this effort is to develop the midstream so that both sides of the pipeline - there's a name, that's where it came from - both sides of the pipe can benefit if the pipe is built in such a way that it honors the desires on the demand side and honors the desires on the supply side.

Eric Jackson 13:13

So this notion of building a pipe, the most efficient means by which to get product from A to B, started coming into view and I started putting a team together in early '16 to explore this a little bit more, and we spent about six months doing some research and developing the thesis more clearly, and then I stepped out into the capital markets to to raise money because you know, the midstream business is very asset heavy and it takes a lot of capital to put the pieces together. So that's sort of the condensed version, I could go on for hours about other aspects of it, but that's sort of the condensed version of how I came to form Pipeline as a company.

Koen van Seijen 13:59

And now you have, I counted on the website over 50 people working with you? Can you give the condensed version of what Pipeline Foods, obviously changing constantly, but what it is today? What your focus on? What's your theory of change?

Koen van Seijen 14:16

Yeah, so again, consistent with the initial thesis that somebody or somebodies had to take out their checkbook and start investing in the midstream so that the product from the farm can reach the consumer. If you don't have that midstream in place, then neither side gets to do as well as they could. So today, after not quite 18 months in business, we have headquarters here in Minneapolis, we have a team in Canada that manages our Canadian program, we have a team in Buenos Aires that manages our South American program and we've created a partnership with a like-minded group out of Europe.

Eric Jackson 14:58

That gives us a global program in terms of being able to work directly with growers today in about 20 countries. To be able to, number one get them the best price possible for the products they're producing and then on the other side working with consumer groups, consumer companies, people that put branded product on the food shelf, to take their sustainability programs and be able to express those back to the farmers so that those farmers who choose to participate in those programs sort of have a translator, to get them there. The food companies have a challenge in terms of their sustainability programs and how the promises they've made to their stakeholders and to their customers. Most food companies don't directly touch the farm. And most midstream groups that are sitting in the same position in the universe as pipeline don't have an interest in making that connection. They operate in a black box model, where actually there their stock and trade is "no information shared".

Koen van Seijen 15:42

The less you know, the more that the more I can exploit you.

Eric Jackson 16:13

So we took the exact opposite approach and said "well, that's not what the consumer wants, we know that there are some farmers that would like to participate downstream and understand what the consumer wants, while consumers want to participate upstream, and understand how their food is grown". So we said "let's be completely transparent and create sort of a two way telescope - consistent with a thesis of a pipe, I guess - and give both visibility to do each other and strengthen the food system in a way that hasn't really been done at least at a commercial scale before. So, again, today, like you said, we have, somewhere in the neighborhood of 50, just over 50 people. We have four grain elevators, two in Saskatchewan and two in North Dakota. We have a small oilseed crushing operation in Missouri. We're exploring more elevators, we're exploring feed milling, for animal feed for the organic dairy sector in particular. We're looking at elevators and grain processing facilities in Argentina. And we again, through our European partnership we've got projects in Kazakhstan, Uganda, Malaysia, and various other areas around the world. All follow the same trajectory, where we say we have boots on the ground. So we are not simply buying and selling product but we are actually actively working with the growers to try to help them improve their opportunity, as well as to give our customers assurance that the products that they receive are in fact from, you know, this particular farm or this particular region of farms. So it's a very intensive business, it does takes more labor, more arms and legs and your traditional business. But so far, the market signals are telling us that we're doing the right thing.

Koen van Seijen 18:15

And in terms of a concrete example, let's say I'm a grain farmer, and maybe I'm already organic, or maybe I'm thinking about it, and I knock on the door of Pipeline Food. What would be what would be our our journey?

Eric Jackson 18:30

Yeah, so in the case, let's say that you do not have any organic production, but you've been dreaming about it.

Koen van Seijen 18:38

I've seen my neighbors doing it and I wanted to. I would like my children to come back to the farm, and they didn't want at the moment.

Eric Jackson 18:47

Yeah, exactly it is very much about the next generation in many cases. But there are three primary challenges for embarking on the journey, and we've consistently uncovered these to the point that we're convinced that these are the three sort of hurdles that have to be overcome. One is economic uncertainty. There's a three year period for the U.S. organic program there's a three year transition period.

Koen van Seijen 19:14

I think it's exactly the same here.

Eric Jackson 19:16

So you have to do three times 365 days of agriculture that that includes no prohibited applications of materials. And so during that period of time, there aren't very many market opportunities to get a better price for your product. So you're essentially still selling into a conventional market, but you're doing everything different on your farm as a farmer. And so normally during that transition period you have some yield drag as you're learning the new system, and you don't have a better economic opportunity. So the first challenge is the economic piece and out of that, then your lenders, your traditional lenders may or may not be willing to support that. So we put together a toolkit of third party partners on the banking side, we continue to discover more and more bankers that are interested in willing to sponsor if you will, this transitional period.

Koen van Seijen 20:24

To finance I guess, it's transition finance.

