Investing in California Permanent Crops

Darrick Walker:

Appreciate it. Thank you for having me.

EMS:

Absolutely, Darrick. So to kick off the conversation, tell us a little about the firm and how you got to where you are today.

DW:

Well, I grew up in a family farm. My dad has been a grower in the Central Valley for 50 years in Madera and Fresno. And I grew up driving tractors, irrigating, raking leaves, and pruning citrus when I was a young kid before I went to college. And after growing up and moving away to college, I built a successful asset management firm, managing money for high net worth individuals, family offices and a lot of local farmers. And then began Central Valley Ag Partners in actually 2012, and then really formalized it in 2016.

EMS:

Very interesting journey, Derek. So given your focus on investing in California permanent crops, I wanted to hear your overall outlook for this space, including the challenges and opportunities You see,

DW:

I think a lot of investors out there have been so focused on Wall Street investments, stocks and bonds, sort of the intangible assets that you see on your computer screen. And then after the 2009 and 2010 financial crisis, there was a big push and a move to hard assets including farm ground. Even though the world changes constantly, people still have to eat and there's nothing like walking the soil and putting your boots on the ground on a real asset that no matter what happens, we'll still be there. Unlike other financial assets, dirt never goes to zero. And after embracing that and seeing the fact that investors out there are looking for hard assets and not just hard assets, but assets that produce food and fiber, we really saw the momentum change in really late 2015 and 16.

EMS:

Darrick, to shift gears a bit, I wanted to discuss ESG and DEI, which are hot topics for the investment industry right now, and wanted to see how your firm integrates these

DW:

Now. ESG is certainly a big thing. It's whatever you invest in. It's not just taking from the environment, but making sure you're withholding the environment and actually improving the environment. And in the almond business, we have a goal by 2025 to have zero waste. And by that I mean we have almonds are a three-part commodity. You have the whole, which is the outside skin, you have the shell, and then you have the nut, and obviously the nut is the diamond, we'll call it. And that is a plant-based protein, but you also have the hole and the shell that gets ground up and it becomes a waste product. So over the last 10 years, we've worked with dairymen and people outside of the almond industry to work on zero waste. So essentially what we do is we take the almond hole and the almond shell and grind it up and actually make cattle feed, and we sell it to cattlemen and dairy farmers.

So their cows are not eating as much alfalfa anymore, but they're actually eating these plant-based protein byproducts from the almond industry, and that allows cattlemen and dairymen to not grow as much alfalfa as they used to, which means they're using a lot less water. So we're trying to take our byproducts and actually integrate them into other industries. There is also a big push to take almond holes and skins and make, there's prototypes for tires, women's makeup, and the goal is to not have any waste, but to use everything that an almond tree produces. In addition, when the almond tree runs out of its economical life, after about 25 years, we actually grind up the almond tree and spread the wood chips back into the ground and it produces carbon in the soil that gets released over time and it acts as a fertilizer. So essentially we're using less nitrogen on our almond trees and using the actual biomass from old almond orchards. The other thing we do is water is a very scarce commodity, as we all know in California. So we use micro jet emitters, which essentially if you think of an IV in the hospital when you're dripping your medications into an iv, we do the same thing at the tree level. So it's essentially like a pulse flow of drips that hit the tree with the goal of having at least 95% irrigation efficiency. We don't want water to evaporate, so we're irrigating with very precise irrigation instead of flood irrigating. And that's a big thing for us.

EMS:

Darrick, we've covered a lot of ground today and wanted to see what your future plans are for the firm.

DW:

Well, our future plans are, there is a very large push worldwide for plant-based proteins, the perfect protein. A lot of people around the globe are realizing that they could be lactose intolerant, a lot of meat, red meat is not great for the American, I guess the dietary requirements, and if you take a lot of the nuts, walnuts included, but specifically almonds and pistachios, they almost are the perfect protein. And if you look at the large push worldwide to eat less red meat, almonds and pistachios fill that gap for plant-based proteins.

EMS:

Darrick, I want to thank you so much for sharing your perspective with our listeners.

DW:

Oh, it's great. I could talk all day about what we do. We provide a great product. People like it. It's healthy, it's very social. If you think of being around a kitchen table during the holidays and you have a bowl of almonds and pistachios instead of potato chips and salty snack foods, it's a great business. And I think as people are living longer and there's more of a push towards healthy eating, we really feel like we're in the sweet spot.

EMS:

And thank you for listening to the EisnerAmper podcast series. Visit EisnerAmper.com for more information on this and a host of other topics. And join us for our next EisnerAmper podcast when we get down to business.

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