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Westchester Global Thoughts: Summer 2021
35 years of investing in farmland
By Eric Decker
Vice President, U.S. Midwest Row Crops
When I began my career nearly three decades ago, Westchester was a relatively new, small company with two offices in the U.S. Midwest, and a vision that farmland could become a premier asset class. It’s amazing and humbling to reflect on the journey, the people I’ve worked with, and the global agricultural leader that Westchester has become within a relatively short period of time.
For many of us at Westchester who grew up on family farms, we learned to gain an appreciation for the land and the local farmers who help care for it. It’s rewarding for me to still be working with many of the same farm families, now going on to the third generation, on the same farms throughout the Midwest region of the United States.
As Westchester celebrates its 35 year anniversary of investing in farmland, it’s the origins, principles, and people that have contributed to the organization Westchester is today. While I have experienced many, many changes throughout my career at Westchester, there are common threads that remain woven into the fabric of who we are that include a shared stewardship and disciplined approach to investing in farmland as an asset class to achieve success for all stakeholders. It’s a privilege for me to witness this milestone.
Cristina Hastings Newsome joined Westchester as the Head of Sustainability in April 2021 to lead sustainability and ESG across our farmland platform. Cristina joins Westchester following 9 years at Louis Dreyfus Company (LDC) where she was the Global Sustainability Lead, responsible for the sustainability strategy and implementation for the Grains and Oilseeds complex. Prior to LDC, she held strategy roles at AstraZeneca, Proteus and Accenture. Originally from the U.K., Cristina has lived in the U.S., Europe and South America. She graduated with an M.A. from the University of Oxford, an MBA from London Business School and a PostGraduate Certificate in Sustainable Value Chains from the University of Cambridge. Cristina brings significant international experience in sustainability and agriculture in the U.S., Latin America, Europe and Asia Pacific.
Solar investments in California
By: Frank Lu
Investment Manager/Vice President, Global Horticulture
California is uniquely blessed with fertile soils, an integrated water delivery system, and sunny weather - conditions that support its “Golden State” nickname. The state’s natural exposure to sunlight has resulted in the popularity of photovoltaic solar panels as attractive capital investments for residential homes, commercial buildings, and agricultural properties. This has been particularly true in the Central Valley region, where the hot-dry Mediterranean climate along with continued advancements in solar technology and associated cost reductions, have encouraged the growth of solar panel installations from consumer grade to utility scale.
With this backdrop, the Global Horticulture Team at Westchester is in the process of installing seven solar projects across ranches located within the Central Valley of California. The Global Horticulture Team manages permanent crops such as tree nuts, citrus, and avocados where consistent annual irrigation is needed to keep trees in these orchards healthy and productive. Whether boosting water from canals and reservoirs or supplementing surface water with groundwater extractions, there is a steady need for power to help drip-feed the properties within the portfolio.
In aggregate, the seven initial projects total approximately 5 megawatts in system size and will support close to 26% of Westchester’s horticulture acreage in the Central Valley. Additional projects are being analyzed for future investment. With a small footprint (less than 1% of each ranch) and minimal annual maintenance, these new photovoltaic installations will help to offset close to 80% of the power needs at the orchards and provide a hedge against continued utility price increases. It is estimated that, from the seven solar projects currently underway, the clean energy generated will replace 196,000 tons of CO2 emissions over the course of 30 years. This is equivalent to 22 million gallons of gasoline consumed or 216 million pounds of coal burned.
Permanent crops are already uniquely advantaged from a climate standpoint in terms of their low carbon emissions per unit of crop produced. Dedicating a small amount of land within these orchards for renewable power generation will only serve to further reduce the carbon footprint of these ranches while offering considerable cost savings. These renewable, eco-friendly projects are accretive to both our sustainability objectives and farm level returns. All these factors will support Westchester to continue sustainably investing in agriculture into the future.
