Episode 176: Vertical Integration for Regenerative Farmers with David Stelzer

Hi friends, this is John. Welcome to the Regenerative Agriculture Podcast, where we have all kinds of fun conversations related to regenerating our landscapes, our soils, the food that we eat, and our collective health and the health of the ecosystems that we're responsible for stewarding. Today, it's quite an honor to have someone here who I consider a longtime friend, someone whose work I've greatly admired and the, the impact that they've been able to produce. So I have here David Stelzer with Azure Standard. David, thank you for being willing to join me and to share your story about the things that you've been working on. You're doing a couple of interesting things. You're farming in a challenging environment, but then I think the piece that is so desperately needed in today's world is you are developing a pathway to deliver growers' products, starting with your own products, to consumers. And you've essentially removed all the intermediaries in that pathway. And you are owning the pathway itself. And I think in the world today, we see all of— there's this constant refrain where growers are describing how, well, the middlemen are making all the money. We're not making any money. And yet, in many cases, Many growers are not adding a great deal of value. They find themselves in a commoditized commodity production system. And you've chosen to take on the management of all that, or some of that value addition and that value creation. So I can't possibly do justice to your story. I'd love to, for you to just tell us a bit about the context, the history. How did your farming operation come to be? How did Azure Standard come to be? And what led to the few dozen fires you have poking around in today?

All right. Well, if you know, going back a little bit, you know, originally, my dad actually started farming organically in 1973, way before it was cool. In fact, you know, nobody even hardly knew what it was. But he had— we had changed our diet as a family, mostly because of health issues that I had had as a small child. I was, you know, very ill, not expected to live. A naturopath told my parents they had to change their diet radically or I would die. They did. I regained my health. And so it piqued dad's interest in—

That's quite a— that would be quite a statement. Well, and also quite a goal for you as a young child. How old were you at this point?

Well, I was, I was very young. I was super sick from the time I was about 9 months old till I was almost 5, I guess. Um, my earliest memories in life are laying on the couch wondering if I was going to get my next breath or not.

Oh my.

Because it, it was, you know, it manifested respiratory in a, in a large since my symptoms were— I mean, it wasn't only respiratory. I was broke out from head to foot. I couldn't breathe, uh, had other issues. We had been to I don't know how many specialists, and they prescribed this and that, and nothing was working. Uh, you know, the story, um, goes where the, you know, one of those things where it's— it was actually, you know, now when I'm looking back on it It was actually my microbiome. The bacteria that I had in my body was different than most people's. And I was not able, it was not able to digest a standard modern American diet. It just couldn't do it. Couldn't handle, you know, and still to this day, I can't handle dairy very well items. So it, I couldn't do that. But refined sugar, everything set me off. So it was no refined sugar, no white, white flour, no Crisco type, you know, any of that kind of, no heavy fats or fractionated or hydrogenated oils. It was a bunch of stuff. And this is back, you know, around 1970. So before this was common knowledge, you know.

Yeah. In today's world, that's— this is an increasingly common story to some degree. And in some regards, you, you're almost a bit of a canary in the coal mine, an early indicator of that.

I was way, way ahead of it. But by diet change, after they got the recommendation from a naturopath, they— dad was either in or out. He was no half-hearted anything. He never tried anything unless he went all the way in. And so we changed, our whole family changed our diet. Crazy thing was my granddad, he had heart trouble. He had, he had been a farmer as well. He had to retire when he was like 50 because he had such bad heart trouble. After the diet change, his, he got well too. And he was farming again 16 hours a day when he was in his 70s.

Wow.

Actually, ended up dying in a farming accident in his mid-70s. So this, you know, it worked not only for me, but it worked for him as a side effect. And now he was, you know, perfectly well. So it sold our family on the concept of healthy eating. And then dad's out there in the, you know, he said, I was in the field. He was, we were doing grain at that time mostly. you know, wheat and that kind of thing, barley and stuff. Anyway, he was out there planting wheat, and he was up to his armpits in this— in the grain drill, in the spreading out the wheat, and his hand was all red and pink, you know, because of the treating, the treatment stuff they put on the wheat, because he had bought it from, you know, the elevator like everybody else. And so he decided to call them up and ask them what was on the wheat and why, what it was for. And so they, so he calls them up and they have to call their chemical scientists or agronomy scientists or whoever it was to figure out what was on the wheat. Oh, we just put on whatever this, whatever the brand name was. So they finally dug into it. You know, this is before the internet. You can't just look these things up. You have to call the salespeople. And they, uh, turns out that it was almost pure mercury.

Whoa.

