185 Boris Spassky on building the biggest organic almond farm in France and making it investable

Boris Spassky, cofounder of Greenpods, joins us to talk about the critical role of project developers in creating bankable investable projects, the funds being raised and the missing deal flow.
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Big funds are being raised, but they all complain about the missing deal flow. So we need more project developer, disciplined people, who put together the business plan, organise the permits, figure out the seed or tree genetics, the irrigation equipment, organise the off-take agreement, and, while it gets delayed, don’t take a salary or a very low one for a few years. Boris is one of those project developers in France!

More about this episode on https://investinginregenerativeagriculture.com/boris-spassky.

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The above references an opinion and is for information and educational purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

Transcript

SPEAKER_00 0:00

Big funds are being raised, but they all quote unquote complain about the missing deal flow. So we need more project developers. In some sectors, this is a dirty word, but here we need people who are disciplined, who put together the business plan, organize the permits, figure out the seeds or tree genetics, figure out the irrigation equipment, organize the offtake agreements. And while it always gets delayed, don't take any salary or a very low one for a couple of years. All of this to create bankable, investable projects. So the investors who are usually far away and have never Never seen an almond orchard or a permanent pasture weed system get comfortable and convince their investment committees and their bank colleagues to give the green light. So farm after farm, hectare after hectare can start with the implementation of regenerative practices. It might not be sexy, but it's absolutely crucial. So enjoy this interview with one of those project developers in France. This is the Investing in Regenerative Agriculture and Food podcast, Investing as if the planet mattered, where we talk to the pioneers in the regenerative food and agriculture space to learn more on how to put our money to work to regenerate soil, people, local communities and ecosystems while making an appropriate and fair return. Why my focus on soil and regeneration? Because so many of the pressing issues we face today have their roots in how we treat our land and our sea, grow our food, what we eat, wear and consume. And it's that we as investors, big and small, and consumers start paying much more attention to the dirt slash soil underneath our feet. To make it easy for fans to support our work, we launched our membership community and so many of you have joined us as a member. Thank you. If our work created value for you and if you have the means, and only if you have the means, consider joining us. Find out more on gumroad.com slash investing in RegenAg. That is gumroad.com slash investing in RegenAg. Or find the link below.

UNKNOWN 1:55

you

Why are you doing what you are doing? Why Soil?

SPEAKER_00 1:59

Welcome to another episode today with Boris Spetsky, the founder or one of the co-founders of Greenpots with a long history in, let's say, regenerative agriculture, sustainable agriculture, finance. I'm very happy to have him on the show. We've known each other for a while and it's finally time to have Boris on the show. So welcome. Hi, thank you very much for having me, Ken. And to start with a personal question, what brought you to this space of, I mean, from all the different career paths you could have taken in a comfortable office somewhere with a lot of air conditioning and to be very comfortable instead of out in the field planting trees, financing trees and trying to get this done. What led you to this sector? I was

SPEAKER_01 2:40

basically given the opportunity to work into agriculture by a friend who was working for a commodity merchant. He told me about a cocoa guy he had met when he was doing his internship on a flour mill in Cameroon and I applied to e-com. This was back in 2007 to a large commodity merchant and I applied to join their Central Asia desk. I'd been studying Central Asian and Caucasian studies at St. Petersburg State University and decided that I maybe could join work and personal interests. So basically I already have 15 years of experience in agriculture, we could call it agribusiness. It's a mix between value chain finance and public-private partnerships and I worked on on three different continents. So I started as a merchant originating cotton in Uzbekistan, shipping 50,000 tons of cotton a year through the port of Bandar Abbas in Iran, shipping it mostly to textile mills in Bangladesh. And given the difficult context back in the days, political context in Uzbekistan, I quickly moved to Tajikistan where we were invited at the initiative of the Better Cotton Initiative, which was maybe, a kind of burgeoning concept of region ag to replicate the coffee model of a group that prides itself in having more agronomists and the merchants on the payroll. So basically provide technical assistance to farmers, increase their yields, increase their revenues and become their preferred off-taker. This is where I... So I didn't come from the soil. I came

SPEAKER_00 4:26

more from... We all do, right? And we all go back.

SPEAKER_01 4:29

Yeah. Yeah. I came off from the social aspect because back in the days Tajikistan the farmers were very much in debt after the fall of the Soviet Union a civil war that followed and they were I think their debt aggregated debt was 400 million US dollars to cotton ginners to intermediaries and basically these guys were pre-financing the farmers in kind with poor fertilizer diesel that was cut with water seeds were given late and of course with a 30% of or even more, predatory interest rates. So the European Bank for Reconstruction and Development came in, refinanced the farmers at decent interest rates through the banks, and they asked that someone actually buys the cotton at the farm gate to make sure that the credit cycle was being closed. So that's how I started, got acquainted with agriculture. We had lots of agronomists helping the farmers. Then moved to Mexico in 2011, did two years in a coffee, plants, then did another three years or more in the former Soviet Union in Moscow to sell cocoa products. And then 2015 or 14, actually, the war started and Russia invaded Crimea. We came back to Europe. I did my MBA. And this was the emergence of... There was a kind of... There was... How do you call it? There was demand from investors to invest into kind of sustainable land management and agriculture. So you had different funds. You had the initiative of Danone with Livelihood. You had Clément Chenot with Moringa, who you interviewed. And the UNNCC was starting the Land Negotiation Neutrality Fund. So basically, they had been given a mandate by one of the three conventions, the United Nations Convention to Combat Neutrification, to basically launch and structure a fund that would invest into sustainable land management and revert the trend of land degradation. So these were really five interesting years. I became the investment director for Latin America. We did some deals in Nicaragua, in Peru, in Colombia, did other deals in Bhutan as well, mostly tree crops. And this is where basically I think along was learned. The UNCCD provided us with a very robust scientific framework. And basically, you started having an interesting consensus between civil society, between academia, on how to kind of restore lands, and between restoration, regeneration. Well, I think then, let's not play on words, but it's quite similar. So this is how I came to basically, to setting up Greenpots because after five years, we saw that there was maybe more, not enough deal flow, more money wanting to flow to Regen Ag than actual developers. And with an operating background, and it's especially a matter of personal taste, I felt more compelled to go back to operations than stay as a financier, which financiers are useful people. They're the pump of the economy, but it depends on what you think your best action is. of what you, maybe not even what you're best at, but what you like most. And it was definitely finding land, finding the right irrigation equipment, the right genetics. So, yeah, that's how