Eric Jackson 20:26

Exactly transitioning finance. We also have put together and continue to add to a portfolio of agronomic support tools. We ourselves are not agronomists, we do not pretend to be but we do have one agro-ecologist on the team. His primary job is to identify agronomic support organizations or individuals in various places that can be brought to bear in support of the grower who's embarking on this journey. And then a third piece is a long term view of the market. Because it's one thing to get through the transition, but then there's still the question of, you know, where am I going to sell my organic product and what sort of prices am I going to get for it? So this with primary to our business. We are able to put together a framework that supports the post-transition world. Now that you are organic, and now that you're producing organic, then we can provide the market access through our day-to-day business model. So putting all that together into a package that we can sit down and talk to an aspiring organic farmer is you know... that would be the journey that we would embark on with you.

Eric Jackson 21:47

Now if you're existing organic, a little different approach. So the thing that we look for with the existing organic growers, in addition to doing business with them here and now, is to explore whether they're interested in expanding their opportunity, their acreage, and oftentimes, the answer is "yes, but I don't want or I can't buy more land". So we're matching landowners with farmers who want to expand and essentially helping them put together long term arrangements, normally 7 to 10 year arrangements, that are sympathetic to the organic thesis in terms of the lease structure. And again, we stand there as the market maker for the product, so that the land owner has confidence that the farmer will have the means by which to pay them. Then we accomplish, you know, there are landowners, increasingly there are landowners that are more and more concerned about how their land is managed, and so this is sympathetic to their view, as well. With existing organic growers, we look to help them expand by connecting them to landowners that have an interest in the organic, regenerative, sustainability thesis overall. But it's a lot of education on both sides because, you know, a lot of people know the words but they don't really necessarily completely understand the meaning. So we're teachers, everyday we're teachers out in the marketplace

Koen van Seijen 23:28

And just to unpack that a bit because you provide long term agreements etc. for me thet when I'm through that journey, because I'm going to be organic, to basically make sure I have offtake agreements etc. I read somewhere you're buying the whole rotation because as an organic farmer, I'm going to rotate probably quite a bit, does it mean also livestock? Or is it basically the grain and seeds etc., that rotation that I'm gonna grow from year, I mean from year now but from year four, five, etc. oficially organic.

Eric Jackson 24:01

Yeah, it's the grains. So the livestock side is a very interesting, can be a very interesting piece. We do have some of our farmers that are using livestock really as the transition crop.

Koen van Seijen 24:14

Yeah, I see a lot of people who are experimenting with it.

Eric Jackson 24:17

Yeah, it's a very interesting concept. We ourselves do not get directly involved in the trade of meat, milk, or eggs. So our concentration is really on those crops that are, I mean nothing is completely non-perishable, but that's the market that we try to stay with. There are things that can be stored for a long time, they may require some some special handling and care but they are not... we do not deal with meat, milk, eggs, produce, fruit or any other fresh-to-table products.

Koen van Seijen 24:54

And on the already organic farms that want to expand and you help them basically getting proper lease agreements on other land, how does thst work? Did they capture at all the value they create by regenerating that land? Probably going to organic or going beyond organic. Because I see a lot of opportunity there and a lot of tension at the same time, because you're basically helping somebody else's asset grow. And what what do you see in terms of developments on that side?

Eric Jackson 25:28

That's a great question. So we talk to people across the value chain in agriculture and everybody, well, unless you're against organic, and there are still plenty of people that are fundamentally against organic. From an academic perspective, an intellectual perspective, you understand of course that you're building soil health, and you're increasing pollinator habitat, and biodiversity, and improving water quality but the valorization of that, all those good things, is still very immature. And what I mean by that is that the idea that land would trade for a higher value once it's been converted to organic should be supported by the economics associated with being an organic farmer, which is, you know, at least in our part of the world, or the parts of the world that we operate in, our farmers make a lot more money per acre than their conventional neighbors. That should be what drives land value, but there hasn't been enough organic, organically certified land change hands to positively prove that thesis.

Koen van Seijen 26:47

Maybe everybody likes to hold on it.

Eric Jackson 26:49

Well, and quite frankly, sort of the flip side of the same discussion is: there is concern about, you know, okay, if you're not doing traditional weed control and if you're not doing traditional fertilization, maybe you're actually mining my soil, and you're going to give me back a weedy patch, okay. So there's, there's still some tension in that whole proposition about being able to monetize, valorize the actual improvements in the soil itself. That's, again, intellectually everybody understands it but we are just too young, in the practice yet to be able to positively affirm. The marketplace has not come as, for the land anyway, has not come along as quickly as the marketplace for the product.

Koen van Seijen 27:44

And actually you touched upon a very interesting point as well, when you mentioned the three pieces of the toolbox, basically, you're using. I think you're highlighted somewhere in one of the documentations, a forth as well which comes back to this point, and I'm quoting here, "perhaps one of the hardest parts of this journey is to walk into a local coffee shop, and getting the cold shoulder for doing something different". How do you work on that psychology piece that "I'm going to be the the weird one in the village, in the community, because I'm going organic, and gonna have a very messy field".

