Simon St.Laurent: June 2011 Archives
By Krys Cail
Over the past decade or so, social trends have emerged that promote local economic exchange around a regional or local food system. The rise in popularity of farmers’ markets is shown by the 16 percent increase in number of markets between 2009 and 2010.[1] Grocery stores, college cafeterias, and now even Walmart stores are trying to source more fruits and vegetables from local growers.
Slow Food is an international NGO that began in Italy but is now world-wide in scope. It celebrates the local and regional culture of the table while encouraging taking the time to enjoy basic social activities, like sharing food. Indirectly, the Slow Food movement also encourages local culinary, agricultural, and wine tourism industries. In the Tompkins County area, we have made significant progress in the development of local and regional food systems, often in collaboration with the region’s grape growers and wine makers. Local food is a current focus of local interest that we would be well served to further develop in view of energy decline and the need to shorten food supply chains.
The Slow Food Movement was among the inspirations for the work of Woody Tasch, a socially responsible investing leader and author. He coined the term “Slow Money” to describe investing in the local foodshed with a portion of one’s portfolio—with an understanding that this investment might pay off better in social and environmental benefits while generating a somewhat lower financial return. His book, Inquiries into Slow Money: Investing As If Food, Farms and Fertility Mattered[2], inspired others, and a number of like-minded individuals launched an effort aimed at starting a Slow Money Movement[3]. They adopted a goal—one million people investing one percent of their assets in local food systems within ten years. They also adopted principles[4] and began working with local and regional Slow Money organizations to establish investment programs. Slow Money has gained some national recognition over the past couple of years, with articles appearing in Business Week[5] (one of their “big ideas for 2010”), Entrepreneur.com [6] (one of “five financing trends for 2011”), Utne Reader[7], Time[8], The Wall St. Journal[9], and The Los Angeles Times[10].
A local group, loosely affiliated with the national movement, has begun planning activities here in Tompkins County. This Slow Money Central New York group can be contacted through the Alternatives Business CENTS program[11] or Local First Ithaca[12].
Envisioning a new investment paradigm is difficult theoretical work, but actually implementing a system that directs flows of investment cash into local food systems is even more difficult. As a nascent movement, Slow Money has moved methodically to build a robust infrastructure for implementation. A growing national network of interested people have been considering how local groups or “Slow Money Alliances” would be structured in order to accomplish the work of bringing more investment into local food systems. The national Slow Money Alliance uses a number of other national organizations as models, including Slow Food, BALLE (Business Alliance for Local Living Economies), Social Ventures Partners, and Transition US. There is a focus on preparing for energy descent through relocalization by investing in local food systems.
Investors may have a simple need—to keep at least a portion of their portfolio invested in the local foodshed. Food buyers, both in the urban areas in the region and in the Tompkins County area, also want to buy food from nearby. This gets complicated very quickly, however, by rural/urban interdependence. Cities, and especially huge port cities like NYC, relocalize by becoming more dependent on a regional, not local, foodshed. Rural areas in the region may be dependent on investment from the urban areas. Tompkins County may or may not be in a position in the future to source investment capital from local investors alone; rural areas may find that they continue to have some dependence on larger regional centers of finance. Many Tompkins County farm and food businesses currently sell a portion of their produce to local markets, and also ship a portion to regional urban population centers, most typically NYC. Tompkins County is within the NYC Greenmarkets catchment area, and currently, many local food producers make the trip to sell in those lucrative markets. While that pattern may change some as the price of truck transportation increases markedly, it may not: sourcing fresh foods from even farther away may cost yet more, making the relative cost of Tompkins County grown food in NYC still attractive.
Additionally, wholesale foodstuff supply chains move food from local farms and food processors into urban markets. Locally-owned shipping companies, such as Regional Access[13], may adapt to new transportation approaches as fossil fuels increase in price. For example, multi-modal shipping via train and/or barge would allow shelf-stable or cooled produce to travel more economically. One gallon of fuel will take a ton of freight about 155 miles by truck, 413 miles by train, and 576 miles by barge.[14] In particular, crops such as grains, beans, seeds, oils, and meats that require a large land base for their production are likely to continue to be imported into large cities from their peripheral rural areas. In many cases, it’s more cost-effective to manufacture minimally processed foods, such as canned or dried fruits and vegetables, closer to where they are grown, and then ship them via lower-energy transport, such as barges or trains. Tompkins County is exceptionally well placed to ship local goods by water; it is possible to send goods by boat from Ithaca to anywhere on the Great Lakes, the Mississippi, or the East Coast.
