Potatoes

Washington Grower Shares How To Scale Regenerative Farming

Wed, 04 Dec 2024 17:11:54 GMT

By Deborah Huso

Austin Allred’s family has been farming the Royal Slope region of Washington state between Seattle and Spokane for three generations. He and his two brothers, Derek and Tyson, farm a combined 6,000 acres. They grow potatoes, cherry and apple trees and produce honey, while also running 10,000 beef cattle and milking about 6,000 dairy cows. The family also recently added a worm farm and a beef processing facility.

Like many producers with combined operations, Royal Family Farms focuses on finding a purpose for every acre and every byproduct. In fact, the Allreds have been practicing regenerative farming before it really had its own term.

“My dad was no-tilling before it was billed as regenerative,” Allred explains. “He was doing it to reduce diesel usage. He was also very conscientious about planting woodstock in corners of fields.”

Allred and his siblings took the same approach as they expanded the farm operations.

“I accelerated and defined [what Dad was doing] and put some strategy to it,” Allred says, with the goals of building organic matter in the soil, sequestering carbon and cleaning wastewater.

Royal Family Farms

(Royal Family Farms)

Extended Crop Rotations and Grazing
Allred recognizes the kind of stress agricultural production can put on the land, hence the many inputs required in traditional farming. But Royal Family Farms has demonstrated that not only do regenerative practices work, but one can accomplish them at scale.

“Anytime you’re growing a crop that a human can digest, you’re going to put a lot of pressure on soil,” Allred says. “It’s really hard to do a total no-till strategy. You can’t plant weeds with your wheat.”

Allred says potatoes are the least regenerative crop the farm grows, but says they counteract it by working cattle into a long crop rotation for added soil fertilization.

“If 20% of the ground is in potatoes, that land doesn’t come back online for another six to seven years. And during those years, we do a lot of composting,” he says. “Other years we do cover cropping and planting multispecies crops to grow microbial activity.”

Allred grazes his beef cattle on the cover crops, which provides feed while simultaneously adding more soil amendments, such as nitrogen (N) and phosphorus (P).

Upcycling Everything
Nothing goes to waste at Royal Family Farms. The Allreds work with all the processors who clean and box their apples and turn their potatoes into French fries to retrieve all of the products that don’t qualify for human consumption to be upcycled into protein, as Allred explains it, providing food for their cattle in the form of potato culls or damaged fruit or nutrient-rich compost for their fields. Meanwhile any wood chips produced when the Allreds retire a cherry or apple orchard is either turned into cattle bedding, used for the worm farm or processed into biochar, a carbon-rich byproduct.

The Allreds’ interest in biochar, a charcoal-like substance derived from organic waste, developed out of a desire to bring more carbon into agricultural systems. And for the past few months, Royal Family Farms has used four machines to burn wood chips into charcoal that, when mixed with compost, recharges carbon in the soil.

“As farmers, we are selling off carbon, whether it’s beef, milk or cherries,” Allred says. “Seventy to 80% of retired apple, cherry and pear trees in Washington were getting burned at the end of their effective life. Biochar was a way to bring in more carbon and upcycle and compost it.”

“We try to upcycle every byproduct into something of value,” Allred says. “Eventually it all becomes a soil amendment. It’s only a loss if we let that carbon into the air.”

Reusing Wastewater With Worms
Water is a critical part of any farming operation, and Royal Family Farms sought out a better way to
filter wastewater from their dairy operations and reuse it. What was their regenerative solution? Worms.

“We started investing in what is now the biggest worm farm in the world about eight years ago,” Allred says.

Working with a company called BioFiltro headquartered in Santiago, Chile, the Allreds’ worm farm includes eight acres of what looks like 5'-deep swimming pools. These pools are able to serve as the home for about 50 million worms at any one time.

“Wood chips make up the medium they live in, and that’s also the filter for the dirty water,” Allred explains. “The dairy is designed to flow to a low spot, where we have two 5,000-gallon vacuums that bring the wastewater to the worms.”

The worms digest the wastewater, removing heavy metals and other contaminants. The waste matter the worms produce is rich in microbials, and the Allreds take the worm castings and mix them with compost to produce nutrient-dense soil.

Royal Family Farms

(Royal Family Farms)

Eliminating Waste and Need for Inputs
Allred says engaging in regenerative practices large-scale required careful consideration of how everything could work together.

“We started integrating vegetable, fruit, protein and bees to get to the next generation of regeneration,” he explains. Allred points out that the digestive systems of cattle along with biochar create compost. “It’s all about upcycling ‘waste’ products.”

The result of instituting these practices is dramatically reduced reliance on inputs.

“This year we used no phosphorus and potassium and had equal to or greater yields without it,” Allred remarks. “And across the board, we have better quality.”

He adds the farm’s greatest payout is not having to input synthetics.

“The more natural systems we have in play, the more nutrients we keep in the loop, the less we have to go get inputs,” he says.

Allred acknowledges farmers can filter water through mechanical or chemical systems, but says natural systems are typically cheaper to implement.

“Natural investments are always going to have a long-term return on investment,” Allred says. “The problem is producers often don’t have the margin to always be investing in long-term ROI.”

Royal Family Farms’ regenerative farming practices offer payoffs 10 to 15 years out, Allred estimates.

“We’ve bridged that gap with carbon credits and vertically integrating to pick up those margins,” he says.

This year Royal Family Farms is starting to see its regenerative operations pay off in a big way.

“We purchased 90% less phosphorus and potassium [K] than we have in the past and significantly less nitrogen,” Allred says. “We’re working on nitrogen for the next five years because ruminants make P and K.”

“Regenerative farming starts to gobble up the biggest expenses any farm is going to pay — your fertilizer bill and your chemical bill,” he says. “On the cattle side, your feed bill is your biggest expense. Regenerative farming gives you higher-quality, local food.”

