Since the 2007 subprime mortgage crash, which threatened to derail the entire global economy, Americans have been waking up to the realization that Wall Street is too stratified, trading is too abstract and too rapid, and corporate power has advanced so much that no one is looking out for Main Street.
Young farmers have suffered greatly, especially those who raise organic produce and pasture-raised meat for families in their own communities; they have experienced a decrease in their ability to obtain the capital they need for land and equipment to run a successful farm enterprise.
According to the American Farmland Trust (AFT), the number of beginning farmers has reached a 30-year low. Between 2007 and 2012, the number of beginners dropped 20 percent, and new farmers now represent the smallest share of farmers since 1982, as per the Census of Agriculture.
Responding to what is starting to look like a crisis in farming, with thousands of farmers due to retire and fewer young farmers than ever, a number of organizations — including USDA, large agricultural universities such as Cornell and the University of Minnesota, Farm Credit and the AFT — have put forth new programs to help young farmers find land and financing.
But closer to home are the many small, innovative programs that have been springing up in the past decade to create new tools for building local economies.
Progressive economists have been pointing out that a dollar spent at a business in one’s own community circulates many times within that community, while a dollar spent at a national Big Box store disappears into corporate coffers, where it contributes to the profits of faraway shareholders.
New local investing programs have been devised that depend upon direct community involvement to finance small, local businesses and farms. Beginning with crowdfunding, which uses social media to promote and help fund adventurous new projects, these innovative programs are wielding old investment methods like shareholding and even local stock exchanges to engage the community in investing in businesses close to home.
Instead of buying stocks in distant companies, the public can invest close to home in a local farm or business through a mechanism called a Direct Public Offering, or DPO. Unlike investors in the stock market, these buyers do not have to be accredited to invest in a DPO, and no minimum investment is required.
Amy Cortese, author of the book and blog Locavesting — a term she invented to identify the new investment model — tells how residents in her Brooklyn neighborhood got together to rescue a beloved bookstore by investing whatever they could afford to provide the business with capital.
According to the Sustainable Economies Law Center in Oakland, in a DPO, “a business owner or a group of leaders of an organization advertise the opportunity to invest in their enterprise to their community or to the general public directly, without the use of stock markets, brokers, or other middlemen.”
In 2012, President Obama signed into law the JOBS Act — Jumpstart Our Business Startups — which established a legal framework for DPOs. It took until last year for the SEC (Securities and Exchange Commission) to work out the details. Now 34 states have created their version of the rules for local investment.
Cutting Edge Capital (cuttingedgecapital.com) works with a team of attorneys to help farmers and small businesses set up DPOs.
With the high cost of land, young farmers are likely to need more capital than an urban bookstore or a small-town bakery.
“A more just food system is inherently intertwined with a more just system of land distribution and ownership,” said Christina Oatfield, policy director of the Sustainable Economies Law Center (SELC). “Beginning farmers need some pretty significant financial resources to buy land. Where will all that money come from?”
SELC is exploring some possibilities. Trillions of dollars are held in retirement savings and other long-term savings accounts, she said, and “many of these investors would be willing to take a smaller return on their investment if their dollars were financing more just and sustainable food systems.”
In Port Townsend, Washington, a group of investors got together and pioneered the concept of a Local Investing Opportunity Network (LION). Locavesting reports that since 2008, “the Port Townsend LION has grown to more than 60 members, who have made more than $3 million in investments.” A similar investing club in Maine is called No Small Potatoes.
With the surge in consumer desire for fresh, local, organically grown and well-prepared foods, much of this investment has gone to food, whether in the ground, in the store or for prepared specialty items.
Slow Money, an adaptation of the concepts espoused by Slow Foods, an organization that seeks to produce local, natural, community-supported food systems, has invested $57 million since 2010 in more than 625 organic farms and food enterprises via dozens of local Slow Money groups.
A similar organization, FarmlandLP, aims to “provide investors with the opportunity to invest in two dynamic markets: farmland and organic food.” It invests in commercial farmland, converts it to organic and then manages the land.
Iroquois Valley Farmland Real Estate Investment Trust is “a restorative farmland finance company providing land access to organic family farmers, with a focus on the next generation.” It has a special program for young farmers and is currently seeking “young farmers with a diversity of farming operations, including grains, local and organic foods, vegetables and pastured livestock.”
“Some of this work is already happening through loosely organized community groups, as well as nonprofit loan funds like RSF Social Finance, Northern California Community Loan Fund and others,” said Oatfield. SELC intends to pick the best models “to support a new generation of more diverse, ecologically-minded, community-supported farmers.”
Rules vary, so you may need to do some hunting online to find out what’s available in your state.
As with seeking any other type of financing, know what you are looking for and have your farm business plan at the ready. The task of finding “slow money” can indeed be slow, but that may be one of its strengths.