The Central NY Slow Money Group has been meeting at the Alternatives Federal Credit Union[15]. The group has established a cooperative, interdependent relationship with Slow Money NYC. Central NY generally, and Tompkins County in particular, has many farm and food enterprises, but relatively fewer eager high-net-worth investors. For NYC, that situation is reversed. Some collaboration can be of value, allowing people who eat Tompkins County food to invest in Tompkins County food growers and processors, whether they live very near the farm or in the nearest megalopolis.
Access to capital can be gained by a business through an equity deal (selling portions or shares of business ownership) or through debt instruments (loans requiring a stipulated repayment schedule, but conferring no ownership rights). There are also hybrid arrangements, such as debt instruments that convert to equity shares if not repaid over a certain period. Under the current regulatory framework, it is difficult—not impossible, just difficult—to raise private equity funds for a business venture from a large number of investors of limited means. Typically, “qualified investors” (those with more than one million dollars in net worth) are able to play by somewhat different rules than the rest of us, as the regulators consider them to be savvy enough to fend for themselves in the investment world. To make an offering to a group of people who are not all “qualified investors” (for instance, the membership of Greenstar Cooperative Market), some form of an intermediary fund is probably most practical.
Cooperative membership/ownership organizations are but one model that allows for a large group of investors to provide capital and share risk. The CSA (Community Supported Agriculture) model is another approach. Slow Money groups at the national, local, and NYC levels are all exploring the best ways to facilitate these kinds of transactions, meeting the needs of businesses while mitigating exposure to risk for investors and also keeping some liquidity for investors.
Slow Money group members seek to meet two very different kinds of needs with one suite of mechanisms.
First, investors want to move beyond socially-responsible investment opportunities and now want to invest their money in businesses that have a triple-bottom-line benefit: businesses that are socially responsible and environmentally appropriate while also making some profit. People who understand the inevitability of energy decline may well want their money invested in shortening the supply chains for essentials like foodstuffs.
Second, small farm and food businesses need access to capital to grow and process the foodstuff supplies that we need in a more localized or regionalized food system. Traditional financing, still stuck in a global market worldview, is often disinclined to channel investment into the type of enterprise that could help smooth the adjustment to a world with a lot less oil.
Three opportunities for investment in Tompkins County food systems
Several local initiatives offer both Tompkins County residents and city dwellers the opportunity to invest “slow money” here. In the following, I’ll briefly describe three of them.
Local opportunity number 1: Facilitating land acquisition by prospective farmers trained at Groundswell
Groundswell[16] is a program that uses both classroom teaching and on-farm training to teach students to farm. If there is one practical suggestion for an easier transition in the face of energy decline, it is that more people need to learn to be able to grow food. In a globalized market for energy, food-growing resources have been diverted to the production of fuels such as ethanol, which, in combination with increases in costs of petrochemical inputs into industrial farming, has caused food commodities to experience great price volatility. In the near term, we are likely to see spot price run-ups and shortages, while in the long run, food grown closer to home and with more animal-power, human attention and labor, and organic inputs will be more sustainable. Groundswell’s programs are tailored to producing more farmers through a classroom-based curriculum of instruction delivered at EcoVillage at Ithaca, dovetailed with hands-on farming apprenticeship in a structured program that exposes students to many local farms. The emphasis on sustainable and organic methods prepares new farmers to farm with less reliance on fossil fuels. When newly-trained would-be farmers emerge from this training, however, they require land to farm.
Some communities, such as Burlington, Vermont, have established agricultural land specifically set aside for use by beginning farmers. The Intervale in Burlington is an area that includes community gardens as well as small acreages for use by tenant farmers who are just starting out in vegetable farming. The land has excellent soil and is close to housing in the city. The location is ideally suited for this purpose, and the property has been protected from development by the generous action of a philanthropist. Tompkins County currently lacks such tenant-farming options, but Groundswell is attempting to develop similar options locally.
Joanna Greene, Executive Director of Groundswell, has worked with local farmers and EcoVillage to establish a farm incubator program in Tompkins County. If an intermediary financial capital stream were available, the graduates of such programs would be ideally suited to match with a group of local investors. Alternatively, CSA models or direct equity investment on the part of larger, qualified investors, or debt-to-equity financing, may be more appropriate financing approaches. A “Slow Money” program could take a number of forms. Joanna has been participating in Slow Money planning talks, representing the needs of beginning farmers.
