Midwestern BioAg CEO: Organic Label About Marketing, Not Nutrition

Midwestern BioAg has been in business for more than three decades, and during that time it has worked with thousands of farmers to implement the Madison, WI-based company’s recommended soil and crop care practices on about four million acres of farmland, says CEO Tony Michaels.

Founded in 1983, Midwestern BioAg initially fueled its growth through revenue and retained earnings, Michaels says. But in recent years, he says the company has raised outside funding in order to grow more quickly.

Part of Midwestern BioAg’s business involves working with farmers converting conventional farmland into organic farmland. Michaels says that while the average organic and conventional crops aren’t any different in their nutritional quality, some farmers feel there’s a financial incentive to get their land certified as organic because organic foods tend to command higher prices than conventionally grown ones.

In 2014, Midwestern BioAg raised its first round of outside capital, from an investment group that included California-based Proteus Environmental Technologies. Midwestern BioAg gave up a controlling interest in the company as part of the deal. Michaels, who co-founded Proteus in 2007 and continues to serve as one of the fund’s managing directors, took the top job at Midwestern BioAg around that time.

The company has since reeled in additional external financing, most recently a $15 million equity funding round that Midwestern BioAg disclosed to federal securities regulators last month.

Michaels says his company estimates there are about 400 million acres of farmland in the markets Midwestern BioAg serves that would benefit from using the fertilizers and other items it sells. These products are designed to improve soil health and increase crop yields, he says.

“We’ve got 396 million acres left to go,” Michaels says. “The world can’t wait another 35 years for us to convert the next four million acres.”

Midwestern BioAg works with food producers to educate them on how to best use the company’s products, which it says can improve the nutritional content of crops. In addition to fertilizers, Midwestern BioAg’s product line includes seed and ingredients the company says can make animal feed healthier.

“We look like a fertilizer company, but we’ve really been a farm-advising company that monetizes our free advice through fertilizers,” he says.

Some, but not all, of the fertilizers and livestock nutrition products Midwestern BioAg sells are ones that farmers seeking to get or maintain an organic certification from the U.S. Department of Agriculture (USDA) are permitted to use. These items represent a growing segment of the company’s business, Michaels says.

“Traditionally our business has been about 70 percent conventional and 30 percent organic,” in terms of both revenue and farm acreage, Michaels says. “But we now have about 48 percent of our customers that are buying organic product.”

That shift has occurred as consumers increasingly pick items with an organic label at the supermarket over ones lacking such a label. More shoppers and diners are demonstrating they’re willing to pay a premium for produce, meat, dairy, and other foods they eat. Organic food sales were a record-high $45 billion in 2017, according to the Organic Trade Association. The industry group says organics account for more than 5 percent of total food sales in the U.S.

The reasons for the organic boom likely stem in part from consumers’ perception that organic foods tend to be fresher, less likely to have been sprayed with harmful chemicals, and grown using more eco-friendly agricultural practices.

Organic farming is perhaps most easily defined by what it is not. Farmers must grow crops without using genetically-modified organisms or synthetic fertilizers, hormones, pesticides, or herbicides, according to standards set by the USDA. Tools and cleaning supplies also need to be organically approved. A farm can only be certified organic if … Next Page »

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