Is This the Crop That Saves Florida Agriculture?

by Tom Schenk

If you’ve driven through central and southern Florida over the last several years, you may have wondered why much of the land that used to grow oranges and grapefruit in central and southern Florida now sits fallow and choked with weeds? Most people are aware of the fatal citrus greening disease that has caused one of the greatest agricultural disasters in US history. Almost every remaining grove in the Sunshine State is infected with this disease as researchers struggle to find a cure with little to show for results.

In 2017, the growers who were still in the game were spending between $1,500-$2,500 per acre in expenses to coax a profitable citrus crop out of their dying groves. These efforts were met with almost ideal growing conditions and by all accounts it appeared that their efforts would be rewarded with one of the best crops they’d seen in years.

Until the arrival of Hurricane Irma which went through Florida like a chainsaw leaving no grove untouched.

Damage reports indicate that half or more of the unripen fruit is now laying on the ground while what remains in the trees is bruised or will eventually drop off in the coming weeks.  And if that wasn’t bad enough, many groves were left standing in water far beyond the critical 72 hours which is almost always fatal for citrus trees.

Directly and indirectly, Florida’s citrus industry creates almost 45,000 jobs which translate to almost a $9 billion contribution into Florida’s economy. Today’s citrus industry has shrunk by well over half from its peak in the late ‘90’s leaving rural towns and communities distressed and struggling to survive as families and individuals move away to find work elsewhere.  There are only 7 remaining processing plants in the state and it is highly questionable how many will remain open and viable when ultimate crop losses may be as high as 80%-90%.  There’s a point where it does not make economic sense to salvage the remaining fruit in a grove or open a processing assembly line for the smallest harvest since the 1940’s. Like any commercial real estate, ag land is generally priced as a function of its income earning value plus any development potential. Citrus grove and that used to be valued at $10,000 – $15,000 or more per acre now sells for less than half to a third of that.

But why can’t some other crop fill this void?  It’s not for lack of trying.

South Florida’s hundreds of thousands of acres of sandy, shallow soils and rainy climate narrow the field of viable crops that can be profitably grown in those conditions.  Afternoon rains continually flush fertilizers and chemicals out of the soils, into the drainage canals, and ultimately Florida’s coastal estuaries and Everglades. In spite of these challenges, many growers and outside investors have ventured into some alternative specialty crops such as peaches, blueberries, tomatoes, and strawberries.  Establishment costs, however, are very high.  In the case of blueberries, it could exceed $15,000 per acre! To make matters worse, growers have found themselves struggling with a diminishing supply of farm labor. And finally, whenever prices spike higher from either early season prices or if there is a production shortfall, floods of cheaper imports arrive in a matter of days from Mexico and South America.

  • So what can work in Florida’s unique agricultural ecosystem?

There is one ray of hope that shows great promise of restoring ag land values and revitalizing business in South Florida’s rural towns.  In 2011, an enterprising group of entrepreneurs from a company called TerViva began approaching some of the state’s largest citrus growers to establish some trial sites with a tropical/subtropical tree crop called pongamia. Pongamia is an oilseed tree that is native to Australia and India.  Conceptually, the crop is like growing soybeans on trees, but at yields 8x-10x over the best Iowa farmland. Pongamia is not new to Florida.  At the turn of the last century, it was introduced as a landscaping ornamental and today a few of these trees can still be found along the turnpike, shopping centers, and in parks in south Florida.

Creating a viable agricultural industry from scratch is not an easy task, but it has been done.  Soybeans were unheard of until they were introduced in the early 1930’s and palm oil trees were developed from the rubber plantations in Southeast Asia after WWII.  Interestingly, products from pongamia are thriving industries in India where the oil is used for industrial applications like fuel, lubricants, paints, surfactants, biopesticidal horticultural sprays, and more.  The “cake” or “meal” that remains after the oil is extracted is coveted as a great fertilizer that releases its nitrogen slowly so a plant can utilize it better. In India it is used to suppress soil-borne pests like nematodes that are the arch enemy of many of our food crops.

So what is the path to prove the viability of a new crop in the US – especially in such a challenging geography as Florida? Below is a checklist of the gauntlet it had to run.

  • Will the tree grow here?

This was the first order of business TerViva set out to prove to growers when they arrived in 2011.  The first grower who would listen to them was Ron Edwards CEO of Vero Beach – based Evans Properties. Edwards, former COO of Tropicana and co-founder of SoBe Beverages and Blue Buffalo Pet Foods, has a track record of spotting a good management team, a good business model, and an idea that had a good shot of succeeding.  Skepticism was high so Terviva offered to split the costs of the first trials.

The result was beyond expectations.  Growers such as Graves Brothers, US Sugar/Southern Gardens, DNE, Alico, Mosaic and others soon followed.  Around the state, the tree grew well in diverse sites with sandy soils, toxic soils, saline soils, and even Mosaic’s challenging clay reclamation soils. In 4 years the trees were 10’ to 16’ in height.

 

FSG_June2017-1

Pongamia orchard in Florida – Photo by TerViva

The trials have shown that these trees survived hurricanes Mathew and Irma, 2 weeks in standing water, frosts, non-irrigated fields, poor soils, higher-salinity irrigation not suited for most other crops, sand, clay, pests, and heat. Indeed, pongamia can deal with Florida’s challenging climate and soils..

  • What are the costs to grow it?

Establishment costs are very similar to citrus.  Indeed, the first thing that growers noticed was that the tree could literally be dropped right into the existing citrus infrastructure. The trees cost about the same as citrus and the planting densities are equal to or slightly less than citrus. Some growers literally planted between the stumps of former orange trees. To date in Florida, no pesticides have been used.  This hardy tree has grown through a laundry list of tropical and subtropical pests that growers spend millions of dollars on to control.  The biggest annual expense is weed maintenance until that young tree can get some height and eventually shade out a lot of the undergrowth which can subsequently be managed with mowing. So annual maintenance costs tally to about $400-$500 per acre – about one third or one fourth of what citrus currently spend.  Some growers used a small amount of fertilizer, and many used none at all.  Pongamia is a legume so it enriches the soil by making its own nitrogen.

  • How is it harvested?

Almost all of the fruit and vegetable crops grown in Florida need manual farm labor and every year that has been more difficult and costly to come by. Conversely, a crew of 2 and a nut tree shaker like those used on pistachios or almonds can harvest a pongamia tree in 3-5 seconds.  Those cost benefits accrue directly to the bottom line.  For the past 2 years as some of the young trees have produced pods early, Terviva has put on grower demos to show how easy and fast the tree can be harvested.

  • Who’s going to process it?