They were treating the wheat with mercury. So he asked, well, why are we putting mercury on the wheat? And they said, well, it's for smut. And so, you know, because the smut spore can't live in mercury when it's planted. And But we're in Eastern Oregon. We don't have smut. We've never seen smut. So that was the last time he ever planted treated wheat. We never saw smut before. We've never seen smut since. I mean, I've seen it in other people's fields, but in this area, there's no smut. So he was actually using mercury for a disease that didn't even exist in our area. That's how you know, and a lot of times these, these agriculture things are kind of like that. It's this one-size-fits-all, and that's what regenerative never is. We never have a one-size-fits-all approach because it just doesn't work that way. You have environment, you have climate, you have soils, all these things. But you guys, you guys all know that. But so Dad, when he started farming organically, First couple years, you know, he didn't really have a market. And so he was still hauling his, you know, his grain to the elevator like everybody else. And then he met Bob Moore, who was the founder of Bob's Red Mill, which is a fairly popular brand in the marketplace at the time. And Bob was just getting started at that time. And he, in fact, he was wanting to do this milling thing and So he and Dad kind of hit it off and they became friends. And so Dad actually helped him get his first stones out of a little mill that's down here in Boyd, just a little way from Dufour. That was his first stone mill. You know, it was a great big stone. And so it was kind of like Bob was going to be the processor and Dad was going to be the farmer and they were going to do organic grain together. And he mostly had an in with Fred Myers because Bob knew Fred Myers. The original founder of the Fred Meyer's grocery chain. And so that went on happily for, I don't know, 10 years or so. I guess we were growing all the grain we could on the farm organically. Bob was buying it, you know, and processing it and getting it into Fred Meyer's. And then Fred, the original Fred Meyer, he retired, sold the company to some kind of investment group. It took them a few years to figure it out, but somewhere along the line, this investment group figured out that why are they carrying this expensive organic stuff in Fred Meyer's? This is in the '80s, probably. Yeah, mid-'80s. And so they came to Bob and they told Bob, hey, we don't want this expensive organic stuff. Nobody cares about organic in the marketplace. We just want conventional in there. And Bob says, no problem, I'll take care of it. So he calls dad up and says, I'm sorry, I don't need the organic grain anymore. Fred Meyers just wants conventional. And he just went down to the elevator and got the cheapest wheat and rye and stuff that he could possibly get, ground it and put it in his bag. So he switched from organic to just conventional. And most of his stuff is still conventional to this very day. Uh, you know, it didn't bode really well for his relationship with Dad. They weren't super close after that. But, you know, and the crazy part was, you know, we were mostly raising winter wheat and rye for Bob at that time. So when he called and said that Fred Meyer wouldn't take it anymore, we already had planted. So we had the crop in the ground because that was like in November or December when he called. And we plant in, you know, September, early October here. So it was already all planted. So we had, you know, probably 500 acres of grain in the ground with no market for it. And that's when I, you know, and I was young and stupid, I guess, at that time and didn't know that it was supposed to be hard. So, so I figured, hey, we've got to be able to sell this. Some, somebody was buying it, you know, um, at Fred Meyer's. Somebody must have cared. Maybe weren't selling as much as they could sell on their shelf space if, as if it was cheaper and conventional, but somebody did buy it. So we have to find those people. So I started going around to the mostly health food stores and food buying you know, food co-ops kind of a thing. At that time, there were quite a lot more of them than there are now. That was before Whole Foods and some of those kind of messed up the market. And, and I kept getting the answer, oh yeah, I'll— we'll take 5 bags or 3 bags or 6 bags. And I'm like thinking, Well, I've got about a million pounds. How's that? How's that play?

Gap. There's a big gap between a million pounds and 5 bags. Oh no.

So I, so instead of saying no, I said, okay, can we do it every other week? And then I did these little, I did this little route here in the Northwest and just in my pickup truck, you know, just in the pickup. And I would deliver one week, I'd go like Eastern Washington, Seattle, and back. And the next week, like Bend, Eugene, Portland, and back. And, and started delivering to those. So that's kind of how Azure got started. And then I realized, well, they don't want grain, they mostly want flour. So I went and I hired a custom mill up in Yakima area. To grind the flour for me. So then I had grain, wheat, rye flour, pastry wheat, hard red wheat, rye. I think those were like 3 grains and the flours for those 3 grains. I started with like 6 skews, right? And that's, that's how we got started.

That's an interesting beginning, but you know, there are many people who have made a beginning but then have never grown into what Azure is today. So that's— you've shared the beginning seed, but there's still a long pathway from there to where you are today. Just how many SKUs do you have today?

About 12,000.

There's a bit of a gap between those two. What happened in the gap?

Well, you know, um, I'm a little bit dense, but when I was out delivering, I was like in Eastern Washington and stuff, and I started having people, you know, like friends or friends of friends or whatever, they kept asking me, you know, you're going to be in Portland, can you, can you pick me up some nuts or some spices or something at— in Portland when you're there and bring it next time? And so I kept doing that as a favor. And after it happened 8 or 10 times, I suddenly had this, you know what, there is a gap in the marketplace here, not only for our products but for products in general, because, you know, finding those kinds of products in Eastern Washington or healthy you know, or even natural whole food type products. Can you buy just whole raw almonds in Eastern Washington? It's like, probably not. I mean, you can now because we're there, but you know, at that time, so I figured, hey, you know, and I know these people, so I, you know, and I had attended because dad had been organic. I'd been attending like all the Oregon Tilth meetings and things like that. So I knew a lot of people, knew a lot of farmers and stuff, even though these are not things that we could raise. Um, I knew people that raised those things, and so I would call them up and say, hey, you know, I don't need very many, but would you sell me like, you know, 1,000 pounds of almonds, or, you know, a couple thousand pounds of lentils, or whatever it was. And mostly they were happy to do that because, I mean, I was pretty small then, didn't, you know. So I just basically started in a bedroom in the house. I cleaned out a, cleaned out a bedroom and a little room off the garage, and that was my first, first warehouse of— and then, and then we broke those down. So from the very beginning, I started doing breakdown. So take the 50-pound box of almonds that the grower I knew, you know, that was either organic or, you know, no spray, or, you know, one step better into, you know, what we know today as regenerative agriculture. But then that term wasn't used all that often. And then, you know, and then I would break those down and I'd put them in— first, I guess, put them in a poly bag and put a little label on the outside.

