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How carbon-smart farming is catalyzing the big bucks needed to transform the way America eats

Will regenerative agriculture alone save us from climate apocalypse? No. But thanks to its much-hyped carbon sequestration potential, unprecedented funding is pouring into efforts to convert America’s chemical-laden industrial agriculture system into something better. And that just might save us yet.

Stone House Grain

The Stone House Farm in New York is home to a new carbon marketplace tied to regenerative agriculture. Photo courtesy of C.J. Clouse

The contraption Matt Sheffer wants to show me sits at the far end of a field of alfalfa and grasses, a weave of green and pale gold, broken only by the parallel grooves we’re trudging along, a path carved by the tires of a pickup truck. It’s Nov. 4, and America is in the midst of a presidential election that feels like being trapped, upside down and spinning, on a ramshackle carnival ride. So I’m grateful for this opportunity to escape, to walk on sturdy ground and see all the way to where the earth touches the sky. 

I’ve come to Stone House Farm from Brooklyn to learn more about how regenerative agriculture — the nature-based approach to farming generating all kinds of buzz around its climate mitigation potential — actually works. Standing alone in the open field, the solar-powered equipment Sheffer shows me could be mistaken for some sort of high-tech scarecrow, but it has a far different job: to monitor and measure the CO2 in the soil at this farming operation and research center in New York’s Hudson Valley. 

Many scientists and other experts agree that regenerative practices — growing diverse crops rather than monocultures; planting cover crops (such as the alfalfa and grasses) on resting fields instead of leaving them bare; minimizing mechanical tillage of the soil; and incorporating livestock into the crop rotation — lead to environmental and health benefits. The soil becomes richer and healthier, runoff that pollutes water is reduced, biodiversity and habitat for the birds, bees and other wildlife increases, farm animals live better, and the food produced is more nutritious. Early research also indicates farmers using these techniques can reap long-term financial gains

Still, it’s regenerative agriculture’s potential as a carbon sink that’s driving millions of corporate and investor dollars into soil-climate initiatives, large and modest. And while there’s plenty of room for skepticism when Big Ag gets into the sustainability business, this trend represents something of a game-changer, a level of investment in sustainable farming that never has happened before. 

In fact, the current system of agriculture finance in the United States has, for decades, worked against any large-scale transition away from the industrial farming complex it was built to support. Scientists may not agree on exactly how much CO2 agricultural soil can sequester — in fact, they spend a fair amount of time blog fighting about it. But in a way, it doesn’t matter. Given that American agriculture needs to change, for a whole slew of reasons including its contribution to the heating of the planet, if the hype around soil carbon helps to fuel that transformation, that in itself is a good thing. 

Making it rain for America’s farmers

Sheffer and his partner Ben Dobson are among those who believe aligning farmers’ economic interests with positive environmental outcomes is the way to remake the farming landscape. This month, they’ll launch Hudson Carbon, an agriculture-focused carbon marketplace they envision as a "farmers market" for carbon credits, where mission-driven brands and individual consumers can connect with a particular farm and buy offsets to support its regenerative transition. 

They’re also asking Hudson Carbon customers to pay more, significantly more than the current global price of roughly $20 per ton, which they say doesn’t necessarily motivate farmers. (That price is also far below the low-ball estimate of $50 per ton for the true social cost of carbon pollution.) 

"The current carbon price is self-serving for those who are required to offset, like power plants and other polluters, but it doesn’t motivate behavior change on the other side of the equation," Sheffer tells me. "To catalyze any major shift to regenerative agriculture, there needs to be better financial mechanisms and a higher price per ton of CO2."

How high? Hudson Carbon wants its customers to pay $100. 

Matt Sheffer, Stone House Farm

Matt Sheffer is managing director of Hudson Carbon, an agriculture-focused carbon marketplace they envision as a “farmers market” for carbon credits. Photo courtesy of C.J. Clouse

The marketplace is one of a number of new platforms born in anticipation of huge corporate demand for soil carbon credits. In January, Seattle startup Nori raised $1.3 million to fund its marketplace, which uses blockchain technology to pay farmers for carbon sequestration. Boston-based Indigo Agriculture, a similar startup, announced in June a $300 million kitty from its investors, making it the world’s highest-valued agtech firm at an estimated $3.5 billion. The new Ecosystem Services Market Consortium (ESMC), set to launch in 2022, promises to be the largest. It will offer both carbon and water credits, and planning has begun for biodiversity credits as well, executive director Debbie Reed told me when we spoke by phone in October.