Local opportunity number 2: Facilitating grain processing for local grain farmers through Farmer Ground Flour
Grain farmers Erick Smith and Thor Oeschner joined forces with Greg Mol about a year ago to begin a grain-milling operation in Trumansburg, Farmer Ground Flour[17]. They use a modern mill that can make up to 15,000 pounds of flour a month. They began by grinding the wheat, spelt, corn, rye, and other grains they grew. At first, they had to take the grain to Penn Yan to dehusk it, but now that operation is handled at one of the farms.
They clearly hit an area of the food system ready for development. By January 2011 they were in the New York Times in an article titled “Reviving New York State’s Grain Belt”[18]. To quote from the article:
It is a cooperative effort among several farms growing organic corn, spelt and wheat, often heirloom varieties…. Packaged under the Farmer Ground Flour label, the flours are sold in paper sacks in Greenmarkets by Cayuga Pure Organics, a participant in the cooperative. The flours are fresh, and have not sat for months in warehouses.
Greg Mol bags rye flour at Farmer Ground Flour
Located at the old Agway building in Trumansburg, the mill occupies a site where animal feed was milled in the past. In many ways, it is an ideal site for an enterprise that includes a lot of unloading grain from trucks and a lot of loading flour and other milled products back onto them.
Farmer Ground Flour has been very successful in meeting an emerging need for artisan-milled flours and meals in NYC. That is not, however, their only emphasis. They also sell flour and other milled products to the local market, through Regional Access, Greenstar Coop Natural Foods Market, and Garden Gate home delivery service. A recent edition of GreenLeaf[19], the newsletter of Greenstar Coop Natural Foods Market, showed the big-picture development of Farmer Ground Flour in historical perspective:
Farmer Ground’s success is part of a larger effort to restore grain growing to New York state. While now thought of as dairy country, upstate New York once grew so much grain that Rochester topped the nation’s flour production in the mid 1830s, giving it the nickname “Flour City.” (A later rise of nursery businesses changed that moniker to “Flower City.”) That flour was shipped to New York City and beyond via the Erie Canal.
Oechsner and Smith have both worked closely with Elizabeth Dyck, of the Organic Research and Information Sharing Network, which seeks to reintroduce wheat growing to New York state… [She] is working with farmers like Oechsner to identify those [varieties] that grow well in New York’s challenging climate, and, just as importantly, also taste great and bake well.
…Like other foods, “the flavor has been bred out of wheat,” [Oeschner] explained, in favor of yield and uniformity. “Growing the old wheat varieties is like growing an heirloom tomato.”
“Farmer Ground Flour is really making a difference for other farmers,” said Dyck. “They’re a great example of farmers banding together to put needed infrastructure into place, in this case a milling facility. They deserve enormous amounts of respect.”
No question, there is market interest, both regionally and locally, in the product of a local grain mill. But how does a small, “farmer-owned, grown, and ground” operation finance the necessary equipment purchases to keep up with the demand? Greg Mol, Erick Smith, and Thor Oeschner approached banks to seek financing for their equipment needs, but the amount of money that they sought to borrow was too small to fit the lending programs available. They have pursued working with individuals in the community to finance their equipment needs, but there is no organized program for doing so. The need for relatively small infusions of capital hampers their ability to expand and improve Farmer Ground Flour.
Will grain farming for human food expand in New York State only as quickly as the processing capacity is able to expand? Slow Money could be a means by which those interested in the re-development of grain farming in New York State could participate in the effort to develop the needed processing capacity. Greg, Erick, and Thor have already made connections with a few local investors to gain some access to expansion capital, and hope to do more of this in future. And the availability of their product has already spurred other business start-ups and more local investment opportunities. For instance, Wide Awake Bakery[20] operates a bread CSA using Farmer Ground Flour as an input.
