Regenerative agriculture may be this year’s hottest emerging topic in the sustainable and impact investing space. Taking sustainability one step further, regenerative principles moves beyond a “do no harm” approach to one focused on building up the soils of our farms. As we discussed in our introduction to the topic, integrating holistic regenerative practices into day-to-day farming will take fighting climate change to the farm, sequester carbon and improve our soils.
As an investor looking to diversify a portfolio with farmland, regenerative agriculture has the potential to further enhance your overall strategy. Regenerative practices create a more valuable asset over the long-term and many organizations are looking at ways to better value improvements to soil health in land appraisals. Annually, regenerative farming can decrease operational costs while unlocking food grade markets such as specialty grains and livestock that may seem out of reach for a typical commodity farmer.
FarmTogether was recently named a semifinalist for the 2019 Terraton Challenge, an initiative to remove 1 trillion tons of carbon dioxide from the atmosphere and enhance agricultural soils. We could not be more excited to be selected among a great cohort of innovators. As we look at how our platform will offer regenerative agriculture opportunities over the next year, we wanted to share some of our learnings over the next few months so that we might all better understand the importance of this growing movement!
Companies like General Mills, Danone, Kellogg, and Nestlé, have all made public and financial commitments to regenerative agriculture, sending signals for future market growth. But what exactly is “regenerative agriculture” and how will it impact a farmland asset?
More than half a dozen organizations have jumped into the fray to develop definitions, principles, or full-blown certifications to codify regenerative agriculture practices. While time will tell if any one standard dominates the market, Carbon Underground and the Regenerative Agriculture Initiative at Chico State have categorized regenerative practices into four broad categories.
For over 100 years, the vast majority of farmers till or break up their soil. This practice has its pluses -- helping to control weeds, break up hard soil, or loosen up the ground for planting. Unfortunately, this process also pulverizes soil and fungal communities increasing CO2 emissions. By tilling the soil, farmers increase erosion, losing quality organic matter and nutrients.
Practicing no-till or minimum tillage holds the nutrients on the land, decreasing erosion and increasing water retention. For farms with wider grain, well drained soil, changing tillage practices will actually improve productivity and can be an easy first step for a farmer.
Our soils are alive. Millions of plant and soil microbes transfer nutrients so that they are available to our crops. However, in the quest for higher yields, traditional farming systems have relied on added synthetic fertilizers that load soils with the nutrients plants need. By making nutrients so readily available — not to mention the fact that much of these nutrients are lost in erosion or evaporation — conventional farming create imbalances in how microbial communities function. This leads to less resilient plants and a soil that breaks down faster, releasing more CO2.
To increase our soil fertility, regenerative farmers use a series of practices that include: (i) cover cropping, (ii) rotational cropping, (iii) composting and (iv)increasing the use of natural animal manures. Each of these practices adds nutrients to the soil promoting natural CO2 sequestration.
Agricultural efforts do not occur in a vacuum. In fact, they are part of a larger ecosystem that includes nearby natural areas, plants, and animals. Traditional farms are monocultures, large areas growing only a single crop. The lack of diversity doesn’t return diverse nutrients back to the soil, while also impacting soil microbes, pollinators such as bees, and other beneficial insects and animals.
By restoring ecosystem diversity we can improve the resilience of our crops and broader agricultural regions and prevent further degradation of our soils. To accomplish this, a regenerative farm may utilize compost to restore microbial communities, a multispecies cover crop, or expand its crop rotation to include additional cash crops beyond corn and soy. Increasing diversity has the potential to unlock new end markets for farmers increasing their overall profitability and resilience to market downturns.
Row cropping doesn’t often leave room for the possibility of integrating grazing on a farm’s landscape. In some cases, regenerative agriculture works to bring livestock back to the land. Well-managed rotational grazing, where livestock is moved throughout a farm so that the soil has time to rest and regrow can stimulate increased plant growth, deposit more carbon to the soil, and increase soil fertility.
Grazing animals not only makes them move valuable products but also takes them out of feedlots and confined systems. These systems increase water pollution, decrease disease resistance, and release CO2 and methane in greater quantities that well-managed grazing operations.
Every acre is different, meaning regenerative agriculture will look different from farm to farm. This may explain some of the difficulty advocates have had in coming to a universal definition. What we do know is that these practices represent a wholesale shift in thinking about how we maximize productivity of farmland and how we ensure that we are doing right by the farmer and the planet.
Farmland investors are inherently long-term investors. We see regenerative agriculture as the next evolution of that long standing mindset, protecting the value of the asset by improving the value of the ecosystem services the farm provides. Over-time, a regenerative farmer will need to apply fewer external inputs and will produce crops more resistant to extreme weather events and disease. As we think about how to integrate more regenerative agriculture practices on farms, farmers will need trusted land-owner partners, patient investors, and expert advisors who can work together to ensure a smart, effective transition.
We look forward to offering you opportunities to support regenerative agriculture and work towards addressing climate change, improving soil health, and sustaining our farming communities for generations to come!
Disclaimer: FarmTogether is not a registered broker-dealer, investment adviser or investment manager. FarmTogether does not provide tax, legal or investment advice. This material has been prepared for informational and educational purposes only. You should consult your own tax, legal and investment advisors before engaging in any transaction.