A conversation with Maarten van Dam, founder of Schevichoven Regenerative farm, about numbers when transitioning from conventional to regenerative agriculture and keeping records on inputs, prices, and machinery. Maarten is keeping a lot of records of their pioneering farm transitioning from a mono dairy farm to a diverse agroforestry system.
Remember the Dutch farming protests? What do we miss when we talk about the transition from conventional to regenerative? We miss numbers numbers numbers. Many of the pioneers- rightfully so- didn’t keep good records, on inputs, prices, machinery and, of course, hours. Nobody tracks hours in agriculture. What does it cost per hectare, and what off-take do you need? With a minimum of 50K euro per hectare in the Netherlands, you can transition in about 7 years to a diverse perennial agroforestry system, only counting wholesale prices, counting all your hours, and paying a fair wage. Of course, at Schevichoven they are only in year 4, so all of that has to be proven. But what does it mean for the rest of the 50.000 farmers in the Netherlands? What are the types of regen systems they can apply? We need about 150 billion to transition them. It sounds like a lot, but is doable.
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Nobody tracks hours in agriculture. What does it cost per hectare, and what off-take do you need? With a minimum of 50k euros per hectare in the Netherlands, you can transition in about 7 years to a diverse perennial agroforestry system, only counting wholesale prices, counting all your hours, and paying a fair wage. Of course, they are only in year 4, so all of that has to be proven. But what does it mean for the rest of the 50.000 farmers in the Netherlands? What are the types of regen systems they can apply? We need about 150 billion to transition them; that sounds like a lot but is doable, so let’s find out in an episode where we share very openly a lot of numbers!
WHAT IS POSSIBLE IN ONE OF THE MOST EXPENSIVE FARMLAND COUNTRIES IN THE WORLD
The average arable farm in the Netherlands has 3000 euros in turnover, 2000 costs, and 1000 gross margins.
‘We put a price on capital of 3%, and we put a price on land of 2%. So, we try to use the actual numbers, realistic numbers […] We said, well, now all the farmers could do the same. There’s nothing special to our system, and then it should end up with a turnover of 30,000 euros per hectare per year. And hopefully not more than 23,000 euros per hectare per year of costs after seven years. […] The only thing is that in our system, there are a lot of unknowns. So, we need to build the proof points, and it takes seven years.” Maarten van Dam
HOW TO FUND THE TRANSITION OF THE FIRST PIONEERS IN THE REGEN SPACE AND THEN THE SECOND BATCH
Maarten discusses refinancing loans for farmers, mentioning the importance of having skin in the game (own money or savings) to qualify for better loan terms.
”So, we decided to have 1/3 of the financing needs, about one and a half million, organised through crowdfunding. And we managed to do so. So, 700 crowdfunders, on average, 2000 euros per person, are great investors. It’s a 10-year loan […]. In 10 years we’ll just repay the loan one way or another”. Maarten van Dam
”Then we fund another one and a half million with bigger tickets; I would say 50,000, 100,000, 150,000 with no collateral 3%.'[…] It’s quite challenging because you know the day will come, and you know for sure that you can’t repay the loans from the agricultural produce from the system. So, you need to refinance. So, we’re already starting to think about refinancing”. Maarten van Dam
”And the remaining 1.7, it’s our own money, savings, or whatever. And so there is quite some skin in the game, so to speak. And so, we share these numbers, because, like you’ve just said, all the farmers need to deal with that. If they want to go into transition, then somehow you need to refinance, you need to think about other structures, and banks will come, but not as first movers.” Maarten van Dam
”The full billion I really would offer to farmers willing to go into transition needing about between 25 and 100,000 euros per hectare. Finding the first really good, good, good entrepreneurs is important because not all farmers are good entrepreneurs, but you need good entrepreneurs to make it happen. And build showcases in the 10–15 different systems, and maybe 10 farmers per system. So, find the first 100 farmers, spread the 1 billion to them, and make it happen, and some of them will fail. So, you need to have it in one fund, but the other nine will succeed”. Maarten van Dam
”So, the first billion aims for the first 5%. Those are probably the most entrepreneurial people, to build the showcases in all different kinds of systems. They will be the pioneers, and the other 95% will follow.” Maarten van Dam
OFF-TAKE AGREEMENTS ARE CRUCIAL FOR UNLOCKING THE TRANSITION
Maarten emphasises the need for credible parties to buy and finance the transition, providing comfort and security to pioneering farmers.
”Even more important, we could make the right contracts with the off-takers, the buyers of their produce, for the right prices. And they said, okay, now we feel a bit more secure. And we also have a farm that we are very proud to be part of, which is a dairy farm. 90 cows, 50 hectares, really turning into a regenerative system, but the farm needed 80 cents per litre. Well, that’s not a normal price; 45 or something is a normal price. But then we found the right people to actually buy the milk for 80 cents per litre for the long term. And then she said, well, now I’m prepared to take the risk of financing, work towards a regenerative system, and have the comfort of 80 cents per litre”. Maarten van Dam
”I’m not sure if supermarkets are accountable for 80 or 90%; I don’t know. But for the other 10 or 20%, I think we should aim for that, which is a big market in itself. So, I think that’s enough for the first 1000 regenerative farms in the Netherlands, which is only about 2%. And then hopefully it becomes a bit more mainstream”. Maarten van Dam
OTHER POINTS DISCUSSED
Koen and Maarten also talked about:
- Farming methods and market growth
- Bring back soil life
- The financial benefits of regenerative farming for investors
LINKS:
LINKED INTERVIEWS:
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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.