The beauty of the pongamia industry is that everything about it is low-tech. The tree puts out a pod that is easily shelled with a nut sheller and crushed with conventional soybean crushing equipment.  It doesn’t require elaborate $100 million processing plants or exotic enzyme formulations to make it work. The bean inside that pod looks about the size and shape as a lima bean.  It consists of about 40% oil and the 60% balance is the remaining seedcake. In 2017, the forward-thinking Hardee County IDA and its head, Bill Lambert, unanimously voted to build the first pongamia crushing plant in Florida. Because of the elite varieties that Terviva is cultivating at various commercial greenhouses in the state, an acre of their trees is conservatively estimated to yield about 400 gallons of oil and almost 3 tons of seedcake!

  • Who’s going to buy the products?

This is where it gets interesting. There is a long buffet of diverse markets for this oilseed tree crop and therein lies one of its greatest advantages.  These profitable markets range at the low end from a feedstock for industrial oils, to feed, and all the way up to highly-valued biocontrol products for the organic agriculture.  Organic growers have long been familiar with the benefits of pongamia’s oil and meal products under the Indian name karanja.

Like soy, pongamia oil is a long-chain C18:1 compound that can readily be refined into biodiesel or bio-jet A fuel.  Those tests have been tested and validated by Shell, Valero, REG, and ARA Labs. Refiners view a pongamia crop in Florida as a new oilfield that faithfully produces oil every year. Fuel is the base-case end market and can produce fine investment returns.

Classified as a politically correct “non-food” feedstock it can be used to make biodegradable polymers such as fracking fluids, plastics, detergents, paints, and other industrial products.  Secondary compounds found in the oil have documented and long used in India as extraordinarily effective biopesticides as good as or more effective than more commonly known neem products that are widely used by organic farmers, gardeners, and in the fast growing cannabis industry.  Because of the lack of need for inorganic chemicals used in growing pongamia, these high-value end-products are in growing demand by organic feed and growing operations. Sales into these channels alone can double or triple the value of the cake and oil.

The seedcake or meal can be further refined to produce a (30%) high-protein animal feed, or simply be used as an environmentally-friendly, slow-release 4-1-1 fertilizer that plants can better utilize.  Because the backbone of the oil shares similar properties to various food oils, scientists have told Terviva that the secondary compounds could be stripped out to upgrade the oil to “food quality” which could be of great value in parts of the world where pongamia could be grown on a footprint not adaptable to traditional oilseed crops.

  • Bus 101

The arrival of the pongamia farming model into the staggering agricultural void created by the citrus greening disease could be a classic business school case study.  The trail has been blazed.  A deeper dive into this business model reveals some very unique attributes.  The trees high yields offer an extraordinary margin for error in any given crop year.  For many alternative oilseed row crops planted elsewhere in the US (often as a new rotational crop), the entire growing season can tolerate few hiccups or else the yields will have a difficult time justifying the risks of planting and new machinery investments.  Pongamia’s low annual maintenance costs also allow a lot of margin for adverse weather surprises.  Pongamia’s diverse downstream markets mitigate marketing risks.  Low-tech processing that can create products from fuel and feed to fertilizer and biocontrol horticultural sprays can allow plenty of flexibility to target up-cycling markets and reduce dependency on single consumer markets.  And depending on those markets, Terviva estimates that at maturity, the groves could generate a net income between $700- $1,500 per acre.

What would the ideal replacement crop look like if it showed up at growers’ doorstep? Probably something like pongamia.

The Alchemy of Nitrogen-Fixation

By Kevin Hancock

With an ever-increasing world population comes an increased demand for food, fuel, and fiber. Land, water, and energy resources are becoming scarcer. Nitrogen is abundant worldwide, and is needed for the growth of most plant species. The majority of the world’s nitrogen is in the gaseous form, which cannot be utilized by most plants. This means that most plants must rely on additions of synthetic fertilizers to supply the needed nutrients.

There are very few plant species that are capable of fixing atmospheric, N2 gas, converting it into a usable form like ammonia, and storing it in root tissue. These plants are referred to as nitrogen-fixing. Symbiotic nitrogen-fixation (snf), which occurs naturally in some leguminous crops, can play a vital role in transforming atmospheric nitrogen gas into ammonia that can be utilized by these plants.

Biological reduction to ammonia can only be performed by prokaryotes and is a highly oxygen-sensitive process. Symbiotic interactions between prokaryote partners occur in two groups of soil bacteria — rhizobia in symbioses in legumes and Frankia bacteria in actinorhizal symbioses.

Snf is highly important in the production of biofuel feedstocks. Many current plants which produce abundant amounts of biofuels such as oil palm, canola, and corn are not nitrogen-fixers and consequently they rely on inorganic nitrogen fertilizers. Every step in the production, delivery and application of nitrogen fertilizer requires fossil fuels. Even though the formation of fossil fuels occurs naturally through anerobic decomposition of plants and animals, they are not considered renewable sources of energy.  Decomposition takes millions of years to form large enough quantities of fossil fuels. Those reserves are being depleted at a much higher rate than they are being formed.

The problem with the use of synthetic fertilizers is that plants only absorb a small percentage of applied fertilizer at any one time. The remainder of the applied fertilizer (30-50%) is subject to runoff, volatilization, and are leached beyond the root zone or denitrified. In many areas this can create algae blooms and eutrophication – a condition of high concentration of nutrients, but low oxygen levels. For example, Lake Okeechobee in Florida is experiencing this due to nutrient runoff from adjacent croplands.

Snf reduces the plant’s dependence on inorganic nitrogen sources and can provide a substitute for nitrogen fertilizers, thus reducing costs and helping the environment at the same time. Biological nitrogen fixation has been estimated to produce approximately 200 million tons of nitrogen annually.

KH nodules 1

Leguminous root nodules – PC: NMSU

It would be very beneficial to humanity as well as the environment if all agriculturally important plants were capable of fixing atmospheric nitrogen.  Although a lot is still unknown, a lot of work has been conducted to better understand the intricacies involved in symbiotic nitrogen fixation. Nitrogen-fixation is composed of 3 components; first, the formation of nodules which provide the correct environment for nitrogen-fixing bacteria; second, the regulation of nodule numbers by both internal and external factors, and third, the actual conversion of atmospheric nitrogen into ammonia by the invading bacteria using the nitrogenase enzyme complex.

Nitrogen-fixing plants are not capable of extracting N2 gas directly from the atmosphere, they work in concert with common soil bacteria called Rhizobium. Rhizobia attached to root hairs, induce a pronounced curling of root hair cells. The root hair becomes deformed and the bacteria enter the plant by a newly formed infection thread growing through it. At this same time, cortical root cells are mitotically activated giving rise to the nodule primordium. Infection threads will grow towards the primordium and the bacteria are released into the cytoplasm of the host cells. The bacteria become encapsulated in the small compartment formed by the curling. The bacteria enter the plant’s root system and form nodules along the root pathway. The plant supplies all the essential nutrients as well as energy to the bacteria. Within a week after infection, nodules will become visible by the naked eye. Under field studies, nodules appear within 2-3 weeks. The nodules allow the plant to absorb the N2 gas that is present in the soil, and the plant converts it into ammonia that enters into a biochemical pathway producing both organic and inorganic forms before reverting it to N2 gas. Nitrogen-fixing bacteria need high calcium levels to work efficiently. Three micro-metabolic elements, iron, molybdenum, and cobalt are essential for the nitrogen-fixing process in bacteria.