What is Greenpods and what does the first farm look like?

SPEAKER_00 8:15

I... You say something super interesting there on the developing side. You say there's more money that wants to flow than projects, investable projects to flow into. And you happen to really like that development piece, which is I think it's a very under-spotlighted role in the sector. And we've seen it in renewable energies where the developers have been always the crucial piece to put all the different puzzle pieces together and then the money will flow. And of course, something about to take early risk and now 20 years later or 30 years later, whatever my timeframe you look at, like that sector exists, but it seems to be almost in the region ag and agroforestry space that developer role hasn't really been filled yet. And we see it sort of emerging. I see multiple people starting to take that role. And what really, because maybe for people to understand, what is that role? I mean, you're saying from figuring out irrigation equipment down to the genetics and buying and figuring out the land. So describe that first project in France that you've been on the way now. Like what is it like? Let's make it as visual as possible because we are on an audio tour, obviously. And then let's unpack a bit what it takes to put something like that together and get it financed. Because it's, of course, we can make a great PowerPoint, but if we don't get it financed, nothing will be in the ground.

SPEAKER_01 9:34

Maybe we'll get back exactly. This is a very interesting point that the ag has never been structured like renewable energy, where at some point 20 years ago, you had project developers come to finance and say, look, I've put a data room together. I've got the permits. I know it will work. I've got the technology. And it's non-recourse project finance. I've got no money, but I want to stay as a majority shareholder. And please finance us with kind of long-term and patient capital to make sure that we go through the J curve. And this is completely something project finance, the rules could be applied to ag. So this is what we tried to do at Lagrange, which is Green Pod's first project. We kind of, actually in the team that has set up Green Pod, we all did a stint with the LDN fund. So Green Pod is a fully integrated region ag farm developer specializing in tree nut and servicing the growing demand for plant-based products, providing full traceability back to the farm. So the first farm Lagrange close to Toulouse is France's largest organic almond orchard. And we got certified with the French Label Bacarbon in January with an estimated 4,500 tons. So that's the farm. And the context was the following. So as you know, agriculture is a major cause of climate change with being responsible for roughly 25% of greenhouse gas emissions. We have 1.3 billion hectares available to feed the world population. We degrade 12 million hectares a year through deforestation, intensive monocropping and overgrazing. And if you look at France, in France alone, we import 4.5 million tonnes of soy every year. It's mostly GM in the sense that it comes from the Americas or South America. And the same goes for almonds. Nothing to do with GM this time, but we have a consumption of 40,000 tons and we produce less than a thousand so the system

SPEAKER_00 11:33

because it's not the ideal climate or because it's not possible or it's possible it just hasn't been at its scale

SPEAKER_01 11:39

yeah we did have a large almond production back in days but it's just that you know sometimes you shift and we've got a lot of land where it could grow which is allocated to different things here in the south of France you see some huge maize fields and I don't think that's the most appropriate crop to plant in the area in Provence. You've got some higher value added crops. So the system won't work any longer. One, we must switch to more plant-based diets and eat more local to leave pressure on land. And

SPEAKER_00 12:13

not grow

SPEAKER_01 12:14

maize and then it's

SPEAKER_00 12:15

going to be fed to livestock. Yeah, exactly.

SPEAKER_01 12:17

And that's on the demand side. And on the supply side, we must transition our agricultural production towards region ag, less pesticide and fertilizer they use less water use more biodiversity and better farm incomes this is I think the broader accepted definition that's been already kind of carved into stone by OP2B

SPEAKER_00 12:42

so I know people are listening we haven't had them on the show OP2B is the biodiversity alliance if I have to I'll put a link below in the show notes of large what is it basically all the large food producers in the world are around biodiversity, I think was launched by the then CEO of Danone. Exactly, it was

SPEAKER_01 13:03

Emmanuel Faber. And they had put these videos together with Patagonia. And I think, can we date maybe, at least in France, we always spoke about agroecology. So maybe the sustainable intensification of agricultural production. It was not really a fight, but at some point when you've got a company like Patagonia and the kind of marketing genius coming with a term like radioactivity, RegenAg and making it spread, I think. Sexy, yeah. RegenAg has taken over and I think in terms of marketing, in terms of message, it's efficient.