Eric Jackson 28:18

That's the hardest part, for us to address directly. You know, we're not running a social agency here, and we're not running a psychological agency.

Koen van Seijen 28:27

And you're not running the coffee shop.

Eric Jackson 28:29

Right. So I mean, one of the things that we are starting to do, again, you know, being a young company, we had to sort of do things in a particular order. But one of the things that we're starting to do is to create a community and connecting all, you know, various farmers to each other, giving them the opportunity to understand that, although they may be odd in the local coffee shop, that in the in the global coffee shop, they're not that odd. And having those connections to other farmers who have been through this journey, and have come out the other side and are successful. That level of support, obviously, we can't force it on people, but we are recreating those connections both to help the new farmer from a transitional standpoint. Sometimes the best mentor for them as an existing organic farmer, but also to give them a community that they can interact with either over the phone or through events. We have a we have a lot of field days, for example, during the summer, we're very actively involved in that right now. Where we convene communities of growers that, some of them know each other but some of them don't, and giving them a chance to sort of form a peer group, if you will, between themselves in order to establish the fact that they aren't maybe quite as odd as some of the local folks might treat them. It's very interesting when you find somebody who broke ranks a number of years ago and went organic a number of years ago, and now they are successful. All of a sudden they're not the odd one anymore, but they're the ones that sought after. So there's a period of time, maybe three to five years where you may have this feeling of isolation. But if you are successful, particularly in the farming community, then you become admired. So there's a, you have to sort of go through the valley of death.

Koen van Seijen 30:32

Like the yield a drag, it's also your reputation drag.

Eric Jackson 30:36

Yeah, right. I mean, that's what the coffee shops all about, right, is everybody tells a story about the fishing trip, in the form of yields, you know, how big things are, and how much they sold it for, and blah, blah, blah.

Koen van Seijen 30:48

Never unwind food side of things.

Eric Jackson 30:50

Yeah, right. Right. No, but you're right, that is a very complicated piece of this, and quite frankly, you know, probably the least discussed but probably the most real barrier. When a grower starts thinking about going in this direction, he starts socializing the idea with his neighbors and his neighbors all react negatively, oftentimes, and then the grower just goes back to what they were doing before and it's easier. And we can't conquer the world, we have to find those bright spots where we can be successful.

Koen van Seijen 31:29

Yeah, I see a lot of parallels with the impact investing space, which is clearly booming. But in many countries, there are only a few that actually see their portfolio and their investments and their family office as a potential to actually be a force for good and actually invest, get return, and be able to sleep at night and not having to worry that your money is invested in certain pipelines that are not so sustainable. But if you are the only one or the first one to start there, mainly your family is very worried they're gonna lose a lot of return, your friends probably say "why don't you buy a boat and go sailing". So it's a very lonely field until you discover peer groups, which luckily started to happen in a lot of places, because the tools are there, the transition, the journey to clean up your portfolio to actually invest it in very deep impact or lighter impact, etc. That's all there. The main question is, are you able to do that journey, which might take like an organic three, five, or ten, could take quite a long time but yeah, you need that support group, because it's not easy being the only one walking to the right, when everybody's walking to the left.

Eric Jackson 32:37

That's a very good parallel example. I fully agree. On a personal level, we made the transition several years ago, to first start taking things out of our portfolio. That's kind of the first step, right?

Koen van Seijen 32:55

First thing I would say is looking what is in it, because most people actually don't know it to the full detail level, if you outsource part of it. Yeah.

Eric Jackson 33:03

Yeah, well, first for us I mean at a personal level is finding an advisor, right? Finding an advisor that knew the journey, and that could help us think through and demonstrate to us, help us figure out what it is we really cared about, and what we really wanted to accomplish over what period of time and with what risk return profile and etc. So, we're to it to a certain degree, we kind of play that advisory role in the business that we're in. I don't want to I don't want to overemphasize that point. But, you know, we do we speak with impact investors all the time. I've been contacted by a long stream of folks that are somewhere on the continuum but I would say that even our first investor or our initial investor, although they weren't well organized around an ESG theme, their LPs (this is a private equity group) they're their LPs were increasingly asking them to analyze their portfolio of investments as a GP and start grading their investment portfolio along certain ESG frameworks. And so we've actually been helping our primary financial sponsor understand what this means at an operating company level, and have helped them create their ESG policy and you know, now, they have hired at least one person full time for that endeavor internally. So they themselves are in transition between what I would consider to be a conventional investment shop and a more ESG driven investment shop. But there are some much more pure impact investment groups, many times they are in the form of a family office, who have come to us specifically along those lines and they understand that we are not ourselves the agricultural producer. But once they understand the critical link that we're providing that makes it possible, you know, for these agricultural practices to find the commercial return, and they connect those dots, we become very interesting opportunities. So I have those conversations all the time. That's an important part of what we think our future is.