So into what that has grown into today, you have given us some context for the, the scope of your distribution, and I'm, I'm really intrigued. Why did you choose to go the pathway of this, this regional, or this very widespread distribution network instead of going through the mainstream supply chain channels?

Well, that was, uh, that was something that I learned very early, is that mainstream supply— so if you're into distribution, especially in the natural channels, distribution is exceedingly expensive, uh, to get into. And then you have no guarantees, nor do any of the distributors have any ethics to speak of? So first of all, to get, you know, to get one SKU into national distribution and into the multiple store channels, just paying for distribution, advertising in the distribution channels, the free fill for every store, Everything, you know, slotting fees in some cases on the high-volume stores, you're going to be close to, in today's money, about $500,000 into it before you make your first dime. And it seemed absolutely untenable and unreasonable. And so I was already delivering And I thought, man, if we can just deliver a little bit further, there is no reason that we have to use mainstream distribu— distribution. And so when that was one of, and that's what's really near and dear to my heart because of the health challenges that I had early. I know how important it is, especially for folks with families. To eat well. And because we're farmers, I know how important it is to find a market for your product. So if you're a farmer that cares about the quality of the food that you produce, or if you're a consumer that cares about the quality of food that your family consumes, that's the connection that has to be made. Nobody was making it. There was nobody doing that. Oh, there's mainstream distribution, there's the health food stores, but nobody was really paying attention to the source and to the consumer. So, I mean, you know, and come, you know, the late '90s, we ended up with the organic label, but the organic label, you know, and nothing against the organic label, it's a good label. But it doesn't tell you what is in your food. It only tells you what's not in your food.

Right, exactly.

You know, and what's not in your food is important. You know, I, I'm not a big fan of having glyphosate-soaked, you know, grains. And at least organic tells you that they didn't desiccate with glyphosate, but it doesn't really tell you what, how it was raised and whether, that farmer cares about the soil. And that's what— that's the connection that really needs to be made, the entire thing.

So when you think about the connection that you're making to— from all the way from the growers to the consumers, you know, there's this, this supposed paradoxical conversation where on one hand, people who who are not in favor of regenerative agriculture or organic agriculture would like to suggest that, well, if we produce food in this manner, it's going to be more expensive. It's going to cost more because— and production is going to go down. We can feed fewer people. And we need to keep— and along with that conversation is that we need to keep the price of and the cost of food down to consumers. So how can we produce food that is higher quality and also keep it lower cost to consumers? There's only about half a dozen different things wrong with that framing and with that argument, which I think you and I probably have similar perspectives on. But I suppose I have two questions. First is I'd like to get your reflection on that story, that narrative, which I'm sure you've heard a thousand times. Oh yeah. But also secondly, how does the model of Azure Standard and the work that you were doing, how does that, how is that model different in both pricing to the consumer and rewarding farmers? How does, how does that compare with the mainstream model?

