The New Opportunity: Invest in Small Working Farms

Sustainable farming brings up the image of a plot of land – maybe an acre or two – overseen by someone in a kerchief and frayed blue jeans. For Iroquois Valley Farms, the image is a thriving family on hundreds of acres, backed by money from pension funds and private equity.

That’s the dream of David E. Miller, co-founder and CEO of Iroquois Valley Farms. With a background in structuring alternative real estate investments at companies like Bank of America, Santa Fe Southern Pacific and First Chicago Corporation, Mr. Miller wanted to invest in something other than ‘commodity agriculture' which he believes is ruining the environment and creating inferior food. His dream was a venture that brings together investors and farmers to support the restoration of old farmsteads, leading to both land productivity and healthier farmland. His plan was to purchase farms and lease them back to farmers for as long as the farmer wants to work the land. He wanted a marriage between the investor, the farmer and the land.


“Investors have to be in it for the long term.” –Kevin Egolf, Managing Director of Business Operations at Iroquois

Mr. Miller, something of an iconoclast, said about founding his company, "It's not that hard because all we had to do was the opposite of what Wall Street was doing."  The company started by reaching out to mid-sized financial advisors. After they were featured in Financial Advisor, foundations started finding them.

"Calvert foundation,” Mr. Miller smiled. "Tomorrow they are wiring a nice sum of money."  Iroquois has been amongst the Calvert top 50 on their impact investing list for three years r unning. "And then there's the Sisters of Loretto, in Kentucky," he continued. "They're against fracking. These are nuns you don't want to mess with."

Mr. Miller went on to talk about scale. From 2007-2011, the company was building their portfolio and gaining market creditability. An LLC, they now have 150 members, none of whom have left although some have taken cash out. Since 2011, they have been building to get to scale in order to create liquidity for investors. At 20 farms in 7 states, they have achieved their goal.


"The farm isn't nearly as important as the farmer," said Mr. Egolf. "We often buy with the tenant in place."

As a corporate guideline, Iroquois does not look for specific farmland to purchase, but develops relationships with farmers, mostly young and organic, that want to start or grow their sustainable farm business. They then purchase the land when they have a tenant, ready, willing and able to farm the land.

Because Iroquois is committed to sustainable farming, they tend to work with younger farmers through their Young Farmers Land Access Program, which has provided $100mm so far. This program capitalizes on what Iroquois sees as an increase in interest in farming as a career by young people, many of whom are looking to make production changes and grow more nutritious, healthy and local foods. Iroquois maintains a list of young farmers who are growing their sustainable farming business and want to lease or purchase more farmland. As farmland becomes both scarce and expensive, these farmers often find themselves unable to expand their business, which can mean they can't support a family and must look elsewhere for income. After an extended review by company management, these farmers become eligible for tenancy on future farmland acquisitions. Many are third or fourth generation farmers.

Encouraging young farmers is particularly important because about sixty percent of the farmers in this country are 55 years old or older, according to the Bureau of Labor Statistics. As important, the EPA reports that the number of farmers is declining as the demand for agricultural products increases. The US Department of Agriculture has worrisome statistics on the loss of farm labor from 1910 to 2000, as shown at the right. This makes Iroquois’ concern about farms that will support a growing family critically important. In order to be a successful farmland investment firm, they are very selective because they want to be sure that they are working with farmers who have a future. Mr. Egolf added that "Our values come from ideas that were generated by talking with sustainable farmers and land trusts, and how they view developing farm land. We wanted to create a business that supported sustainable land health and provided long term security for the farmer."

For farmers, the Iroquois advantage is a lease with no end date:

"Unlike Iroquois, most traditional leases are 1-3 years, which is really bad for sustainable farming," Mr. Egolf said. "It takes time to rejuvenate soil health. The transition years can be difficult, so the biggest thing we can provide is permanence."

He called their approach a 'fixed rate variable'. "The fixed rate is low, but farmer's give up a little of their upside," he said. “If a farmer has a really bad year in one location, we have cash flow from other farmers and can weather it while they get back on their feet.” Additionally,Iroquois supports capital improvements that can mean the difference between an efficient profitable farm or a failing one. As an example, Iroquois recently installed drainage tiling that cost $100,000 at one of their farms. The company paid the bill and will capitalize that into the lease rate.


The Land

Iroquois only invests in farms east of the Mississippi, since that is where they can find smaller family farms. In the Midwest, land is flatter and can sustain the large machinery that supports big investments in chemical fertilizers and hybrid seeds. The second factor -- and potentially more important -- is that the east tends to be wetter than the Midwest and West. As a result, Eastern farms are picking up after droughts have begun to threaten larger farms in California and across the Midwest. Although America has been losing more than an acre of farm and ranch land every minute to development, according to the Farmland Trust, the amount of farmland east of the Mississippi is growing, as shown in the chart to the right.

Latest Purchase 

A recent example of their approach is the McMunigal Farm in Monroe County, West Virginia. Mike and Callie McMunigal will be restoring the pasture based farm and outbuildings to dairy operations. In this case, the new tenants are not twenty somethings, but in mid career. Their children, Cade (12) and Maiya (7) will be helping with the transition and represent the fifth generation of family farming in the area. Maiya particularly loves animals and is looking forward to helping with the milking chores.  Mike has been working as a soil conservationist with the West Virginia Conservation Agency, specifically advising dairy and livestock farmers on nutrient/manure management. He has a BS in Biology from Virginia Tech. His parents still operate a cow-calf operation in Virginia where Mike and Callie co-manage the 240 acre farm. Callie is a biologist with the US Fish and Wildlife Service and manages the Appalachian Partnership Office connected to the White Sulphur Springs National Fish Hatchery. She works with private landowners in both Virginias to implement habitat restoration projects. Her academic background includes a BS and MS degree in hydrogeology from Florida Atlantic University.

Negotiations on this purchase took many months and included the buy-out of a gas lease to obtain all mineral rights. The former owner was a coal mine operator and drilling on the farm was an ongoing possibility, threatening future farm operations. 

The McMunigal Farm is Iroquois' first purchase in West Virginia and follows the recent acquisition of Healing Ground Farm in central Kentucky. The company sees growing opportunities in the Appalachian corridors as land uses transition to more sustainable businesses focused on local and organic foods. As noted, the McMunigals will be marketing their organic milk through the Organic Valley cooperative producer pool. Iroquois is very excited to be able to support this family and their lifelong commitment to conserving soils, waters and wildlife.