February 04, 2021
A Deep Dive Into Row Crops
In previous blog posts as well as in our white papers, we’ve discussed “row cropland” as one of the two major types of investments FarmTogether focuses on. Row cropland investments are popular, reliable options for any investor looking to diversify a portfolio with alternatives - in fact, for an idea of just how popular they are, look no further than FarmTogether’s recent Rinehart Farm deal, which fully syndicated on our platform in about 2 hours.
Still, Rinehart Farm - a corn and soybean farm - is the tip of an iceberg when it comes to the range of farm and crop types across all US row cropland. The term “Row Crops” actually belies a huge variety of crops, with the sole unifying distinction that row crops typically are annually harvested and replanted, and produced on a large scale with the aid of machinery - specifically, a row planter and combine harvester. This means that, beyond corn and soybeans, row cropland investments could include anything from cereal grains to roots and tubers to legumes, or even non-food crops like fibers or oilseeds.
However, not all annual crops would be considered “row crops”, as the employment of labor vs machinery in farming can differ greatly based on the crop’s characteristics - the parts of the plant that are harvested, how densely they can be planted, and the compatibility of equipment with different crop attributes or seeding approaches. Understanding what constitutes a “row crop” isn’t always easy. Below, we’ll dive into some of the variety in row crops and illustrate a few key sub-categories, their historical significance and modern-day economic importance, and other characteristics that could make any of them attractive farmland investments. For context, we’ll also explore some of the fuzzier distinctions between row crops and other annual crops that don’t qualify as row crops for various reasons.
No other category of row crops are more significant economically, culturally or historically than Cereal Grains, which are almost all derived from the grass family (Poaceae or Gramineae) and have been central figures in farming ever since the origins of agriculture itself. The first cereals independently arose in each of the three “cradles of agriculture” - wheat and barley in the “Fertile Crescent” of the Middle East, corn and quinoa in the ancient civilizations of Central and South America, and rice in South and Southeast Asia. Those and other cereal grains became fixtures in the diets and cultures of the civilizations where they originated and, unsurprisingly, remain among today’s most commercially significant crops both in the US and globally. The techniques used for their production have changed dramatically, as have the range of uses of these crops - including outside of direct consumption as human food.
Corn, for example, has transformed enormously in how it is produced, and as a result has transformed our global food system. Native to Central America, it was originally planted together with beans and squash in a subsistence farming polyculture system commonly known today as the “three sisters'' across the Americas’ indigenous civilizations. Today, thanks to centuries of advances in breeding and agronomy for corn growing, monocultures of densely-seeded, machine laid rows of corn take up farm fields across the American midwest almost as far as the eye can see. Corn is used both in fresh and processed forms as human food, as well as significantly as a livestock feed grain and even an input to biofuels. With its myriad commercial uses, corn leads all crops in the US in terms of both planted acreage and total crop value, and its production in the “corn belt” region has made the US the world’s long-standing leading producer and exporter.
While corn leads all crops in the US in terms of both planted acreage and total crop value, the US remains a major global wheat producer as well. In fact, wheat was one of the first crops to be grown on an industrial scale - on the “bonanza” farms of the 19th century in the American West - as well as the first crop to benefit from modern plant breeding techniques for disease resistance and hardiness to extreme weather. Norman Borlaug, an American plant breeder whose research uncovered ways of effectively redesigning the genetics and the very structure of a wheat plant for better yield and hardiness, had such an effect on how scientists thought of crop genetics that he became known as the “father of the Green Revolution”. Today, wheat ranks third in US crops by planted acreage and, like corn, has a wide range of uses in human food as well as livestock feed.
Interestingly, despite their tendency to be produced with heavy reliance on machinery, not all cereal grains fall neatly into the “row crops” category. Rice, for example, is still commonly hand-harvested even in the global north, and is often seeded so densely in flooded paddies that a tractor wouldn’t easily be able to drive through the field. The same, in fact, could even be said for most styles of wheat production where seeding rates are too dense to allow in-season equipment such as a sprayer to move between the rows.
Still, though not as significant a commercial crop in the US as in other parts of the world, rice is the primary staple food for more than half the world’s population and also figures importantly in the US agricultural industry. Four growing regions - three in the South and one in California’s Central Valley - make up the bulk of US rice production. Rice production and demand are also evolving, both in terms of technologies used in rice farming and in terms of consumer demand, with wild rice touted as a “superfood” for its wide range of health benefits.
Aside from these three major crops, other Cereal Grains produced in the US and around the world include oats, barley, rye, buckwheat, millet and pearl millet, sorghum, and more.
Loosely referred to as “peas” and “beans”, pulses are another major category of row crops with significant production in the US and around the world. All belonging to the legume family (Fabaceae), pulses are the seeds of pod-like fruits that usually burst into two halves when they ripen and dry out. They are consumed in various forms, both fresh and dried, as well as whole and processed, and play a more varied role in our diets than any other category of row crops.
Compared to cereal grains, which are predominantly composed of starchy compounds, pulses have a much higher protein content - usually around 20% by mass in dry seed form - and thus deliver a hugely important share of protein requirements in a mixed diet. Like cereal grains, they have figured prominently in agriculture throughout its history and still have huge importance both to traditional cuisines and to modern diets in general. Beans, lentils, peas, chickpeas and groundnuts such as peanuts are a part of nearly every society’s food and, beyond protein, also provide a rich diversity of vitamins and micronutrients critical to human health.
