By Kevin Jones, Regenerative Capital, Tom Hatley, Catalpa Partners, LLC, and Christine Laporte, Consultant

ReGen18 organizer Kevin Jones is on a team launching the following new project in Southern Appalachia that is working to find ways for poor families to maintain ownership of the family land. They aim to develop a globally replicable network of high margin biomedicinal sharing, trading and giving, coupled with a peer learning network, starting with colleges who have tracts of forest land, and appropriate park and reserve land. This is an overview of the project, which will be coming to ReGen18.


Revitalizing the Appalachian herb marketplace could create a very new and equitable market for the 21st century and contribute to building resilience into small farms and traditional cultural landscapes. The compelling logic is that where land is held by small owners, small quantities of herb product can yield very high margins. But this high value remains unrealized today, as it has in the past.

Revitalizing this market could enable smallholders to continue to own the family land as property values rise, or to augment incomes in places where land values stay flat and jobs are scarce. It would also enable broader, systemic region-wide biodiversity restoration and enable large-scale reforestation and forest restoration to be economically viable beyond relying on donations or government grants.

Both an assessment of the current situation, including the identification of existing obstacles that have led to the current stagnation of small owner markets, and planning for a pilot project, can point the way toward a right strategy for regenerative change in the Appalachian landscape.

Background

Identified and culturally valued since distant antiquity—and into the present by indigenous peoples–Appalachian herbs made their way rapidly into the European marketplace by the 16th century. They became the most valuable, by unit, product of the region into the early 20th century, and have potential to remain so today. The basis of the commercial side of the business was gathering and wildcrafting from wild populations, often by small farmers supplementing income.

Wildcrafting and gathering held sway as a means of income, in no small part because of the freedom and traditional knowledge associated with it. This cultural persistence held in the face of sometimes devastating extractive export forces. For example, by the 1780s in the upper Savannah headwaters, the wild roots of ginseng– revered and all but extirpated in its Asian habitat–had also been pushed into near disappearance.

During the 20th century, land loss, out-migration, the near-monopoly of middlemen “dealers” paying pennies on the pound and selling at exponentially higher prices into the wider market, and lack of regulation of any kind, led to the devaluation of the price paid to gatherers. At the same time, profits for buyers (dealers), distributors and processors have increased sharply. Rural Support Partners and United Plant Savers are leading the way on addressing these and other market issues that need to be improved while protecting the wild.

Today’s international market demands on many forest botanicals occurring throughout Appalachia are driven by open web-based marketing, exerting a previously unimagined pressure on wild plant populations. This fully globalized demand is today rapidly extinguishing already stressed local and regional medicinal plant populations—and the latitude of genetic variability—into extinction or critical levels for survival.

Reversing the Arc

Black cohash has long been used medicinally. Photo credit: Cheryl Oakes

The challenge today is to meet conservation needs for stabilizing diversity loss and genetically robust populations, growing a marketplace for sustainable demand, and potential to benefit to the economically marginal small landowners. As in small farming, and in farmland retention, a key challenge is to find new and patient capital sources, while developing new brand premiums, production, certification and quality assurance, distribution and market outlets.

Building on increased regional awareness that cultivation (primarily though wild-simulated or forest farmed plants) is crucial for conservation of many forest botanicals and other non-timber forest products species, pilot “anchor site” projects could be targeted at land owned by private forestlands, community forests, research forests, towns, or colleges and universities. For example, Warren Wilson College in the Southern Appalachians near Asheville has academic expertise, extensive forest resources, a seed bank, and a strong commitment to ecological forestry. A project here can prove a new model for small scale, branded, and highly valued production of herb planting stock. Throughout the Appalachians, insufficient planting stock (of appropriate genetics) is identified as a key barrier for reliable production targets that are necessary as incentives for buyers to enter into agreements for purchasing. This initiative could be paired with another college, research, or community forests in Central Appalachia. At the same time, this model to be successful will require the creation of new, and scalable, production and processing facilities, as well as tech-based distribution, marketing, and purchasing.

Overview: Producers

Many farms in the Appalachians have both forest and field resources, often with more forest than open land. Most farm landowners, new or multigenerational owners, are not familiar either with herb production or the market, e.g. who to contact to sell potential production. In part this is because the markets have devolved into an informal economy, where profits are very low and participants often economically marginal, with both production and purchase opportunistic.  Increasingly though, buyers are hearing from consumers that they want reliably-sourced plant materials in their consumer products, and so many are returning to a more direct relationship with producers who follow formalized conservation protocols, for example, such as those being developed and by experts in conservation at United Plant Savers and experts in Non-Timber Forest Product Forest Farming and land management at Rural Action.