KH nodules 2

Nodule Formation Cycle in Pea Plant – PC: Pearson Education

Most legumes form symbiotic relationships with a select few Rhizobium, however Pongamia pinnata is able to produce snf relationships with various strains of Rhizobia as well as Bradyrhizobium. In areas of India the results clearly demonstrate the major advantage of the leguminous nature of Pongamia when compared to the Jatropha tree, another plant feedstock being evaluated as a source of biofuel energy.

Since the presence of oxygen can inactivate the process of nitrogen-fixing, it is important to know that legumes can regulate the gas permeability in their nodules allowing enough oxygen to maintain respiration without deactivating the nitrogenase enzyme. Nodules contain a heme protein called leghemoglobin. Leghemoglobin is present in the cytoplasm of infected cells at high concentrations (700 uM in soybean nodules). This protein gives the nodule a pink color.

The mystery of the symbiotic relationship is that it only occurs through a complex exchange of signals between specific genes of the plant host and symbiont. Infection and nodule organogenesis occurs simultaneously during root nodule formulation. The symbiotic relationship between legume and bacteria is not obligatory. It is quite possible for a seedling to live out its life cycle without becoming associated with a symbiont.

Among many compelling characteristics, the reduction of dependence on commercial, nitrogen fertilizers, the reduction of runoff and minimizing other environmental concerns all show the benefits of the snf process inherent in Pongamia pinnata.

 

References:

Majda, W. (2014). How to increase the rate of biological nitrogen fixation. Retrieved from https://permaculturenews.org/2014/09/25/increase-rate-biological-nitrogen-fixation/

Meyer, S. B., Anderson, D. B., Bohning, R. H., & Fratianne, D. G. (1973). Introduction to plant physiology (2nd ed.). New York, NY: D. Van Nostrand Company.

Rhoades, H. (2017). Nitrogen nodules and nitrogen fixing plants. Retrieved from https://www.gardeningknowhow.com/garden-how-to/soil-fertilizers/nitrogen-nodules-and-nitrogen-fixing-plants.htm

Taiz, L., & Zeiger, E. (2002). Plant physiology (3rd ed.). Sunderland, MA: Sinauer Associates, Inc.

Wikipedia. (2017). Nitrogen fixation. Retrieved from https://en.wikipedia.org/wiki/Nitrogen_fixation

Flynn, R, & Idowu, J (2015) Guide A129 Nitrogen Fixation by Legumes. Retrieved from http://aces.nmsu.edu/pubs/_a/A129/

What I Wish I’d Known Before Becoming a Pongamia Farmer

by Elisabeth Beagle, TerViva Propagation & Agronomy Associate

My friends won’t know what I’m talking about.

New pongamia farmers, have your elevator pitch ready – even most fellow farmers have never heard of the crop. Pongamia (pohn-gah-me-ah for most, pohn-gaym-ee-ah for Florida folks) is a semi-deciduous, nitrogen-fixing legume tree that can be grown in diverse tropical and subtropical marginal lands. Drought and salinity tolerant, it’s well-suited for land not arable for food crops. The trees grow to 15-20 meters, set flowers after 3-4 years, and take 9-11 months to form a mature pod after anthesis.

Pongamia farmers harvest pods – up to 100 kg of pods per mature tree, per year. Each pod contains a seed. The oil content of the seed is approximately 35% of the dry seed weight and 55% of it is oleic acid, the ideal fatty acid for good-quality biodiesel production. Uses for pongamia oil are extensive – from adjuvant to lubricant, biodiesel to jet fuel. Beyond the oil, the seedcake (pulp left over after the oil is pressed from the seed) is a valuable source of protein; the pod shells separated during processing is a viable baseload feedstock for power plants.

DO mistake the forest for the trees.

Each variety of pongamia tree grows differently – the trick to successful pongamia crop production is to grow the best varieties, consistently. Ideal traits include regular and timely flowering, growth rate, pod set and weight, and seed oil content. Here’s the catch: if you crack open a pod and plant the seed, the tree that grows is unlikely to share the characteristics of the tree the pod came from. TerViva has compiled an exclusive library of high yielding, patentable pongamia genetics from around the world, and developed propagation techniques for scalable, consistent results. The core of TerViva’s IP platform is elite pongamia genetics that are iteratively advanced.

TerViva is not a coconut water company, Mom.

TerViva helps growers convert distressed agriculture land into productive acreage by growing pongamia. The US has lost 40 million acres of arable land in the past 40 years to disease and changing environmental conditions – while demand for food and fuel soars. In Florida, disease has caused 50% of citrus acreage to be lost in 10 years. Hurricane Irma made the picture worse. In Hawaii, 85% of sugarcane production has been abandoned due to cost of production and competition.

IMG_6975

Pongamia orchard on the North Shore of Oahu in July 2017

TerViva provides cultivar development and supply by selling growers elite trees best suited to their situation. TerViva has established commercial size acreage in Florida and Hawaii, geographies where the need for a new crop and the proper climate for pongamia intersect. Pongamia easily “drops in” to existing farm operations, utilizing the same field setups and infrastructure. The grower plants and maintains the trees at their expense; the pods are harvested using existing mechanical nut-harvesting equipment and transported to a centralized processor; then TerViva acts as the marketer for oil, protein seed cake and shells.

Pongamia farmers in Hawaii take an average of 9,740 steps per day in the field.

Hope your boots are made for walkin’, pongamia farmers. It turns out putting hands and eyes on each of the 121 trees per acre adds up to quite a distance. Trees are planted at 18 feet intervals along rows spaced 20 feet apart to accommodate the catchment frame of the harvester. Each field row consists of trees of the same cultivar, so that the entire row flowers, sets pods, and is ready for harvest at the same time.

The walking distance triples during planting. Pray for cloud cover.

Never say there is nothing beautiful in the world anymore. There is always something to make you wonder in the shape of a tree, the trembling of a leaf (Albert Schweitzer).

Sweaty, dusty pongamia farmers enjoy moments of respite while sitting beneath the shade of pongamia trees, reflecting hopefully on the gravitas of our work. Growing pongamia is for those farmers who are in it for the long game; growing pongamia is an investment for the future. Growing pongamia exhibits the belief that agriculture will continue to lead our population forward, towards renewable and environmentally sustainable energy sources. Had I known how rewarding growing pongamia would be, I would have started sooner! Wish someone had told me.