SPEAKER_00 13:42

And let's talk about the farm then as what is fundamentally different. Of course, I mean, let's talk about the maize field it replaces. Of course, it's a very different view or very different image. It's very different food and not feed, but also compared to a non-organic or a non- let's say, organic regenerative almond production, what are the, for the non-almond geeks, what are the differences we could recognize? Like what would we see differently under your trees, with your trees, around your trees compared to a non-organic one where most of it probably comes from now imported to

SPEAKER_01 14:15

France? Yeah, I think it's important to discuss the baseline as in a carbon project. So two years ago during lockdown, we came across a farm facility in Toulouse that had been producing conventional corn for 30 years, export it to Spain's pork industry. So this French cold was fed to pigs in fattening stations. These pigs were sent to slaughterhouses and then packed and basically shipped back to the French supermarket shelves. It's a bit crazy, far from what you would think of as a definition of sustainability. It's a bit of agro-economic nonsense and actually it gives the baseline of a project even in carbon terms. So we've We couldn't buy the farm. We managed to secure the farm for a 25-year lease and it was bought by an insurance company called La Maif in France that had a fund dedicated to basically helping young people settle on land and they had identified the land purchase as really a barrier to entry. Which it is. Yeah, it is because we didn't have 2 million euros. So that's for sure. So basically we went from that really flat piece of land that had been basically depleting the soil resources for 30 years and we converted it to first we entered in April 2021 and we started rotating crops again we planted buckwheat soy and sunflower and then we had winter crops and we planted oats spelt winter wheat and others so already you try to regain a bit of

SPEAKER_00 15:57

life you're did that to have these cash crops or you did it to build up soil life and to prep for the trees?

SPEAKER_01 16:03

No we did it because first of all it was not the purpose just to sit back and of course out of the 150 hectares we plan to have 70 hectares of almonds so I would call this more of a tree crop player that's what we concentrate on that's what we know and once you've gone Once you reduce your acreage to 70 hectares of annual crops, it's not really worth buying the equipment. So you're giving it to a service provider. Of course, then the margins get eaten. And first of all, on annual crops, if you don't kind of process yourself or integrate downstream operations, it's not extremely profitable. The point is more to get it at breakeven. As well, as you know, for Regen Ag certification, ROC certification, which we're aiming for, Regen Organic certification, you need to rotate several crops. Of course, we got that lease for 25 years, but one condition of the lease was you convert to organic at year one. That's what we did. Once you've got 30 years of intensive monocropping, and we came in late, so we planted in spring while we had to basically we were competing with the weeds and it's been very difficult we lost money we had to compete with datura and xanthium which are toxic and our soy got contaminated and was declassed from some tons had to go for animal feed and were not fit for human consumption so the transition it's true has a cost because if you leave your if you if you kind of treat chemically for 30 years the day you stop applying chemicals it's party time for your weeds and if you and we should have maybe planted winter crops before because this year for example we planted wheat and you know it doesn't germinate at the same time and there's been no competition the wheat is perfect so we're now in conversion takes three years in France we call it C1 C2 We're in year C2, and next year we can start selling our annual crops as organic to the co-op. And so this is the annual crop part. But on the 24th of February this year, we planted the first 32 hectares of the orchard. We've been working on this project for the past two years. with basically good friends, good Spanish friends, and you know them. It's Cristobal Aramega, who runs the nursery Crisada, who used to be the president of Alvelana for a couple of years. They came to the farm several times.

SPEAKER_00 19:06

Just as a background, I don't know him personally, but we've had Commonland, we've had, of course, the Spanish project a number of times on it. I will link below some interviews. Yeah,

SPEAKER_01 19:15

exactly. So this is the man who runs the nursery, which has provided many plants to the Commonland project. So they were quite interested to try to adapt their almond trees, which grow in the kind of Altiplano in Andalusia, and see how they adapt with the climate frontier moving north.

SPEAKER_00 19:37

Why did you take their genetics? Is that a risk, taking genetics from such a different climate, or you're sort of calculating that you might be in a similar climate, or they were simply the best genetics around? No, no, we're not in a similar climate. You're going to be? What was the reasoning going for that? They

SPEAKER_01 19:54

have many different varieties. And you've got blooming calendars produced by different research centers in Spain. You've got Irta in Catalonia. You've got Sebas in Murcia. And what we planted was, of course, late blooming varieties. Because as you've seen in the past two years in France, we had a terrible late frost. And we've taken varieties, we've planted varieties that bloom in April. And in April, already in Toulouse, the the frost risk is much more reduced than in March. Plus, it's mitigated. They're much further south, but they're at a higher altitude. Even Castilla-La Mancha this year, Castilla-La Mancha is right in the center of Spain, but the altitude is much higher, 600 meters, and they suffered from late frost this year as well.

SPEAKER_00 20:45

We're a couple months in now. It's difficult to say something, obviously, but how have the trees been? The trees have been quite

SPEAKER_01 20:54

well we've got a very high germination rate few losses we're still counting the losses and the nursery if the nursery helps you plant normally you have a contract with nursery where they guarantee kind of 100 germination of the plants maybe what you call a première feuille first leaf then if it gets eaten by animals of course they won't replace them it's a different story so no they're doing well the growth is good and we've planted the we're lucky to have the MAIF help us with the structure of the project. Some passes had a high clay content and we've had to drain some of them. This was taken care of by the MAIF and we've started with the most suitable areas which are in Spanish, which is quite sandy soils because there's one thing that almond trees hate is really being swimming in water having the root system wet in water so you get root asphyxia so you want to make sure that water flows and if you have drains you're safe so now the trees you what you do you plant them they come at they come at a height of 1 meter 20 that's what's guaranteed and then you kind of have your first kind of formation pruning you prune them back to 90 centimeters you plant them with the tutor, you put a protector against rodents, and here you go.