Photo credit: uwdigitalcollections

When landowners know about herb markets, they mainly know about wild harvesting ginseng or ramps, both of which carry acute issues of overharvesting, as well as requiring great effort on the ground.

There are two methods for producing herbs: forest grown and (for a different set of species) open field cultivation. Small farms in the Southern Appalachians and Foothills are a mix of field and forest. Promotion activities have tended to focus on species that can be forest-grown, under the canopy. While these are especially valuable and marketable, this approach requires an investment of longer time horizon. Less time is required for cropping open-land herbs, for which markets already exist. Many producers grow some of each.

Natural capital, in the form of verified seed stocks and sufficient quantities for establishing cultivation under forest canopy are hard to find and expensive. The same situation exists for herbs grown in other, more open field, contexts.

Processing facilities for drying and packaging are absent from most areas, with emerging efforts to fill the gap, as by Appalachian Sustainable Development in Duffield, Virginia.

Like seed supply, certification, production, transportation, and on-farm processing facilities can be major or minor issues, but require investment and hard to find technical assistance. There are expertise clusters, for instance at Virginia Tech where the Appalachian Beginning Forest Farmers Coalition is based within the agroforestry research program and through Agricultural Experiment Stations throughout the region, but extension agents (and potential clients) are limited their ability to broadcast their findings and organize client initiatives.

Investment Capital Availability

Capital is not available through traditional sources (USDA or banks) and money to take opportunities to scale (sustainably) when appropriate can’t be found in foundations. Though foundations can and do fund proof of concepts with potential. That said, many of the institutions and money sources to allow entry to this market in a manner predicated on vetted conservation protocols do not exist in significant numbers and need to be invented (or reinvented).

For instance, new impact investment products such as small farm-funding donor advised funds (DAF) could help change this situation. The philanthropic investment from a DAF would be an attractive vehicle for broad community engagement. Investor donors would get a tax deduction for putting the money into a DAF and would be involved in putting patient capital to work for the public good. Donors would expect no financial return to their own bank accounts beyond tax breaks, but the DAF would realize financial return as a philanthropic vehicle. Money earned at harvest could be invested or donated again, in the manner of “evergreen fund. The money in the DAF could also serve to get matches from Self Help Shared Interest loans, now under consideration, or from coops or other loan sources.  As a result, each investor donor would have the impact of $20 for every $10 put into the DAF.

Social investment holding companies or a social venture fund could be created for the greater Appalachian region. Risk capital without collateral (i.e. with a venture capital risk profile), with a fund held in a holding company (which unlike a venture fund has no mandated time to exit, could prove to be a key missing mechanism for increased economic opportunity. It would be patient capital Slow Money on a timeline of ~five to seven percent PRI-like return that is in sync with the time it takes a new product to come to market. Such a holding company could be extremely useful to augment philanthropic and public sector funding, and would collaborate with other funds that have been formed or are in formation in the region, as well as with DAFs.

Coops or voluntary associations, some existing and others emerging or certainly potential, could aggregate small producers and provide services to create investable opportunities for the holding company fund.

Working in the pilot stage with “anchor institutions” such as Warren Wilson College, or Settlement Schools in KY or community forests in WV etc., can reduce risk and increase the likelihood a successful model by linking across the stateliness and thus regionalizing the solution in some fashion.

Markets and Marketing

The initial problem is that there is no strong awareness of the opportunity for most small landowners and farmers. And yet there are now outlets to the markets other than those beyond 19th century local buyers and accelerating market demand.

Building awareness will require rebuilding market structures, reinforcing broadband infrastructure, and creating awareness of high value opportunities.

Part of revaluing will involve creating recognition, for instance through a compelling regional label or certification program.

Access to broadband, in woefully underserved communities, is an underlying potent solution.  With broadband access, dispersed producers can organize their businesses, even forming virtual cooperatives, to market products through online sales in unprecedented ways.

Join us at ReGen18 May 1st through 4th to learn more about this project and other initiatives that come with innovative financing vehicles attached to solve the core problem of regenerative economy: the time to market doesn’t match investors’ expected time to payback.