Mad Money

Organic cropland for cash? Yes, please!

Silicon Valley star on seismic shift in food chain
Silicon Valley star on seismic shift in food chain

Jim Cramer has been one of the biggest supporters behind the natural and organic food wave that has swept the country. He considers it one of the most lucrative trends of our era.

Yet, there are some people who still have doubts about this movement. They say that organic food is just for rich people or that it's not an economical way to approach agriculture and can't feed the world. Try telling that to stocks like WhiteWave, Hain Celestial and Chipotle, who have made fortunes from feeding people in a natural and sustainable way.

Cramer was inspired when he saw a TED talk by Ali Partovi and knew he had to interview him for "Mad Money." Partovi is a visionary angel investor, startup advisor and serial entrepreneur who has previously co-founded and sold two high-profile start-ups. He was also one of the first investors who saw the potential in Facebook.

Partovi has recently embraced a new venture for Farmland LP. This is a company that buys regular cropland and makes it more profitable by turning it organic. In the TED talk that Cramer saw, Partovi spoke about how organic farming is actually more profitable, more efficient and less expensive than industrial agriculture.

Could turning organic crops to cash catch on for the rest of the farming community? To find out, Cramer spoke with Partovi.

Ali Partovi speaks at The New York Times Food For Tomorrow Conference At Stone Barns, NY on November 12, 2014 in Pocantico Hills, New York.
Getty Images

Partovi explained that he first started to wonder why organic food was so expensive when he had his first child and started caring about the type of food he was feeding her. He felt guilty that he was able to afford nutritious and organic foods, just because he was more affluent than others.

"I felt like it should be possible for everybody regardless of their economic status to be able to feed their kids the healthiest, best food," he said.

When Partovi began looking into why organic food was so expensive, he discovered it was because of a simple mismatch between supply and demand. Wal-Mart recently surveyed its customers and discovered that 91 percent of customers want to eat organic and natural foods.

Thus, the demand for organic food is enormous, and the supply is not able to grow fast enough to keep up with the demand.

"Anytime you have that kind of situation, you have a systemic shortage, this means there are a lot more people who want organic food than there is product available for them, and that's what leads to high prices," Partovi said.

He attributed this imbalance between supply and demand to government programs that tilt the playing field for agricultural farmers. Essentially, he said, the government subsidies are set up to reward those farmers who grow maize, or corn, and soy rather than those who grow fruits and vegetables. Thus, the supply for corn and soy is now beyond the amount that humans can eat and the price of vegetables has increased dramatically.

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"I believe in capitalism, but the invisible hand hasn't been able to do its job properly. It's had little invisible handcuffs," he added.

Partovi further explained that there are not enough policies rewarding organic farmers for making the three-year transition to turn their fields organic. And while organic farming does cost a little bit more in terms of how much land is needed, he stated that the overall cost of organic farming is less than traditional agricultural methods because it takes a lot less fossil fuels and chemicals.

"If you can find a way to farm that reduces those inputs, the total product at the end of the day might be able to produce as much food at lower total cost," Partovi added.

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