Koen van Seijen 35:21

Yeah, because let's dive into that bit a bit. I mean, you've only been around with this company, if you've been around a lot more, but 18 months. What does the rest of - it's now June 2018 - what does the rest of 2018 look like? What are the main exciting projects you can share?

Eric Jackson 35:41

Yeah, well, it's actually relatively simple. So you know we're in the Northern Hemisphere, we're already done planting essentially so the work that we did prior to planting was to organize as many farm-based contracts as we could and to go through a planning process with the organic farmers to help them understand what the opportunities were for the various crops that could be grown in their in their area. To your point about earlier point about rotation. Rotations are a much more important part of the organic framework than it is the conventional framework. So you have sort of two different decision horizons, one is an agronomic horizon i.e. "What should I be doing agronomically in order to optimize not just this year, but the next several years in my system?" and then right alongside that as the economic piece "Okay, what will it cost me, or how much can I make". So it's a matrix-type decision approach, and we we get to sit with the growers and do that. So that's all done now, in the Northern Hemisphere. we're embarking on that in our South American operations right now for the winter season down there. So now, it's, a bit of it is sit and wait, because the crops are growing, we're working with customers primarily right now to help arrange their supply chains for the upcoming harvest.

Eric Jackson 37:11

And we're, you know, because of the assets that we purchased, we're still doing some basic capital project work to improve those assets and make them a little bit better than they were necessarily when we bought them. And we're always talking to people across the value chain about additional acquisitions. Today, so far, that has not meant additional companies that we are buying it has strictly been assets, but we are certainly in the market for acquisition opportunities. You know, being as young as we are we're still struggling a bit with just some basic internal infrastructure, with accounting systems and things like that. So still getting that sharpened up is important. Our fiscal year ends at the end of June. So, you know, taking stock of what milestones we met or exceeded or missed. And, you know, doing the planning for the upcoming year. But you know, when you're in agriculture, you, if you're in agriculture in a single hemisphere, you really have one cycle a year. So agriculture is maddeningly slow, in the sense that it's not a factory where you can run down and turn a knob every five minutes and make adjustments you have one time a year, to get things done. And you have to accept that cadence as a fact. It's a little bit different, because we have operations in the north and south hemisphere, so we get to do this twice a year. But nonetheless, there are certain realities that you simply can't change. So you get into this cadence of, you know, plan, plant, grow, harvest, handle, ship, wash, rinse and repeat, you know, and that's just the nature of the business. So there's no real big exciting projects this year, you know, we've got a couple of assets that we're looking at to expand our footprint. But our program development work, particularly on the farm, what we call our farm profit program, which is our farm facing program goes on year round, because once we get into post planting, then we start having these these field day events and community building events and things like that. So that's, it's not mundane by any means, but it's not it's incrementally improving what we've already started to do, would be the best way to describe it.

Koen van Seijen 39:41

It's a good rhythm and in terms of what means regenerative agriculture for Pipeline Foods, and what are your plans in that? I mean, you've mentioned organic as a way to express that, can you expand on that a bit?

Eric Jackson 39:56

Yeah, so I mean the the term regenerative in the commercial sense is really very new. Now, if you go back to Rodale Institute many, many years ago that term was was being used, but it wasn't being used as a commercial label. And really the power of a market to make change is when you connect the demand side to the supply side, because the primary exchange is money, right? And without money the universe of participants shrinks to only those who are mission driven, which is important, but in my mind, not sufficient. So we're trying to figure out how the signals are going to get sent, if you will, and regenerative is a relatively new signal in the commercial world. We have a regenerative organic certificate now that some food companies are considering adopting, which is sort of organic plus. The organic community itself is fracturing a little bit from those who think that the current regulatory environment is sufficient, and those who think that it falls short of meeting their own personal aspirations to be more environmentally friendly, more socially responsible and have a higher degree of governance over their business. But this conversation about regenerative as a commercial communication tool, upstream and downstream on the value chain, is still new. Our approach at this point is a little bit of a wait and see, not because individually as people we aren't sympathetic to many of the ideals expressed in regenerative and the regenerative conversation, but again if the market signal does not turn into a commercial opportunity, we believe that the outcome is going to be too small to be measured. So the commercial signal can come in many different ways. Consumers are certainly the preferred mode, but they can also come through the investment community, because the investment community has the opportunity to use money, again, to incentivize certain behaviors and you do not even need to have somebody who is mission oriented to stare at a monetary opportunity.

Eric Jackson 42:35

I tell my team, at some level, we shouldn't care about motivation, as long as the outcomes are aligned with our business philosophy and our ethos. So if a grower, for example, is solely motivated by money, and that's the way that we can get that grower to behave in a different way, that creates an economic opportunity for the grower and an abundance of additional environmental outcomes, we shouldn't care. We shouldn't be so altruistic that we need for the growers to stand up and salute some sort of flag or some sort of icon, we should really care about the outcomes of the endeavor. And so that's sort of where we are in the in the regenerative journey, because it's still a very new concept commercially. Even while we feel, you know, I would say most of us anyway who work here, feel very strongly, personally, that the notion of regenerative certainly makes sense. And if the marketplace can at least align with that concept, and, you know, not certainly not penalize, but if there's a reward system associated with it, then we stand ready to use that as another way to create good outcomes at the farm level. It but it's a split, it's tricky. Regenerative is tricky right now, because it is so new.

