Converting farmland to organic production is never cheap, but the financial hurdle doesn’t faze Farmland LP.

As an investment fund managing $250 million in agricultural real estate, it’s got the wherewithal to overcome obstacles that may deter other organic farmers.

“There should be a lot more farmland converted to organic to keep up with demand, but it’s challenging for the average farmer to do that,” said Craig Wichner, Farmland LP’s founder and managing partner.

Though growers can only use organic tools during the three-year conversion process, they can’t market their crops as organic until it’s complete — missing out on premium prices they often need to earn a profit.

“They’re basically taking a loss for the first three years during the conversion process,” said Kevin Lehar, general manager of the investment fund’s Green Spring Farms subsidiary.

Making the switch

As it’s grown to 16,000 acres in Oregon, Washington and Northern California, Farmland LP has refined its strategy for converting newly acquired properties, which are then usually leased to other farmers.

“We can absorb the cost of that conversion where a lot of farmers can’t,” Lehar said.

Organic production embodies the investment fund’s philosophy of environmentally responsible farming, but it also aligns with its financial objectives.

Over the past 14 years, Farmland LP has developed a track record of earning higher returns by switching fields to organic production, with an emphasis on food crops, Wichner said.

“There’s a very clear business case for the benefits of converting to organic agriculture,” he said, such as the higher lease rates commanded by such properties. “We’ve really proven organic farming is more profitable than chemically dependent agriculture, and that took a long time to prove.”

The investment fund concentrates on buying high-quality farmland with robust water rights, then figures out the optimal crop rotations for those particular fields.

Roughly two-thirds of Farmland LP’s real estate is leased to a carefully vetted group of growers in each state, but it directly manages the rest though its Green Spring Farms subsidiary.

While the investment fund prefers to have other farmers cultivate its properties, certain fields are best-suited to its experience and skills.

For example, Green Spring Farms is the primary organic vegetable producer in Oregon but not in California, where more growers specialize in such crops.

Organic emphasis

“We want to focus on buying farmland and ensuring it’s managed organically,” Wichner said. “Our goal is not to be a vertically integrated grower.”

Similarly, Farmland LP hasn’t invested in food processing facilities and instead supplies its crops to local buyers “to minimize the risk to our investors,” Lehar said.

The company works with three crop growers each in Oregon and Washington and four in California, as well as two livestock producers in each of the three states. About 40 different crops are grown across the properties, while the pastures are dedicated to cattle and sheep.

“We have tenants who are like-minded to our mission,” Lehar said.

The system allows the tenants to expand their operations and stick with the crops they know best, moving fields from year to year on a decadal rotation meant to discourage persistent pests and diseases.

“We can actually bring multiple farmers onto the land, each specializing in a certain crop,” Wichner said.

Transition tactic

During the three years fields shift to organic production, they’re generally planted to cover crops that improve soil biology while providing forage for livestock, Lehar said. “The bulk of our land is converted that way.”

Cover crops, including peas, triticale, oats and wheat, are grown by Green Springs Farms using assets bought from a grass seed farm based in Suver, Ore., which now serves as the subsidiary’s operating base.

With perennial crops, such as blueberries and winegrapes, the company relies on equipment and planting methods that allow the fruit to be mechanically harvested but still sold in the higher-priced fresh market.

“If we have to have more handling, there’s no profit in it. It’s just too expensive,” Lehar said.

The company commonly installs infrastructure, such as irrigation equipment, soil probes and weather stations, on properties it buys. The investments maximize the value of Farmland LP’s real estate while enhancing the results of growers who lease the properties.

“We see ourselves as partners with our tenant farmers,” Lehar said. “If they succeed, we succeed.”

Founder and managing partner: Craig Wichner

General manager of farming subsidiary: Kevin Lehar

Type of business: Investment fund focused on agricultural real estate

Value of assets: $250 million

Acreage under management: 16,000 acres in Oregon, Washington and California

Time in operation: 14 years

Workforce: 8 employees in fund management, 45 employees in farm management

Number of tenant farmers: 10 crop producers and 6 livestock producers