No one knows better than you that the future of your farm depends on balancing practices and profits that sustain your land, resources and family . The stakes are evolving based on weather patterns, technology, market demand and more. What actions are you taking to remain resilient?

ConAgra’s Fruitless Ralcorp Deal Invites Breakup Talk

Fri, 20 Nov 2020 05:40:28 GMT

The best way for ConAgra Foods Inc. to commemorate the two-year anniversary of buying Ralcorp Holdings Inc. may be to undo the deal.

Since ConAgra completed the $6.7 billion acquisition, it’s the only food-products maker in the Standard & Poor’s 500 Index that’s handed losses to shareholders, making it one of the industry’s cheapest stocks. Chief Executive Officer Gary Rodkin last month announced plans to step down as he struggles to prove the purchase he oversaw was worth the money.

It’s time for ConAgra’s board to evaluate options, including breaking up the $14 billion company and selling the pieces, according to Rhino Trading Partners LLC. ConAgra also could draw the attention of activist investors. While Rodkin said in November 2012 that adding Ralcorp’s faster-growing private-label business would be a “great fit” for the maker of Chef Boyardee, Slim Jim and Healthy Choice foods, the unit has since dragged down profit and contributed to a $681 million writedown.

“When you make a very large bet and it’s not working out and your CEO leaves, this is exactly the kind of situation where you’d want to be evaluating strategic alternatives,” Timothy Chen, a New York-based analyst at Rhino Trading, said in a phone interview. “We’re two years post-merger and people expect results. If the results aren’t there, investors are going to expect the board to take action.”

Teresa Paulsen, a spokeswoman for Omaha, Nebraska-based ConAgra, said in an e-mail last week that the company is “confident of and committed to our strategy that includes differentiated positioning and strong balance among our consumer foods, commercial foods and private brand businesses. We are making good progress and we are confident of our ability to meet this year’s financial commitments.”

Hybrid Company

Before the Ralcorp acquisition, ConAgra was focused on branded packaged foods such as Hunt’s ketchup, Swiss Miss cocoa and Orville Redenbacher’s popcorn. Most are second- and third- tier brands, according to Ken Shea, a food and beverage analyst for Bloomberg Intelligence.

Buying Ralcorp made ConAgra more of a hybrid company by substantially increasing its revenue from private-label foods, which are sold under supermarket names.

Most food companies sell either branded products or private-label items, so ConAgra still has to prove that it makes sense to have both, Shea said. Skepticism that it can is reflected in the stock price, he said.

Underperforming Shares

From the deal’s closing in January 2013 through last week, ConAgra shares slipped 0.3 percent, while every other food- products company in the S&P 500 advanced at least 10 percent, according to data compiled by Bloomberg. ConAgra was valued last week at about 14 times this year’s estimated profit, a 30 percent discount to the median multiple for similar-sized North American food manufacturers, the data show.

The acquisition tripled ConAgra’s ratio of debt to earnings before interest, taxes, depreciation and amortization. Its credit standing was lowered to one level above junk status by S&P. And for the fiscal year ended in May, the company booked a $681 million non-cash charge, most of which related to the private-label business.

“ConAgra really stretched its balance sheet almost to the limit to buy Ralcorp,” Shea said in a phone interview. While the writedown doesn’t impact cash flow, “it does communicate to investors that the company perhaps overpaid.”

Even after the writedown, ConAgra’s goodwill-to-assets ratio is about 40 percent, among the highest in the S&P 500, data compiled by Bloomberg show. Goodwill is the amount paid above the book value of a target company’s assets. If the value declines after the acquisition closes, it must be written down on the acquirer’s balance sheet.

Bad Situation

“ConAgra is burdened with a challenging portfolio, and the situation is getting worse,” Alexia Howard and other analysts from Sanford C. Bernstein & Co. wrote in a July note. “It remains to be seen whether the company can successfully manage both private-label and branded products under the same roof.”

Amid the challenges the Ralcorp deal has presented, ConAgra said last month that CEO Rodkin plans to retire next May and that it’s searching for a replacement.

“They’re really in limbo right now,” Jack Russo, an analyst at St. Louis-based Edward Jones & Co., said in a phone interview. “I don’t see a lot of options. I think investors are just going to have to be patient as we go through this leadership change.”

A breakup or sale may be unlikely, at least for right now, because ConAgra probably prefers to give the next CEO a chance to lay out a strategy, Russo said. It would also be difficult to find a buyer that wants the whole company given that it operates two different businesses, he said.

TreeHouse Combination

Selling itself in pieces is an option, Chen of Rhino Trading said. It may make sense for TreeHouse Foods Inc., a $3.5 billion private-label foodmaker, to combine with that piece of ConAgra, he said. TreeHouse has purchased at least 13 companies since 2006, though this would by far be its largest deal, according to data compiled by Bloomberg.

Ron Bottrell, a spokesman for Oak Brook, Illinois-based TreeHouse, said the company doesn’t comment on deal speculation.

The dilemma in divesting Ralcorp now is that ConAgra may get less than it paid for the business, Russo of Edward Jones said.

Activist Invitation

Still, the CEO departure and Ralcorp disappointments have opened the door for some sort of deal or even activist investors’ initiatives, according to Chen.

On the company’s June earnings call, analysts from firms including Citigroup Inc. and Barclays Plc also asked whether it’s time to explore strategic alternatives such as a breakup or selling assets to boost shareholder value. Absent any changes, ConAgra’s shares may not have any upside given that they traded last week for about the same price as analysts’ average 12-month price target, data compiled by Bloomberg.

“The board certainly needs to evaluate all options,” Chen said. “If they don’t, it’s not going to be very long until their shareholders ask them to -- if they haven’t already.”