Okay, well, on the, on the first part, as far as, you know, You know, will we have famine? Will food prices go up substantially if we go to a more regenerative agriculture model? On some items, food prices, you know, are artificially low. We have subsidized food prices here in America. And I don't know that we're going to get subsidized regenerative agriculture anytime soon. So when we're actually getting regenerative, healthy agriculture, it's the subsidies are going away. As far as volume goes, in our experience, and we've, you know, you know, dad started farming, we had about 1,800 acres at the time. We now farm a little over 5,000 acres. So I've transitioned a fair amount of land. From conventional to organic regenerative, um, concepts. I have yet to reduce yields more than for a year or two during the transition period. Our yields compare with any of the conventional neighbors. We are not losing yield. Is it more expensive? Yeah, in some cases there's more labor. Our fertilizer mix, I mean, we're putting on probably this year a half a million pounds of various kinds of inputs just on our spring. You know, so that was, you know, it takes, it's, it takes more, you know, more labor, more work. So it is going to cost a little bit more from the labor perspective. But I will tell you one thing. It's worth every penny of it, even if you're paying a little bit more for your food. Now, what the Azure model— what we've been able to do is, because for the most part we control the entire chain, in the case of the stuff we grow, we grow it. I don't grow anything for the commodities market. Well, I do sell a few cherries because we just have so many right now, but other than that, I don't grow anything for the commodities market. And even the cherries, we're putting in an IQF line right now, hopefully be done by cherry harvest. But the— we control from the farm Then we control the processing. So you put, we put in our own, if it's fruit, we put on our own packing lines. We put, we're right now we're putting an IQF in for the culls and stuff so we can pit cherries and, you know, dice pears and peaches and stuff, freeze them and then have, you know, have a direct market frozen afterwards. If it's the grain, we put in our own flour mill. Then we put in our own packaging, we put in our own mixing so we can make the pancake mixes and all the different, you know, mixes that you would make with, with the grain and the flour. So, you know, we control every aspect. Now, if you go from the commodities price to the, to the finished goods price, for that, you know, 2-pound bag of pancake mix, there is still plenty of margin in, in here. We can do that. But if you're going to go from, you know, so if you think about it from standard commodities, you're selling to an elevator or something, you know, even on the organic world, let's say you're selling to a broker. So then the broker, they take their 5 to 10%, then the broker sells to the mill, um, or maybe they sell to another broker. But either way, let's just say we only have one broker in there and they sell directly to a mill. Then the mill buys it, they need to mark it up and they need their processing out of it, and then they put it in a big you know, super sack or whatever they're doing. Then they send it off to the mixing plant, so they get their margin. Now you get another piece of packaging and you get freight. Now it goes to the mixing plant. The mixing plant, you know, so they mix it and make the pancake mix. Then they put it in, you know, their packaging, and maybe they're vertically integrated enough that they can put it in a small bag. Maybe they're not, you know, you could, could go either way on that. Then you have— but they don't— the mixing plant, they don't have their own brand. So now you have somebody else, some other third party that does a private label brand. So then you have the margin there, you've got the, the, the third party. Now the third party, they didn't do anything except put their name on the product and market the product. So they're the marketing agency. So it's Aunt Jemima's, or whatever the pancake mix might be, and they're taking, you know, 30-35% to do the, the marketing and the packaging. They're not even doing the package, they're just creating the graphics for the package. Then, you know, so then it goes into distribution. The distributor, um, you know, they're going to take 25%, uh, to distribute it, maybe, maybe a little more depending on how heavy it, you know, what kind of product it is. Then it's going to be sold typically by another broker, a retail broker, so that's another, you know, 5 to 10%. Then you have your retail store And that's at 33%. Typically, that's minimum, could be up to 40% margin. You add all that up from the raw ingredients that the farm— and that's even after it's ground into flour. But if you just take the raw ingredients to get it to retail, you're doing 4 times the price. Just to break even. That's the real world that we live in today, in today's modern specialty foods world here. If we can cut all of that out, we can reduce the price. So I can pay the grower more. So we have a higher cost of goods. Because, you know, we would only do that because it's better product. But, you know, we, we're doing that because they're producing a premium product and we can still reduce the cost to the consumer by 50% over what it would be had we paid that higher price. So we can stay almost competitive with that market. I'm not saying we can always be 100% competitive if we're paying the premium for the ingredients and the organic certification. I mean, just organic in itself. When I started selling organics originally on the conventional market in grain, we were very happy to get 1.5 of conventional price for organic. So if the, you know, Chicago Board of Trade said wheat was $4 a bushel, we were very happy to get $6 a bushel. Today, You know, if the Chicago Board of Trade is saying, and it really isn't even so connected anymore, but they're saying wheat's worth $5 a bushel right now, or whatever it is, I don't keep up with it that well anymore. But right, right now, the, the cost of, of organic, just organic, no regenerative or anything, if you were just to go for a good quality organic grain, you're going to be paying at least $20 a bushel. That's the marketplace has already changed that much over the course of the last 25 years or so. The demand for high-quality food there, it has struck a chord in America, and there will, you know, a lot of consumers are willing to pay more. But, you know, with the Azure model, we're normally able to keep the price very competitive. You can't, you know, can't say they can't find the cheapest garbagey stuff they could possibly find and we're the same price. We're not, but we're going to be way better priced than anything of the same value. And I'm not going to sell the crap because I can't do that in good ethics.

So in, in essence, if I'm following you correctly, what you're describing is that You described this conventional model where you have multiple processors that are specialized, that are doing one thing. And by moving all of those various processes in-house and managing them internally, then you are, you're doing a couple of things. One is you're reducing the margin overhead required per each step, and you're reducing the number of brokers in, in the process. So you're essentially reducing the margin requirements because you have one party instead of 10 parties all participating.

That's right. Yeah. Or, you know, if I'm buying from another farmer that, you know, we still for the most part are going to do the processing or the packaging. So because we've created our own packaging and processing facilities, then, you know, if I'm buying from a farmer, you know, we can buy his, you know, and I don't process, I don't have all processing. I mean, for instance, if I'm going to buy millet, I got to get somebody to haul it. I don't have a millet hauler. So some of the edge case stuff, I don't have a buckwheat hauler. I don't, you know, some of these more specialty things. But if we're gonna, but most of the stuff we do, we have, you know, we've got all the cleaners and the color sorters and all of that kind of stuff in the grain world and the, you know, and then we also have it. And sometimes not only do we just take it to the flour, but then, you know, recently we just put a sourdough bakery in as well. So now you might be able to actually buy the loaves of frozen, you know, organic regenerative sourdough bread. All ready to go.

So I'm sure you've encountered lots of headwinds and missteps in this process as you've developed Azure over the last several decades. But it is intriguing to me, you mentioned earlier on that the food cooperative model has— the number of those has greatly reduced over the years. And I wonder how much of that is a reflection of social, societal breakdown, perhaps a lack of collaboration and people no longer working together quite in the same way as they might have historically. But it is, I suppose, the larger question that I'm trying to get to is Why has Azure survived when others have not or have been less successful? And what is the, what is the long, what is the opportunity today for other people who want to get into selling directly to consumers? What, what does the landscape look like at the moment?

Well, as far as I am In my opinion, there has never been a time of more opportunity than there is right now. All right.

Tell us about that.