SPEAKER_00 22:29

What kind of prep have you done? What kind of soil prep? What did you do to make sure that you have the highest chance of long-term success?

SPEAKER_01 22:40

After 30 years of intensive work, there was a compactation soil 80 centimeters below ground. What you have to do is take what we call in French, you have to go for a deep plow and then kind of so you have to start tilling you till once but big time and then it's going to be with cover crops so at some point it won't be touched anymore you do that once you kind of break that soil so you let the root system go deeper and then you kind of clean it with your machinery and then it becomes your orchard. That's it.

SPEAKER_00 23:26

And what are the other, let's say, management practices you're putting in place? You mentioned cover crops. Are you going to do any grazing? What's going to happen in between the lines? How close are they? What are you looking at?

SPEAKER_01 23:38

We're not there yet because, frankly speaking, we're in an area which is slightly more humid than the rest. So already farming organically in an area which is less dry will have, I think, a few more treatments to anticipate possible fungus or used copper. You get to use what four kilos a year max per hectare that's the rule in France so we're not there yet we've discussed we're going to of course put some beehives three to four per hectare because although we have self pollinating or I call them auto fertile varieties you do increase your yield by putting beehives it makes it better and I think there's only one species of sheep that doesn't eat your your trees it's the Shropshire sheet but we won't test it this year we'll have to wait a bit you cannot do unless it's a demonstration plot you cannot do everything no no no no

SPEAKER_00 24:41

but like long term how do you would you like to see the orchard develop

SPEAKER_01 24:45

yeah yeah long term we want to keep it as a pure organic pure organic orchard with basically we we've planted lots of hedges because it was completely flat and we got a grant from the Caisse de Depot to plant hedges and maybe one hectare as well of kind of, how can we call it, a climate adaptation research orchard, a kind of pilot orchard to take some different varieties from Spain and kind of compare the flowering, blooming calendars with valleys that are further south and see how it evolves. But no, I think the reality is going to be quite classic. Full cover crops, which gives you the highest score in carbon hedges or what you call them multifunctional hedges. So sometimes it's good for auxiliaries. And yeah, quite simple. So on the end, we would like to farm some in between maybe lavender, but today it's we still have to control the old weeds from the

SPEAKER_00 26:02

previous user. How did you structure it as an investment or how did you structure, because you didn't buy the land as you mentioned before, but then all this planting obviously comes at a cost. As a developer, how did you structure this and how easy or difficult was it to find the money to get it into the ground basically?

SPEAKER_01 26:24

It's taken time and I've always been maybe back to what we saw. I always thought that in agriculture, especially tree crops where there's a pretty long and deep you need to be disciplined and not pay yourself. In France, we've got a system which is called Macron d'émission en conversion. So I resigned from the UN-backed fund and had two years of a kind of reduced salary paid to launch my venture. And we raised roughly 1 million in equity because, oh, it looks like it's a very good idea on paper that you have someone else buy the land for you and lease it to you. But once you go see the bank the bank has no collateral so they say okay it's good that you're starting that someone has bought the land for you but what can you put as collateral against that loan so basically capex is quite high in tree crops it's between 10 to 15 thousand euros per hectare so it quickly becomes a 2-3 million euro project so 1 million equity we just got 1 million in debt from a syndicate of French banks made of Crédit Agricole and Banque Populaire. But because they did not know almond trees really well, it's more in Provence. In Toulouse, we think we're the newbies. So they thought that the risk was too important. So they made sure that they could apply bank guarantees from the European Investment Fund, from the European Investment Bank, to basically secure the loan. So they've got 80% first loss. It's called a enough in France. It's a program. So banks basically apply to the European Investment Fund and they apply guarantees on the back of the loans. So they don't take any risk basically? No. Very little. No, because Martin, my co-founder and I, we are 20% second loss guarantors. So for them, they finance innovation. but they didn't want to kind of take such a high risk. And they asked us, that's good for the carbon additionality, they asked us to basically put the carbon, not as collateral, but they said that we needed to do the carbon project and kind of submit our carbon application to the French government to get certified. And

SPEAKER_00 28:58

that carbon certification is crucial for the numbers? Is that quite developed in France? No,

SPEAKER_01 29:06

we have an estimated 4,500 tons of CO2 emission reduction. And at the price today, I think in France, you can sell the label by carbon for roughly 50 euros a ton. So that's 200k. And so that's 10% of your capex and opex until you reach your kind of cash flow positive. So it's not even a cherry on the cake, but it makes it look good. And it shows that we've made the efforts to submit. We've been good schoolboys with the French ministry.

SPEAKER_00 29:40

And how do you see this develop? I think if developers are listening from the renewable energy space, they will recognize if they've been around 30 years ago or 20 years ago. But how do you see this going? This was the first one, which is always the most difficult, not only from the economic perspective, but also from the finance perspective. How would you see a second or third, these projects, how would they ideally be financed or structured?