2020 support for rural & regional Australia
By: Matt Bull
Executive Vice President and CEO Westchester Group of Australia
Given the unprecedented conditions experienced in rural Australia during 2019, mainly due to the impact of both the extended drought and the devastating bushfires, Westchester in Australia along with employees donated a total of $36,000 to support the following organizations, as part of our 2020 Corporate Social Responsibility (CSR) program:
- Australian Red Cross:
- Royal Flying Doctors Service:
- Foundation for Rural & Regional Renewal:
- NSW Rural Fire Service (RFS) – 15 local brigades:
These national charitable organizations were chosen as they allowed Westchester to provide a broad level of general assistance (Australia-wide), without being too specific to certain states or a single cause. We wanted to provide support to rural and regional communities where possible (in the medium to longer term), whilst also supporting those in desperate need (in the immediate to shorter term). We believed donating to the above allowed our business to achieve that objective.
As our head-office and about 75% of our staff in Australia are based in Wagga Wagga (NSW), and since the community of Wagga Wagga provided strong support to nearby regional communities who were devastated by the bushfires, we decided to also donate to 15 local fire-brigades within 20-25km of the city of Wagga Wagga. These fire-brigades are part of the Riverina Zone Rural Fire Service (NSW), and are essentially small sheds stationed by volunteers with limited resources.
A number of team members in the Westchester Wagga Wagga office presented the donated cheques personally to each of the respective fire captains of the 15 local fire-brigades. All fire captains were extremely appreciative of these donations.
Re-establishing Romania’s irrigation infrastructure
By: Greta Lupu
Country Manager, Romania
During communist times, Romania constructed a vast irrigation network covering more than 3 million hectares (7.4 million acres), equivalent to more than 20% of the total arable land in Romania. Unfortunately, this system has fallen into disrepair. However, many farmers and landowners, including Westchester, are now seeking to bring this vast system back to its former glory.
The system, with its main channels and pumping and re-pumping stations is still the property of the Romanian state. However, to rehabilitate the irrigation system, the project has been split into two parts: (i) direct state investments in the main infrastructure – main pumping stations and irrigation channels; and (ii) the secondary infrastructure, where the local landowners and farmers need to organize themselves and form Irrigation Associations for each pumping station or a group of pumping stations. The Irrigation Associations or the so-called OUAIs can be formed only if the members, landowners and farmers, represent at least 51% of the surface that the pumping station is irrigating. The Association needs to be approved by the Ministry of Agriculture, and only once that is completed is the Association considered officially formed and the affected pumping station(s) will be moved from state management and responsibilities to the related association. Once this is completed, the OUAI can prepare a project for the rehabilitation of the pumping station and related secondary infrastructure. Finally, the OUAI can then apply to the EU for a grant of up to €1 million towards the cost of the project.
More than 30 years after the fall of communism, only about 200,000 ha are benefitting from rehabilitated irrigation infrastructure. This is still a very disappointing number for the remaining area of which at least 2 million hectares should be under irrigation, and in consideration of the economic impact that a drought, such as the one in 2020, has had on the Romanian farmer.
There are many reasons the modernization has been slower than one would expect. On one hand, the €1.1 billion from the state budget to rebuild the main infrastructure only became available around 2007. On the other hand, the farmers needed time to consolidate their operations by consolidating the land they work, improving the efficiency and effectiveness of their operations, and only then could they consider irrigation projects. However, we are witnessing increased activity around the creation of OUAIs, in particular in the counties that have seen more active swapping and consolidation of the land parcels. However, there is still ample opportunity to consolidate and increase efficiency and effectiveness at the farm level across all good agricultural areas in Romania. Nevertheless, a milestone has clearly been reached as the interest in irrigation is picking up with more and more farmers and landowners forming OUAIs, and Westchester is playing its part in this area, currently actively participating in various OUAIs.
2021 Nuffield international scholar
By: Westchester ESG Committee
Renato Rodrigues – Brazil
Research topic: Climate change in agriculture, greenhouse gases and sustainable production systems
Originally from the state of Rio de Janeiro, in Brazil, Renato won a 2021 Nuffield International Scholarship sponsored by TIAA-CREF Global Agriculture and will study sustainable agricultural practices.
