Ranch Investor Podcast

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Episode 5 | Earth Stewards: Insights from Three Masters of Land Management


Unlock the secrets of a thriving agricultural future as we converse with industry titans Will Harris, Howard Halderman, and Don Colter. They bring to the table an in-depth exploration of the delicate interplay between investment strategies and sustainable farm management. Dive into the symbiotic relationship of yields and returns and how seasoned experts like Howard balance the stewardship of a family legacy alongside the creation of institutional farmland portfolios. As the conversation deepens, learn how these thought leaders navigate the challenge of aligning short-term investor expectations with the long-term value of regenerative agriculture. Discover the innovative approaches that allow investors to foster sustainable farming methods without the onus of land ownership. Our guests share their wisdom on incentivizing investment in regenerative agriculture for a sustainable future, highlighting the promise of higher market values for well-managed, environmentally conscious farms. This episode is more than just a conversation; it’s a roadmap for the future of agriculture, where the health of our land is the foundation for prosperity.

Will Harris: 0:00
You all take a very linear approach to agriculture. You’re talking about five years, ten years, what? The number is Very linear and I think that’s wrong. I think that agriculture has a living system that’s very cyclical, not linear.

Colter DeVries: 0:18
I’m Colter DeVries, owner of Ranch Investor Advisory and Brokerage Services. I’m an accredited land consultant with the Realtor Land Institute and proud member of ASFMRA.

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Colter DeVries: 0:51
Let’s start with some introductions, howard, if you would, yeah, howard.

Howard Halderman: 0:56
Holderman. I’m in North Central Indiana, so Wabash, indiana, and in the Eastern Corn Belt. We are a 94-year-old company. We have Holderman Farm Management, holderman Real Estate Services and we do property management 600-plus farms in the Eastern Corn Belt predominantly. We also do farm appraisals and we do farmland brokerage. Primarily it’s going to be corn and soybean land. That’s one business. The other side of my business is US agriculture. Us agriculture is an asset manager. We build farmland portfolios for institutional investors. A couple of our clients this is public information One is Arkansas Teachers Retirement System and the other is the New Mexico Teachers. So in both those instances the teachers have about 100% of their pension invested in farmland and we invest all over the continental 48 United States. So we have a set of parameters that they have given us and we go out and build portfolios according to those parameters. We have about 600 million in assets under management today at US agriculture. So that’s separate from my Holderman businesses that you see the logo for the Holderman companies are what my grandfather started US agriculture. We started back in 2011.

Colter DeVries: 2:16
Now, howard, 600 million assets under management and what did you say? What percentage of the pension fund is in farmland? You broke up when that happened.

Howard Halderman: 2:28
Oh, sorry About 1%. 1%, yeah, in Arkansas Teachers System they allocated 1%. They got about a $20 billion portfolio, so that’s $200 million, and US agriculture has about 125 million of that invested, and then US USB has the other. I think Not USB, but oh, the Swiss organization.

Colter DeVries: 2:55
UBS yeah, UBS, UBS, United Bank of Switzerland and Don Coulter. You probably have some experience with United Bank of Canada and TIAA-CREF and some of these large, large institutional farmland owners. Tell me about your background.

Don Colter : 3:15
Thanks, coulter. I was born and raised in the cattle industry in Colorado and Arizona and then out of college I went through and got my AECON degree and then started into the banking field. So I was in ag finance for 35, 37 years, something like that, and then worked for a large equity group for about eight years, both managing farm properties and as the acquisition manager.

Colter DeVries: 3:45
I’m going to give a little introduction to Will Harris. Him and his daughter, jenny, have twice been on the Joe Rogan podcast Joe just thinks the world of Will and had him back on a second time. Will is I don’t want to speak for you on your business, will, but it sounds like Jenny’s going to be taking on more responsibility and you have a book out and that book is a bold return to giving a damn and that can be bought, probably on Amazon. How about on the website Will?

Will Harris: 4:20
I think so. I believe they do offer it on the website, and Jenny is one of my daughters.

Colter DeVries: 4:25
I have two daughters and two in-laws in the business here that are in the gradual process of transitioning control of it In the process of transition, which is extremely difficult on a farm and a ranch, I’m sure as Howard and Don know from experience and some of their clients. Well, let’s just get started. Will, if you can give Don and Howard and I and the listeners one more time, how would you describe your operation?

Will Harris: 5:01
White Oak Passage is our family farm in Bluffton, georgia. It’s 3,200 acres of well. We own a little over 2,000, lease about 1,000, and we farm another 2,000 acres. That is solar and we have a lot of old tech arrays that we graze, so a little 5,000 acres. My great grandfather started the farm in 1866, followed by his son, my grandfather, followed by his son, my dad, followed by me, followed by my two daughters and two in-laws. We currently have pastries, five red meat species cows, hogs, sheep, goats, rabbits five pole for species chickens, turkeys, geese, guineas and ducks, organic vegetables, a small way, honey. What over the land will produce that we can market?

Colter DeVries: 6:09
Now five species of poultry, five species of livestock and Don and Howard. What are your clients looking for? Is it just an annual yield of 4%? Can’t you accomplish that with this diversified crop mix?

Don Colter : 6:27
I think it’s both looking for annual yields, irr, but also scale. I don’t know how are his clients, but other equity groups that I’ve been involved with are looking. They’d like $5 million at the bottom and $100 million or $200 million on the upper end for investable assets they’re looking to place a minimum of $5 million.