SPEAKER_01 30:38

I believe you need to take advantage of long-term debts when it exists and of cheap debts. This has been the market conditions for the past few years. I've got no clue if these conditions will prevail in the future. So that's the problem. But again, back to some people you had on the podcast, I think you really need to talk to investors. who have in mind that you need patient capital. It's not for VCs who want to invest into NFTs or the metaverse. I mean, it's a different ballgame, especially with tree crops. Annual crops, if you work well within two, three years, you're in cruising speed. Tree crops, you get your first harvest in out of the year. You get a symbolic harvest at year three, four, five, five, six, you're in cruising speed depending on your planting density. If it's walnuts I think it's close to 10 years. Same with pistachios, hazelnuts, it's maybe close to almonds. It's quite classic. I think the gearing ratios are roughly 50-50. If you put one in equity, one in debt is fine. Once it's in cruising speed, why not have more debt on the operation? You have to be very conservative and especially have people... not pay themselves too much at the beginning. I think that's a, it's, it's a rule for every entrepreneur. They have to bootstrap your, your company, but especially in agriculture, people, you have to be, you have to be stingy to succeed.

SPEAKER_00 32:23

And so you're, what does the next phase now look like apart from obviously managing this farm, making sure that as many trees make it as possible in the best possible shape, the cover crops get on the arrow one as well. You're looking at next projects or what, is next in terms of the Green Pots initiative? Because I'm imagining you didn't raise 1 million in equity for one farm in Toulouse.

SPEAKER_01 32:47

Yeah, but this is at SPV level. Yeah, maybe it was a bit too much, but at the beginning you have to, that's how you can convince your investors, especially you can convince your banks, especially if you don't have the land to put it as collateral. So no, I think now the idea is to scale, not to scale. We're not planning to build a unicorn. That's not the idea.

SPEAKER_00 33:18

So many people are going to stop listening now.

SPEAKER_01 33:19

No, I'm joking. The idea is really to reach a certain scale. I cannot tell you how big that scale is to get some interest and to be able to have bargaining power with maybe distributors or large retail players. So they listen to you because when you're small, even 70 hectares looks big in France for an almond orchard, but it's gardening compared to what the Americans can do with a farm like a company like Pomona, which has got 40,000 hectares under management. So I don't know. We'd like to maybe secure. It could be a lease. It could be a purchase. Not the same structure then, of course, in financial terms. Reach 500,000 hectares. and plant it and I think best is to have a portfolio I like yeah nuts because they're non-perishable so it reminds me of my years in coffee and cocoa you can store them I wouldn't be able to do yeah fresh fruit because I think there's a certain anxiety after 24 hours you know that you've only got 24 more hours left before it runs so I'll stay away from this business it's for really artists and yeah Yeah, portfolio of farms. The idea of Green Pulse is to scale and build a portfolio of farms in Europe to basically contribute to food security. Food security substitutes our own production to imports. The statistics are crazy. If we enter that discussion, I think France has doubled its fruit and veg imports over the past 10 years. It's insane. It's insane. It's a lot.

SPEAKER_00 35:09

And are you scared of, I mean, scared, do you see climate change as a risk as long-term fruit trees or this case, the tree nuts and they take a while and they, it's not really easy to move or possible. So what would you say, like if investors say, yeah, I mean, annuals, you can, you can adjust quite quickly at this case, you're, you're sort of stuck for the next 20 years. How do you anticipate on, on the risk of climate change? Toulouse just went through, I think 40 degrees last week for the first time ever. What's your answer when somebody raises that question?

SPEAKER_01 35:46

Of course, we've had it raised more than one time. I think you need to have a certain water policy. You need to make sure that what you draw on the water reserves is sustainable in the sense that you should not dig wells. You should draw on to basically surface waters which are renewable until Today, this is the case with the river basins of La Garonne or even the Ebro River in northern Spain. You've got ample precipitation on the Pyrenees. There's rain, there's snow, your snow melts, then it gets back into the rivers. And basically, we get water from the Canal de Saint-Marthory, which dates back to Napoleon III because you had overflows during the meltdown from the Pyrenees in La Garonne. And this was made to divert that overflow and bring it to roughly 30,000 hectares that are being irrigated around the farm so this is really important that's why of course I wouldn't go today to the south or some people are going to Morocco I think that's quite a risky bet I think it's interesting to anticipate the climate frontier moving north a bit don't plant almonds in Scotland today but there's certainly a a trend. It's pretty hard to quantify. I think, again, blue water withdrawal, it's one of the criteria of the OP2B and the Regen Act definition. In the US, they use 12,000 cubic meters of water to irrigate one hectare of almonds. We've only got a limited... We've got a... We call it la dotation. We get an allowance of 6,000 cubic meters per year so you can already see that between the French approach and the American approach you've got a difference which is basically mandatory it's just regulatory which is hard yeah we see water use in a different manner and in France you cannot build it's impossible to build a kind of water storage unit you need to use what you get and if there are water shortages you can count on the head of region or so sorry, the prefet. So it's a department level to put on some restrictions. And this year in Spain, some farms which had water rights up to 8,000 cubic meters have been restricted down to 1,750 cubic meters around the Galalquivir river basins close to Sevilla. So this is really...

