Sweet: ‘A Pure Arkansas-Flavored Investment' for Arkansas Teachers Retirement System


Sweet potato harvesting at Dawson Farms is in full swing headed toward the big Thanksgiving push of holiday product. Arkansas Teacher Retirement System acquired 1,596 acres of cropland and support facilities earlier this year.  | (Photo by George Waldon)
Sweet potato harvesting at Dawson Farms is in full swing headed toward the big Thanksgiving push of holiday product. Arkansas Teacher Retirement System acquired 1,596 acres of cropland and support facilities earlier this year. | (Photo by George Waldon)

Activity is in full-tilt harvest mode at the 100-acre Hall Farm on the southern outskirts of Delhi, Louisiana. The crop of sweet potatoes is making its way from the field to the storage facility 7 miles down Highway 17.

International Harvester tractors haul trailers loaded with produce along the southbound shoulder to the warehouse complex and haul trailers with empty bins back to the field along the northbound shoulder.

The stream of traffic is feeding forklifts that move the 20-bushel bins of sweet potatoes from the trailers to the warehouse. Forklifts also are busy moving loaded bins around the complex as part of the curing process that transforms starch to sugar and yields a tasty sweet potato.

The Hall Farm and sweet potato facility are part of the Dawson Farms operation, the newest addition to the agri investment portfolio of the Arkansas Teacher Retirement System.

The $8.2 million investment encompasses 1,596 acres devoted to growing sweet potatoes and a rotation of soybeans and corn. The sweet potato harvest is supported by 100,000 SF of refrigerated warehouse and 108,000 SF of packing and storage space.

“To us, farmland is like a pure Arkansas-flavored investment,” said George Hopkins, ATRS executive director. “Our only regret is that we weren’t there 10 years ago.”

The state’s largest pension fund has invested about $73 million in 14,580 acres of cropland since it began building its roster of farm holdings four years ago.

ATRS owns nine farm properties scattered from Indiana to Idaho and from Wisconsin to Florida.

The May acquisition of Dawson Farms added a new crop to a roster that includes organic oranges, sugar beets, barley, alfalfa, kidney beans and popcorn as well as mainstays such as rice, wheat, corn and soybeans.

ATRS intends to allocate up to 1 percent of its nearly $14.7 billion-asset investment portfolio to agriculture property.

“We think that’s 1 percent that will provide quality returns over time,” Hopkins said.

The agri properties are a subset of the pension fund’s $1.6 billion real estate segment. The biggest chunk of that is almost $1.2 billion worth of retail, office, industrial and apartment investments. Timber property accounts for about $347 million more.

The Role of Landlord

ATRS has adopted the low-risk role of landlord with its farm investments. Purchased for cash, the properties are leased for crop production that generates a reliable flow of income.

Dawson Farms is leased to a joint venture between ConAgra Foods of Omaha, Nebraska, and Black Gold Farms, based in Grand Forks, North Dakota.

Black Gold, which oversees the Dawson Farms operation, has a long history with potatoes but only ventured into sweet potatoes in 2010.

A portion of the Dawson Farms crop is sold to Wal-Mart and other retailers for the fresh market, and part is sold to ConAgra Foods, which owns a nearby $156 million processing plant through its Lamb Weston subsidiary.

Opened in 2010, the platinum LEED-certified project is touted as the first large-scale processing facility in the world dedicated to high-quality, frozen sweet potato products.

The Delhi plant cranks out an assortment of products with a menu of seasonings and sliced into a variety of shapes that include twisters, crinkle cuts, wavelengths, crisscuts, ribcuts, crispycubes, mini tater puffs and juliennes.

“We’re capable of processing 600 tons of raw product a day,” said Scott Smallwood, production manager at the facility.

The output is fueled by the growing popularity of sweet potatoes as a fat-free, cholesterol-free, low-sodium, 130-calorie source of nutrients, including vitamins A, C and E.

Industry tracking indicates that per capita consumption of sweet potatoes grew by 25 percent during 1998-2008. That garnered recognition for the tuber as the fastest-growing side-order in the food-service industry.

Launched in 1994, Dawson Farms is considered the largest sweet potato grower in the mid-South.

Its acreage represents a collection of farms assembled by Lev Dawson, a local boy who made good as a technology entrepreneur. Big Baker, Northridge and Santiago are among the farms owned under the Dawson banner.


Farm Holdings of Arkansas Teacher Retirement System

  Investment Acres Primary Crops
Bridge Farm, Idaho $16.2 million 4,241 Barley, sugar beets
Dundy Farm, Nebraska $11.8 million 2,317 Wheat, corn, kidney beans, popcorn
Darlington Ridge Farm, Wisconsin $10.9 million 1,537 Alfalfa, corn
Duvall Farm, Cross County $9.9 million 2,801 Soybeans, rice
Dawson Farms, Louisiana $8.2 million 1,596 Sweet potatoes, corn, soybeans
80 Foot Road Grove Farm, Florida $6.6 million 463 Organic oranges
Wright Farm, Indiana $5.8 million 854 Corn, wheat
Miller Farm, Prairie County $3.1 million 771 Soybeans, rice
Total $73.2 million 14,580  
                                 

Diversification Move

ATRS officials began to explore agriculture property as an avenue to further diversify its investments in early 2010.

“It’s not uncommon for people to ask us to look at doing this or doing that and investing with them,” Hopkins said. “Along the way, we were asked, ‘Have you ever thought about investing in agriculture?’

“After a while it became clear we needed to be investing in farmland. It’s a great inflation hedge, a slow and steady performer that is outside the stock market.”

ATRS sought out E. Ritter & Co. of Marked Tree, a player in large-scale farming in Poinsett County for decades, as a partner to delve into agriculture.

However, those talks came to naught, and the pension fund expanded its search for farm management expertise beyond Arkansas.

“We ended up interviewing several potential managers with our consultant and ultimately hired Halderman Farm Management out of Wabash, Indiana,” Hopkins said. “We were their first institutional investor. We liked how they approached things and how nimble and well-versed they were.”

The pension fund’s first agri investment was made in east Arkansas. The August 2011 purchase of a 2,801-acre soybean and rice farm in Cross County closed at $9.9 million.

An initial $75 million investment allocation in 2010 has grown to $100 million as Halderman and ATRS scout out agriculture properties.

“There was some high-priced properties we were looking at, and we wanted to make sure we had plenty of dry powder,” Hopkins said. “We’re not looking for trophy farms. We’re looking for trophy returns. We got in at the right time to start doing this.”

Incentives

The deal with Halderman is incentivized so that better ATRS returns on agriculture properties result in more money for Halderman.

These days, Hopkins is kept apprised of salinization issues with wells that support the Idaho farm and concerns with the possible effects of Asian citrus psyllid on Florida citrus groves.

Balancing field production and stewardship of the land is another consideration to be weighed in agri-investing.

“You want good farmers who aren’t mining a farm,” Hopkins said. “We want the farm to be just as fertile five years from now as it was when we bought it.”