Will Harris: 6:56
Yeah, I can probably shed a little insight right there. What we do here is not scalable in my mind and in anything like those kinds of numbers. It is highly replicable. There can be a lot of them, but in terms of scale, there is a high side to it. We may be on it.

Will Harris: 7:17
We sell about $25 million a year and I don’t want to go to $30 million. I actually didn’t want to go to $25 million. We’re actually operating at a little bigger scale than I’m comfortable with. I found it necessary to go to that because I failed to say that we did build a USDA-inspected red meat plant. We did build a USDA-inspected poultry plant. We have some customer facing, public, facing businesses going on here, a store, a lot of lodging. We’re very, very rural here for Eastwood and the city you know, maybe not you know I’d say define that where you want to. It’s one of the poorest counties in the United States of America. In fact, this county was the poorest county in the United States of America in 2020. So it’s we have, we’ve got 170 or so employees, largest private employer in the county, and housing is an issue.

Howard Halderman: 8:27
So we’ve spent a lot on housing as well, howard, you’re in Southeast Georgia, southwest Georgia, southwest, okay.

Colter DeVries: 8:37
Howard, 25 million on 2,500 acres sounds like a very compelling PPM to go pitch.

Colter DeVries: 8:44
Oh, now 5,000 acres 25 million on 10,000 acres sounds like a compelling PPM to pitch. Howard, why couldn’t you take that model and I hear that scale is a factor, but replicability may not be why not? Why not break it out to where you have the the corn and soybean enterprise and then you have an independent entrepreneur like me who would run goats behind it, and then someone else who’d run cows behind it, someone else who would take that risk and shift it to the local value added market that Harris has have there. How come you? Why couldn’t we just chop up these? And I know Will doesn’t like special Will and I talked about specialties last time and he doesn’t like that that I was pro specializing in certain areas, but why? That seems sellable to me, howard.

Will Harris: 9:48
So farming on the scale that you’re advocating is a wholesale business. Your customers will be one of the big meat companies, one of the big grain companies, one of the big you know, and that that does not work for me. So farming the way we farm here, it is absolutely a deal buster. If I’ve got to go through a big multinational ag company, you know you’re producing a commodity product and you’re taking commodity prices and my business won’t work like that.

Howard Halderman: 10:25
So, to answer Colter’s question, I don’t know that we wouldn’t invest in it. But here are the challenges. First of all, they do have a return hurdle. That’s important. We have to develop what we think over a 10 year timeframe. The internal rate of return will be on this, which includes not only cash return but also value appreciation.

Howard Halderman: 10:49
One of the things, one of the dynamics, that becomes a challenge with this operation is what happens if Will Harrison, his two daughters, are not involved. Are there other tenants that could step in and operate it? And I would argue, with the diversification that Will has, that might be a long shot or an impossibility, to be fair. I mean it sounds like a very unique situation. Now, that said, you know we’ve got clients that are invested in blueberries in Southeast Georgia. We’re the largest producer of blueberries in the state of Georgia and now they’re good. Those are going to Michigan blueberry growers. We have put in two processing facilities on our properties there, so we are buying up the value chain. Is it a commodity? Yes, it’s not a large scale commodity like corn and soybeans, but it’s still a commodity at that point. But in these facilities we’re going direct to the clamshell, that’s going directly to Kroger or you know, you name the retailer. We’ve got a citrus operation in South Central Florida. It’s a specialty tangerine that basically it’s a unique variety that sold out every box the last couple of years that it’s been available. It also has some resistance to greening. That’s a situation where we’re producing a crop that goes directly to the retailer and there to the consumer, but that is not what Will’s doing. I mean Will is running agro-tourism mixed with ag retail and a very diversified operation. Not saying we wouldn’t have a client that would look at that, but I think the concerns over our ability to replicate the management of that if Will and his daughter say no, we’re not doing it anymore, that could become a challenge.

Howard Halderman: 12:41
Now on the sustainability front, we have a client and I’ve not named them because it’s a private deal but we have a client that wants to buy farms for lack of a better term, I mean that is a very general term, but any farm operation that is doing things in an ESG sustainable way, they don’t really define exactly what they’re looking for, outside of the fact that they say we want to do it better than those operators in the general vicinity around the asset that we’re buying. So that may involve cover crops, they may involve organic, that may involve reduced tip lids or no tip lids. That could be a whole host of things that are viewed as sustainable or ESG interesting. So we do have clients looking for that aspect of what Will is doing. So I wouldn’t rule it out. I’m just telling you that and from a minimum standpoint we could go down If we were to go to Southwest Georgia. Probably $5 million is going to be your minimum, just because we don’t have any other assets that part of the state. If it were in Indiana, illinois, places where we’ve got assets already, then we could go down to $1 million. So we’ve got some latitude to go down to smaller, bite-sized pieces.

Howard Halderman: 13:59
But I think the locally grown agro-tourism, agro-retail that Will has, that’s going to be a management structure. You’re going to have a lot of employees. Honestly, our clients aren’t super excited about employees. We do employ all the labor on those blueberry farms and we do it through an organization that brings in the seasonal labor to harvest the blueberries for us. So we do have instances where we’re directly operating the farm, taking all the product as your return and paying all the expenses, including labor, to get it done. But we’ve got to have an onsite manager that manages every detail day to day. Us agriculture doesn’t have the expertise to do that, so we’re going to need somebody like Will and or his daughters or that team that can come in and manage that operation. If they’re not there and I think suspicion that’s going to be really hard to replicate.