Well, right now, particularly since COVID I think the last 5 years or so, since almost, you know, the majority of Americans realize that the medical establishment and the government lied to them about COVID Nobody, very few people you would ever ask say, oh, the government was absolutely perfectly honest to me. Everything they said was absolutely sterling and the medical establishment did an excellent job handling COVID, right? Not very many people are going to say that. Um, and then you have players like Kennedy that's, that have come out and said there's things about this. And now there's a bunch of other doctors and stuff getting on the bandwagon saying it matters what you eat. You know, highly processed food can cause problems. Uh, you know, our children are not as healthy as they used to be. Uh, all of these things. Because of our highly processed food, we shouldn't, we shouldn't put these chemicals in our food. And then the next step is what about agricultural chemicals? So if we can tell that story to the consumers, minds are open. Even 10 years ago, those might not— near as many minds were open to the concept that the food that we put in our bodies matters, and it matters substantially towards our health and towards the health of our families and the health of the planet. Those are all issues that now are almost mainstream. They're almost front and center. Furthermore, there are not near enough organic producers compared to the demand in the market. We know that somewhere around 60% of the organic food that is consumed in America, and I'm just using the organic because we actually have statistics for that. Most of the regenerative, the statistics are rather scarce. It's nebulous. Yeah, it's hard. But on the organic side, 60% of the organic food that's consumed in America is imported. It's coming from other parts of the, of the world because, and, you know, and you can ask any, almost any process. Now there's a few players like, you know, Costco and Walmart and stuff that dabble in the organic food space and they just import because that's what they do. But even in the space of—

Are they importing for reasons of lowest cost?

Well, reasons of lowest cost and quick volume, you know, Walmart. I mean, that's what they do. They're, they're an import company. That's, that's their entire model. That's how they became a wealthy company is through cheap imports and cheap junk to, to the American. And they do that to Americans. They do the same thing in the organic food space. Yeah. It, And it probably is organic, probably has the paperwork, probably doesn't have the chemicals on it, but it came from, you know, it came from China or it came from Brazil or Argentina or Peru or someplace. They're not Turkey, maybe. They're not really. But we are not able to keep up even for our supply here at Azure. I do everything in my power to do domestic production of high quality, of high quality products. But when you get into things like frozen fruits and vegetables, for, you know, just as one example, we should totally be able to raise every bit of that here. We're having to pull frozen, you know, raspberries and things like that from Chile because the domestic, there's just not enough domestic product. Peaches from Turkey, there, there's just not enough organic peaches being raised. The, the few that are raised go, you know, fresh market. There's very few processors being raised in, in the US. And a lot of people think it's hard to raise organic peaches. I don't know. I mean, it, We've done it, but it, you know, I don't— can't quite do everything.

Well, if they think it's difficult to raise organic peaches, then that seems to be an appropriate plug to, uh, to suggest they need to start working with AEA, and then they can do it.

There you go.

Well, actually, David, you were, you were speaking— I mean, you have a, you have a large audience of farmers here listening. What are the significant products that you do not find adequate supply of in the United States that you'd love to purchase more of domestically?

Well, those are, those are a couple of them. You know, fruits are, and, and again, I don't, we're actually working on IQF line right now to be able to do some of that ourselves on the processing side. But up to this point, I haven't been able to process that product. So we need them already frozen, but we sell a lot of, you know, there's a huge demand for frozen fruits and vegetables that are fully organic and regenerative. Even just organic is a big step in the right direction. Beans is another thing that's really hard. It seems like a wonderful legume. Add-on for any organic farmer. But lentils, beans of various sorts, always right on the edge of having enough supply. You know, we're almost— it feels like the price of, you know, of lentils is almost doubled in the last few years just because, and a lot of them are being imported now.

Yep. And give us, give us some context. I'm familiar with your operation to a degree. I know it's constantly growing, but give us some context for the, for the scale and the volume that you're talking about.

Of like those kinds of commodities?

Yeah, the various commodities and also the fruit crops that you spoke about.

Well, if I were, you know, if it's organic blueberries, you know, here at Azure right now we're selling probably about, a semi-load a week. So I'm going to say 50 semi-loads a year. Bigger, you know, you can get about 40,000 pounds in a semi on blueberries. Peaches would probably be half of that. Don't sell quite as fast as blueberries. Raspberries, we can never get enough. But we'd sell probably close to the same as blueberry. We don't sell as many as blueberries, but mostly just because we can't get them. Them. Uh, raspberries— there is such a deficit in the market right now. Um, it's like they don't even— they can't even raise enough in Chile to cover the demand.

Wow. I think, I think you and I are going to be having further conversations offline about this because I know the people who have the capacity and the capability of growing.

Well, I mean, it would be it would be great. Again, you know, they, they got, there is a processing step in there.

Yeah.

You gotta get them washed and frozen. But yeah, no, the, the raspberry thing, blackberries also can hardly get organic blackberries. Should be something easy to grow. And again, we're not, you know, we're not in the ideal location to grow the, you know, berries here, but we grow really good fruit. So we grow a lot of cherries and apples and pears and things like that here. Apricots, we've done some peaches. In fact, we just, just putting about 50 more acres of peaches in here this past year, just because the demand is there. But you know, we're not going to be able to keep up with ourselves, even putting in 50 acres a year. There's no way.

What have you— you mentioned the transition that you observed over COVID and post-COVID. How have buying patterns and behaviors changed? You have a unique perspective and visibility into that that many growers do not.

Well, one of the, one of the big things that has happened is that Americans learn to cook at home again. And I'm not saying everybody, but a huge number of Americans had to cook at home because they couldn't go to restaurants, and they decided they liked it. They enjoyed eating home-cooked meals. So now And I'm not saying there's not still a huge market for prepared foods. There is. But the, the market for retail-ready ingredients has just skyrocketed. And a— somebody who's eating at a restaurant is never getting the highest quality food, almost never. There may be one or two exceptions to that rule. But restaurants, you know, their whole model is to buy cheap and sell expensive. So they buy the cheapest food that they can possibly get. I mean, it's just what their CFO tells them to do. So Cisco pulls up with the cheapest junk they can possibly get and the most semi-prepared, so they have the least amount of labor involved. And so You're not going to get good organic food at a restaurant, but somebody who's cooking at home, now they're going to look at that package and they're going to say, oh, well, it's 50 cents more for the organic flour versus the conventional flour. I'll just get the organic. I'm willing to pay an extra 50 cents. They're going to pick the organic 9 times out of 10 if the price isn't all that terribly different. Because the restaurant never will, but the, the home consumer, they will because they're, they're feeding it to their own family. If they think it's super expensive, and I, you know, I disagree. I don't think organic regenerative food is ever too expensive. You know, if you compare it to a few doctor bills, it looks cheaper and cheaper and cheaper all the time, no matter how much you pay for it.