Local opportunity number 3: Expanding Cayuga Pure Organics into rolled grains
Erick Smith is not only a partner in Farmer Ground Flour, he is also a principal of Cayuga Pure Organics[21]. Cayuga Pure Organics is the source of much of the “locally grown” beans and grains offered for sale in the Greenmarkets, co-ops, and restaurants of NYC. They also supply our local Tompkins County region with these products. Cayuga Pure Organics was also featured in a New York Times article this year, in the Magazine under “Field Report - Market Watch”[22]. This excerpt shows how Cayuga Pure Organics evolved to serve the niche market it now depends on, growing grains and beans for human consumption, to be sold in Tompkins County and NYC:
In 2003, Erick Smith and Dan Lathwell — men nearing 60 who’d farmed intermittently when not working at Cornell or teaching elsewhere — thought they’d hit upon a smart niche when they created Cayuga Pure Organics to grow pesticide-free feed for the region’s newly organic dairy farms. Two years later, the Ithaca food co-op and a natural-food distributor asked if they’d grow organic beans on their land in the town of Caroline. They were also connected with a local taqueria, and soon the two were struggling to keep up with the restaurant’s weekly order for 500 pounds of black and pinto beans. Then, in the fall of 2008, the farm inspector for New York’s Greenmarket tracked them down in her quest to find a grower to satisfy the demand for local beans and grains.
“We hemmed and hawed, thinking that going to New York City is a whole step up in the organizational process,” said Smith, an articulate man for whom overalls and a graying beard are a natural fit after years of teaching math education. It also required getting up to speed in marketing, which for farmers means both self-promotion and literally selling at markets.
Owner Erick Smith with wheat cleaning equipment at Cayuga Pure Organics
Many of the processes for harvesting, shelling, and cleaning the beans and grains can be handled directly on-farm. Over time, Cayuga Pure Organics has become less dependent on other farmers for the use of processing equipment, streamlining the efficiency of the operation. However, specialized equipment for such tasks can be expensive, and it can be difficult to raise the capital needed to purchase it, house it, and integrate it into the operation. For some time, Cayuga Pure Organics has had plans to purchase equipment to be able to roll oats. Oats are a crop well-suited to our climate in Tompkins County, but they are almost always consumed by humans in the form of rolled oats, also known as oatmeal. Cayuga Pure Organics applied to the NYC Slow Money Group’s first Entrepreneurs Showcase to pitch the idea of investing in this business expansion. They were one of only ten businesses that will be featured in the first Showcase, giving them the opportunity to gain Slow Money investment for this business expansion.
Conclusion
The area between the growing consciousness on the part of consumers that they want to support a more localized food chain on the one hand and farmers who want to grow and provide local foods on the other is ripe with possibility to re-invent investment. While the shape of this emerging movement is not yet clear, the motivations of farmers, food processors, short-haul food transporters, and restaurant chefs are clearly aligned with those of investors with an interest in facilitating a more localized farm and food sector. The roles of regional investors, and the roles of local investors, will be established in part based on who steps forward to help shape the food web through investment and marketing. Perhaps, depending on developments, the Ithaca Hours local currency revival will also play a role. Establishing a farm and food sector in Tompkins County that is able to provide grains, beans, oils, meats, and dairy products to the metropolitan areas of the region as well as the local market seems a relocalizing strategy worthy of the investment of both thought and money.
Postscript from the Farmer: Erick Smith notes some additional benefits and hurdles
Erick Smith of Farmer Ground Flour and Cayuga Pure Organics read an early draft of this article and responded with the following note, which he has kindly given us permission to include here.
The basic products we produce are helping support others in the community. Farmer Ground Flour is one such startup. Another is Wide Awake Bakery in Mecklenburg… Ron Springer in Van Etten is using our grains to produce sprouted products including sprouted gain crackers, sprouted rolled grains, and sprouted breads. Also, Hans Butler, an Ithaca-based chef, is actively developing products from our beans and grains under the name: Cayuga Pure Organics, Chef Hans. He is currently producing the bean dips that are available at Greenstar and is in the process of developing other products. This year we are also growing mustard seed for Mary Graham, a local mustard producer. The point is that Cayuga Pure Organics and Oeschner Farms, as producers of basic organic commodities, provide the basis for other small-scale food processors to create their own products based on our locally-grown commodities.
A major struggle that both CPO and Farmer Ground Flour face is the lack of infrastructure to support what we are trying to do. 100 years ago, operations like ours were scattered across NY State and there was appropriate equipment, repair parts, local expertise, and market structures in place to support these operations. One of our technical and financial challenges is recreating this infrastructure in a modern world where few models are available.
