Is This the Crop That Saves Florida Agriculture?
If you’ve driven through central and southern Florida over the last several years, you may have wondered why much of the land that used to grow oranges and grapefruit in central and southern Florida now sits fallow and choked with weeds. Most people are aware of the fatal citrus greening disease that has caused one of the greatest agricultural disasters in US history. Almost every remaining grove in the Sunshine State is infected with this disease as researchers struggle to find a cure with little to show for results. In 2017, the growers who were still in the game were spending between $1500-$2500 per acre in expenses to coax a profitable citrus crop out of their dying groves. These efforts were met with almost ideal growing conditions and by all accounts it appeared that their efforts would be rewarded with one of the best crops they’d seen in years. Until the arrival of Hurricane Irma which went through Florida like a chainsaw leaving no grove untouched.
Damage reports indicate that half or more of the unripe fruit is now laying on the ground while what remains in the trees is bruised or will eventually drop off in the coming weeks. And if that wasn’t bad enough, many groves were left standing in water far beyond the critical 72 hours which is almost always fatal for citrus trees. Directly and indirectly, Florida’s citrus industry creates almost 45,000 jobs which translate to almost a $9 billion contribution into Florida’s economy. Today’s citrus industry has shrunk by well over half from its peak in the late ‘90’s leaving rural towns and communities distressed and struggling to survive as families and individuals move away to find work elsewhere. There are only 7 remaining processing plants in the state and it is highly questionable how many will remain open and viable when ultimate crop losses may be as high as 80%-90%. There’s a point where it does not make economic sense to salvage the remaining fruit in a grove or open a processing assembly line for the smallest harvest since the 1940’s.
Like any commercial real estate, ag land is generally priced as a function of its income earning value plus any development potential. Citrus grove and that used to be valued at $10,000 - $15,000 or more per acre now sells for less than half to a third of that. But why can’t some other crop fill this void? It’s not for lack of trying. South Florida’s hundreds of thousands of acres of sandy, shallow soils and rainy climate narrow the field of viable crops that can be profitably grown in those conditions. Afternoon rains continually flush fertilizers and chemicals out of the soils, into the drainage canals, and ultimately Florida’s coastal estuaries and Everglades. In spite of these challenges, many growers and outside investors have ventured into some alternative specialty crops such as peaches, blueberries, tomatoes, and strawberries. Establishment costs, however, are very high. In the case of blueberries, it could exceed $15,000 per acre! To make matters worse, growers have found themselves struggling with a diminishing supply of farm labor. And finally, whenever prices spike higher from either early season prices or if there is a production shortfall, floods of cheaper imports arrive in a matter of days from Mexico and South America.
So what can work in Florida’s unique agricultural ecosystem?
There is one ray of hope that shows great promise of restoring ag land values and revitalizing business in South Florida’s rural towns. In 2011, an enterprising group of entrepreneurs from a company called Terviva began approaching some of the state’s largest citrus growers to establish some trial sites with a tropical/subtropical tree crop called pongamia. Pongamia is an oilseed tree that is native to Australia and India. Conceptually, the crop is like growing soybeans on trees, but at yields 8x-10x over the best Iowa farmland. Pongamia is not new to Florida. At the turn of the last century, it was introduced as a landscaping ornamental and today a few of these trees can still be found along the turnpike, shopping centers, and in parks in south Florida. Creating a viable agricultural industry from scratch is not an easy task, but it has been done. Soybeans were unheard of until they were introduced in the early 1930’s and palm oil trees were developed from the rubber plantations in Southeast Asia after WWII. Interestingly, products from pongamia are thriving industries in India where the oil is used for industrial applications like fuel, lubricants, paints, surfactants, biopesticidal horticultural sprays, and more. The “cake” or “meal” that remains after the oil is extracted is coveted as a great fertilizer that releases its nitrogen slowly so a plant can utilize it better. In India it is used to suppress soil-borne pests like nematodes that are the arch enemy of many of our food crops. So what is the path to prove the viability of a new crop in the US – especially in such a challenging geography as Florida? Below is a checklist of the gauntlet it had to run.
Will the tree grow here?
This was the first order of business Terviva set out to prove to growers when they arrived in 2011. The first grower who would listen to them was Ron Edwards CEO of Vero Beach – based Evans Properties. Edwards, former COO of Tropicana and co-founder of SoBe Beverages and Blue Buffalo Pet Foods, has a track record of spotting a good management team, a good business model, and an idea that had a good shot of succeeding. Skepticism was high so Terviva offered to split the costs of the first trials. The result was beyond expectations. Growers such as Graves Brothers, US Sugar/Southern Gardens, DNE, Alico, Mosaic and others soon followed. Around the state, the tree grew well in diverse sites with sandy soils, toxic soils, saline soils, and even Mosaic’s challenging clay reclamation soils. In 4 years the trees were 10’ to 16’ in height. The trials have shown that these trees survived hurricanes Mathew and Irma, 2 weeks in standing water, frosts, non-irrigated fields, poor soils, higher-salinity irrigation not suited for most other crops, sand, clay, pests, and heat. Indeed, pongamia can deal with Florida’s challenging climate and soils..