Koen van Seijen 44:07

And do you see, I imagined that within your group of farmers you have an enormous spectrum. That some folks have been doing it for a long time and are maybe pushing the boundary or have really gone beyond organic, quite a while ago. Do you see them going into even more complex rotations, adding, we've discussed livestock a bit, but tree cropping into etc., also doing things that are not part of your ecosystem? And do you see them going beyond organic?

Eric Jackson 44:39

You know, in the in the North American and South American commercial agricultural areas the answer is "no". We do see some of that in areas that we don't necessarily practice in at this point. So at the smallholder level, where oftentimes there may be a corporate entity involved, that is deeply concerned for example about their raw material supply of cocoa or chocolate or something something more exotic that's typically not grown in a well developed area. Those types of schemes are, I would say are more advanced than they are in midwest U.S., or Buenos Aires Province in Argentina for example. So we haven't gotten that far yet, at least at scale, there's always there's always projects, intersperse cropping, either multi species cropping or using permaculture as part of the rotation, experimenting with different water management systems. That's all pretty small scale stuff at the commercial level anyway, that doesn't mean that it won't come. I mean, again, assuming that the market continues to ask for the food market continues to ask for a higher and higher value proposition and the market is willing to pay for that value proposition, or at least support, incentivize conversions or extensions, then they'll take hold as they take hold. But again, the challenge in agriculture, the good the good news/bad news is the inertia that's built into the one year cycle means that sometimes you have to get go through an entire generation to see real change. And that just, it just simply takes time.

Koen van Seijen 46:40

And with your history of carbon sequestration, etc. do you measure that level of detail also with the farms you work with now? I mean, do you do the soil carbon tests, etc. to see - I mean I don't know if there's a market now in the U.S. for for those kind of ecosystem services - but is that a level of measurement and transparency you also want to provide to your customers that end up buying a product?

Eric Jackson 47:07

Yeah, so just in the last 24 months, so just prior to us getting started as a company, and continuing on now with a little bit more velocity the whole soil health discussion has really, particularly in the US, I'm impressed with how much that term is used, because it really wasn't being used outside of sort of the NGO, activist world until just a couple of years ago. So soil health, and that means a lot of different things, one of which is certainly organic matter, which is often expressed as carbon. Microbial activity as another marker. There are a number of chemical analysis that can be done. And so with soil health being really the topic that's driving that conversation, now getting commercialized by major food companies and major participants in the value chain, out of that conversation now the drive for measurements has started to take hold. So before, it was really about, you know, soil health as a promoter of crop yield. So the tests that were being done was to see primarily, you know, how's my organic matter moving from year to year? So there's a number of micronutrient tests and a number of some in some cases around carbon, but not so much. But now that it's moved where the soil health concept has moved more mainstream the measurements associated with what soil health, how do you how do you measure soil health is becoming more of a commercial aspect of the business, we still do not have. As far as I know, we still do not have a major food company that has any sort of specifications that they've come out with but the indications are that we're moving in a direction in which again, on a somewhat on a consumer driven basis, that soil health, which includes the carbon components, there's going to be something that's that is, those attributes are going to be more sought after in conjunction with a physical supply chain than they have done in the past. Doing those tests is not, you know, you're not breaking any new ground by doing those tests. We know how to do those tests. It costs money. The question is, what is the motivation for doing those tests? And up until now, it's been mostly around understanding how how the practices are affecting yields. But now increasingly is becoming our the practices affecting these other environmental outcomes.

Koen van Seijen 50:07

So if we would have this conversation again in a year from now, chances are there will be at least a few major companies that have made some statements around soil and hopefully actually also translated those statements into concrete questions and asks from their suppliers.

Eric Jackson 50:26

Yeah, absolutely. Year over year over year, this is this will become more, I hesitate to use the term mandate, but conceptually more of a mandate in the supply chain. So this is where we start talking about, okay, which technologies are we going to use? How important is blockchain in this whole world? But before you go into the technology of how you're going to....

Koen van Seijen 50:52

Somebody need to ask it.

Eric Jackson 50:53

Somebody needs to ask it, right. You have to have a... What I've learned in my software days is you better be able to put it on paper before you start coding it. So, we're still in that putting it on paper phase in this market. Ultimately this will not be a technology problem. Technologies exists already to do a good job of capturing and expressing the data. But what is the motivation? And, you know, the crass question always comes up who's gonna pay for it?