Well, not only that, but there is this intangible characteristic of satiation, of how filling is a certain food. I've had the experience numerous times where I get, let's say, a poor quality meat versus a good quality meat, and you're only able to eat a third as much. Or fruit, you're only able to eat a fraction, and you feel full, you feel filled. You don't desire anymore. And, um, that aside from all the differences that it has to your metabolism and health, I've come to the realization that you can't accurately do a direct pound-for-pound comparison and assume that they're going to nourish you in the same way.

They don't, not even close. And you— I actually saw you do the most interesting teaching on that, and you were talking about that when it came to So you, this has been quite a few years ago, you did a teaching on this plant pyramid, right? The, was sugars, lipids, proteins, essential oils, is that right?

Yeah, yeah, the phenolic compounds, yeah.

Yeah, and you were teaching about how that, you know, how the insects only, only eat simple sugars, for instance. And certain insects kind of go away if your sugars are complex. Now, if we teach that same exact concept on our side of the fence, we teach a very, very similar concept to that on what it does in our bodies. Do— when we're actually getting a regeneratively raised food, we're getting a complex sugar that is going to power our body for a long period of time. We're getting a complete protein chain that is going to help build muscles and empower our stamina. Whereas if we're getting a one that's, you know, a plant that's just been pushed by anhydrous ammonia, ammonia, it has a simple chain, which is what you teach on the other side of the fence as far as for the grower. And we teach the same basic concept. I don't use the same words, but the same concept. When you're by— when you're using that as nutrients for your body, that's the why you feel full, because you've got a complex sugar or a complete amino acid chain or lipids that were actually fully developed instead of half-developed ones. And your body needs more protein. It's got plenty of protein 'cause you ate wheat that was 14% protein, but it only had 3 amino acids in it instead of 12. There's your—

Must have been 15 years or more ago that I gave that presentation in your garage.

Well, I still remember it. Yeah. No, it's very—

um, one of the questions that I wanted to get into, the discussions I wanted to get into with you, is around, uh, marketing and communications. You have, you have, you have the perspective of having visibility into a large customer base And I'm curious about how you market Azure Standard, how you market various products, how you're thinking about that has evolved over the years. What I find today is historically the word farming was associated with growing things. If you wanted to be a successful farmer, you had to be good at growing either crops or livestock. But increasingly, if you want to be successful, particularly financially successful and viable as an operation, then perhaps the most valuable skill set is not growing things. That's almost like a fundamental prerequisite. And the next step that is really necessary is you have to be able to sell. You have to be able to market your product. Otherwise, you're just— you're on a commoditized pathway to doom. Perhaps it's some dire language, but it's the reality that many people are facing today. And yet marketing is something that I enjoy, but I find that many people don't. And I'm puzzled by that because I do enjoy it. I'd like to get your perspective.

Well, I have found that the marketing part is actually your most important. Part. You know, I often— you know, I've often— you know, there used to be a saying, you know, build a better mousetrap and people will beat a path to your door. That's completely not true. You can build the best mousetrap in the entire world and nobody will come to the door because they don't know about it. And there are competing voices everywhere saying we have the best mousetrap, even if they're not telling the truth. But they may not even know about your mousetrap either. It's the same. It's exactly true, just the same with your— the food that you raise, whether you're raising, you know, fruit or beef or whatever it is. If your customer doesn't know about you having the very best of the best then how are, how are they going to be willing to pay you extra money for it? They don't know why they should. So marketing is basically just being able to tell people about what they do and why they're producing a superior product and why I should buy it. It's that simple. There really isn't any— it's not any miracles. I mean, you can have terrible marketing and, you know, and tell lies and stuff like that, but it— that's going to be very short-lived. Nobody's going to buy from a company that doesn't deliver the quality and the product that they say that they're growing and they're going to deliver. So you have, you have to just tell the absolute truth about what it is that you're doing. But regenerative farmers, you guys have a product that is so much better than what anybody can get in mainstream America's grocery stores that it's easy to tell that story. Tell them why you have a complete protein in your beef. Tell them why you have complex polysaccharides in your fruit. Tell them what— why it makes a difference in their health. And that's when it becomes worth more, because they know that it's, you know, this has complex polysaccharides that are going to allow my children to not have to you know, eat candy bars when they're trying to, you know, run their— do their basketball game because they have slow-release sugar throughout the day or throughout their, you know, from their meals because they ate fruit that was not just pure fructose. These are— that's— and once they experience that a little bit, they'll never— they'll never go back. This is, this is your story.

That's, that's the— you preempted the question I was going to go to, David, which is what does your customer retention look like?