What are the costs to grow it?
Establishment costs are very similar to citrus. Indeed, the first thing that growers notices was that the tree could literally be dropped right into the existing citrus infrastructure. The trees cost about the same as citrus and the planting densities are equal to or slightly less than citrus. Some growers literally planted between the stumps of former orange trees. To date in Florida, no pesticides have been used. This hardy tree has grown through a laundry list of tropical and subtropical pests that growers spend millions of dollars on to control. The biggest annual expense is weed maintenance until that young tree can get some height and eventually shade out a lot of the undergrowth which can subsequently be managed with mowing. So annual maintenance costs tally to about $400-$500 per acre – about one third or one fourth of what citrus currently spend. Some growers used a small amount of fertilizer, and many used none at all. Pongamia is a legume so it enriches the soil by making its own nitrogen.
How is it harvested?
Almost all of the fruit and vegetable crops grown in Florida need manual farm labor and every year that has been more difficult and costly to come by. Conversely, a crew of 2 and a nut tree shaker like those used on pistachios or almonds can harvest a pongamia tree in 3-5 seconds. Those cost benefits accrue directly to the bottom line. For the past 2 years as some of the young trees have produced pods early, Terviva has put on grower demos to show how easy and fast the tree can be harvested.
Who’s going to process it?
The beauty of the pongamia industry is that everything about it is low-tech. The tree puts out a pod that is easily shelled with a nut sheller and crushed with conventional soybean crushing equipment. It doesn’t require elaborate $100 million processing plants or exotic enzyme formulations to make it work. The bean inside that pod looks about the size and shape as a lima bean. It consists of about 40% oil and the 60% balance is the remaining seedcake. In 2017, the forward-thinking Hardee County IDA and its head, Bill Lambert, unanimously voted to build the first pongamia crushing plant in Florida. Because of the elite varieties that Terviva is cultivating at various commercial greenhouses in the state, an acre of their trees is conservatively estimated to yield about 400 gallons of oil and almost 3 tons of seedcake!
Who’s going to buy the products?
This is where it gets interesting. There is a long buffet of diverse markets for this oilseed tree crop and therein lies one of its greatest advantages. These profitable markets range at the low end from a feedstock for industrial oils, to feed, and all the way up to highly-valued biocontrol products for the organic agriculture. Organic growers have long been familiar with the benefits of pongamia’s oil and meal products under the Indian name karanja. Like soy, pongamia oil is a long-chain C18:1 compound that can readily be refined into biodiesel or bio- jet A fuel. Those tests have been tested and validated by Shell, Valero, REG, and ARA Labs. Refiners view a pongamia crop in Florida as a new oilfield that faithfully produces oil every year. Fuel is the base-case end market and can produce fine investment returns. Classified as a politically correct “non-food” feedstock it can be used to make biodegradable polymers such as fracking fluids, plastics, detergents, paints, and other industrial products. Secondary compounds found in the oil have documented and long used in India as extraordinarily effective biopesticides as good as or more effective than more commonly known neem products that are widely used by organic farmers, gardeners, and in the fast growing cannabis industry. Because of the lack of need for inorganic chemicals used in growing pongamia, these high-value end-products are in growing demand by organic feed and growing operations. Sales into these channels alone can double or triple the value of the cake and oil. The seedcake or meal can be further refined to produce a (30%) high-protein animal feed, or simply be used as an environmentally-friendly, slow-release 4-1-1 fertilizer that plants can better utilize. Because the backbone of the oil shares similar properties to various food oils, scientists have told Terviva that the secondary compounds could be stripped out to upgrade the oil to “food quality” which could be of great value in parts of the world where pongamia could be grown on a footprint not adaptable to traditional oilseed crops.
The arrival of the pongamia farming model into the staggering agricultural void created by the citrus greening disease could be a classic business school case study. The trail has been blazed. A deeper dive into this business model reveals some very unique attributes. The trees high yields offer an extraordinary margin for error in any given crop year. For many alternative oilseed row crops planted elsewhere in the US (often as a new rotational crop), the entire growing season can tolerate few hiccups or else the yields will have a difficult time justifying the risks of planting and new machinery investments. Pongamia’s low annual maintenance costs also allow a lot of margin for adverse weather surprises. Pongamia’s diverse downstream markets mitigate marketing risks. Low-tech processing that can create products from fuel and feed to fertilizer and biocontrol horticultural sprays can allow plenty of flexibility to target up-cycling markets and reduce dependency on single consumer markets. And depending on those markets, Terviva estimates that at maturity, the groves could generate a net income between $700- $1500 per acre. What would the ideal replacement crop look like if it showed up at growers’ doorstep? Probably something like pongamia.
Author: Tom Schenk