Will Harris: 15:00
I agree with everything Howard says and I think there’s an even greater point that he didn’t mention, and I think the biggest issue is I’ve got some debt but I’ve got 3 times as much equity as I’ve got debt and I’m satisfied with a very, very low return on my investment, not just because of lifestyle. That’s great, I enjoy the lifestyle. But my farm has gone from a 1% organic model to over 5% organic model. That’s excellent In the last 20 years and I can’t do it as fast as I read people do it took me 20 years and I’ve been doing it for God’s blessing.

Will Harris: 15:46
But and if I I got friends who are land appraises and they appraise my land, they say, well, if it’s half percent, 5%, we’re going to appraise it for the same thing. And they do that’s fine. The productivity of my land at 5% is exponentially greater than the production capacity of my neighbor’s land at a half a percent and that means a lot to me. You’re building my land up does not show up on my financial statement. If I was working it for an investor you might, but the ones I know wouldn’t give me much credit for that. But for this family farm that we own, it has exponential value to me. So if I can operate the son of a bitch at break even and increase that kind of value, this is a good deal for us Don.

Colter DeVries: 16:43
I want you to comment on that, because he brought will already brought up my next question Isn’t there long term value in what he’s doing? So if you’re, howard talks about a 10 year IRR, don, and if your hurdle rate is 7%, wouldn’t that organic matter and the sustainability, resiliency of what will is doing? Wouldn’t that add value in the long term? Or are we still kind of in this position where ESG sustainability metrics it hasn’t been proven out to add value, that people are taking a discount to pursue green investments?

Don Colter : 17:28
Yeah, I would agree. I think one of the things that traditional investment hedge funds, equity funds, is their timeline. I think they can be a little bit short-sighted in that and, as Will mentioned, developing the organic matter and improving the soil of that nature is a very long-term process. So how do you measure it? What’s the value of it? I know you understand you’ve got the metrics of it, but trying to translate that into a value and represent that and communicate that to a pension fund and whatnot can be difficult. Personally, I think it’s got huge value.

Don Colter : 18:21
I’m a huge proponent of that regenerative style of agriculture all regenerative agriculture, depending on what level an operator is doing. So I think it’s not new, but new enough and not measured enough for a traditional fund. At many times I think there’s a lot more light being shed on the needs for regenerative ag, especially with ESG mandates In the US. In the EU it’s become a lot more focused on with their SFDR mandates. In the EU it’s really built into their reporting requirements and I don’t think the US has quite got there yet.

Will Harris: 19:15
I wish you’d filled the news whole words. I don’t know what to end them down. I can’t end you. I knew that one. I knew you, all of us, y’all speaking acronyms. I have no idea what you’re talking about, but I will say that and I certainly don’t mean.

Will Harris: 19:32
I want to be very respectful to this group here, but you all take a very linear approach to agriculture. You’re talking about five years, 10 years, whatever. The number is very linear and I think that’s wrong. I think that agriculture has a living system that’s very cyclical, not linear, and I think that’s the reason I’m satisfied with almost no return on my investment. As long as I know, I’m exponentially building the production capacity of my farm. We’ve owned it for 160 or whatever number it is. You know my children may sell it. If they do, they’ll sell it and it will be sold. I’ll be dead. But what I’m doing is putting them in a position so they can’t own it for another 160 years if they want to, and I realize that’s not marketable in the situation that y’all are in To operate this in a cyclical model, which is the way I think that a natural system really needs to be operated. You can’t look at it as an annual return or decade, or maybe not even generational. It’s got to be perpetual.

Colter DeVries: 20:54
Howard, aren’t we seeing more of these institutional owners turn into essentially permanent capital, this protection of principle and granted, I think Will might be a little fresher at even talking about these types of assets as balance sheet assets, but we’re going to today. Are they not becoming more permanent capital? And it’s just this excellent protection of principle. And maybe is that message not being marketed more effectively that hey, if you take a small discount on the annual yield, we’re going to actually improve the principle in the long term? Am I way off in that thinking, Howard?

Will Harris: 21:38
Well, you’re wrong. You say small discount. I think you’d be a huge discount.

Howard Halderman: 21:43
Will’s not wrong. We do have to look at performance metrics, and so we’ve got to really try to create a 10-year internal rate of return that hits the marks that they want, and if they’re at 68% internal rate of return, then that’s probably a transaction that we can look at Honestly. I think how it? But your right culture is that there are more and more groups out there that want to invest and they do want that long-term sustainable theme here. It would work well with an operator like Will and this is where we’ve done it with these other producers I mentioned earlier is that we don’t operate their core business, but what we do is we come in and Will says, hey, I want to buy this 1,000 acres next to me and I want to do the same thing on that 1,000 that I’ve done on my own farm, but I don’t want to put my capital into it or it can’t whatever. Then, mr Investor, could you step in and be the capital source for? That.

Howard Halderman: 22:41
And I’m going to operate that 1,000 acres under my system, which is a very sustainable, long-term cyclical, as Will was describing, a very holistic approach to soil enhancement and making that farm better 10 years down the road than what it is today. Then we can build the model from that and by leasing that to his operation and he may not want to go to $30 million, but it could help him grow his operation in some fashion and not have the capital tied up in the land resource.