SPEAKER_00 38:29

It's coming. Yeah, it's real. And for you, like the 6,000 in your calculations, of course, it's difficult to know now. Is that more, just to get an understanding, is that more than enough? Is it way too much? You can easily make it. It's nice if it's there, but you can easily make it with way less. Do you have that in this kind of system? Do you have that flexibility to let's say it gets half? Are you in deep trouble?

SPEAKER_01 38:51

There's a very good graph produced by the Catalonia Research Center with water use and yield when it comes to tree crops. The correlation is one to one. The more water you use, the better the yield. At some point, there's a bit of a plateau in the sense that at 6,000 cubic meters I think you've got the optimal irrigation if you apply 7 or 8 you're going to be wasting a lot of water but you're not increasing the yield it's just a marginal increase so I think this is the right this is the it's our sweet spot you can always discuss it maybe a bit less and in case there's no more water one day you have to think it this is really the crash test we've planted with densities of 6x3, so that's roughly 550 trees per hectare. If things go wrong, you can always take out one tree out of two in the row. You get back into 6x6, and 6x6 is very close to the classical Andalusia Spanish density, which is kind of family farming with no irrigation whatsoever. Low input, low output. And that's what you get. So I think you need to have a kind of escape scenario where you get back to non-irrigated. Well, I hope not. No, no, of course. It's been asked, of course.

SPEAKER_00 40:27

Yeah, it's been asked and you need to at least be ready and hope that it never happens. But then

SPEAKER_01 40:33

you really get into a low-yield system. You can reach yields of 1.5 tons in organic, even higher per hectare, that if you don't irrigate, it's a tree that kind of alternates from year to year, bumper crop, then low crop. And if you don't have irrigation, it gets even harder. So you could get yields down to 300 kilos, 400 kilos per hectare, so then you're not going to be touching it much.

SPEAKER_00 41:06

And then what are you planning, like in terms of of yields? What are you modeling with?

Are super high intensive regenerative almond orchards possible or not?

SPEAKER_01 41:10

I think between a ton, 1.5 tons, it's very early to say, but you've got people who manage this quite well. I've seen Spaniards reach 2 tons per hectare in organic in 6x3. Today you see a method called a super high density production model, they call it super intensive, where it basically hedges It's like... And they go over it with the machine. Yeah, yeah. And you can just harvest with a machine. Well, this is a different model. And what we see that some people are already thinking that it might be a bit too extreme in the sense that your kind of yield curve goes down quite quickly. When you're farming traditionally, an ocean can last for 40 years. I think it lasts for 25 if you're doing semi-intensive. But if you go super intensive, you might have a a shorter lifespan for your orchard.

SPEAKER_00 42:27

Which is, I mean... Which is something that you can model in, like if it makes sense in that sense. And of course it's extremely high input. We've had some discussions on here and I've had some other discussions. Shout out to Dimitri of the Regen Agroforestry podcast on like, I think what would be very interesting as well is to test that. How can you make that as, I wouldn't even say regenerative because that sort of suggests that it's a thing, but how can you apply as many as some of the world is moving to high intensive? Like what would that look like if you take extreme biodiversity measures, soil health, et cetera, like be possible and yes maybe the hedges only last 10 years or 15 years but you can model that in like would that even be possible to do it without all the chemical input that it currently needs and all the water it currently needs and what would that look like and I don't know I don't think I don't know if anybody did it yet

SPEAKER_01 43:17

there are people trying there are trials in super intensive inorganic and without irrigation and I think it's let's see from what I understand and from what I've seen in all the orchards I have visited I've driven several thousand kilometers between France and Spain the super intensive model works well under steroids but if you switch it to organic it gets confused and you don't get much because you've got all these you've got all these rootstocks which are called dwarfing rootstocks and they need to be pumped up so the tree

SPEAKER_00 43:59

grows So you need a bigger root system to theoretically make that work. And then what is it? When you're farming

SPEAKER_01 44:08

organically, you have less choices with fertilization. So you need more vigorous rootstocks on which you graft whatever variety you want. But today you've got two main rootstocks in almonds, which are the GF677, which is a prunus, and another, Garnem, when you have a bit more fungus in your soil. But the The rootstocks for super intensive are totally different. From what I understand, it's much more about being the apprentice sorcerer than the classic rootstocks you have that are just being multiplied in every nursery that you can find.

SPEAKER_00 44:47

And the high intensive guys and girls are saying, yeah, we need to do this because of labor shortages. We need to automate. We need to be able to drive over it with a machine and harvest and et cetera, et cetera. Is that a thing in the almonds? I know it's a thing in the olive space or some people call it a thing. Is the labor shortages, is that something you're planning with? Is that an issue in the organic almond industry in France or not at all? It's true that you need

SPEAKER_01 45:21

to mechanize in order to be competitive because in Northern Europe, we are not the cheapest. Our friends in the south sometimes are cheaper so yes you need that's a constraint and there is as well a constraint of scale or size is that tree crop machinery works well if you want to make sure that you pay it back working with 50 hectare blocks economically makes sense if you only got 20 it's going to be hard to invest into all the machinery because if you need to have a tractor that costs you 90,000 euros, you need a sprayer, then you need a harvesting machine. You can always adapt and kind of do it the Soviet way as we call it, but you need a certain scale. You need scale. You need passes that are not too small because if your tractor guy has to turn every 30 meters, you just go crazy. Plus, you know, you have to leave 8 meters on the sides to make sure that you have a a comfortable space for a U-turn. So your parcels need to be of a certain size. And of course, a square is better than some kind of a crazy artistic parcel.