 

 

Wild relatives may not be so crazy after all

by Madison Brown

Recently, I came across an article pertaining to a study done on the use of ‘Crop Wild Relatives.’ This study analyzed the wild relatives of crops widely used across the globe to analyze qualities such as drought-tolerance and heat resistance, amongst other more desirable traits plant breeders seek out as our climactic patterns continue to become less and less predictable.

Climatologists and weather forecasters are already calling for another El Nino event to begin this fall. El Nino typically brings weather extremes such as abnormally rainy, warm winters and dry summers. In the world of food production, this means crops struggle to survive respective seasons. For consumers, this can lead to shortages of their favorite fruits and vegetables and in the worst-case grains and other staple crops. In turn, this leads to shortages of livestock feed. These threats result in plant breeders and researchers to investigate ‘wild’ relatives to these crops that in their current form may have lost the ability to adapt.

Staple crops such as rice, barley, chickpea and sunflowers were all analyzed throughout said study. The crops analyzed in this study are major sources of carbohydrates, plant-based protein (legumes) as well as oils and are cultivated consistently throughout the world. By providing information pertaining to commonly cultivated crops, their ‘cousins’ so to speak can be analyzed to provide further understanding of said crops genetics and how the variability can provide both good and bad references of its behavior and survival in the future, or potential improvements to current cultivars. It seems the overall goal here is to increase biodiversity. However, this study left-out major oil crops such as soybeans and corn, which are responsible for ethanol, bio-diesel and other petroleum alternatives that continue to increase in utilization every year.

This article and the information it presented is compelling because our team has been applying these same principles in a process to domesticate Pongamia Pinnata, a native to India and Australia and a wild, tropical relative to legumes we consume and utilize in industrial processes every day. Native to the tropics, Pongamia is naturally drought and tolerant to most temperature and weather extremes. Considering current predictions of our climate and weather patterns for the future, Pongamia seems to fit the bill as a “Wild Relative” for future oilseed crop production.

pods 1

However, Pongamia is vastly different in that it is a tree crop, thus providing other major environmental benefits to our planet. One benefit is carbon sequestration as all trees consume significantly larger amounts of CO2 to complete photosynthesis. In addition, Pongamia is a legume – meaning it “fixes” its own nitrogen through a symbiotic process involving tiny organisms living in the soil. These organisms are called Rhizobia and they participate in a symbiotic relationship with their host by feeding on photosynthates (carbohydrates and sugars provided by photosynthesis), whilst providing nitrogen to their host. Nitrogen also happens to be the most limiting nutrient to plant growth.  With these characteristics, Pongamia can provide us with a clean, forward-thinking alternative to soybeans and other oilseed crops.

Overall, it is both refreshing and exciting to learn other scientists and organizations are performing similar research to ours, on the same path to increasing sustainability and biodiversity on this beautiful planet we call home.

Keep Edible Oils for People, and Non-edible Oils for Industry

By Tom Schenk

In 2012, actor Matt Damon starred in a movie “Promised Land”.  The story was about a rural community whose water was being contaminated from chemicals used in the injection fluids from a petroleum company’s nearby oil and natural gas fracking operation.  While the movie was a box office flop for Damon, it did raise the public’s awareness about the toxic cocktail of chemicals (benzene, toluene, xylene, and ethylbenzene, and methanol, to name a few) that are combined with the large quantities of water (up to 7 million gallons) and sand that are injected deep underground at high pressures to fracture and open up rock formations so oil and gas can flow to a well. These chemicals help to reduce corrosion of the well, lubricate the extraction process, and prevent clogs and bacterial growth.

fracking

Many studies have claimed that these chemicals were used in such small quantities that they posed little risk to aquifers and other groundwater sources. Nevertheless, the movie, numerous articles, and academic studies raised the public’s awareness about some of the potential dangers created by this new drilling technology.  And no doubt it also raised alarms in the oil and gas companies’ legal and risk management departments that contaminating the water supply of one or more cities would wipe the company off the map.

Guar gum has been used in the food industry for many decades.  It has also been one of the favorite products drillers used to hold that sand in suspension and deliver it to its destination.  The greatest source for guar gum historically has been India.  The boom in fracking has created monumental price spikes and shortages for drillers in obtaining this product and has created havoc on their P&L’s.

In recent years, ExxonMobil, Halliburton, and a myriad of other oil-related companies have been developing suitable alternatives – often from plant-based oils – for developing greener, more environmentally-friendly lubricants for their drilling activities.  They would also like to see a more dependable domestic supply for the ingredients in their fracking recipes for biodegradable polymers.

However, in the fast developing world of biodegradable polymers, drilling fluids are almost a rounding error by comparison to all the other wonderful consumer and industrial products that technology that is developing from plant-based oils such as marine oils, auto and aviation lubricants (often with superior wear and heat properties), surfactants, detergents, shopping bags, food containers and countless other products where petroleum-based products and plastics have historically dominated. This technology is in a profound growth phase as almost anything we currently know as plastic can be reproduced in a more sustainable manner with plant-based oils rather than petroleum. And it sells because the consumer wants it.

Soy is the most dominant feedstock for many of these renewable products, as well as corn, canola, flax, palm, cottonseed, peanut, and others that are cultivated in large quantities worldwide.  Couple the growth in biofuels with the growth in this new technology for industrial applications, and all it will take is one or two bad years of crop production for there to be be a collision between food security for people and feedstock supply for factories and refineries.

Only the most arable lands – which are in diminishing supply – should logically be devoted exclusively to food.  Champions of these earth-friendly fuels and industrial products made from renewable feedstocks are missing the full picture.  They should be calling for the development of high-yielding non-edible oilseed crops that can thrive on the marginal land!

This is Terviva’s mission.  One of the most promising crops in this space is the wild tree called pongamia that our company is commercializing. These oilseed trees can produce up to 10x the amount of oil per acre that the best soybean land in Iowa can produce. Carbon is sequestered, and vast fallow acreage in Florida and Hawaii is on its way to becoming annually renewable – and profitable -“oilfields”.  Hardy, high-yielding crops on marginal lands are the optimum way to achieve peak biodiversity. Leave the good lands to make food for people.

Galls Gone Wild!

Galls Gone Wild!

Cue steel drums. Now get ready for a wild picture:

Galls

Cue grumbling. OK, cheap move, but really, would you have clicked on a blog post titled “Pongamia’s potential in Okinawa”?

PresentingI recently had the honor and privilege of being invited to speak at a conference on the Island of Kumejima, in Okinawa prefecture. It was a delight to be able to explore such a beautiful part of the world, especially an area with a strange dichotomy wherein some aspects of the landscape appeared analogous to my home state – Hawaii – while other aspects were utterly divergent and completely foreign.

One of the people I struck up a conversation with an emeritus professor from the University of Tokyo, and current President of the Deep Ocean Water Applications Society. As interested in pongamia as he was, I was equally intrigued by his Ocean Thermal Energy Conversion (OTEC) field, though that’s enough fodder for a whole separate blog post. After hearing my presentation on TerViva’s work to commercialize pongamia, this professor did a bit of research on his own and determined that in the Japanese language, pongamia is called “Kuroyona,” and that there are many Kuroyona trees to be found in Okinawa prefecture.

While the picture at the beginning of this blog post may have tipped you off, I can confirm that pongamia most certainly do exist on Okinawa Island. After a bit of exploring, I was able to locate several dozen Kuroyona trees, and observed them to be robust, with some displaying dense examples of early stage flowering, which could lead to a plentiful crop of oilseeds. In addition to these observations, I also recorded the presence of many leaf galls, which are structures built on the host pongamia’s leaf tissue by mites. In this context, there was no indication that the presence of leaf galls was having a negative impact on the trees in which I saw them; I determined there was no indication of ill effect due to the lack of superficially observable differences between trees with heavy gall outbreaks relative to trees with no visible galls. It should be mentioned here that the pongamia trees TerViva is growing in the United States have been verified to be gall-free by the USDA, and TerViva has not observed any galls on trees growing in the wild in the United States. Pongamia sign

The presence of pongamia in Okinawa is significant for a couple of reasons in particular:

  • Presents further indication of just how hardy Kuroyona is, given that Okinawa is impacted by typhoons an average of 7-8 times every year
  • As vividly depicted in the picture of galls going wild at the beginning of this post, the pongamia trees I observed appeared to be thriving in spite of what in some instances was high-density gall colonization
  • In spite of these environmental insults, and indication of minimal maintenance, the Kuroyona I observed were vigorous, and many trees displayed early indications of high density inflorescence, meaning the trees could be highly productive

flowersAs a result of my exploration and observations, I naturally wondered: what is the potential for pongamia cultivation in Okinawa Prefecture?

Looking for statistics on oil/diesel use in Okinawa Prefecture was difficult, and ultimately I was unsuccessful, which probably had something to do with the fact that I don’t speak Japanese, and so cannot search Japanese-language websites. Luckily, some friends from Kumejima Island (a larger island in Okinawa Prefecture) stepped in and graciously helped by providing me with the following information: As of 2004, ~300,000 gallons of oil per year were used for transport (both gas and diesel) on Kumejima Island.

Anyone who read my previous blog post will remember that I am prone to spontaneous bouts of case study formulation. Here’s a quick one: how much land would be required for a pongamia orchard large enough to supply all of the diesel needed for transportation on Kumejima Island? First, some assumptions:

  • Half of the transportation fuel used on Kumejima Island in 2004 was diesel, which can be replaced by biodiesel produced from pongamia oil
  • Kuroyona orchards on Kumejima Island still yield the 400 gallons of oil per acre that we expect them to yield in the United States

Given these assumptions, TerViva would need to plant an orchard ~375 acres in size to supply all the diesel used for transportation on Kumejima Island, ~150,000 gallons as of 2004. Since it is almost 2015, let’s assume diesel use has grown by 33% since 2004, to annual consumption of ~200,000 gallons. To produce 200,000 gallons of pongamia biodiesel, TerViva would need to plant a 500-acre orchard. As a point of reference, 500 acres represents less than 3.5% of the entire landmass of the island of Kumejima. Because I was not overly diligent in the research for this blog post, let’s say I was off, that it’ll take double the land I calculated would be needed; that is still less than 7% of the entire island’s land mass.

Allow me to summarize the above babble: using less than 7% of the land on Kumejima Island, TerViva could supply all of the diesel needed for transportation on the entire island. All of your diesel needs for less than 7% of your land? That’s a pretty good deal.

An Oilseed Crop for Florida’s Lost Citrus Acreage

Diseased abandoned citrus acreage in Florida

Diseased abandoned citrus acreage in Florida

While the United States is the most efficient agricultural producer on the planet, it also is home to one of the greatest agricultural disasters on earth. Few people outside of the state of Florida realize that the 150 year old citrus industry could be on the brink of collapse in as little as two years, according to some industry observers. Citrus contributes $9 billion in revenues to the state and employs 76,000 people. A series of severe freezes back in the 1980’s drove the majority of the citrus industry from the northern half of Florida to the southern half of the state – generally from Orlando southward.

Ten years ago, in its heyday, the state produced about 240 million boxes of fruit. As of the most recent USDA crop report, that number has declined to as low as 104 million boxes. And that rate of decline is not linear, it is accelerating. Estimates are that as production declines to 80 million boxes, most of the remaining processing plants will begin to shut down. After that, citrus in Florida could remain only as a niche crop.The cause is a pinhead-sized insect that transmits a bacterial infection to citrus trees and slowly chokes off the flow of water and nutrients from the roots to the leaves. Not only have scientists been unable to come up with a viable cure, they haven’t even been able to culture it in the lab.

Infected trees can take years before the first symptoms appear. By then the tree has already lost a great part of its root mass. The best strategy growers have is to just keep the progress of the disease at bay by feeding it repeated heavy doses of pesticides and fertilizers. It used to cost growers close to $500 per acre for these sprays. Today, those cost are exceeding $2000/acre! These high costs with declining yields are squeezing the life out of the growers’ profit margins. And it’s not doing much to help the long-term health of the soils, either. Imagine if an incurable disease wiped out corn and soybeans in Illinois and you’ll get an idea of the magnitude of the impact to the state.

To be sure, tens of millions of research dollars are being thrown at the greening problem at the state level, federal level, and even worldwide. One of the most promising solutions is inserting a spinach gene into the citrus which makes the tree quite resistant to the deadly bacteria. However, this veers into the genetically modified world and risks considerable consumer backlash over GMO food. There is a wasp that preys on these insects, but that is considered too little too late for Florida.

The Headwinds against Florida Citrus

Even if a cure is found, growers still face other headwinds. Annual consumer sales of orange juice (the main product from Florida citrus) in the US have declined from about 5 gallons per person in 2000 to about 3 gallons currently.   High prices, recession, alternative energy drinks, concerns about sugar and obesity have all contributed to eroding the demand side of the consumer equation. It could be difficult to reverse those trends.

Citrus groves that once sold for $18,000 per acre now sit barren, weed-infested, and end up looking like the above picture. They sell for close to $3000 per acre. Not only has millions of dollars of landowners’ wealth evaporated, but also have the state’s tax revenues.

The Problem With Alternative Crops

Some growers are replacing their lost citrus by planting peaches and blueberries. However, those crops are expensive, labor intensive, and can have intense price competition from other states when their harvest comes to market. Planting only a few thousand acres could swamp the marketplace with over-supply and crush prices. Stated differently, if there was a viable alternative crop to grow, there wouldn’t be over 125,000 acres of abandoned citrus land.

Arguably, the only agricultural industry with deep enough demand to accommodate the tens of thousands of acres of dead and dying citrus land is the oilseed industry where the worldwide demand for oil and protein is huge and growing. Currently, the oilseed demand is being met primarily by soy, and to a lesser degree by cottonseed, canola, and other minor (by comparison) row crops like flaxseed, safflower, etc.

So why haven’t some of these row crops filled in the void in these lost groves? There are two major problems in the soils in the southern half of the state. While the Florida is blessed with a long growing season and generous rainfall, the soils where citrus is grown are extremely sandy with a hard clay layer underneath.   This sand layer makes it difficult for them to hold nutrients. During the rainy season which runs from June to October, the almost daily rainfall flushes fertilizers and other nutrients out of the soil. The other problem is the field configurations. Citrus cannot tolerate its roots standing in water for long periods of time so the great majority of the groves were “bedded-up” when the groves were initially set up. Top soils were pushed into raised beds with a furrow in between to remove water in heavy rain events. Over the years, soil compaction occurred while in this configuration. Attempts to simply grade the raised beds flat for row crops still resulted in a wavy topography (once the soils settled) which created drainage issues. Some tried deep-disking this sand and the underlying clay layer in an attempt to blend the two into a sandy loam-like consistency, but the result was a mud bog that seemed to never drain properly.

Ground Rules for any Successful Replacement Crop

Any time that a new crop is introduced into a local geography, it has to meet some fundamental tests if it is to have any hope for viability. For example:

  • Hardiness. Does this new crop fit the climate?
  • Does it fit within the growers’ existing infrastructure?
  • Is it easy to grow and harvest?
  • Can growers generally utilize their existing body of agronomic knowledge?
  • Does it minimize labor requirements/costs?
  • Is it profitable enough to make it compelling versus alternatives?
  • Can growers use their existing machinery or at least need minimal new machinery?
  • Does it require high CAPEX to process?
  • Are there readily available downstream markets?

However, there is one beam of hope in this sea of gloom that has shown great promise for current citrus landowners and extraordinary opportunities for agriculture investors – and checks off on all challenges listed above.

Pongamia

A young company called TerViva has been working for several years with an oilseed tree crop called pongamia. Pongamia is an oilseed tree that is native to Australia and India. It is adapted to tropical and subtropical climates.  In the US, we already know that the tree thrives in Florida.  It was introduced back in the 1920’s when it was planted as an ornamental.  Many mature pongamia trees can be observed in southern Florida on both coasts along freeways, in neighborhoods, and in state parks and shopping centers.

Conceptually, growing pongamia is like growing soybeans on trees. The tree yields a generous harvest of nuts (which is why it fell out of favor as an ornamental) whose seed properties are similar to soybeans.  It has a high tolerance to salt and cold tolerance is similar to citrus so it is geographically suited to the same sites where citrus grew.

What’s the advantage for pongamia over soybeans? Pongamia’s per acre yields of oil are 6x greater than that of soybeans on prime Iowa farmland, plus it can grow on a footprint where soybeans generally cannot!

One of the first things growers notice about this tree crop is that it drops right in to the existing citrus field architecture. Some growers have literally planted it between the old citrus stumps.

Pongamia is very much like any orchard tree crop. The tree must first get established. It will begin to flower around year 3-4, and it should be commercially harvestable around year 4-5. Then the tree can produce for over 50 years.

There is also a strong ecological theme with pongamia.   This tree is a legume so it fixes nitrogen in the soil and enriches it.  To date, no pesticides have been used- or needed – in any geography TerViva has planted – Florida, Texas, or Hawaii. Insects and deer really do not care the leaves that much.

 

Mature pongamia acreage in Florida (photo courtesy of Paul Family operation near LaBelle)

Mature pongamia acreage in Florida (photo courtesy of Paul Family operation near LaBelle)

Growing – Harvesting – Processing – End Markets        

  • Harvesting can be mechanically done with a nut tree shaker. This is how pecans, almonds, pistachios and other nuts are harvested. Mechanical shakers also minimize the cost and challenges of dealing with manual migrant labor that is necessary for most orchard crops.
  • Processing after the harvest is all low-tech and low CAPEX; the seeds are shelled with a peanut sheller, and the seeds (about the size of lima beans) are crushed with a soybean crusher.
  • The End Markets are a separate discussion, and that’s where this gets interesting. Like soy, there are two end markets for pongamia: the oil and the seedcake.

Several oilseed crops used in industrial applications are surrounded in controversy. Soybeans should be for feeding people, not trucks. Palm oil production is coming at the expense of the rain forests which have caused a huge backlash from environmental groups and consumers. Chemically, pongamia oil is practically a first cousin to soybean oil, but it has some bitter flavenoids, so it is not edible. Its utility is for broad industrial applications that currently utilize soybean oil and palm oil. Industry loves soy and palm oil because these seeds contain rich long-chain carbon compounds which are high in energy content and can be separated into compounds such as oleic acid, palmitic acid, linoleic acid and others. These plant-based compounds are used in soaps, detergents, lubricants, cosmetics (like Oil of Olay), surfactants, inks, paint binders, and even plastics. In fact, a whopping 60% of the pongamia oil is oleic acid, compared to soybean with 24%.  Oleic acid is so valued that Monsanto has created a new GM version of soybeans called Visitive, just to increase the oleic acid content.

Pure pongamia oil being used in crop spraying

Pure pongamia oil being used in crop spraying

The oil also has known biopesticide properties. There is a recent study on this where it was more effective than DDT.   There is a body of literature on the use of a 50/50 mix of neem oil and pongamia oil as an exceptionally effective biopesticide. Early evidence also has shown pongamia oil could be an effective substitute for “435 mineral oil” that growers mix with many of their crop sprays.

As a jet fuel, the Department of Defense and the airline industry have a strong interest in fuel refined from plant oils called biojet fuel. It is 7% lighter than conventional jet fuel so a plane can fly farther or carry larger payloads. But most importantly, it burns considerably cooler than fossil-based jet fuel which means longer engine life and lower maintenance costs.

The deepest market, however, is to simply refine the oil into diesel. When that long-chain carbon compound in the oil is combusted, it releases a lot of energy. (Ethanol is only a C 6:1 compound that releases much less energy when combusted. This is why it is such a poor fuel for performance and mileage.) Currently, about 80% of biodiesel is produced from soy oil. Refiners are hungry for feedstocks for their refineries. No matter what you think about renewable fuels, they are going to be around for a long time. Both political parties are even in favor of them. Additionally, most countries around the planet have aggressive mandates for renewable fuels. It is important to emphasize that the biodiesel market is the base case scenario and con turn a fine profit at that.

The remaining seedcake can be used as a high protein animal feed. It has about a 27% protein content which is quite high. Tests are currently being conducted with Texas A&M as an animal feed. So far Phase 1 livestock feed tests have been quite positive, and Phase 2 testing is now being done. The next step is submitting the results for regulatory approval. Livestock and poultry feeders are always in the hunt for protein to blend in their feeds. Animal feed is quite the growth market in China, by the way.

Separately, the seedcake can also be used as a high-nitrogen (4%N) organic fertilizer. Nitrogen has become a very expensive crop input in recent years. Additionally, as a fertilizer, it is also reported to have great nematocidal and nitrification properties in the soil.

Processing

Once mechanically harvested, all that remains is to shell the pods and (just like soybeans) crush the seeds into oil and seedcake. A facility for shelling and crushing is not a large capital expense; perhaps $1MM-$2MM would suffice for a crushing facility that could service about a 75-mile radius. Several municipalities have indicated that the state has generous economic development funds for these small rural communities for economic development for these facilities.

Expected Returns                                                                                                                                                      

The other downstream markets (mentioned above) are fun to talk about and are very high-value markets, but the point is that simply selling this oil to refiners to make into fuel can be deliriously profitable. …Certainly more profitable than most traditional agricultural row crop commodities. We can produce oil for about $1.60/gallon. There is broad demand for good virgin oils for biodiesel refining that generally are in the vicinity of about $3.50/gal. There are a couple of small refineries in south Florida, and major biofuel refineries nearby in Georgia, Louisiana, and Texas.

In any new endeavor, risk must be commensurate with returns. TerViva conservatively believes a grower can make >20% 8-year IRR growing pongamia assuming the base case of just selling the oil to the biodiesel refiners. Stated differently, net income to growers who already own land is estimated to be about $800-$1200/acre with some fairly conservative yield assumptions – about 400 gallons of oil per acre and about 2.25 tons of seedcake.

Pongamia seeds are available on the internet, but the problem with propagating from seed if that you don’t know what you are going to end up with because the tree is an out-crosser (you don’t know who the other parent is.)   No serious grower is going to make the capital investment to start a grove and find out five years later that his genetics are no good. Growers want uniformity at harvest time as well consistency on other traits like oil content in the seed, gross yield, as well as other desirable traits. TerViva propagates their young trees clonally from a licensed library of highly selected mother stock from science groups in Australia and India who have documented their research over meaningful time periods. In other words, TerViva’s science team wants as close as possible to 100% probability that these trees are replicas of the mother.

Establishment costs per acre are close to citrus – about $2000-$3000/acre. However, annual input costs are a fraction of citrus amounting to primarily weed maintenance.  

Indeed pongamia is a new crop. There is always uncertainty in agriculture. However, based on how the trial sites that TerViva has established throughout southern Florida have performed over the past few years make it feel like a pretty high-probability bet. The trees have grown astonishing well. The oilseed industry is big, globally, and it is not going to go away. There’s a great chance that this $3000 land will be productive $13,000 land again. It is quite rare to observe a massive agricultural transition of this scope in our lifetimes. And for it to happen in a US geography may be unprecedented. For farmland investors facing low returns on conventional row crop farmland, or sovereign risk in South America, or infrastructure and transportation risk in Eastern Europe or Africa, investing in this oilseed crop in Florida looks like a slow pitch over the plate.

Tom Schenk is Director of Business Development at TerViva. For more information:   : 509 251 2565

Shining a light on Guar

I read an amazing stat this weekend: Farmers in the Indian state of Rajasthan are growing 11 million acres (4.5M HA) of guar this year! That’s a pretty staggering figure considering that Texas grows just 6M acres of wheat—which is considered a large-scale commercial crop (and Texas is twice the size of Rajasthan). As it turns out, guar was India’s largest agricultural export to the U.S. in 2011, according to the USDA Foreign Agricultural Service.

guar 1

Guar has been grown in Asia for centuries. Guar beans are eaten by people and animals (cattle primarily). In the US, refined guar gum is used for various food purposes including as a stiffener in soft ice cream, a stabilizer for cheeses and instant puddings. However, it remained a niche crop until the boom in natural gas drilling tripled demand for the crop. In hydraulic fracturing (or fracking) guar gum powder helps thicken the water that is pumped into the ground to shatter the rocks, releasing oil and natural gas deposits. Demand increased, prices went up and farmers followed by planting the crop in large numbers.

However, there are less obvious and more significant reasons for the guar explosion.

  1. It’s easy to grow: Guar is less labor-intensive and needs less fertilizer than other cash crops like cotton or lentils. Importantly, farmers in Rajasthan have been growing guar for a long time and knew best practices to generate good yield.
  2. It has multiple benefits: As a legume that fixes nitrogen, guar has the added benefit of being an excellent soil-improving rotation crop for cotton, sorghum and other vegetable crops.
  3. It’s easy to process: Splitting and dehulling guar beans is a relative inexpensive and straightforward process.  There isn’t an expensive biorefining process that takes money out of the farmer’s pocket.
  4. There are large and growing downstream markets: With natural gas and food markets needing guar, farmers feel comfortable that their hard work will result in a profitable venture.

In other words, it is not just demand and price that matter, but also a robust ecosystem that incentivizes farmers to grow the crop. In an earlier post I discussed how TerViva’s first commercial crop, pongamia pinnata, has similar dynamics. Read more about it here (it just might be the next 10 million acre crop!).

Sudhir Rani is TerViva’s CFO. 

ps. Check out the front cover of Time magazine which talks about the pressing bee problem which we discussed in a previous blog post

TerViva: Why We Do What We Do – Part II

Back in June, I wrote the first part of a blog post called:  “TerViva:  Why We Do What We Do”  (http://bit.ly/18WIC2j).  In that post, I identified three sub-topics: (1) why marginal land matters (2) why new crops are necessary for marginal land; (3) what is TerViva’s unique approach to new crops for marginal land.

I discussed topic 1 in the previous blog, and in this blog, I will tackle topics 2 and 3.

To recap on topic 1 – why marginal land matters…

Put simply, the amount of marginal agriculture land is growing every year.  According to a recent Oxford University study, future environmental hazards such as climate change, land degradation, and water scarcity could eliminate as much as $8 trillion in agriculture assets annually (http://bit.ly/11Z2NeQ).

Oxford has put some thought into the environmental risks for agriculture.

Oxford has put some thought into the environmental risks for agriculture.

We use agriculture to make food, feed, fiber, and fuel.  To meet future demand, we will need to farm lots of new acreage, increase production on existing acreage, and also find ways to use underproductive acreage.

On to topic 2 – so why new crops for marginal land…

New crops aren’t the only option for marginal land.  Indeed, companies such as Monsanto and Pioneer are using genetic modification techniques to improve the ability for existing crops such as corn, soybeans, rice, and wheat to grow better in harsher conditions.  Other companies, such as Drip Tech and New Leaf Symbiotics, are improving the viability of marginal land itself –through advancements in areas such as in soil fertility and irrigation.

We commend such efforts.  But there are places where, no matter the extent of GMO or land improvement, existing crops like corn, soybeans, rice, and wheat simply will not grow.  Where we work in Florida citrus country is a good example:  weeds, sandy soils, high water table, bedded rows, high humidity.  In other words, it’s land that’s excellent for citrus but not for most other crops.  And now, with citrus greening disease wiping our hundreds of thousands of acres, it’s increasing difficult for citrus, too

But this land can potentially be farmed with alternative, hardier crops that can still produce similar food, feed, fiber, and fuel.

On to topic 3 – TerViva’s approach…

A few years ago, we convinced ourselves of the need for new crops for marginal land.  We then began to evaluate many different “new” crops, from the well-known to the not-so-well-known:  sorghum, miscanthus, castor, jatropha, camelina, moringa, simaruba, yellowhorn, etc., etc.  At TerViva, we describe these crops as “semi-domesticated”  — they have had varying degrees of advancement by humans over generations, but not nearly to the extent of large-scale commercial crops like corn and soybeans.

Our search process led us to three conclusions, or better said, three pre-requisites for the success of new crops on marginal land:

(1) Hardiness:  the new crops have to be versatile, capable of withstanding the “new norms” of soil salinity, water availability, and pests.  Ideally, these crops will require fewer inputs than their predecessors in terms of fertilizers, pesticides, and irrigation.

Hardiness in action:  pongamia in the desert.

Hardiness in action: pongamia in the desert.

(2) “Drop-in”:  the new crops have to utilize a region’s existing agriculture skills, labor force, equipment, field setups, and processing infrastructure.  New crops are risky, and if growers cannot leverage existing capabilities, the rate of new crop adoption is likely to be low.

(3) Disruptive economics:  by definition, marginal land is not generating a good return.  High, sustained returns require both high income per acre and scalability.   $50 net income per acre doesn’t excite a lot of growers (I’m looking at you, camelina).  Similarly, It doesn’t help to have a $5,000 net income per acre for a crop with a market of only 5,000 acres.  For these niche crops, supply eventually exceeds demand, driving down revenue and returns.

Pongamia trees "dropping in" to Florida, just like citrus.

Pongamia trees “dropping in” to Florida, just like citrus.

Not many crops can check all three of these boxes.  But we have found one: pongamia.  It’s the crop of fervent devotion on this blog:  a legume species of tree that produces oil and seed cake of similar quality to soybeans, which is used heavily for the biodiesel and animal feed markets.

Pongamia is extremely adaptable:  droughts, waterlogging, sand, clay.  Where tree crops are cultivated, it drops right in to the existing agriculture system.  It can serve the huge markets for biofuels, biochemicals, and animal feed, at a return per acre of over $1,000 per year.

For these reasons, pongamia is rapidly gaining traction with large, leading landowners in Florida, Texas, and Hawaii.

Naveen Sikka is TerViva’s CEO.

Africa, the rise, the fall, the rise, the fall…

The African continent is blessed with some of the world’s greatest natural resources, huge mineral wealth and fertile land however; it would have to be the understatement of the year to say that doing business in the African continent is easy.  If you can get over the initial bureaucratic, political and logistical hurdles to set-up a project you are still left with the daunting task of deciding where.

Both Africa’s recent and ancient history is riddled with war, famine and political unrest with some countries experiencing almost inconceivable changes to their national welfare in extremely short periods of time. 

ImageTake the cataclysmic fall of Zimbabwe. This is a country that following its independence, in 1980, was considered one of the most stable countries to do business in.  Initially under Robert Mugabe’s leadership, it was doing well both in economic terms and as well as a tourist destination.  In the early 80’s it prospered from mineral exports but when the world markets fell, it managed to successfully transition to an agricultural economy and continue its growth.  Although droughts and foreign exchange issues slowed Zimbabwe’s growth, a steady 4.5% growth was maintained for more than a decade.  However, in 1997 the government began making poor decisions, including assisting the civil war in Congo. 

ImageThese bad fiscal decisions materialized in the economy in the past decade. For example, in 1980 inflation was 0.5% with an exchange rate of US$1 to Z$0.7. By 2008 inflation was 231million%.  In 2008 a Z$10 million dollar note was worth less than $US1.35. On the 17th of January 2009, Zimbabwe issued its first Trillion dollar note and later suspended its currency. Zimbabwe is ranked 173rd out of 185 countries in doing business by the World Bank. Zimbabwe isn’t alone. The bottom 5 positions are held by DRC, Eritrea, Congo, Chad and the Central Africa Republic.

However, other countries are seen to be benefiting from a change of regime and new industrial links with China.  Angola spent more than a quarter of a century ripping itself apart with a bloody civil war.  Since the war Imageended Angola has one of the worlds fastest growing economies with GDP growth of over 11% with over 50% of this being generated by the oil sector.  The other major export is diamonds with over 10 million carats a year being produced.  However, this growth has not yet filtered down to the general population, with subsistence farming still providing 85% of the population with a livelihood.

Angola currently ranks number 172 in the World Bank’s index, one above Zimbabwe.  In fact there are no African countries in the top 20. The highest ranked country is South Africa at 39 followed by Rwanda and Ghana at 52 and 64, respectively. 

Despite these rankings, many African countries are a sought after destination for foreign investment, be it for oil, or as a manufacturing base or as an agricultural producer for countries with limited and expensive land resources of their own.  Ethiopia, South Sudan, Mozambique, Liberia, the DRC and Sierra Leone have all signed sizeable land deals with foreign investors.  It’s estimated that in the last decade international companies have acquired more than 11 million hectares of land.

The land grab issues in Africa are well reported and so are the many failures that have occurred, particularly in the bio-fuels industry.  However, the truth of the matter is that many African countries offer an inviting opportunity for investment but the challenge is how to do it in a sustainable and equitable way while helping to create a stable, long-term, positive economic environment.

Many business leaders argue that these goals cannot be achieved by the countries alone, but need to be addressed by organisations such as the G20.  Things like weak judicial systems, non-transparent administrative systems, lack of capacity in regulatory bodies and failure to tackle corruption, increase the risk profile of an investment in Africa against an investment somewhere else.

I’d like to think the days of short term goals outweighing the common good are a thing of the past and that Africa has the ability to take advantage of this new period of growth. But who is ultimately responsible for building this desperately needed long term stability… investors, external bodies, political leaders or concerted effort from all three…

TerViva has trial plantings in Mozambique as part of a sustainable agro forestry project.

Matt Willis is TerViva’s Director of International Markets