Howard Halderman: 23:14
And so that’s what we’re doing in many instances, whether it’s apples in Washington State or the oranges down in Florida we’re going in as a partner with an existing operation and providing a capital source for them to expand and grow their operation, and then our owner, our client, receives the financial rewards and the benefits and the returns to that land and that investment in trees or whatever. So that’s probably a more of a way to look at it than us coming in with an investment in the whole operation Because, as I said earlier, to try to replicate that management team and oversee that management team, I think Will’s got a unique situation there. These obviously are very successful, so, but I think being a part of that and providing capital as part of that would be something that we do on a regular basis.

Will Harris: 24:06
I bought every farm that’s sold for the last 20 years that touched mine. I bought it and I have reached the point. I can’t keep doing that and there will be other farms for sale. This country down here was in 250 acre farms or so when I was growing up and those people have left and consolidated. Now they’re just a handful of bigger farms, most of them industrial peanut, cotton, corn, root crop farms, and most of them don’t own a lot of land. They lease land. So I’ve been buying land and I’m very pleased that I did.

Will Harris: 24:46
The land I bought escalated in value significantly over the last 10, 15, 20 years and I’ve increased the organic amount of the productivity of it and put it in grass and fenced it, cross fenced it, chopped it up into 150 something small politics, which is very advantage and we made the family decision recently that some of these other little farms will be selling in the next decade or so and we probably can’t buy them. I just don’t want to incur the risk at the low return that we generate. I don’t want to put my family at risk. We have some debt now but it’s pretty manageable. I just don’t trust a big land buying outfit. I mean I can’t stop them from buying it. But if they did, it’s hard for me to trust that they would allow me to improve the land and share in that benefit, and I can’t afford to pay them what land leases for if I’m going to improve it.

Will Harris: 25:58
You got to decide what you want. You want the organic amount to go from half a cent to five a cent or do you want to collect 100 or like a rent? You fellas may be different. I hope you are. I hope you are. God bless you. But everybody I’ve ever talked to it was about the return they can get on the land. You know they get in the most money they can and the most money they can get is going for somebody that’s going to get the hell out of the land. And that’s what I got to half a percent for them, to your organic amount, sharing the risk and the reward, and Don.

Colter DeVries: 26:32
I suspect that what Will just said you’ve heard before from some of your strategic partners. You’ve heard before from some of the competition. I understand that when you go out looking at a farm, it’s not other institutions that you’re bidding against. For the most part, it’s the neighboring farm. How do you Don? How do you address the concerns Will had just mentioned about? Well, maybe I am backable. Maybe it does take institutional financing to expand. How do you address? Because you’ve heard I’m sure you’ve heard this before from other farmers.

Don Colter : 27:12
But you have. You know, when you’re going out looking at properties to acquire. Maybe it’s unique in my area up here in the Pacific Northwest A lot of the larger quality operations are being sought after by institutionals or some of the large corporate entities. There’s not a lot of smaller individual family farm corporations that are getting them. So that’s one of the things that are unique up in this part of the world. But you’re right, you do hear that. You know I’m going to improve the soil but that takes time, that takes money and can we share in that? Yeah, that’s a. It’s again a difficult discussion sometimes with the investors because they’ve got their investment horizons and return requirements to meet for their pension clients, for example.

Colter DeVries: 28:20
Howard, how do you allocate or deal with this vested interest vesting and making sure that the tenant is operating to the best of the soil’s ability? And we haven’t even talked about community, and no, community is a big piece about what Will does, but we’re talking numbers on a balance sheet. So vested interest sharing, risk sharing, returns, howard, how do you approach that?

Howard Halderman: 28:50
When we look at a opportunity, we’re going to first of all buy something and it isn’t so much about the piece of property as it is about the operator, and the operator has to be able to bring value and probably is going to be a little special in each marketplace and then we want to invest alongside them. So you’re partnering with them.

Howard Halderman: 29:16
I mean that as a partnership, we’re not seeking the highest rent, we’re seeking a replicable rent, so it’s a rent that we could get from five other tenants. That way we know worst case scenario this guy gets hit by a Mack truck. We’ve got somebody else that could step in and pay that kind of lease rate. It isn’t so unique that you’re stuck. We took our investors on a field trip in August and we do this every other year. We went to Northern Illinois and we went to a partnership that we have with this family farm operation. It’s two brothers and their father that they have solar, they have wind, they have gone into cover crops and no till in Northern Illinois. We’re partnering with them and buying land.

Howard Halderman: 30:02
Basically, they’re saying, hey, we can’t put our capital in land, halderman, you’ve got this client out of the EU that’s willing to take a little lower return because they want to enhance the value of the soil long term, and so we’re then basically acquiring pieces of land for them that they’re going to operate in this sustainable fashion. We certified a leading harvest, so leading harvest is a certification method that has been kind of accepted by a lot of institutional asset managers, and we certify all of our properties to that, which basically means that you’re doing things in some part of an ESG compliant method. So Will knows what that is. That’s environmental, social and governance practices that are sustainable long term sustainable in all those three categories. So that’s the way we do it.

Howard Halderman: 30:51
But we really look to try to build a long term partnership, and if you’re going to build a partnership with a tenant for 10 years, 20 years, which is the investment horizon a lot of these investors have they have to make money too. So, colter, we’re not doing this and saying, hey, we want the highest rent possible and we really don’t care what your side of the equation looks like. That’s false. We want to have them be profitable, because if they’re profitable, they’re going to reinvest in that property and likewise we will invest in them and it becomes a great relationship and they’ll bring us more deals over time and it just grows that overall portfolio and will hit the marks that our clients are looking for.

Colter DeVries: 31:30
Will. How do you feel about certifications, oh?