Another major issue we both face is that, compared to conventional farms and conventional flour mills, we are very, very small-scale, yet from the perspective of many of the producers of local produce, we seem large. A major reason is that growing grains and beans and milling flour require a certain level of mechanization that forces certain economies of scale. So the tractors we use are small compared to what would be found on typical crop farms and the 40-year old combines we use for harvest are so small that the size machine we use is no longer even available new. To operate on a smaller scale would make our products prohibitively expensive. Yet, because we are so mechanized, we are very dependent on fossil fuel energy. Farmer Ground depends on electricity and the farms depend on diesel fuel. We know that this has to change and that we face a major challenge in creating that change. Greg is currently actively looking into the prospect of using water power to produce the electricity to run the mill. We currently are using about 10% bio-diesel and would like to use more, but the older diesel engines in our equipment can have problems with higher levels of bio-diesel. So, we know change is coming and may very well, at some point, be looking for ways for the community to support our efforts, both technically and financially. If the Slow-Food and Slow-Money communities are serious about supporting the needed changes for a local-foods economy, these are issues that we all need to be looking at together.
Further reading
Previous TCLocal articles on local aspects of agriculture, food systems, solid fuel (biomass) agriculture, and food processing have included the following:
2008.01.27: Fruits in a Post-Peak Tompkins County [http://tclocal.org/2008/01/fruits_in_a_postpeak_tompkins_1.html]
2008.12.09: Local and Urban Small Livestock and Poultry [http://tclocal.org/2008/12/local_and_urban_small_livestoc.html]
2009.02.25: Food Processing in Tompkins County [http://tclocal.org/2009/02/food_processing_in_tompkins_co.html]
2009.03.28: Examining the potential local foodshed of Tompkins County [http://tclocal.org/2009/03/examining_the_potential_local.html]
2009.06.16: Can New York State Feed Itself? [http://tclocal.org/2009/06/can_new_york_state_feed_itself.html]
2009.07.25: Visioning County Food Production, Part One: Introduction [http://tclocal.org/2009/07/visioning_county_food_producti.html]
2009.09.02: Visioning County Food Production, Part Two: General Problem Areas in Sustainable Agricultural Design [http://tclocal.org/2009/09/visioning_county_food_2.html]
2009.10.15: Burning Transitions [http://tclocal.org/2009/10/burning_transitions.html]
2010.01.20: Heating with Biomass in Tompkins County [http://tclocal.org/2010/01/heating_with_biomass_in_tompki.html]
2010.02.13: Visioning County Food Production, Part Three: Seeing County Food Production as an Integrated Whole [http://tclocal.org/2010/02/visioning_county_food_prod_3.html]
2010.04.26: Funding and Finagling the Transition to Biomass Heat and Power [http://tclocal.org/2010/04/funding_and_finagling_the_tran.html]
2010.05.31: Visioning County Food Production, Part Four: Urban Agriculture [http://tclocal.org/2010/05/visioning_county_food_prod_4.html]
2010.06.20: Visioning County Food Production, Part Five: Peri-urban Agriculture [http://tclocal.org/2010/06/visioning-county-food-prod-5.html]
2010.07.31: Visioning County Food Production, Part Six: Rural Agriculture [http://tclocal.org/2010/07/visioning_county_food_prod_6.htm]
2011.01.18: Health and Food Security [http://tclocal.org/2011/01/health_and_food_security.html]
2011.04.15: Chickens in the Energy Descent [http://tclocal.org/2011/04/chickens_in_the_energy_descent.html]
Notes
[2] http://www.slowmoney.org/book.html
[4] http://www.slowmoney.org/uploads/1/3/6/7/1367341/principles.pdf
[5] http://www.businessweek.com/smallbiz/running_small_business/archives/2009/12/big_ideas_for_2.html
[6] http://www.entrepreneur.com/article/217795
[7] http://www.utne.com/Politics/Utne-Reader-Visionaries-Woody-Tasch-Slow-Money-Alliance.aspx
[8] http://www.time.com/time/business/article/0,8599,1921889,00.html
[9] http://online.wsj.com/article/SB125305092106313571.html
[10] http://articles.latimes.com/2009/sep/22/business/fi-smallbiz22
[11] http://www.alternatives.org/cents.html
[12] http://localfirstithaca.org/
[13] http://www.regionalaccess.net/Home.html
[14] http://www.waterwayscouncil.org/study/public%20study.pdf
[16] http://www.groundswellcenter.org/
[17] http://farmergroundflour.squarespace.com/
[18] http://www.nytimes.com/2010/01/06/dining/06flour.html
[19] http://www.greenstar.coop/index.php?option=com_content&task=view&id=565&Itemid=219
[20] http://www.wideawakebakery.com/
[21] http://www.cporganics.com/live/
[22] http://www.nytimes.com/2010/10/17/magazine/17food-t-000.html