Roots, Bulbs and Tubers
Potatoes, yams, carrots, beets, onions, garlic, turnips and radishes are examples of row crop plants that are grown and used primarily for their underground parts. Each of these crops is either an edible root structure (such as carrots, beets, turnips and radishes), a bulb (a swollen leaf base that forms a fleshy structure below ground, as with onions and garlic), or another part of the crop plant called a “tuber” (round underground starch storage structures that are actually a part of the plant’s stem, such as potatoes and yams).
These crops are primarily consumed as fresh produce and are an incredibly prominent part of all cultures’ diets. The most commercially significant of these crops, in terms of total acreage planted and volume harvested, are potatoes. In the US, potatoes are grown in at least 23 states, with the largest producer among those famously being the state of Idaho - the runaway leader in production among all states, it even has a potato museum and has invested substantially in certifying and marketing potatoes as “Idaho-Grown”. Globally, the US is the fifth-largest potato producing nation, preceded only by China, Russia, India, and Ukraine.
Interestingly, though, potatoes are also among the best examples of the huge genetic diversity and rich history of root, tuber and bulb crops, and perhaps have the most interesting story of all these crops. To begin with, they originated not in any of the top 5 producing nations just mentioned, but in the Andes Mountains of South America, and are still grown widely in that region by communities that, to this day, employ centuries-old traditional cultivation techniques and harvest an enormous range of varieties of potatoes not commonly found in commercial production in the rest of the world. Andean potatoes are so well-known for their rich and diverse flavors that they often feature prominently in fine dining and have been central to the careers of decorated chefs.
“Specialty Crops” - Fruits and Vegetables
All of the categories of row crops that we’ve discussed so far are generally considered “field crops” in the US agricultural sector; generally, this refers to the fact that all such crops are grown across extremely large areas with the aid of machinery. Meanwhile, there are plenty of annual crops grown on smaller plots and with much more hands-on crop management practices that can be referred to as “specialty crops” - or, what we more commonly think of as fruits and vegetables.
This can create some confusing dichotomies, but in general, fruits and vegetables that would be classified as “specialty” crops are any commercial crops where the harvested part of the plant is either the above-ground stem, leaf, flower, or fruiting body itself, and where the crop plant needs to be re-planted annually. Therefore, crops like lettuce, spinach and other leafy greens, as well as cabbage, brussels sprouts, most berries, pineapples, squash, and tomatoes would all be considered specialty annual crops, whereas other fruits such as citrus, apples, and other trees, vines or shrubs would be considered specialty permanent crops.
The significance of these crops to our diet almost goes without saying - the importance of fresh fruits and vegetables to human health is perhaps the one aspect of dietary science that has seemingly never been disputed, and beyond whole fresh consumption, many of these crops are also commonly used to flavor other comestibles, including everything from desserts to spirits.
Thanks to the fragility of the harvested part of the crop and requirements for more hands-on management, the cultivation of these crops is often labor-intensive and harder to mechanize or operate at extremely large scales. Land used in farming specialty row crops is also often managed differently than land used for field crops, principally in that rotations are regularly used in successive years of farming to make sure that the unique nutrient demands of one crop type don’t chronically deplete the soil for future years of harvest. Strawberry farmers in California’s Salinas and Pajaro Valleys, for example, will often rent land as one of multiple tenants on a multi-year lease, and swap fields from one year to the next with vegetable farmers in order to balance the health of soils and prevent pathogen outbreaks to which one specific crop might be particularly susceptible if farmed too intensively.
Fiber Crops, Oilseeds, Sugars, and other row crops
Finally, there are still some row crops that don’t fit neatly into any of the above categories, but which still play major roles in our lives and in the US agriculture industry. These include crops grown and harvested for sugar production such as sugar beets and sugar cane, “fiber crops” such as cotton, which are grown not for food but for materials used in production of goods like textiles, ropes and fillers, and oilseeds such as sunflower, rapeseed (canola), and linseed (flaxseed) which are used comparatively more for their processed oils than they are as a direct source of food. Still, each of these types of crops can be grown at quite a large scale and yield a high-volume, high-value crop, especially considering their variety of culinary or industrial uses.
Soybeans, for example, are by far the most commercially important of all oilseeds, largely due to their unique mix of high fat and protein content which enables their use in processed oils and meal, as well as many uses in human food. Soybean oil can be used for cooking and in meat and dairy substitutes as well as in biofuels and even in manufacturing as a petrochemical alternative, while their meal is an extremely important source of protein in livestock feed. This array of uses is what has made soybeans so incredibly commercially important, including in the US, where soybeans rank ahead of wheat and sit second among all crops in terms of total planted acreage. Still, their importance to human food as a crop for direct consumption cannot be understated, either: Soybeans are eaten around the world in whole fresh, sprouted, dried, and fermented forms
Investing in Row Cropland
As we’ve discussed in previous posts, investing in row cropland is a solid option for anyone looking to diversify their portfolio with alternative assets, given the manageable risks involved and row cropland’s unique potential for generating stable, consistent returns. In fact, they are a great compliment to permanent crop investments as well, and they tend to offer more flexibility than permanent crops given that farm operators have the freedom of changing what they plant every growing season.
FarmTogether’s mission is to support sustainable and profitable farming by leveraging technology, and removing the barriers to entry to farmland ownership, all the while providing individuals, our investors, with an opportunity to share in the rewards from farming well.
We are actively pursuing investment opportunities in row cropland and plan to have more to offer very soon.
Disclaimer: FarmTogether is not a registered broker-dealer, investment adviser or investment manager. FarmTogether does not provide tax, legal or investment advice. This material has been prepared for informational and educational purposes only. You should consult your own tax, legal and investment advisors before engaging in any transaction.
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