Will Harris: 31:34
you know I’m just burned out on them. I mean, I’m not anti-certifications. I’ve had just about all of them you can have. I don’t think you need many I hadn’t had at some point. Today we’re certified by plan to market the slavery deal. American Grassville Association certified humane properties and mobiles. I used to be certified organic. I got pissed off when they allowed hot house tomatoes to be certified organic. I’ve had many of them. I don’t hate them, but they’re all. This is another thing I feel very strongly about is I went to the University of Georgia.

Will Harris: 32:21
I majored in animal science undergrad in the 1970s. The courses were taught by professors that were from Montana and Massachusetts and Maine. They could teach anywhere because it was so repostant. I very strongly believe that every ecosystem has rules that you go by. The laws of nature, the cycles of nature, the energy cycle, mineral cycle, carbon cycle, water cycle, dot dot dot. We name a bunch of them Are universal, but the application in the coastal plains of Georgia versus the Rocky Mountains, versus the Great Plains versus New England is different 30 miles from here. I’m disturbed by the way certification programs are designed to work anywhere in the world. I don’t hate them, I just sort of burned out on them. I got a bunch of them. We still got a bunch of them. They’re important to my daughters. They’re not important to me. I don’t like them, but they’re just so. I don’t know what the word is. They just apply to everywhere.

Colter DeVries: 33:51
So they really apply to nowhere. Homogenized to Don. Let’s get philosophical. You mentioned that you like regenerative agriculture. You’re an old cowboy yourself. Really, you’re a cowboy in a suit. Today. It looks like you’re going to go hunting after this. But is there a future where we start seeing more UBS, ubc, tia, craf investing in regenerative agriculture with livestock?

Don Colter : 34:26
I think there is an interest in regenerative ag and I think one of the things it goes much to the same as organic and the others. What’s regenerative to me is probably very different to Will, to Howard, to you, so it’s much to the same as what’s a GMO. I hear people get on the soapbox anti-GMO.

Howard Halderman: 34:54
What is it?

Don Colter : 34:55
Is that selective breeding? Is that gene splicing? It’s all genetically modified. So my backup into just a general category of regenerative agriculture I think there’s going to be more institutionals involved in it. There’s one company, VEDA. A former colleague of mine works there. They’re kind of a start-up but they’re really trying to work with tenants on regenerative practices and for them that might just be cover crops, precision agriculture, to selectively spray, to selectively apply fertilizer, so they’re trying to limit that input and regenerate and build soil health.

Don Colter : 35:49
So, like I said, if I step back just to my old cowboy roots, my dad do I say take care of the ground, the ground takes care of you. It’s fairly simple. So how do you blend that into institutionals? I, Howard, hit on it. You have long-term relationships with quality tenants that, as is one of my former colleagues, do the right thing when nobody’s looking. So it’s harder to measure, but there’s interest in it and I think if the managers, fund managers or those of us who’ve been involved, can convey that message as well as deliver whatever a decent return that a client might need, I think that is a critical part into the chain as well, Howard you’ve had those discussions, I’m sure.

Colter DeVries: 36:51
What is the challenge with the clients that approach you and say we want ESG, we want green, we want regenerative, but we also want a 4% annual yield. Where’s the friction there? How have those conversations been going?

Ad: 37:08
Well from our standpoint, what we’ve always done at US agriculture is.

Howard Halderman: 37:13
I believe in the public, transparency, and we’re at a stage where we don’t have to take the next dollar, and so our answer has always been I can tell you I was at a meeting in New York City at Global Ag Investing Conference, and I had these two investors sit across the table from me and they wanted to hear what we could do, and so I started talking to them about what we can do and how returns are somewhere in that 6% to 8% long-term internal rate of return and they said, well, we want 15%. I said, well, that’s not the kind of agriculture that we do. And they said, oh, I said so, I guess we’re done here, and the conversation ended in five minutes because it so. That’s the approach that we’re going to take. If somebody came to me and said, well, we want this ESG compliant, leading harvest compliant, you know, whatever certifications Will doesn’t care for. Honestly, it’s a lot of work on our end too.

Howard Halderman: 38:08
So I completely get his frustration. And if you’re designing one of those, it has to be general, because it has to fit a thousand different operations. It can’t be just, you know, specific to one region or one spot, because then you don’t have enough scale to justify. So it is frustrating because it is so general and you’re answering questions about crops that don’t apply to you, and so I get all that. But if we have a client that comes and says we want that, all right, we can do it.

Howard Halderman: 38:38
But here’s reality it’s probably going to cost you a little more because we have more management that we have to do and you make sacrifice some annual yield for that cash yield. But we believe long term you’re going to end up with a better farm, and so the onus on us as the manager then is how can we document what Will’s documenting and show value in that? Because I would argue, if Will’s going to a 5% organic matter and he’s telling me his production, annual production, is better than all of his neighbors who are at half percent, we can monetize that. I can sell not that Will wants to sell his farm, but I can sell that. Because if he’s telling me why I can grow 220 bushel corn on half the water they’re using or half the fertility they’re using because my organic matter is better, then there’s got to be a.

Howard Halderman: 39:32
I can operate that on a custom hire basis and make a higher rate of return than what I can on a normalized custom lease. So that’s the answer I would give is how can we formulate a partnership that capitalizes on making that a better farm over 10 years, and how do we translate that to real value when the appraiser comes out to appraise it? And granted, we do 1200 appraisals a year at Halderman, so I know how the appraisal game works and you have to use comparable sales. Well, how can I show that appraiser that this is certified to leading harvest and it’s got a better organic matter than all these comps you’re using? And therefore that translates to a higher APH, which, at the end of the day, is higher farm income.

