According to the US-based nonprofit organization, Carbon Cycle Institute, carbon farming is a “whole farm approach” to optimize via practices and the application of innovation and technology the sequestration (removal) of carbon from the atmosphere for long-term storage in microorganisms as well as plant and soil organic matter.
Such undertakings rely on the premise that the ability to improve the rate at which CO2 is removed from the atmosphere on working landscapes can both mitigate climate change, and increase the provision of important ecosystems services, including water, soil improvement, and even agricultural and crop yield.
Although there are some slight deviations in reported figures, agriculture and forestry practices are estimated to account for some 24-32 percent of global GHG emissions, and nearly 10 percent of carbon emissions in the US. With agriculture covering more than half of the Earth’s terrestrial surface, it makes sense that paying farmers and producers to restore carbon-depleted soils has emerged as an alluring opportunity to employ a natural climate solution that has multiple benefits. This also includes helping nations meet their commitments under the Paris Climate Agreement to stabilize global warming below 2 degrees Celsius.
Thus, agriculture stands to be one of the only economic sectors with the potential to transform itself from a ‘net carbon emitter’ to a ‘net sink’ by employing practices broadly classified under the umbrella of “carbon farming.” Since climate scientists estimate that 200 billion tons of CO2 will need to be removed to halt and begin to reverse the effects of climate change, there is tremendous interest, (and millions of dollars being invested) in developing farming programs and innovative approaches, designed to capture more CO2 in the fields.
How can Soils Meet the Carbon Sequestration Challenge?
In order for agricultural lands to become carbon sinks and sequester greater amounts of CO2, there is universal agreement that we will need to change the way we grow food. In some instances, drastically, and sustainably.
Often approaches to carbon farming fall under the “regenerative agriculture” umbrella, which despite being rooted in Indigenous land wisdom and centuries-old growing practices across cultures, has no one true definition. The two are synonymous, notes the Carbon Cycle Institute, “when that term [regenerative] is explicitly rooted in an understanding of the underlying system dynamics and positive feedback processes that actually make a “regenerative” upward spiral of soil fertility and farm productivity possible.”
When that is feasible, regenerative approaches can improve watershed health and bolster soil health, and as is hoped, sequester carbon. Techniques include active soil management such as conservation tillage, which minimizes the need for plowing and thus reduces soil disturbance. It also includes crop management, such as rotating crops across agricultural landscapes to support soil microbe diversity, as well as the use of cover crops to reduce soil erosion.
In terms of science basics, plants produce energy by withdrawing carbon dioxide from the air, combining it with sunlight and water via photosynthesis, resulting in a process that embeds carbon via root systems into the soil where it can be sequestered for years if left undisturbed. The key is to employ practices that put organic matter back into the soil (more than what is taken out), effectively storing more water and drawing more carbon out of the atmosphere.
Emerging Carbon Farming Markets
According to a 2021 study from consulting firm McKinsey & Co., the market for carbon credits overall, including forestry and other carbon-capture projects, could reach $50 billion by 2030. An S&P Global study estimates that the food and beverage sector accounts for 57% of total potential demand for carbon credits in agricultural lands. It is hoped a robust carbon credit trading market system will create potential revenue streams for AG companies, with a shared portion of proceeds from the sale of credits earmarked for participating farmers in their value chains.
With rising costs of agricultural production, especially for small- and medium-sized farmholders and suppliers, participating in the market seems enticing. And certainly, there is both incentive, onramps, and even support when farmers are somewhat entrenched formally as suppliers for AG companies driving the markets. In other words, it behooves large companies looking to document carbon offsets across their own supply chains (referred to as carbon ‘insetting’), to bring their relational growers on board.
There are several carbon farming initiatives undertaken by individual companies that have garnered some attention in reporting, including some we have profiled through the lens of regenerative ag. Agriculture industry giants such as Cargill Inc., fertilizer producers Yara and Nutrien Ltd., big seed and chemical dealers Corteva Inc. and Bayer AG, and startups like Indigo Ag Inc., among others, are developing systems that aim to create a farming-driven carbon market. “The companies' ambitions stretch from the United States to Canada, Brazil, Europe and India,” company executives told Reuters in a published article in 2021.
