A conversation with Emma Fuller, co-founder of Fractal, about the transition to regenerative practices or outcomes of the millions of acres of broad-acre row cropping, corn, soy, and wheat in the US, Brazil, Argentina. Fractal provides farmers with equity financing by investing alongside them in their farmland to fund their growth.
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We all know the amazing examples that are pushing the boundaries of agriculture: syntropic agroforestry, silvopasture, food forests, complex intercropping, very advanced CSA, no dig market garden, or even agroforestry at a relative scale. But what about the rest? What are we going to do with all those acres and how do we get regenerative practices, regenerative outcomes or outcomes we like and seek like soil health etc at scale? Is there a path to having hundreds of thousands of acres in transition? Can soulless investors and the least interested in soil health farmers get these outcomes? Is there strong consumer pressure?
MILLION OF ACRES OF ROW CROPPING COULD WITH THE RIGHT INCENTIVES APPLY REGENERATIVE PRACTICES TOMORROW, THE ONLY THING MISSING IS CAPITAL
Emma realizes that many of the folks that have done a lot impressive work doing impact investing, are actually looking for almost philanthropic levels of impact alongside their investment.
”We could invest in 100 million acres if we had the capital to deploy in the next year, we can just deploy so much capital to drive so much change so fast…”- Emma Fuller
”50% of our corn goes to ethanol, something like 30 to 40% in the US of corn goes to cattle feed. So just focusing on food is also not going to hit these acres. There’s just so many acres that still need a lever for change, and that’s why I think financing actually ends up being a really compelling tool to address ethanol acres, to address livestock acres that are not going to get polls. Some of the developments in what’s happening with ethanol, with carbon intensity is great from a soil health perspective. But I think, the livestock feed is going to be a much slower burn, for getting carbon intensity passed through that mechanism. And so, you still need a way to address those acres if we’re trying to make change.” – Emma Fuller
”We sort of fit in this intermediate place… if we’re successful, this is just meeting a need of farmers and investors and it’s just baking in regenerative as part of the cash flow investment. This reduces variability cash flow, improves land valuation. This is just a good business decision and that’s actually our sort of non-romantic goal is to make soulless capital who doesn’t care about regenerative agriculture, invest in regenerative agriculture.” – Emma Fuller
WHY COULD FRACTAL OWNERSHIP IN FARMLAND UNLOCK THIS
Emma saw this opportunity to build a program that was going to be deeply impactful, but also be able to hit the scale they needed in a real way.
”To be able to move that floor up, all these farms can move along the adoption spectrum, no matter where they start or the first time that they’ve ever thought about cover crops. We have farms like that in our portfolio, who are starting to think about it for the very first time and are saying, this is really a dollars and cents question for me. And so now I’m seeing some real dollars on the table, I think I’ll adopt and qualify for this discount. And then we’re also seeing the folks that are doing seven out of our seven practices and are saying, Great, I’m going to use this and buy out the landowner and to be able to make a lot of these changes that I didn’t have the ownership security to do. So, I’m going to deepen my practices on this new field, but I’m going to be able to now own based on that. So that’s what’s hugely exciting. It’s like actually seeing that start to play out, even at our small portfolio size in the last six months.” – Emma Fuller
”We often find that some of the really big farms may already have these relationships themselves, with especially folks that have an investment background. And so, we’re finding a really nice fit, actually with sort of the smaller row crop farms. […] I’m talking about sort of 1000 acres, when we see a lot of more medium to big size at 3000 acres and above, in the US. So, those folks that are really good agronomically, really focused on their crops, have not had the time or interest in developing investor relations, like who wants to do that? …Let alone structure it. That’s the sort of fit that we are really seeing with these farms, that we can really help to be able to provide that service for them.” – Emma Fuller
THIS IS POSSIBLE NOW, MOSTLY THROUGH REMOTE SENSING AND SOFTWARE TO GET THE COST OF DUE DILIGENCE DOWN
Emma argues that people are familiar with looking at soil indices, but those are static indices that are not updated.
”That index maybe was applied 30 years ago, or 40 years ago, and we know that even on a decadal timescale, management can have a huge impact. […] When you look at satellite imagery, you can see just the horizon at the top chunk of the soil just like down the hill. And it’s like three times or something crazy, much more erosion than what we have in our formal estimates. So anyway, landscapes can change in a big way, on a decadal timescale, which is kind of hard for humans to wrap their heads around. Decadal is kind of too long to be able to sort of remember what it was 10 years ago exactly.” – Emma Fuller
”I want to build a business in which you don’t have to rely on the founders’ passion, and sort of motivation for this. And so, we are working with a third-party NGO, for example, to be able to audit and review our full verification process so that we have another entity that’s got a reputational standing and wouldn’t want to be affiliated with that greenwashing, to make sure they are looking over our shoulders to make sure that we were doing this right. And that also sort of reduces the need for the investors to be as concerned to know that there’s someone looking at additionally diligence on our end. So, combinations, that’s a long way of saying extremely low touch. And in places where we can’t see from remote sensing or other existing, we often asked for sort of third party generated reporting. So, it’s like crop insurance or machine data or things like that, that come from third parties, rather than the farmer self-reporting.” – Emma Fuller
WE NEED TO FOCUS ON RAISING THE FLOOR AS WELL AS PUSHING THE CEILING
”You want a portfolio approach to your impact. I hope that many of these investors are thinking about a diversified set of solutions that they’re trying to press against. So rather than focusing entirely on that race to ceiling sector to start diversifying, […] any solution that raises the floor alongside pushes that ceiling, because I think if we’re only focused on pushing the ceiling up, we’re just going to wait too long. And we’re putting all of our eggs in one basket without addressing the underlying infrastructure of the system for how to help move it… So, I think it actually indirectly supports many of these, raising the ceiling solutions by continuing to move the entire system along that direction.” – Emma Fuller
OTHER POINTS DISCUSSED
Koen and Emma also talked about:
- Impact investing in farmland, scalability, and investor response.
- Regenerative agriculture monitoring and verification
- Diversifying food systems and reducing carbon footprint
LINKS:
- Fractal
- Fractal Theory of Change
- The extent of soil loss across the US Corn Belt
- Traction Ag Acquires Granular Business from Corteva
- Allergy Free Partake Foods
- Carbon dioxide removal–What’s worth doing? A biophysical and public need perspective
- Farmland Turnover in Illinois
LINKED INTERVIEWS:
- Liz Carlisle, how lentils changed a region and started an organic company 30 years ago
- Liz Carlisle – Let’s get real, regeneration is nothing new, so let’s honour the indigenous history
- Pete Oberle on how to invest in lab grown regenerative meat
- Tripp Wall on why provenance is key and time kills food
- Mark Lewis, hunting for unicorns in regenerative agriculture and food
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The above references an opinion and is for information and educational purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.