Will Harris: 40:20
I’ll tell you what I’m going to start. I bought a little farm out here several years ago and I had borrowed money from the bank sent an appraiser that I didn’t know and so often these appraisals are kids, but this guy was about my age and I didn’t send anybody with him. I took him myself because I just wanted to and I showed it to him. We have a nice in-depth conversation about farming and land management and it was good. I thought he was just on cue with his comments and I said I want to show you something. So I took him to another farm that I had bought, that we had really managed well, I think, and the organic model was up north of 5% and it was right beside the farm I don’t own. In fact the cousin of mine owns it. There was a half a percent and I said these two farms are about the same size. They both got a well, both on the road.

Will Harris: 41:22
How would you appraise it? And I said no. But before he said out some, this was 5% organic matter. That was half a percent. He said I’ll appraise them for the same thing. I said you would. He said yeah. I said no, I’m ashamed. He said that to me he understood, but the rules that he felt compelled to play by he appraise those farms. At the same time, I can tell you that the farm that we had improved will yield significantly better, whether it’s grass or grain or grape fruits, don’t matter.

Howard Halderman: 41:59
Well, here’s the thing You’re building up your organic matter. It’s going to use less water, right? Because you’ve got more water holding capacity in that organic matter. So not only is it going to have an enhanced yield, but your cost if you’re irrigating is going to be less. So a lot of regions around the country, water is extremely valuable. And how can you cut that water usage? I can monetize, which an appraiser needs to use an income approach. If he’s purely going off sales comparison, then he might struggle to come up with additional value for 5% of the antimatter. But on an income approach, you’re using the same cap rate but you ought to have a higher income because your farm generates a higher cash return.

Will Harris: 42:48
Yeah, but now we’re on the Floridian aquifer, yeah it’s the best aquifer in the country and water is cheap, with water costs nothing other than the energy cost of getting out to ground and all the crop. Yeah, and I can tell you so the research shows, and I believe, that 1% organic matter will absorb a 1-inch rainfall. It’s 27,000 gallons a acre and I believe that I’ve just watched enough that I not that it comes in 10 minutes, but if it’s gradual, yeah, just so happens. Today we got a 5-inch rainfall, that’s over a 36-hour period. We just got one. That’s the reason I’m in here.

Will Harris: 43:35
I could take you to where my land. Very little water was running off and what was running off was clear. Off an adjacent farm. Four and a half of the five inches ran off because it’s only half an organic matter it’s not going to absorb, and the land was red with clay subsoil. The water was red. So you know, there’s no doubt. There’s no doubt. Well, everything I’m telling you is just spot on. I can show it to you. But in this farming system it just doesn’t matter much because that guy doesn’t own that land, he doesn’t care, he’s pumping water. That’s cheap, cheap water. You can pump water today cheaper than you can build organic matter to absorb rain, and it’s just the economics.

Howard Halderman: 44:31
In your area, but that is not true.

Will Harris: 44:35
And today it won’t always be true. It’s true today, Right, yeah, good point.

Colter DeVries: 44:41
What I hear somewhat, don, is are we lacking in being able to monetize some of these public goods? The soil runoff, drought, resiliency, the reduction of pesticides, herbicides you know, will was talking about his neighbor’s erosion that’s, and Will’s management is essentially a public good. Are we lacking ways that maybe it’s an incentive scheme on behalf of the institutions? Are we lacking ways to monetize that public good that Will provides?

Don Colter : 45:21
I think it’s either a lack of monetization or the lack of particular investors to accept a lower return to do these practices. So, yeah, I think there would be. If there’s a way to monetize them better, I think that would definitely help. You know, you got to have the feedback loop on your investments for things and I don’t know what that because.

Will Harris: 45:48
But I can tell you this I don’t buy the 80 miles from the Gulf of Mexico and the Gulf of this, that part of the Gulf of Mexico, used to be one of the best oystering fisheries in the world and now it’s a big old dead zone, diamond. They banned oystering and all that di-nitroaniline and oligantil phosphate and phosphate and nitrogen that we I was doing it too put on my land and my neighbors put on their land, went down Spring Creek to the Chattahoochee River, to the Gulf of Mexico and did that damage. And I was part of that. They were during the era that I’m not anymore, but during the era that that happened I was putting out chemical fertilizers on the best sides as much as anybody else, probably a little more than my neighbors were. But that’s a cost that we all bear, and I can name a lot more of them if you want me to, and so I mean what we’re doing is so wrong and so uncorrectable that I don’t think we see it done in my lifetime. I think what we’re doing here is one of the solutions for these problems, but it’s expensive and I don’t think I’m not real optimistic about it. You have to tell my family we’re doing what we’re doing here for us. We’re no longer part of this great dream of farming becoming deindustrialized and changing. Maybe it will, probably won’t, certainly won’t during my lifetime, probably won’t during their lifetime, may never happen. But it’s okay because we’re building a tremendous amount of resilience into this land and we have built a market for $25 million worth of product that there are consumers that will pay enough for it to allow us to do it, and the land is getting better and better.

Will Harris: 47:53
And I don’t know this any. I don’t know how that looks. I don’t know how people say well, you have 5.5% organic model. You can’t get to 10, correct, but I can be twice as deep, you can be. Instead of four inches at 5%, it can be eight inches at 5% not during my lifetime at some point. So doing the right things for something as perpetual as the land is a right freaking thing to do.