Given differences across products, geographic scope of supply chains, corporate structure, priorities, dedicated resources, organizational buy-in, and cultural and institutional context of the countries in which their sourcing is procured, it is not surprising that companies engaging carbon farming have unique approaches and strategies. We highlight here three different company entrants in the carbon farming market to highlight just some of these variations.
Bayer Announces New Vision for Sustainable Agriculture
Bayer is considered an early leader in carbon farming with a regenerative focus with around 1.5 million acres enrolled in sustainable agriculture programs globally, mostly in the United States, in its first few years. Its program has been considered unique in that the company compensates growers for approaches like reducing tillage and planting cover crops (interventions) rather than paying them for tonnage of verified carbon they sequester. This was an incremental step in a long-term corporate strategy; it allowed farmers to implement changes in practice, and become more comfortable with smaller steps, while giving them the ability gauge potential monetary gains over time, according to a representative from Bayer’s carbon business division in the Reuters’ article.
Building on this work, the company announced just last week its newly published “Vision for Sustainable & Regenerative Agriculture” following its June 20, 2023 Crop Science Innovation Summit. The company’s vision in the area of regeneration detailed a number of what it describes as “nature-positive outcomes”-based commitments to “producing more and restoring more,” including:
- minimizing the climate footprint of farming
- reducing the environmental impact of crop protection
- enabling smallholder farmers, and
- improving water use.
The headline in Bayer’s press release carried on PRNewsWire indicates the company sees more than doubling of accessible markets and potential to shape regenerative agriculture on more than 400 million acres. Bayer’s announcement stated its Crop Science Division will “capitalize on opportunities presented by the shift to regenerative agriculture to grow in adjacent markets in addition to its core business of seeds, traits, crop protection and digital.” In describing this expansion, Rodrigo Santos, President of Bayer’s Crop Science Division, described regenerative agriculture as “increasing food production, farm incomes and resilience in a changing climate while renewing nature.”
Credit: Bayer Press Release (Caption): Rodrigo Santos, President of Bayer’s Crop Science Division and Member of the Board of Bayer AG at Bayer Crop Science Innovation Summit in New York.
The company’s regenerative ag strategies included an emphasis on the importance of tailoring industry-leading innovations to different crops in a way that not only delivers yield improvement but could also regenerate soil and minimize farming impacts on the climate and broader environment. In this way, Bayer is simultaneously building a business case around pillars of regenerative agriculture that deliver on conservation values around water, improved soil health, biodiversity, and mitigation of climate change, while building the business case for farmers enrolled, including social and economic wellbeing of their families and communities.
Cargill RegenConnect™ Expands to Europe
In early June, Cargill announced it was expanding its RegenConnect™ program, implemented and operational in the United States since 2021, to Europe, paying farmers in Germany, France, Poland, and Romania for integrating regenerative farming methods. The company will also expand this agricultural program in the US from 15 to 24 states following what it deems successful results over the last two years.
Like other companies engaging suppliers on the integration of regenerative agriculture practices as central to their sustainability roadmaps and climate goals, Cargill’s approach includes enrolling suppliers on a voluntary basis. As part of a market-driven approach, the company provides payments and technical assistance to help farmers improve soil quality and take measures that contribute to a climate-neutral supply chain. Central to the program’s strategy, farmers who participate can choose practical applications that suit their farm, such as sowing manure or catch crops and no longer plowing the soil.
According to a recent article in Future Farming, a Cargill spokeswoman said for the 2023/24 season, participants in the US can count on a compensation of about € 80 per ton of CO2 sequestration per hectare. For the European farmers who supply Cargill, the group indicates that it will pay market prices. Enrollment (made on a year-by-year basis) for the coming year is open through September 6, 2023.