Koen van Seijen 51:26

Yeah I know it's an interesting question. I have discussions here with farmers in Europe and some forward thinking companies are starting to ask those questions. Like: we've seen carbon sequestration, what does it cost per tonne to put it down in a in an old gas field, and they start to slowly ask some forward thinking farmers, what would have cost stored in your soil. And the same discussion is starting to happen around water. It's a huge issue in the Netherlands, the amount of rain and especially the intensity, and there's simply not enough space or not enough money to make the rivers a bit wider. And also to serve the public authorities that are taking care of that system, which obviously is hugely important because otherwise we'll be underwater, are starting to pay attention. Maybe we can use the water storage capacity of healthy soils and what would that look like? Very, very early on discussions but a year from now there will probably be some pilot somewhere and somebody needs to figure out some of those things.

Eric Jackson 52:30

So both water quantity management's in excess and and drought, right?

Koen van Seijen 52:36

No, drought is not so much ah in summer it is actually... both of them, plus quality which you mentioned before, obviously. All three around water, and then your biodiversity is another one, which tends to touch upon consumers a bit more. But yeah, water on all side is a huge opportunity and a huge risk.

Eric Jackson 52:59

Correct. In the U.S., one of the things that has become apparent, more apparent now to the rural communities is that they're groundwater, so take away the surface water discussion and go to groundwater. Many of the rural community wells that would be supplying a small town are impaired in terms of water quality, and there's no secret about what the source of that impairment is, is clearly agricultural leaching. And it doesn't matter until it matters. And all of a sudden we have we have towns even here in Minnesota where their community source of water is undrinkable, from a safety standpoint. And it's not due to diseases and pathogens, this is simply due to chemical pollution. So once that starts to actually impact you, and you know, you have relatives in town even though you may still be out in the farm, you realize that some of what you've been told about these systems being benign and not being risky for the environment may not be quite so true. So there's a there's a whole other level of conversation that, I think will be the ultimate accelerator of conversion.

Eric Jackson 54:25

Now, if I could snap my fingers, and turn the entire world organic overnight, I do not believe at this point - I wouldn't have said this a few years ago - but I do not believe at this point that you would see any decrease in production. And in fact, I would argue that over the long term, this is the only way that things can can work over the long term. But you'd see an immediate impact in terms of environmental outcomes and I think people would be astounded and understand that they've been fed a bunch of stories that aren't necessarily true about the need for using synthetic production methods to be able to feed the world. This whole 'feed the world' concept is a red herring.

Koen van Seijen 55:08

Ah it's driving me nuts! And I think the healthcare aspect on the water, I mean, the general ecosystem around us, plus the nutrients in your food, the more comes out of that, and the more I mean, I see some research early on from healthy soil to healthy produce healthy gut systems and thus healthy people. There's a very clear link there which we always knew, but slowly comes back and we have some scientific research to prove it. Of course you have to do organic in a proper way and we are going to see some examples of it not done in a proper way as a sort of a push back from the industry to like "Look, look, you can never feed the world because he lost 20% of his yield". But there are always exceptions like that. I think that healthcare and the ecosystem part in general as we now slowly see, I mean there's a paper out from Montana on the summer fellow practice and if you only do cover crops, what's the impact on the local climate?And you should see a drop in temperature in the summer, and more moisture in the air which are two of the main dangers of climate change to high temperatures and not enough moisture and thus drought. So you start to hopefully see also, like, if I actually change enough farms to organic and beyond organic, we could somehow stabilize or reverse some of the huge challenges that this climate craziness brings with it.

Eric Jackson 56:38

And that's one of the reasons why we're interested primarily in row crops, because it's only through the broadacre system that you're going to, you know, and this is another another interesting point of tension is because you've got the what I'll call the legacy organic crowd, who are typically farming smaller acreage and very intensive, you know, maybe 40 different crops on an acre, right? But it's mostly designed for local use.

Koen van Seijen 57:10

And fruits and vegetables, and not grain.

Eric Jackson 57:12

And fruits and vegetables, and that's great! That's the food I want to eat. And I'm glad that those programs are up and going. But that is not going to make a systemic change on a local, regional or certainly global level, you have to get the broad acre, you have to get the broad acre involved. So to us, the only way we get paid ultimately is through our handling and processing and transportation of broad acre crops. But it's also the only way that we think that you can actually put a dent in the current trajectory is through through broadacre schemes. So, it's not the sexy side of agriculture, but we think the most important in terms of making these transformations.

Koen van Seijen 58:01

We'll make it sexy. I'll keep I will keep repeating it. And just in terms of Pipeline Foods, or whatever you want to share, obviously. I mean, you're 50 plus people, how many hectars are you working with? Or how many tons? Or if you want, how much money have you raised? Just to give a bit of an understanding, what kind of size you're dealing with?

Eric Jackson 58:24

Yeah, so I mean some of these figures are estimates but in our most recent review of the acreage that we are currently working with in North America I believe it's 1.4, give or take 1.4 million acres. In Argentina, it's about 150,000 acres. Rest of world, through our european partnership, which, you know, we take credit for each other because that's that's the way that we've structured our deal. That's a much harder number to get our head around. You know, we know that for example, we've got a sesame project in Uganda that is 60,000 give or take smallholders. Each one of those smallholders has give or take about half a hectare. And that's just a single project. But it's, you know, measuring these things are, are tough.