SPEAKER_00 46:41

Which many places are, unfortunately. Totally, yeah. And so how do you see that? What do you see in the future of mechanization? Is it going to be lighter and smaller and you don't need eight meters anymore to turn? I mean, everybody's talking about autonomous, robotics, et cetera. Do you see anything yet in the nut tree space or is it all a pipe dream? What you

SPEAKER_01 47:03

see is crazy. I've seen some Israeli startups that can harvest your apples with drones. I've seen that too. And come and suck up your apples. This is quite crazy. I don't know at what cost it comes, but if there's one thing I would dream of, it's of course electric tractors. I think the technology is still not there yet, or maybe it's just too expensive. They're coming.

SPEAKER_00 47:31

Shout out to Michael Hertz. I will put a link. He has to come on the show soon. In the

SPEAKER_01 47:38

current calculation, the 190 liters or 200 liters of diesel per hectare that you burn every year, you can feel that in the carbon calculation you would be much better off with an electric tractor that's one thing we have used we've had some trials with Agrin Culture which is a Toulouse based startup and they have robots to basically mow in between rows we did a demo at the farm the other day still not enough autonomy same thing when it comes to electrics so they have a hybrid engine but looking very good and it's true that someone working there's so much work to do on a farm that just going back and forth to do the mowing and the mulching of the weeds that grow crazy every two weeks. I mean, if we can send rockets to space, I really hope that we can have automated lawn mowers that have the farmer or the farm manager sleep in the morning or do something else because you've got your irrigation, you've always got a pump that goes wrong. The day we had the heat in Toulouse, of course, The SD card of the pumps went wrong. So you always get things to fix. So spending time... Driving back and forth, more or less. Shooting CO2 in the sky while you're trying to capture CO2 with your tree crops, that's something I really hope we can get out of in the next five or 10 years. Plus, silence is good. You do get some for permaculture... or horticulture, you get very nice French tractors called the Sabiagri. They look like the lunar rover. Fantastic. But they're

SPEAKER_00 49:23

totally... Yeah, and there's some... They're definitely coming. But, yeah, the silence would be nice as well, actually, in the countryside. You might hear the birds and the insects. Yeah,

If you could wave a magic wand and could change one thing over night?

SPEAKER_01 49:34

exactly. So, not today. I think we're trying to be at the edge of technology. We're not a tech company. We're trying to just speak to the best and say, look, if you want to try your solution, please come to the farm. So Genesis Soil Health has done the baseline of our soils. So they've got different marks. They've got different criteria they look at. So you've got your soil organic carbon, of course. You've got bacteria diversity. You've got oxygen availability, zinc contamination, chrome, cadmium, anything. And the baseline is quite bad. So we hope that with all the proofs prunings of the trees that we'll do by not tilling. We don't hope. We're pretty sure that we'll do much better than the baseline because we started really low.

SPEAKER_00 50:29

You already mentioned one thing that might not be the crucial one. If you had a magic wand and you could change one thing overnight, so you had one wish that would change in food and agriculture, what would that be? It could be anything from a carbon tax to better taste to stop crazy imports to electric tractors, but you only can choose one thing. What would that be?

What should smart investors, who want to invest in Reg ag and food look out for?

SPEAKER_01 50:51

It's a hard question. I would ask people to reallocate some of their disposable income to food. I'm not a communist. My family left the Soviet Union, but I think that people have forgotten that you've got lots of different ecosystem services provided by agriculture between water regulation, air regulation, CO2 capture. I can't remember but these statistics, I don't have them. They're quite famous that in the 50s, maybe the share of disposable income that a household would put in his food was 30%. And now it's maybe less than 10% because most of it is real estate or other things. And food has got much more value in it than just feeding people. In France, you've got the loi Galim. We've tried to protect farmers to have some kind of cost-based, cost-plus... based formula so people are not allowed or retailers are allowed to buy at a price lower than the kind of production cost of the farmer but I think this is one because the economy is crazy you've got bubbles on the internet on NFT on marketplaces and I still think as everybody says it you need to see a farmer three times a day to feed yourself so it is a socially important job that has to be valued so I think I would campaign for for giving more revenues to all people who farm because today I think it's in a modern country sorry in a developed economy it's 2% of GDP agriculture primary production not agribusiness and what goes

SPEAKER_00 52:45

with it that's where the real money is but the direct money going to farmers Keeps us aligned is nothing.

SPEAKER_01 52:53

And primary production is not financed enough in the sense that for a continent like Africa, I think maybe 40% of the population is still rural, a bit less. 25% of GDP or 30% of GDP comes from agriculture. And you've got less than 5% exposure to ag in banks' portfolio. So this is where the money needs to flow. It's primary production. I think it's socially important. That's what the UN have told me. I didn't invent the statistics and it's vital and it's useful. And we see with what's happening today

SPEAKER_00 53:31

in

SPEAKER_01 53:31

Ukraine.

SPEAKER_00 53:33

And so what would you tell, let's say we're in a theater full of quote unquote smart investors, both investing their own money, working in the finance sector. I mean, you've met many of these in the past. What would you leave them with? We're on stage, we're hosting an evening and we're doing this in person, which I hope will happen at some going. What would you leave them with as a message? Obviously not giving investment advice, but what would you like them to do or where to start looking and hopefully investing and putting money to work once they leave that theater?