Our customer retention for the most part is good. We do have, we do have quite a few people that try us like once and drop off. I think mostly because of our delivery model. It's, you know, hey, we're not real consistent with our times of delivery, and they gotta work and all the stuff that's going out. So we're working on a few things to change that. We just launched what we call Drop to Home. So it's kind of a program, a little bit like DoorDash from the drop, where somebody, you know, volunteers or whatever that for an extra $10 or whatever, they'll take it to your house from the drop. We're also starting to look at some, some kind of franchise retail models. We have 3 stores currently that we're using as experiments, experiments. And so someday I would envision for what we're really trying to sell is the brand. And our brand has a certain guarantee. First of all, you're not gonna get any highly refined stuff. You know, there's no, you're not gonna have to worry that there's preservatives or food coloring or MSG or anything. There's not gonna be any genetically modified anything in it. You know, we have a long list of things that you will never find in any product you get at Azure. And unlike every other retailer, you know, Whole Foods, after they sold to Amazon, their, their standards are going down, down, down. Now you can basically get specialized Pepsi in, in Whole Foods, but it's like we're doing exactly the opposite. We're continuing to push our standards higher and higher and higher. You know, we did, we used to sell some like conventional beans and stuff and we quit. Because we actually found traces of glyphosates on some of those feeds. And, you know, our brand guarantee is that we pay attention to these kinds of things. And so we now sell only different, you know, in the, like, beans, we only sell organic now because we don't want to you know, we don't want to, no matter how many times we test it, we don't ever want to find it, you know, glyphosates or any of the other ones as well. I just use that as an example because it's, people understand, know what that is usually. But there's a, there's some other ones that are just as bad, reasonably enough. But we don't, that's our brand. So someday I want to be able to say, hey, if it's an Azure product, if it's an Azure brand, you can buy it through our drop. You can get it delivered to your home. We will have stores all over the country that are Azure partner stores, and we'll even have, you know, you can even get it delivered from the store to your home if you need it instantly. We'll hopefully have all of that, but that's still, you know, that's still vision. Right now, we do have drops all over the country. and we have the direct, the drop to home in, oh, I don't know, about 21 different areas now or so.

David, there's many directions I could take this conversation in, and there's, I think there's so many perspectives you would have to offer that many of our listeners would find quite valuable. But I'll perhaps ask the question that comes is top of mind for me is, and you've, you've touched on a few aspects of this, but Where do you see— if you look at the entire agricultural landscape, and you look at the consumer landscape, which you have a close perspective on, where do you see the biggest opportunity? Where's the opportunity that is just languishing?

As far as agriculture, the opportunities are endless. I was flying over last spring. I flew over the Midwest, you know, and it's one big yellow pit. The richest farm ground in the world was one big yellow pit. Looked like, uh, the whole thing had been sprayed, almost. One little green patch here and there, but 90-plus percent of it— I guess they were getting it ready for their no- no-till GMO corn, I'm assuming. And yet the market doesn't even want that stuff. Farmers are stuck, unfortunately. Many— I was talking to a farmer. I, I go to quite a few of the homesteading conferences, and I was talking to a farmer at one of the homesteading conferences, and his wife is a big advocate of like homesteading. And, you know, she's got, uh, he gave her like 30 acres to raise their family cow and garden on and all that. And she's— it's like changed their lives as a family. But yet his 1,000 acres is still GMO corn and soybeans because he doesn't know what else to do, and it's the only thing he can get an offer. We need to get completely out of that cycle. And I think it can be— there, there is no reason that we need to be stuck in that cycle of U-rays. And he said, you know, he was saying, and I, I just hate it because I know my corn goes to the high fructose corn syrup plant down the road and it makes something that destroys the health of the people instead of enhances But how do I stop? So learning how to stop, and I think that's where you play a huge role, because first of all, he doesn't know how to stop from— how do I get this soil that's been raising GMO corn and soybeans for 50 years to raise anything else? How do I change it? And then if he were to be able to change, what do I grow and how do I, you know, how am I going to make ends meet? The elevator only takes corn and soybeans down here. What do I have to do to raise something else? Now there's no deficit of demand for feed grains either. I mean, the, the demand right now for meat that is healthy, or even not even organic, just grass-fed, or is through the roof. You got all these people realize, you know, meat used to have kind of a bad name. Now all of a sudden there's people saying, oh, eat a carnivore diet, eat lots of meat. But it does not work if at all if they're eating meat that's just a factory, you know, factory chickens that are down there from Tyson. It doesn't work. So, and they're learning that. So the demand for organic feed grades and meat is astronomical. I just feel like there's a tie that needs to be made. There's, you know, there's some, you know, you and your team teaching them how to actually grow something different. Then there's how do you grow the, you know, the chickens, or, you know, fill in the blank. I'm just saying chickens because that's one of the most common meats. And then to take those, you know, organic pasture-raised chickens or pasture-fed chickens and take that, then you have the processing and then you have the marketing on that. There's no lack of demand. The demand is, it's through the roof because people realize that meat can be healthy if you have good meat.

You know, it's interesting, I have this, um, I'm having this conversation with you and I have parallel conversations that sound very similar with dozens of people who are in similar positions that you are. That have some perspective on consumer behavior and they see where the supply chains are falling short. And then I have these other conversations with growers who I think it's sometimes worth asking the question about how serious are they about really desiring a different opportunity because all they can see are the obstacles. And they don't see the consumer demand. They don't see— there is this significant disconnect between the opportunity that exists and the opportunity that growers perceive, perhaps for a wide variety of reasons. Perhaps they believe they lack the skill set or the capability or the infrastructure or the list of plausible excuses can become very long. And I'm not— I mean, some of those reasons are very real. I'm not— I don't want to be dismissive of that. But also, if we are— if people invested as much energy in trying to resolve those challenges as they invested in justifying the challenges, we would be in a very different space quite rapidly.

