What’s the question you are most frequently asked when trying to set up a new sustainability initiative? I bet "how much will it cost?" is a leading contender. It’s no different for farmers — the CEOs of businesses with often slim margins.
That’s why the challenge of financing the adoption of regenerative agricultural practices comes up in almost every conversation I have about this topic. Naturally, I was interested in the results of a new study that the Soil Health Institute published Friday assessing the economics of cover cropping and reduced tillage. Get ready for some good news.
Cover crops and reduced tillage benefit farmers
The researchers interviewed 100 U.S. crop farmers across nine states and in a variety of climates who are long-term adopters of cover crops and reduced tillage. To understand how these practices affect profitability, yield and other farm outcomes, the performance of such fields was compared to those of conventionally managed ones on the same farm and neighboring farms or to county averages.
"I was surprised by the degree of profitability we saw and am extremely excited about this new information," said Wayne Honeycutt, president and CEO of the Soil Health Institute.
Indeed, the numbers are encouraging: Soil health practices increased net income for 85 percent of farmers growing corn and 88 percent growing soybean. On average, farmers reported increased earnings of $51.60 per acre for corn and $44.89 per acre for soybean.
A set of cost savings and increased revenue account for this change. On the one hand, farmers spend less on fertilizers, pesticides, fuel, labor and equipment. These savings greatly outweigh increased seed expenses. As 67 percent of farmers reported increased yields after adopting the practices, they can also count on higher incomes.
Crucial insights on yields and profitability
Profitability and yields are two of the most important characteristics when assessing regenerative farming practices such as cover crops and reduced tillage. Practices that are profitable will be more popular with farmers and food companies alike and thus easier to scale.
As the on-farm profitability of regenerative agriculture has been largely uncertain to date, an entire industry around carbon sequestration and other ecosystem service payments has been developing. Its aim is to bring additional financial incentives to farmers who adopt better practices. But these financial instruments often require complex and costly processes to measure and verify environmental outcomes while offering payments that are orders of magnitudes smaller than the net earnings identified in this study.
Carbon market leaders such as Nori and Indigo have been paying about $15 per ton of sequestered carbon dioxide. On-farm sequestration rates range between 0.2 to 2 credits per year, generating earnings between $3 and $30 per acre. The much larger direct economic benefits of soil health practices outlined above will likely get farmers a lot more interested in regenerative agriculture than the participation in complicated carbon markets. (One doesn’t exclude the other, of course, but the direct benefits could get carbon market skeptics more excited about regenerative agriculture).
100% of participants observed improvements in water quality, 97% experienced superior crop resilience to extreme weather and 83% reduced their fertilizer needs.
Maintaining or increasing yields on existing fields is critical to avoiding further agricultural expansion that involves converting native ecosystems such as forests or grasslands. This triggers catastrophic consequences for greenhouse gas emissions, biodiversity and livelihoods for indigenous communities. Other studies evaluating the impact of regenerative practices on yields have found mixed evidence which resulted in a heated discussion last year regarding the deployment of regenerative agriculture for climate mitigation. While the results of this study by no means provide a final assessment on yields under regenerative practices, they are valuable and encouraging data points.
It is also worth noting that soil health is about much more than profitability and yield. The farmers who participated in this study point to an impressive range of additional benefits. For example, 100 percent of participants observed improvements in water quality, 97 percent experienced superior crop resilience to extreme weather and 83 percent reduced their fertilizer needs. These are all significant benefits for farmers, local communities and nature.
Next on the agenda: transition economics
While the study paints a hopeful picture for the long-term profitability of regenerative farms, it doesn’t address the challenge of farm transitions. How do income and yields perform when farmers switch from conventional to regenerative practices? Does this transition period require upfront investments? How long do transitions last and how can farmers be supported throughout? Recognizing the importance of transition economics for a larger-scale adoption of soil health practices, Honeycutt told me this topic was next on the institute’s research agenda.