Koen van Seijen 59:32

No, no, obviously, but just to have a grasp of more or less the size. I'm not asking the half a hectare per acre dimension.

Eric Jackson 59:42

In terms of sales or for our fiscal year '19 which starts on the first of July coming up we are anticipating sales of product in the range of 150 to 275 million U.S. dollars. I cannot share with you precisely how much money has been invested in the organization, but there's a lot more to go. I mean, when you start with private equity you understand that there's a clock ticking, and the group that we chose, I think we did a very nice job of determining who to work with. Because when you take on investors now you, you've taken on more than just money you've taken on a relationship, and there were many investors that were interested in writing checks for our thesis at the beginning, but I realized that the outboard management that I would have to deal with to work with these folks it would be too time consuming. So, but even our group they're in the business of growing businesses and then moving on.

Koen van Seijen 1:00:57

Yeah, because I was gonna ask your timeframe as you are in agriculture and regenerative and sustainable agriculture takes time. Is this a 10 year? I mean, what kind of long term mission focus? How do you lock into that if you take on even a patient private equity party?

Eric Jackson 1:01:17

Yeah, well so we're already now discussing... We've got some very specific investments that are appealing to very specific pools of capital with a with a mission orientation, an impact orientation. I would guess that within the next 12 months, we will already start accepting limited investments from those groups already starting to build a path towards what I'd call that.

Koen van Seijen 1:01:42

You mean like specific vehicles etc. to put money to work.

Eric Jackson 1:01:46

Yeah. So there's already this sense of look, ultimately the ownership of this business, from a financial standpoint, should be in the hands of those who have an evergreen view and want to perpetuate and are interested in the very long term. But many of those are risk adverse. I mean, as you know, in the in the impact space the challenge of the quality of the investment opportunity, or the maturity of the investment opportunity are two of the key issues in the impact space. And it's no different in agriculture than it is in other components. So now that we have a little bit of time under our belt, and we can demonstrate that we are making progress towards, you know, towards some of the milestones that we set out and initially advertised, some of the initial conversations we've had with impact investors weren't necessarily as financially sophisticated but are much more sophisticated in other in other means, and therefore need a little bit more maturity. The platform into which they're investing, we are now reconvening with those folks and I do expect that in the next 12 months that we will have additional investment into this organization from impact investment institutions. Whether it's again, family office, or some cases we're talking to some foundations.

Koen van Seijen 1:03:20

With a specific long term view and then might at some point, the private equity group needs to move on, and that's then impossible. Yeah, I know I see that a lot. I mean, you really need to stage it and find the right capital for the right moment but then how do you structure it in a way that the mission is locked in but you can still raise capital? I mean, those are a few juggling balls to to play with, just to finalize, because I want to I want to be conscious of your time as well. If you would be, I mean, imagine there's a there's a room full of very smart impact investors listening to this podcast who are ready to move into soil, they've read the books, they've been to roadeo, they are ready. What would be your, without giving investment advice, but wouldn't it be your path, your advice to to look out for and to orientate and basically to get started?

Eric Jackson 1:04:09

That's a that's a tough one to come up with a spot answer. So you know, I obviously have a bias. I think that one of the things that, sounds like I'm pitching Pipelin.

Koen van Seijen 1:04:28

You went through that process and started Pipeline, I mean that's what you obviously thought after you could have retired.

Eric Jackson 1:04:36

It's very hard for any investment community to participate in agriculture in the space in which we're in. I don't mean even the sustainability space. I'm talking about the midstream, asset-based commodity space, because most of the large scale projects, you know, if your mandate is that you can't write a check for under 20 million dollars, let's say just as a number, it's very, very hard for you to find something to invest in, in assets in agriculture. You can buy businesses, you can certainly buy land. But the midstream piece is very tough to get access to, because there's a whole bunch of really, really tiny projects, that would be too small. And then all the big stuff is owned by the big guys. And they don't need your money. Right. So Cargill is not looking for impact investors or any investors, frankly, to come along. They have a bank, right? So we represent, and I had to learn this during the fundraising process, I learned how to present ourselves as an aggregating platform of a bunch of relatively small, individual components, that in total, represent the opportunity to take a relatively large cheque and put it to work. And we deal with all the paper cuts associated with, you know, the smallness of the individual pieces. So in the impact space, where a lot of things are still being tried, and then may or may not be proven, you know, to be commercially successful. What you're looking for, clearly, this is true everywhere, is you're looking for a strong management team. But the ability to pivot, during the inevitable curves in the road, particularly in the early years of an organization is critical in the impact investment space, and even more so on the diversity of the management team, in terms of their backgrounds, so that they can think about things in a more holistic sense. It's critical. We have people from the airline industry, we have people from the processing industry, we have people from traditional agriculture, we have people from the financial industry. We've got this wonderful malange of skillsets so that our conversations can really span pretty much across a spectrum of what you might not usually think about in business, but can be much more important when you're dealing with trying to create a new paradigm. And I know that that is, that sounds all very wonderful, quite ambiguous. That's why I don't give investment advice. But I think at the end of the day, you know, the quality of the management team and their experience in some aspect of execution prior to whatever it is you're considering investing in is critical.