For my Nuffield Scholarship I will be surveying sustainable agricultural practices in the main global players, analyzing market demands for sustainable products, promoting sustainable intensification of agriculture and connecting production with the SDGs, based on a Nexus approach to food, water and energy security
Renato is a researcher at Embrapa which, under the aegis of the Brazilian Ministry of Agriculture, Livestock and Food Supply, works to develop a Brazilian model of tropical agriculture and livestock. Embrapa is headquartered in Brasília, with over 43 research centers and more than 9,000 employees across Brazil.
Renato’s research is focused on climate change in agriculture, specifically greenhouse gases and how production systems like Integrated Crop-Livestock-Forestry (ICLF) can contribute positively. He is also President of a public-private association (ICLF Network) composed of Embrapa and others in the agricultural sector. He believes that Brazil is capable of becoming the first agro-environmental power on the planet, demonstrating how it is possible to simultaneously produce and preserve.
As a result, I hope to set guidelines focused on production practices, public policies, financial mechanisms and market practices, to guarantee food and nutritional security for the global population in a changing world
Renato would like to visit the main grain and meat production regions and consumption centers in the United States, study value-added products and consumption trends in the United Kingdom, France, Ireland and the Netherlands, as well as explore adoption and potential for ICLF systems in Africa, South America, Australia and New Zealand.
I believe in economic development with social responsibility, environmental preservation, cultural respect and institutional commitment, and I believe that conscious companies are the way to that future
Renato has a Bachelor in Biological Sciences, MBA in Environmental Sciences, Executive MBA (management) Masters, and PhD in Environmental Geochemistry.
On-farm storage: infrastructure to drive grower efficiency and profitability
By: Drake Norman
Vice President, U.S. South Row Crops
Grain storage has long been a “nice to have” element in building and growing a successful farming operation, but for many growers, especially larger operators, access to on-farm storage is now critical to the overall success of their business. Increasing yields and improved harvest efficiency present a favorable dilemma: more volume harvested at a quicker pace. Farm operations are often slowed and sometimes halted by limited trucking capacity and/or slow moving grain truck lines waiting to unload at large commercial elevators. Storage infrastructure located onsite provides growers with an ability to stage deliveries to the commercial elevators on a more orderly basis.
Additionally, storage can be an important tool for a grower’s crop marketing strategy in that storage essentially creates time and flexibility. Storing crops could be for drying purposes so the grower receives better pricing for crops with lower moisture content upon delivery, or it could be employed to enable the grower to opportunistically sell crops over a longer time horizon (versus selling all crops at the time of harvest). Proximity of storage to the field is of great advantage to any grower who is focused on increasing the overall efficiency and profitability of their operation.
Westchester evaluates improvement and farm infrastructure opportunities, including grain storage and drying facilities, at the time properties are acquired as well as across the portfolio on an ongoing basis. In 2020, Westchester completed a large, highly efficient and strategically positioned storage and drying facility in Arkansas. This facility consists of over 850,000 bushels of storage, a three-stage dryer with an hourly capacity of over 5,000 bushels, and the ability to unload and load multiple trucks simultaneously. This project further reinforced Westchester’s partnership with a large tenant by increasing the efficiency of this specific property for the tenant while meaningfully improving annual returns for investors.
The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of market returns, and proposed or expected portfolio composition. Any changes to assumptions that may have been made in preparing this material could have a material impact on the information presented herein by way of example. Past performance is no guarantee of future results. Investing involves risk; principal loss is possible.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
Nuveen provides investment advisory solutions through its investment specialists.
As an asset class, agricultural investments are less developed, more illiquid, and less transparent compared to traditional asset classes. Agricultural investments will be subject to risks generally associated with the ownership of real estate-related assets, including changes in economic conditions, environmental risks, the cost of and ability to obtain insurance, and risks related to leasing of properties.