Will Harris: 48:25
And if you expect to trade it, you know when I buy a car, I don’t buy the nicest automobile in the road and I don’t spend incredible amounts of money in maintaining it because it’s a wear-eyed. How many non-depreciating assets are there? Land? Very few. Precious jewels, precious metals, maybe art I don’t exactly believe it, but maybe, but there aren’t many non-depreciating assets and of the non-depreciating assets, the only one you can do something with is land, and the only one that you can improve is degraded land.

Will Harris: 49:04
So if I don’t see how a person with a family that well, if you’re 20 years old and you’re just gonna be doing this until you’re 60, don’t do that. Don’t do that. But if it’s going to be more perpetual, it’s the best investment you can make. You know, again, we’ve got a lot of equity. We pretty good at doing what we’re doing. We built a pretty good business, but there’s not a lot of return and I’m fine with that. Now, I’m fine with it. If it was, if it was spending off cash, we’d be paying taxes on it and probably pissing it away. So what’s happening? You know it’s going back into the improvement of this perpetual asset. That’s exactly where I’m going.

Colter DeVries: 49:58
Howard, you were gonna chime in after Don. What were you gonna say?

Howard Halderman: 50:02
Well, I think so. I did two seven hours today and I did four last week, and one of the slides that I show in those seven hours we had two auctions November 29th of 2022. So on the same day we sold these two farms at auction and they were about 50 to 60 miles of Carter Creek each other. In Indiana it’s pretty consistent. Across Northern Indiana it’s corn and soybean land. There’s a little bit of location difference, I’ll give you that, but not a ton between these two farms.

Howard Halderman: 50:32
The soil productivity index, the inherent soils that are there the farm in Cass County was 148, though Delaware County was 145. Very similar productivity indexes. The range in Indiana is like 188 on the best and down to below 100 on the worst. So very average farms, soil-wise for the state. Those two farms sold for 100% different values. The Delaware County farm brings 15,000 an acre. It had the reputation like Will Harris’s farm would have. It had the reputation as the best farm in the county. So the farm in Cass County had a reputation as a very poorly managed farm, not taken care of. It brought 7,500 an acre, exactly one half the value of the other farm. Now, some of that is made up in location.

Howard Halderman: 51:29
I’ll give you that because this part of Cass County is not a great location and the Delaware County is probably a little better for location, but not all of it. A lot of it, I know, had to do with the fact that that farm in Delaware County had better management. They cleaned up their fence rows, they had better weed control, they had better fertility programs. I don’t know whether they were sustainable or not, but the community viewed that as gosh. That’s a really well-maintained farm, well-maintained asset I’m buying. I know when I’ve sold hundreds of farms at auction, I get the comment when you hear somebody come in and they say, well, that’s a wet farm that’s never had a fertilizer truck across it, those are negative reputational comments. That brings less value Then if.

Howard Halderman: 52:13
I had the soil test from Will Harris’s farm and I could show 5% organic matter and I could show top-notch fertility and I could show top-notch production yields. If I had that to market as a broker, that’s going to bring more value. I truly believe it’s there and I know I’m disappointed that the appraiser gave Will that kind of answer. Because you can adjust for quality. That’s allowed for an appraiser to adjust for. You can adjust for time, you can adjust for location, you can adjust for quality and that’s what his answer should have been.

Howard Halderman: 52:46
Yeah, you know that 5% really ought to be better than 1.5% and I can appraise those for two different numbers and I can justify it. I tell all my appraisers and we did 1,200 appraisals last year, so we’re not small in this business I tell them all, when you do an appraisal you better be able to sit on the stand and defend it. You know, very seldom will we ever go to court. You know it’s not. It’d be a divorce case or something like that.

Howard Halderman: 53:09
So most of the time you’re doing it for a loan-based collateral. But if you always mentally think about, I can defend it. Well, I know I can defend Will Harris’ quality adjustment because I know additional organic matter can absorb more rainfall, I know it’s gonna hold more rainfall, I know it’s gonna hold more fertility and the fertility is gonna be more available to the crop, which translates to a better yield. And a better yield at the end of the day is gonna generate more farm income.

Howard Halderman: 53:34
And a farm is worth. What it produces is income. It’s an income-producing asset, so I think you could easily justify a higher value. I don’t know I’m not giving you an exact answer as to what that’s gonna be, but it’s there. I think it’s provable. And that example from you know 15 months ago is one of the examples I use in those seminars to say here’s why you take care of your farm.

Colter DeVries: 53:56
Well, I know I told you guys an hour and a half, but I’m comfortable with the good hour we’ve done. This has been excellent for me and I hope you’ve enjoyed your time as well. I do wanna have some outros, though, so taking us away. Final thoughts. Will Don Howard, kind of as let’s go full circle, do we see a future for the more scalable or replicable or repeatable institutions looking to get involved with what Will is doing? You’re shaking your head, no Will. Why is that?

Will Harris: 54:29
Well, it’s just, you know, I think that the idea that land is a perpetual asset has been ignored or taken for granted or considered to be, you know, more like a tract or a barn. This is where you can get out of it for this period of time. And I think that, while these guys me understand, I seem to, and I credit you being able to understand increasingly value by increasing the micro-gill life organic amount of nutrient density dot, dot, dot. Most people don’t. And it’s hard for you know, the land that I have bought and paid for paying for. You know, I’m willing to operate on a super low return because I think I’m building something for myself.