Koen van Seijen 1:07:37

I think it's an excellent point to look at. I mean, from our conversation before, looking at scale, what do you want to achieve? Impact is great, but if you're looking at small scale, organic farms of a few acres but you want to actually actually change local climate you need to look at and many, many, many, and then looking at an experienced management team, to get a new paradigm and probably, I mean I would add long term view because this is a generation and generations work. So it's, unless you're in it for the long run, probably agriculture in general is not a good idea.

Eric Jackson 1:08:16

I would I would absolutely agree with that. You know, one of the things I mean, again, selfishly, what we would love to see is we would love to see a pool of capital that has somehow been formed, that is expressly intended to be used to help, you know, the conversion process. And I would suggest it, it can be an evergreen pool that regenerates itself. So another form of regenerative so it's not a one time capital. And the way that it regenerates itself as it participates in those out years in terms of the profitability. You know, I toyed with the with the concept that's essentially a green bond concept, until I realized that to put money together in a green bond at scale, then I have to put the money to work right away. And, yeah, we're not quite there yet.

Koen van Seijen 1:09:09

But they're coming. They're coming. I'm talking to some people, I hope to have an interview up for a climate one actually in India that's taking, I have to say the numbers right, I think about 8 million smallholder farmers to beyond organic as they call it, natural budget farming. And there's a region that takes on that challenge and they are probably going to raise 2.3 billion through BNP Paribas for that climate bond. Of course, it's a state government doing it etc. etc. but it shows that we're moving in a direction where serious capital hopefully, if that one is successful still takes a year, but we're moving into the direction of serious capital, which is quite exciting.

Koen van Seijen 1:09:49

Yeah, no, I fully agree and I'm envious that that can be put together in a place like India and yet we seem to struggle to put even a small scale version of that together in someplace like the USA. Investment in soil health, I mean, you can create a whole Wheel of Fortune, if you will, with lots of slivers of benefits, all coming from essentially the same thing. If you can pool capital and that capital can be put to work to help sponsor the initiation. Because our biggest problem in the U.S. is we do not have enough acres that are organic to support our domestic demands or we're importing - now granted we're always going to import things we can't grow here - but we import 75% of our organic corn soybeans. Right? And let alone whether those imports are, you know, truly organic or not. That's a whole different discussion. But the point is, we are the king of soybeans and corn, and yet we're importing organic soybeans and organic corn because we don't grow enough here. So one of the ways to accelerate that conversion is to have sympathetic capital available that's not looking to make a one time investment for a one time return, but is looking to perpetually spin that wheel, transition financing. And so we've had several people, and they're still investigating this, you know, putting together essentially a soil health bond or organic conversion bond. You know, it's at some level the name may or may not be important, but the whole concept is.

Koen van Seijen 1:11:33

No, in the name is important, because it it signals a lot of things.

Eric Jackson 1:11:37

Yeah. I'll hold on my hand and say we'd be more than willing to work with investors who are interested in that and our job in that would be to, to get the acres up and going. Our job in that would be to commercialize the product. Our job in that would be to bring other other support systems to bear to ensure success to identify the farmers that are most likely to succeed. If I had a, you know again that's starting with a small pool of capital, I think we could make this engine race a lot faster.

Koen van Seijen 1:12:14

That's very exciting, I think we need another hour to discuss fund vehicles and investment...

Eric Jackson 1:12:19

More than happy!

Koen van Seijen 1:12:20

...machines and programs, etc. But I want to be conscious of your time, Eric. And I want to thank you for now and thank you so much for for taking the time to explain and share your journey and the very exciting future that lies ahead.

Eric Jackson 1:12:34

Thank you Koen, appreciate it.

Koen van Seijen 1:12:36

You just listened to an interview with Eric Jackson. I hope you enjoyed it as much as I did. Lots to cover but so much more to dive into. I definitely plan to check in with him again and see what happened to the regenerative agriculture movement on big acres and row crops. Thank you for making the time to listen to this podcast and making it all the way till the end. I hope you enjoyed it as much as I did.

Koen van Seijen 1:12:57

If you found the "Investing in Regenerative Agriculture and Food Podcast" valuable, there are a few simple ways you can use to support it. (1) rate and review the podcast on your podcast app. It's the best way for other listeners to find the podcast and it only takes a few seconds. (2) share this podcast on social media or email it to your friends and colleagues. (3) if this podcast has been of value to you, and if you have the means, please join my patreon community to help grow this platform and allow me to take it further. You can find all the details on patreon.com/regenerative_agriculture or in the description below. Thank you so much and see you at the next podcast.

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