Touch the Soil News #461
Many of our parents and grandparents were used to going out in the country and picking berries right off the farm – it was called u-pick. Today, many home gardeners still plant berries and enjoy them off the vine. As an industrial agricultural crop, berries represent a huge capital investment in terms of land, labor, chemicals, fertilizers, harvest and cold storage. The highly perishable nature of berries represents a costly undertaking in terms of transport, extending shelf life and risk of spoilage. The point of this discussion is that berry production requires large amounts of capital – and that’s where Wall Street comes in.
While it is a small company, we like to follow the farm acquisitions of Gladstone Land Corporation. Gladstone is a publically traded company in the business of buying and owning farmland.
Strawberry farm. Gladstone wants to meet farmers and offer them one of three options: 1) Buy their farm and lease it back to them, so the farmer can free up capital for other needs. 2) Buy land a farmer would like to farm, but not own. 3) Buy the farm outright and find another tenant.
Gladstone recently issued a press release on the purchase of its latest farm – a 70 acre strawberry farm in Hillsborough County, Florida. This marks the 49th farm that Gladstone has purchased since becoming a company approximately five years ago. The economics of Hillsborough County, Florida are steeped in agriculture with the largest crop being strawberries.
Of interesting note are the particulars of the purchase:
- Gladstone paid $1.7 million for the 70 acres – almost $25,000 per acre. The national average for farmland (includes low-cost pasture land) is only about $3,000 per acre. The higher value that Gladstone paid comes from being in a warm climate with a long growing season, an area good for berries, and lots of supporting infrastructure for berry farmers.
- Gladstone will lease the land back to what it calls “a leading global berry operator” through 2021 with an option for a 5-year extension.
- With the purchase of this 49th farm, Gladstone now owns and leases out to farmers approximately 24,000 acres in seven (7) different states.
- Gladstone focuses on owning farmland that produces fresh fruits, vegetables and nuts. The company has determined that consumption is increasing in these agricultural commodities ahead of other foods.
- Gladstone may also begin to invest in other agricultural enterprises such as cooling facilities, processing buildings, packaging facilities and distribution centers – as opportunities arise.
Following is an interview of Gladstone CEO talking about his business: