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.

Terviva: Why We Do What We Do — Part I

Whenever I introduce Terviva as a company at conferences or events, I always start off by saying, “Terviva develops new crops for marginal land”.

Very few people ask me why that’s important, or why anyone should care about new crops for marginal land.

And yet, for the people who work at Terviva, that “why” factor is at the heart of what we do.  It’s what motivates us and drives us to work intensively toward our goals.

So I’d like to share “why” we develop new crops for marginal land.  I’ll break our logic down into three parts, to be covered across two blog posts.

(1)  Why marginal land matters

(2)  Why new crops are necessary for marginal land

(3)  What is Terviva’s unique approach to this opportunity

First – why marginal land matters….

In agriculture, the big picture goal is to increase food production.  The often-cited UN statistic is that, over the next 40 years, global population will increase by 2 billion people, and the world will require 70% more food production.

To meet this challenge, we need to farm more acres, farm more per acre, and – even more basically – maintain the viability of existing land.

It is estimated that 1 to 2% of all agriculture land becomes indefinitely fallowed every year due to soil salinity issues.  Now, add in other factors, such as desertification, declining water availability, extreme weather conditions, new crop diseases, and volatile macroeconomics.  The result:  a significant amount of land that was once valuable for farming is now longer so.

Marginal agriculture land in Florida, with TerViva pongamia trees now planted on it

Marginal agriculture land in Florida, with Terviva pongamia trees now planted on it

There are numerous examples of this marginalization of agriculture land.  We specifically work in three affected areas:

Florida:  citrus greening disease has wiped out nearly 50% of citrus tree acres in the last decade (almost 500,000 acres).

Texas:  extended droughts have triggered irrigation water cutbacks and declining productivity in rice, corn, and cotton farming

Hawaii:  sugar and pineapple farming, once mainstays of Hawaiian agriculture, have almost completely ended, due to competition from lower cost geographies in Asia.

It’s unlikely that any of these three areas will recover to the point where their land will once again be farmed for their traditional high value crops.  But there may be alternative crops for these areas – ones that can meet the demand for food, feed, fiber, and fuel more efficiently than traditional crops such as corn, soy, and sugarcane.

Abandoned citrus field in Florida -- another victim of citrus greening disease

Abandoned citrus field in Florida — another victim of citrus greening disease

No matter what, the amount of marginal land in the world is going to continue to grow.  Solutions are needed to improve the usability of marginal land, and at Terviva, we think we have some great answers.

Next week, I will write Part II of my post, discussing the need for new crops on marginal land and Terviva’s approach to developing these crops.

Naveen Sikka is Terviva’s CEO.

Pecans, Pongamia, and Water

Near Austin, Lake Travis sat at 54 feet below its full level as of January, 2012.

Near Austin, Lake Travis sat at 54 feet below its full level as of January, 2012.

If you live in Texas, water has been the biggest agricultural issue for the last several years. The coastal bend of Texas – where we are growing about 150 acres of pongamia – has historically been a big region for rice production. But that’s been on the decline, due (among other reasons) to less available water. As cities like Austin continue to grow, and rainfall remains erratic, it’s becoming increasing difficult to grow crops that are dependent on irrigation.

Water in TX -- not a good situation

Water in TX — not a good situation

Further up North, near Lubbock, the situation has gotten so bad that some pecan farmers are losing their trees. In this article – http://bit.ly/Y3Ff1w – we read about a family that’s selling its land because of lack of water for its pecan trees. Pecans need lots of water. Anecodtally, we heard from one farmer that it takes 40 gallons of water to make one pecan. More concretely, one of our colleagues at TerViva took a course on pecan horticulture and learned that, during a 6-month period, one acre of pecan trees requires 1 inch of irrigation per week (about 27,150 gallons). Over those six months, that’s over 706,000 gallons per acre, or 14,700 gallons per tree.

As a comparison, we have planted pongamia near the Phoenix area in Arizona – where it’s often very hot and always extremely dry. Our project is with a water treatment facility. Although the facility ends up producing very clean water, that water cannot be used for consumption or agriculture. So we partnered with this facility to try out some pongamia trees. Using drip irrigation, we’re applying about 5 gallons of water per tree per day. Over the course of a year, that equals 260,000 gallons per acre, or about a third of the water required by one acre of pecan trees over 6 months.

Pongamia in AZ -- waste water, drip irrigation, and some good looking saplings.

Pongamia in AZ — waste water, drip irrigation, and some good looking saplings.

Pongamia seeds are not pecans. For one, pongamia seeds don’t taste as good. But oil from pongamia seeds can be extremely useful for making bio-pesticides, lubricants and working fluids. And because pongamia is a legume, the seed cake left over from expelling the oil is also usable as an animal feed.

We’re not making the case that pongamia trees should replace pecan trees. But we do believe that new crops being used in non-food applications, like pongamia, should exhibit water footprints that improve upon water usage by existing crops.

That can be hard to prove concretely. Pongamia is known to grow well in dry areas of the world, producing bountiful harvests under rain-fed conditions 25 inches annually. But even we haven’t done the work to precisely measure optimal pongamia production under irrigation. We’re committed to obtaining the answers, in support of a common agricultural goal – the optimal use of water.

The Lettuce Revolution

Who would’ve thought this would be the title of a blog post? In the last few years, we’ve seen significant changes in the market for — lettuce. We’ve observed three trends:

(1) Shift to local production: urban population centers consume the most lettuce, but lettuce is mostly grown far away from urban areas. More than 90% of the US lettuce supply is grown in California and Arizona. Now, several companies – including Go Green Agriculture (http://www.gogreenagriculture.com) and BrightFarms (http://www.brightfarms.com) — are growing lettuce closer to where it’s consumed. Go Green has established a system of small-scale hydroponic facilities. BrightFarms is going even more local, with a deal with Gristedes supermarkets in New York CIty to grow lettuce right on supermarket roofs.

Go Green's model for distributed lettuce production

Go Green’s model for distributed lettuce production

(2) Shift to less intensive production: hydroponics, and now “aeroponics”, are all the rage with lettuce. Whereas hydroponic agriculture uses nutrient-rich water as the growing media, aeroponics uses almost no growth media (just air and nutrient mist). In addition to the aforementioned Go Green and Bright Farms, other companies to get their name out there are Aero Farms (http://www.aerofarms.com) and Pod Ponics (http://www.podponics.com).

(3) New “varieties”: now commonly available in California are lettuces with the root balls attached, which preserves freshness and shelf life. I can personally attest to this — I left such a head of lettuce in my fridge for two weeks and when I went to use the lettuce, it was fresher than if I had bought a regular head of lettuce from my grocery store that day.

"Living" lettuce with roots attached, available (soon) at a grocery store near you.

“Living” lettuce with roots attached, available (soon) at a grocery store near you.

Also, recently Monsanto released “Frescada”, a cross between iceberg and romaine that’s packed with vitamins. Unlike Monsanto’s corn and soybean seeds, Frescada lettuce is not genetically modified.

So why the all the focus on lettuce recently? Truthfully, we’re not sure. We don’t see cost being a major driver — we don’t know of people who have been complaining about the price of leafy greens (aside from President Obama — http://lat.ms/dzsZqm). We’re not even sure if hydro- or aeroponics will produce a lower cost lettuce.

Our guess is that the Lettuce Revolution is largely predicated on the belief that consumers want higher-quality and more sustainably-grown lettuces. Today, lettuce grown in the traditional manner can be of mixed quality. No one likes limp, slimy lettuce with browning edges. These hydro/aeroponic companies are certainly making a great product that uses far less chemicals and water than the lettuces grown outdoors in the California and Arizona deserts.

Another noticeable thing about the Lettuce Revolution — investors are getting on board. A few of the companies mentioned in this post have received VC funding. We’ve been a bit surprised by that. VCs typically like to say that they want to fund companies that can be “huge” (definition never clear when you talk with a VC), with an “enduring competitive advantage” (jargon that’s been forced down my throat many times). Based on some USDA data, the domestic market for iceberg and leafy lettuces are approximately $1 billion each. That’s nothing to sneeze at, but I wouldn’t call that huge. In addition, it already seems like there are low barriers to entry and a lack of differentiation in technologies from one new lettuce company to another.

Monsanto's new lettuce - Frescada

Monsanto’s new lettuce – Frescada

Lettuce is growing in popularity outside of the US, in places where it might be difficult to otherwise grow lettuce (i.e., the Middle East). The core hydro/aeroponic technologies are also extendable into other vegetables.

But still — VC funding for lettuce companies? No knock on the lettuce companies — they have some pretty significant talent. I personally met the young founder of Go Green Agriculture (a sharp, charismatic guy) and I recently learned that a very smart college classmate of mine with an investment banking background has joined Bright Farms.

We’re not sure how this will all play out. Consumers definitely stand to gain from the Lettuce Revolution, but I’m not sure if investors will. Lettuce farmers in California and Arizona are most at risk from the Lettuce Revolution. We could easily find that, in ten years, more lettuce is grown through hydro and aeroponics than in outdoor fields.