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Why did RSF Social Finance make a loan to Estancia Beef?


RSF Social Finance recently made a loan to Estancia Beef.  Here's a deeper look at why.

Thursday, October 20, 2011 - 8:20am

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Our recent loan to Estancia Beef, a California based company which provides American consumers with free range grass fed beef, has raised a number of questions in our community. These same questions were also debated by RSF staff when deciding whether or not to approve the loan. In the spirit of transparency, we wanted to share more about our decision making process and why we’re so enthusiastic about our loan to Estancia.

Before diving into the more contentious details, a moment on grass fed beef. With all of the terms on meat in the markets—all-natural, organic, premium, free range, le ne plus ultra—it’s easy to conflate practices and hard to decipher differences. More so than any other type of cattle ranching, grass fed cattle is treated humanely, with ample land for grazing and no sight of feedlots. This system is great for grasslands—cow manure fertilizes the land, stimulating the re-growth of deep rooted grasses which ultimately enrich and aerate the soil. Furthermore, from a consumer standpoint, the beef tastes amazing, and is by far the healthiest type, with half the fat and cholesterol of regular grain fed beef, a large percentage of mono-unsaturated fat (like olive oil), and higher levels of vitamins A and E, omega 3s, and conjugated linoleic acids (one of nature’s strongest antioxidants). It’s easy to see why we at RSF are eager to support this industry.

So this all sounds great, right? What problems could arise from wanting to support a producer and distributer of grass fed beef? Here is a look at the most pressing issues.

First and foremost, with our commitment to supporting local farmers and local economies, we asked if it would be better to pass on Estancia and reserve our funding to support the domestic grass fed beef industry. In truth, our lending managers looked at a number of domestic operations before making this loan to Estancia. Some, like Marin Sun Farms, had already secured financing (a personal loan from one of our SIF investors, in fact). In other cases, some companies couldn’t support an RSF loan.

The reality is that Estancia is a leading grass fed beef brand committed to sustainable business practices. The company sources its beef from an exclusive cooperative of forty sustainable family-owned ranches in Uraguay and Argentina. Several of these ranches are converting to biodynamic, and Estancia is providing educational assistance to support these efforts. Estancia hopes to soon become the largest producer of biodynamic beef in the world.

The natural growing conditions of Uruguay and Argentina provide an ideal climate for cattle grazing, with rainfall year-round and naturally occurring high protein grasses. Not only is the climate and land primed for raising premium cattle, but the last two centuries have seen continual improvements in humane and sustainable animal agriculture practices. Along with this dedicated practice come significant advantages in genetics and pasture management practices, compared to the United States, where more than 98% of beef produced comes out of feed lots.

But don’t the vast “food miles” of beef from South America counteract the benefit?

Actually, the carbon footprint of feedlots is staggeringly high, and dwarfs the environmental impacts of Estancia’s shipping. Despite the greater distance from food to plate, Estancia Beef still estimates its fossil fuel consumption per pound of beef at somewhere between 1% and 10% of the United States commodity feedlot equivalent. U.S. feedlots consume large amounts of fuel to raise an animal using current industry standards which feed livestock grain grown with oil based fertilizer and ship them back and forth across the country for slaughter and distribution.

Ok, but wouldn’t it be ideal to support the US grass fed industry? How is Estancia doing that?

For starters, Estancia actually has ranches in California and Virginia, and would like to expand their domestic ranching operations.

But at a systemic level, Estancia’s efforts to raise awareness and build a market for grass fed beef benefit the entire industry, we believe, not just one company in it.

Part of the reason co-founders, Bill Reed and J.P. Theirot, started Estancia is because they understand the difficulty of producing grass fed beef in the US and the challenges of developing a brand on a segregated and undeveloped supply chain. As they grow over the years, they plan to leverage their sales and distribution channels to build US grass fed production alongside their South American production. Reed and J.P. have ranches in California and Virginia where they are raising grass fed beef, which they will eventually introduce into their distribution channels. This will all happen over time, as economic and agricultural change does.

Ultimately, we aim to further best practices globally, with both an appreciation for terroir and and understanding of our economic interdependence.

This isn’t to say that there’s no great work being done in the States in grass fed beef, or that we wouldn’t be happy to support it too. We are looking for opportunities to fund domestic grass fed operations that meet our lending criteria. If you know of any seeking debt financing, please let us know!



RSF Social Finance
Keywords: Sustainable Finance & Socially Responsible Investment | Estancia Beef | Grass Fed Beef | RSF Social Finance | food miles | sustainable agriculture

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