Well, yeah, I agree. I couldn't agree more. And you don't have to start all in. I mean, yes, I mean, There, you know, there was a time when, uh, in our history before I really started delivering to the stores, but my mom used to actually grind wheat in her kitchen flour mill and sell it to neighbors and the local food co-op, you know, in a little— I think it was a Magic Mill or something, a little box mill that ground about I don't know, 10, 10 or 15 pounds an hour. And she'd just keep that going all the time and keep dumping that and package it up in little 5-pound bags and sell it, um, at the local food co-op. That, you know, those kinds of opportunities, farmers markets, things like that, should— shouldn't be dismissed. And I know, you know, when I actually thought about it, you know, I mentioned I had, you know, close to a million pounds of grain and was getting orders for you know, 5 sacks at a time, 250 pounds. If you do the math, that should have been impossible. But it wasn't. We sold through all of that and much, much more. And we sell millions of pounds every year now. In fact, I don't even hardly even raise wheat anymore because I can find other people to raise wheat. You know, now we raise mostly ancient grains because the demand is so high for that. We raise spelt and einkorn corn and corazon and all these, you know, other grains because they're a little harder to raise. And, you know, we've been doing it a long time. Um, so the, the demand, um, the demand is there, but we should not despise small beginnings. We should not despise getting our feet wet. Because we don't know how doesn't mean we can't learn how. And the best way to learn is by doing. And if you have to mitigate your risk and just sell, you know, and maybe, you know, you know, my dad wasn't that guy. He jumped in with both feet when he decided he was never going to use chemicals on our farm again. He never did. That was the last time. 1973 was the last time any chemical ever hit our soil. But not everybody operates that way. They're, you know, hey, take 20 acres of your farm and transition it to regenerative agriculture. Grow something that you see the demand for in your area. I mean, again, I mean, I can, I can give you a list of things I would buy from you. That's fine and dandy. But if you're going to do a farmer's market, what is, what are people not, don't have at the farmer's market much? You know, if you're in the Midwest, probably lots of people have beef and corn and soybeans, I guess. But how many people have, how many people have vegetables? I mean, you know, who does, who does the rhubarb in the spring? Who does the, you know, think up, you know, thinking outside of the box a little bit about what the demand is for. And then, and then you can kind of mess with that, you know, regenerative, the regenerative parcel. And then it's the way to learn, you know, try it, you know. There's so many, so many ways to, to learn. And, you know, and sometimes, you know, sometimes it's not as hard as we think. Uh, yes, if we have huge fields and there's huge economic risk, that's one thing. But if we're just experimenting with it, if we just have an acre or two of something, even if we lose something If we're getting 5 times as much for everything else, does it really matter if we lost something? Then we learned a valuable lesson, and we won't— either we won't grow that thing again, or we'll learn how to take care of it differently. Um, there, you know, I can't tell you how many things that we've experimented with over the years. I've, I've tried almost everything, I feel like, at least that grows in temperate climates. And we've settled on certain things that— yeah, but we're still experimenting with things every year. I mean, I've got— last year, for the— we grew carrots for the very first time. Never grown carrots before, commercial, in Dufour, Oregon.

That sounds like an adventure.

It's— it was a lot of fun, actually. They, uh, and they taste wonderful. We had the best tasting carrots around, but, but it's— but nobody grows carrots around here, right? It's just not a thing, but they grow just fine.

Yeah. David, this has been such a wonderful opera, a wonderful conversation. I've really enjoyed it, and I know that you and I could visit for hours, but what is what is the one thing that you would like to remind people of or just to impress upon them?

The farmer is the guardian of the nation's health. And if we think of ourselves as farmers in that light, it changes the way that we farm and it changes the way that we think. And that was really the key for me. Are we really acting like the guardian of the nation's health? Are we just acting like some other businessman that is going to try to see what we're, you know, see how much we can make? We, and also, you know, there's a saying, and I did not make this up. This is from, I believe, Dave Ramsey. And the economic side. But, you know, we've been talking a little bit about the economics of farming. And he said, he says, the more people that you can serve, that if your, if your heart is into service, the more people you serve, the more people will give you rewards of pieces of paper with presidents' heads on them. So the— as we serve, if our heart's to serve, the reward comes. We become economically viable by serving more people at a deeper level, and that's the basis of true legitimate economics. And I couldn't agree with that more.

The modern-day business mogul way of saying that is if you want to become a billionaire, then you solve a billion-person problem. But right, I like your description much better. Thank you, David. Thank you for being here, and thank you for all the work that you're doing.

Well, thank you, and thanks for the work that you're doing. And I can't tell you how many farmers I have referred to you over the the past couple of years.

Oh, well, thank you.

The team at AEA and I are dedicated to bringing this show to you because we believe that knowledge and information is the foundation of successful regenerative systems. At AEA, we believe that growing better quality food and making more money from your crops is possible, and since 2006, we've worked with leading professional growers to help them do just that. At AEA, we don't guess. We test. We analyze. And we provide recommendations based on scientific data, knowledge, and experience. We've developed products that are uniquely positioned to help growers make more money with regenerative agriculture. If you are a professional grower who believes in testing instead of guessing, someone who believes in a better, more regenerative way to grow, visit advancingecoag.com and contact us to see if AEA is right for you.