What would you do if you were in charge of a 1B investment portfolio

SPEAKER_01 54:05

Divest from sectors which are not helping the planet, for one thing. You've already got a EU taxonomy. I think they'll be under higher pressure. You've got some champions. You've got some very good impact investors. You've got some good ESG investors. I wouldn't be able to quantify what their share of the market or of asset management is. I would guess it's still quite small and very biased, again, because I've worked in... agriculture all my life but it's in this sector invest money in this sector and especially in primary production because that's where it's needed maybe stop thinking of double or not triple digit returns but don't expect paybacks in two years with super high yield because that's actually not the case although you can make good

SPEAKER_00 54:58

money but don't just to be clear you're not in this for charity you're predicting and hopefully realizing You can make very good

SPEAKER_01 55:06

money, and that's maybe not very European, but orchards are being traded by North American funds, and they're very happy with their returns.

SPEAKER_00 55:17

And so what would you do if you are in charge of, let's say, a 1 billion euro investment fund tomorrow morning? What would you allocate it to? Not down to the euro, but what would you focus on? Would it be all nut tree crops? Would it be some percentage of experimental things, some technology? If you had the longest time horizon possible, what would you prioritize if you had to put 1 billion euros to work?

SPEAKER_01 55:43

First, I would choose a geography that I love, which is Central Asia. You've got Uzbekistan you've got Tajikistan you've got plenty of water in the Himalayas two huge rivers flowing which are called the Amudari and Sirdaria and with 1 billion 50,000 euro capex I think you could do what I'm missing these years 200,000 or 20,000 hectares or you could do a lot and I would do I would do also because back in the days it was an intensive cotton monoculture that has ruined the ILC that's that's my first um to buy land and build orchards. Well, no need to buy land. Land can stay with the government. I'm completely agnostic. I think land sometimes can be totally separated from the operating company. I think it's... Unless you have to

SPEAKER_00 56:32

talk to

What would you tell people wanting start working in the space?

SPEAKER_01 56:32

a bank, yeah. But you don't have to do it. In this case, you don't have to do that. Where's your collateral? In this case, you don't need them. Yeah. No, and of course, we discussed investors. Back to your previous question, the layered financial structures that some funds have is very clever because if the public sector cannot subsidize everything, sometimes when they put 5 or 10% at the bottom of a cash flow waterfall and they are junior to all the rest of the investors, the investors are very happy to go into a new asset class which they would not dare enter on their own. That's what big investors can do like the EIB or the World Bank. Especially for a regional like Central Asia, where it's still perceived as very risky, and it's much less risky than it was at the fall of the Soviet Union. So it's interesting. Again, tree crops, not because it's green pots, just because I've worked in this space for many years, even before, and we have forgotten, we always insist in France on horticulture and permaculture, but tree crops, we've lost the makers as well. I think it was maybe two and a half or three percent of our... agricultural surface. We've lost, I think, one percentage point on this. And relegating these crops to Europe, they capture carbon. It's pretty easy to follow good practices because very quickly you will stop tilling. You will make your soil better. You will bring back biodiversity because there's much more biodiversity in an orchard than basically in a cornfield. And you contribute to the much-needed shift toward plant-based diets instead of having basically soy-feeding animals that are then fed to us. Or corn shipped to Spain to feed pigs that ship back to France. Yeah, or ship our corn to Spain so they ship back pork to us. Nothing against pig farmers, but maybe in the future we won't be able to keep doing this.

SPEAKER_00 58:39

And what would you tell, I hear a lot of people reach out to you, like, okay, I want to I don't have a farming background, or I do, and I have some experience now, and I want to get active in this space. It's very difficult to give career advice, obviously, but what would you tell them? Focus on tree crops, focus on the project development. What do you feel is the missing piece out there that's really missing in the region X space?

SPEAKER_01 59:06

I would say that practice is important. Before you launch yourself into a product or it's tempting to leave your full-time job, it's always good to experiment and to do it. If you have some savings, just plant a hectare or two with a friend. That's how we started with Martin. We tried to plant pistachios at his uncle's farm. For some reasons, we decided to do something else. It's important to give it a proper try. You might not like it, so you You might love it. You might become very good at it. And this was actually the point I had with Martin when we started. Many people were coming with concept notes with no background in farming. And as an investor, of course, that's a red flag, immediate red flag. Oh, okay, that's too ambitious. No track record. That's the first reaction of every investor. So if you develop, albeit small, a pilot and that you can show a pilot that is clean, then replicating okay it's changing the scale of the business can change the nature but I think it's a very good start and leasing a hectare of land somewhere with some friends you can do it

SPEAKER_00 1:00:25

I think it's a great advice and I might add this question to as a regular question because it's something to, I think we need more energy, more people, we need more people on the land for sure. We need more people connected to the land and through agriculture, that's one of the best ways to do that. I want to be conscious of your time and thank you so much for sharing. I would say early in the journey of Greenpots, but obviously not early in your journey into tree crops, into agriculture and to finance. And I'm looking forward to check in and how it's been developing and where the next farms will be and how you're going to grow to 500 to 1000 hectares, etc. And of course, grow a lot of tree nuts in the process. Sure.

SPEAKER_01 1:01:06

Thank you very much for having me and look forward to being in touch and speak soon then.

SPEAKER_00 1:01:15

Thanks again and see you next time.