Will Harris: 55:26
If I were building it for someone else, I’m not sure how we divide that benefit. I don’t know what’s fair. You know, I knew I shouldn’t get it all, but he shouldn’t either. And I don’t know, and it’s a soft asset valuation. I mean I can’t tell you I’m going to increase your land by a half percent every year for the next 10 years or whatever. I don’t know that. I know I can improve it, I’m sure you’ve done it, but the guarantees would be difficult. So I you know, I just don’t think that most investors I mean, I know some rich people and they’re good folks, but I don’t think they have this depth of understanding and I don’t think that they view the land as a perpetual asset. And if they do, they’re not going to own it in perpetuity.

Colter DeVries: 56:21
Well, that was. That was kind of doom and gloom. That wasn’t the outro I was looking for, Will, I’m a dumb and doom and gloom guy we’re called.

Will Harris: 56:28
I’ve lived on here a long time. I’ll show you my scars.

Colter DeVries: 56:35
I want to hear a little bit more about a bold return to giving a damn your book White Oak Pastures, as we take it out and hand it off to Don and Howard real quick.

Will Harris: 56:45
Yeah. So I you know I didn’t. I didn’t think I could write a book. And now I know I couldn’t write a book. But we were contacted by Random House We’ve got three names, big publishing company and they wanted me to. They just wanted me to write a book. They kind of recruiting and I told them I couldn’t write a book, I don’t even read books and they ultimately hired a woman to write the book who I kind of fell in love with. She designed me, just one of my daughters, a little sweetheart. We spent I probably got about 50 cents an hour out of my time in writing the book, but it I mean I’m not the judge of how it turned out, but it’s about these things we’re talking about. It’s about, to to great extent it’s about my relationship, my family’s relationship with this land.

Colter DeVries: 57:43
Well, thank you and Don, what’s your key takeaways? What’s your outro leading us out?

Don Colter : 57:49
You know I appreciate Will sharing his story. I mean I just on a personal level and all of what you’ve done and wish more people cared like you do for the ground. I think that in itself would help a lot. You know my personal experience of you know take care of the ground, the ground takes care of you. Wish more people understood that.

Don Colter : 58:16
Like you said, investment wise. I think it’s there’s more incentive to do it, but I think that needs to be more. And somehow have, like you said, have people give a damn more than what’s my IRR, what’s my annual return? How do you monetize that and then set it without making it a regulatory thing? I think you start getting into those type of dictates, mandates, and then you run the risk of greenwashing and people trying to end run a system. So how do we do that to make our investors and just our general society care about the soil? Cause the soil is, like you said, creating the dead zone in the Gulf of Mexico. It’s got the runoff in the various places. So how do we incent people to care more to make it more of an investment vehicle? I don’t know if I answered any questions, but that’s my thoughts.

Colter DeVries: 59:18
Well, my belief is you incentivize people, and people are inherently incentivized by sex, money, power and control.

Will Harris: 59:27
You can reach a point in sex and I was making new. That used to be.

Colter DeVries: 59:32
Howard, what’s your key takeaway? And an outro here.

Howard Halderman: 59:36
Well, I am optimistic because I sit with an. We have 600 landowners at Holder and every two years we have a landowner field day. And for the last I don’t know six or seven of those meetings, I’ve had some portion of the day spent on regenerative, sustainable practices. Sometimes it was tile drainage, sometimes it was cover crop, sometimes it was reduced hillage. It was a focus, in fact. We talked about ehabitat and showed them beehives on one property with what we took them out.

Howard Halderman: 1:00:06
I think out of those clients 600 clients, there’s gonna be half that would say, if I could have my farm farmed that way, I would prefer that. Are they willing to give up yield for that? I think of our typical farm management client I think they would. They’re not all about the end, all be, all yield.

Howard Halderman: 1:00:27
So that transition over to US agriculture, which is institutional asset management. There are some that they’ve got a set return hurdle they want to achieve, but I see more and more of those groups coming today culture that say yes, but we see the longterm view and these are longterm owners. You know I don’t have any hot money. I tell people if you want to day trade agriculture, don’t talk to me. That’s not. You know this is a 10, 20 type of year investment and so we’re gonna try to earn you a good annual return but also improve the value of the farm and over a 10 to 20 year time period.

Howard Halderman: 1:01:08
That’s where we’re gonna end up, is it with a better property? We can’t control the overall market. We can certainly make our property the best it can be in that region and I think there’s more and more incentive out there. People understand the hypoxia zone and what has been created. They don’t want that, you know. I don’t think they’re all about them. The end all be all dollar. I think there’s a hybrid there that we can arrive at, and I see more and more groups willing to sacrifice a little bit of yield on an annual basis for that long-term goal.

Howard Halderman: 1:01:40
So I’m optimistic that we’re getting there. It isn’t overnight. It isn’t overnight for Will to create 5% organic matter either, and so it’s each little step that we can take, and we can take another step this year, and another step the next year, and we’ll get there eventually.

Colter DeVries: 1:01:56
Well, gentlemen, I was trying something new here with this forum style and I hope it was worth your time. Thank you guys for coming on. Have a good week. We have you all.

Agricultural Investment and Diversification Perspectives

Long-Term Value in Agriculture Investment

Developing Sustainable Agricultural Investments

Monetizing Sustainable Agriculture Practices

Land as a Perpetual Asset

Incentivizing Regenerative Agriculture Investment