In its press release on expansion, the company stated Cargill RegenConnect™ has not only received positive feedback from growers and customers but has also been recognized by the prestigious 2023 Edison Awards™ for its innovative approach to creating a more resilient and secure food system. Its expansion demonstrates Cargill’s commitment to helping farmers adopt sustainable agricultural practices across its global supply chain, rooted in the firm belief that change starts where the food system begins – at the farm.
“Cargill RegenConnect’s success to date demonstrates how making sustainable, regenerative agriculture financially viable for farmers can help nature-positive production practices scale more quickly and become standard. It is one of the many ways we plan to meet our goal to reduce emissions in our supply chain and will impact every area of our business – from sourcing wheat and corn for our starches, and sweeteners to growing rapeseed oil for our salmon feed.”
- Chantelle Donahue, Cargill North America Agriculture Supply Chain Vice President
The program’s expansion is the next step in advancing the commitment Cargill made in 2020 — to advance regenerative agriculture practices across 10 million acres of land in North America by 2030.
Constellation Brands Invests in EV Technology on the Farm
We wanted to highlight US-based Constellation Brands, a leading international producer and marketer of beer, wine, and spirits, in its efforts to early-adopt technology innovation as part of its pathway to emission-free agriculture. The company is the first to enter into a partnership with Monarch, maker of the world’s first fully electric, driver optional tractor, to strengthen its deep commitment to sustainability, while driving innovation to propel scalability in agriculture technology.
As part of the partnership, the company will be supplied with Monarch’s groundbreaking MK-V tractors, which combine electrification, automation, and data analysis.
According to Constellation Brands in its December announcement about the new partnership, the tech will help farmers reduce their carbon footprint, improve field safety, streamline farming operations, address labor challenges, and increase their bottom lines. Replacing a diesel tractor with a Monarch MK-V offers an equivalent emission reduction of removing 14 passenger vehicles from the road, according to the company.
“Considering nearly 25 percent of global emissions result from agriculture, the zero-emission Monarch Tractor will help make meaningful emissions reductions as the use of Monarch Tractors scales in an industry that has been historically difficult to decarbonize,” the company stated.
The development of the Monarch Tractor is intended to transform the agriculture industry with next-generation EV technology and unparalleled automation capabilities to meet farmers’ most pressing needs. It was launched in 2020 out of the NVIDIA Inception startup program, and piloted at the Livermore, California Wente Vinyards, the oldest continuously operating family-owned winery in the US, marking for the first time a fully electric, driver-optional, connected tractor had ever been deployed to a commercial farm. The technology was on the radar of investors, with Monarch raising more than US$110M, including a US$61M Series B round in 2021.
Shared Challenges to Carbon Farming and Markets
In these growing carbon farming schemas, as is the case in growing offsetting markets built around forest carbon sequestration, even non-Ag companies seeking to offset their carbon emissions are anticipated investors in the market. With new entrants that include companies, cooperatives and growers associations, NGOs, funding entities, and partnerships, this map published and updated by agfundernews this past year will need expansion to accommodate the many actors.
At the same time, although momentum in enrolled participation continues to grow for some companies as corporate support for initiatives expand, grower enrollments in carbon farming remain still relatively flat, serving as one of the major challenges to markets.
Primary Challenge - Farmer Hesitancy
There are essentially six key reasons or barriers to farmer participation in carbon farming central to carbon credit markets; we identify them here without elaboration, reserving the requisite discussions for separate, more in-depth published Insights of each:
- Real and perceived lagging and/or insufficient financial support from companies to which growers regularly supply to implement practices and technologies.
- Real and perceived lack of access to external financing options to finance costs associated with transformative practices, even at the pilot level.
- Uncertainty around ROI and lost opportunity costs in decisions to pause or shift production on acreage to accommodate regenerative practices that may result in decreases in yield at least in the short term.
- Skepticism regarding the actual contributions of carbon farming to overall CO2 emissions reductions, thus compounding the decision-making quandary to go or no go regarding regenerative transition.
