25 Years of Chestnuts in Iowa: a Food in High Demand

100 years ago, the United States had a booming chestnut economy. The American chestnut, castanea dentata, was a dominant forest tree whose range stretched from Georgia, north to Maine, and west to Iowa. In 1904, a parasitic fungus known as the "chestnut blight" arrived in New York City on contaminated plant material from China. It swiftly decimated 4 billion trees. 110 years later, Chinese chestnuts and Chinese-American hybrids are blight-resistant and fit for commercial production. Chestnuts are a mainstay of Propagate Ventures multi-species investment strategy. Let us walk you through a profitable, replicable chestnut orchard.

Red Fern Farm

Red Fern Farm is a 25-year-old chestnut orchard in Wapello, Iowa. Kathy Dice and Tom Wahl own and run the property. This past October, Jeremy and Harry of Propagate Ventures visited the farm to learn more about chestnut production. In 1990, Tom Wahl foresaw the ecological benefits and culinary promise of chestnuts. They started out by raising pastured poultry in between their rows of young trees, but have since been able to derive their income from sales of chestnuts and other fruit.

Mature chestnut trees will grow to 30 feet tall, but are pruned to increase fruiting.

Mature chestnut trees will grow to 30 feet tall, but are pruned to increase fruiting.

Many Americans are unfamiliar with chestnuts. Chestnuts grow in burrs until they are ripe and ready to be eaten. At that time, the burrs open and the chestnuts drop to the ground. At Red Fern Farm, Chestnuts are harvested off the ground with a hand tool called a "nut wizard."

Chestnuts are still a traditional food across southeastern Europe and much of cold, humid Asia. At Red Fern Farm, we met Bosnians that had driven from several hours away to harvest hundreds of pounds of chestnuts by hand. Koreans and Chinese immigrants from the east coast order nuts online from Prairie Grove Chestnut Growers, Iowa's chestnut cooperative. Akiva Silver of Twisted Tree Farm lends the following (paraphrased) analogy: "Suppose that apples were to suddenly vanish from the United States, and 100 years later, I were to describe their nutritional and culinary qualities. Chestnuts are not commonly grown in the U.S. simply because we are unfamiliar with them. Chestnuts are something you have to experience." Recent immigrants seek out chestnut producers, and those that have been in the United States for many generations swiftly take a liking to chestnuts.

Red Fern Farm, in addition to chestnuts, growss pawpaw, persimmon, aronia berry, and honeyberry. Pawpaw and persimmon must be eaten fresh, and cannot be stored unprocessed for a long period of time like apples are. Aronia and honeyberry are niche berry crops: aronia is a dark, nutrient-dense berry that must also be processed into juices and wines, and honeyberry is an edible honeysuckle. It is effectively a blueberry that fruits in June, and we expect it to take off as a new crop across the northern United States.

The Present Value of Chestnuts

Chestnuts orchards will yield $10,000 per acre in revenue, after 12 years, given adequate management. Treated as an ordinary annuity at a 6% discount rate, the present value of net income from 30 acres over the next 30 years would amount to $3 million in revenue solely from chestnuts, inclusive of installation and management costs. Fortunately, chestnut orchards and row cropping or grazing are not mutually exclusive: in the years after tree establishment, but before yield, we can use the space in the between the rows to grow grain or raise livestock.

The Prairie Grove Chestnut Growers

Prairie Grove Chestnuts Growers is an aggregator for chestnut growers in Iowa, Illinois, and Missouri. They ship nuts all over the country, and are growing rapidly. They run a very straightforward, seasonal business. Work is done by hand, and nuts are sorted mechanically by size.

At present, Prairie Grove sells mostly to immigrants and non-anglo-saxon Americans who either experienced a chestnut culture in their youth or through family traditions. They consume, understand, and value chestnuts. At Red Fern Farm, we met Bosnians and Koreans who had driven six hours to buy chestnuts, and Chinese citizens of New York City order them online. Wholesale prices range from $3-4 per pound for 25-100 lbs of nuts, while upscale grocery stores in Iowa City stock local chestnuts for $10 per pound.

Chestnuts have a sweet, nutty flavor, and are high in carbohydrate. They are of course gluten-free, and can be eaten raw, boiled, or roasted. They have traditionally been processed into flour. We see opportunities for expansion in added-value chestnut products such as polenta, gnocchi, chestnut chocolate milk, crepes, and baked goods.

Industry Attractiveness

Chestnuts are a very attractive industry. The Van Eeghen Group is a Dutch family that has been in business for over 300 years. They gain large market shares of niche products, and operate in that industry until just before the product becomes a commodity: they catch new trend waves, and ride them until just before they break. Chestnuts are currently a niche product that will likely hit the mainstream in the next ten years. Chestnuts are the next coconut, and the supply isn’t nearly large enough to supply that kind of demand.

If demand were to spike, supplier power of existing orchards and aggregators would be large, due to low levels of supply. Carbohydrate-rich nuts are few, but substitutes include any type of gluten-free carbohydrate such as buckwheat or brown rice.

A U.S. chestnut industry would have to compete with Chinese and Italian producers, but producers of other tree crops (such as apples) must do the same. At the end of the day, we believe that the demand is primed to grow quickly, and that domestic supply isn’t nearly large enough to meet that demand.

Propagate Ventures is building an investment fund backed by multi-species agriculture, and chestnuts are a mainstay of our investment strategy. We welcome inquiries, and we look forward to providing you with the latest in profitable, scalable, regenerative agriculture.

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Harry Greene