- Uncertainty around what is required to improve carbon sequestration in different geographies and agricultural systems, which can undermine the value proposition of carbon projects.
- The challenges around on-farm data, essential to monitoring, assessment, corporate reporting, certification, and verification, and ultimately market performance.
Partnerships and Coalitions Critical in Evaluation of Mitigation Impact, Scaling, and ROI
Those engaged in the growing carbon market, or at least the contemplation around its potential, recognize that carbon farming will require the engagement and involvement of robust partnerships for development and implementation. These may be forged at multiple geographic levels and scopes between companies and university and research teams, AG trade groups and farmer membership organizations, nonprofits, catalyst organizations and funders, non-profits, technology providers, and credit institutions, among others.
Here are just a few of the diverse partnership initiatives that have recently emerged:
With a roster of Founding Partners that includes PepsiCo, McDonald’s USA and most recently, The Nature Conservancy, AgMission™, a global collaboration to develop and implement climate-smart farming solutions, announced that it will support a current study initiated by The Ohio State University (OSU) that examines the potential of soil management practices to mitigate climate change.
The Innovation Center for U.S. Dairy set aggressive environmental stewardship goals—including achieving greenhouse gas (GHG) neutrality by 2050. To reach these goals, six national dairy organizations came together to form the U.S. Dairy Net Zero Initiative, an industry-wide collaboration to advance research and technology, on-farm pilots, and new market development. Primarily focused in the US Midwest dairy states of Michigan and Wisconsin, this partnership initiative is planning expansion in both states, with farmer recruitment for 2023-2026 still underway.
As we reported in a prior published Resonance Insights, the Ecdysis Foundation, led by Dr. Jonathan Lundgren, Director/CEO of Blue Dasher Farm, launched the 1,000 Farms Initiative, with the goal of a long-term intensive study of farming practices on farms across the country. The aim of this initiative is to analyze the benefits of a shift to regenerative agricultural practices at a time when companies, consumers, catalyst organizations, and even governments, are encouraging change on farms in response to wicked problems like climate change and emissions, biodiversity threats, and pollution impacts. The South Dakota-based nonprofit issued an invitation to US farmers for participation, with the hope of including 350 farms from several of the 10 delineated eco-regions across the US in year one, and an additional 500 during 2023.
Athian is the first carbon marketplace for the livestock sector – Insetting program for beef and dairy. The company’s cloud-based platform benchmarks, validates, and certifies GHG reductions, carbon capture, and energy production to monetize sustainability in a centralized marketplace. Just launched, the marketplace has already partnered with Tyson Ventures, as well as California Dairies, Inc., the #1 Dairy Processing Cooperative in the leading dairy state, representing more than 300 family-owned and operated dairies.
The US Department of Agriculture (USDA) is committed to supporting a diverse range of farmers, ranchers, and private forest landowners through Partnerships for Climate-Smart Commodities. This effort will expand markets for America’s climate-smart commodities, leverage the greenhouse gas benefits of climate-smart commodity production, and provide direct, meaningful benefits to production agriculture, including for small and underserved producers.
USDA is investing more than $3.1 billion for 141 projects through this effort and all the projects require meaningful involvement of small and underserved producers.
Resonance is a Strong Facilitator and Implementer of Innovative, Well Designed Partnerships
Given the many, and often bold claims made about the potential for carbon farming to improve soils, sequester carbon to mitigate climate change, and increase and expand both productivity and revenue streams, it is still surprising that only 1-2% of farmers across global supply chains are actively participating in the carbon market.
It has become obvious that collaboration and coordination between governments, financial institutions, and an array of often cross-sector organizations can improve participation in carbon farming. Resonance continues to be involved in robust partnerships (Co-owner/CIO Steve Schmida wrote the book on it!) engaged in regenerative agriculture solutions and transformations. Given the interests of many of our clients, we are attentive to the potential of carbon markets to increase opportunities and deliver greater sustainable impact for AG companies and smallholder farmers participating in their global supply chains.