ESMC, in fact, will comprise two markets: one where a broad range of companies — from Silicon Valley to Wall Street — can buy offsets to meet science-based emissions reduction targets; and one for "members," companies with agriculture in their supply chains — including food and beverage, fashion, and beauty and cosmetics brands — that will make results-based payments to their suppliers. Some refer to this practice as "insetting." 

The beauty of insetting is that a company enables its suppliers’ transition from conventional to regenerative practices by providing educational, technical and, in some cases, financial assistance. One $8.5 million ESMC-linked pilot, sponsored by McDonald’s, Cargill, Target and The Nature Conservancy, aims to convert 100,000 acres of land in Nebraska, by providing beef producers technical assistance and an upfront 75 percent cost share. Meanwhile, Nestlé, which is working with 500,000 farmers to support the implementation of regenerative agriculture practices, just announced it would invest $1.3 billion in that effort over the next five years, funds that will go toward sharing the cost of capital improvements and the premium price the company will pay for regeneratively grown goods. 

Farmers who want to earn money selling credits — offsets or insets — on these new markets opt into data monitoring and measurement, because payments are based on outcomes such as increases in soil carbon or improved water quality. The Nebraska program is one of a number of pilots underway to test ESMC’s protocols for quantifying and verifying credits. These pilots are also working out potential cost and pricing models, Reed said.

The current carbon price is self-serving for those who are required to offset, like power plants and other polluters, but it doesn’t motivate behavior change on the other side of the equation.

"These major corporations are putting a lot of money into this, and if we can work with them … we can scale impact," said Reed, who believes having standardized, transparent protocols will help hold companies accountable. "If we don’t work with these companies, and they do it themselves, then we have a patchwork, and it’s really hard to tell [who’s actually successful and who’s not]."

While multinational corporations making big announcements get most of the attention, regenerative agriculture is a movement led by farmers and mission-driven entrepreneurs and brands, which have been researching and innovating for years. Of the 670 companies that work with The Climate Collaborative, nearly 300 have made regenerative ag commitments, director Erin Callahan told me. Most of these are privately owned small to midsize companies in the natural products industry. When we spoke in October, Callahan shared that she’d recently sent an email blast asking for progress reports on regenerative ag initiatives. "I thought I’d get five responses," she said. "And I got 130 in 36 hours." 

One example comes from Happy Family Organics, which learned from two training pilots it sponsored, in 2018 and 2019, that farmers really need financial assistance and ongoing access to mentoring to make the transition to regenerative practices work. This year, the company established a Regenerative Farmer Fund, setting aside $40,000 per year to support up to four farmers annually with new practice implementation.

You grow tomātoes, I grow tomătoes 

It’s difficult to overstate how crucial both training and financial help are to farmers, because transitioning to regenerative or organic practices is complicated, expensive and risky. It takes time and knowledge. Stone House Farm, which sits on more than 2,000 acres in Columbia County, New York, used to grow corn and soybeans conventionally. A grain farm of this size can expect to run in the red for the first two years of an organic transition, accumulating a deficit of more than $400,000 before turning a profit in year three, according to analysis by the USDA. 

The fact that the Peggy McGrath Rockefeller Foundation owns Stone House made its transition possible. An activist in the cause of preserving farmland, McGrath Rockefeller engineered the purchases of various dairy operations that created the farm. When her children Abby, David and Peggy took over, they wanted to rid the farm of toxic chemicals and establish a viable business. The foundation hired Ben Dobson to implement the transition in 2013. Along with his work on Hudson Carbon, Dobson manages Stone House Grain, a certified organic, non-GMO producer that grows barley, corn, soybeans and wheat. The grain company rents the land and facilities from the foundation, which intends for the farm to serve as a model for the region.

Dobson’s parents ran one of the area’s first organic farms back in the 1980s. His interest in soil carbon grew from an early fascination with managing large landscapes naturally and in a closed loop cycle. "I wanted to farm like my parents, but they were very small-scale," he says. "All these organic farms are so small, and that’s good, it’s a great lifestyle. But how do we change this huge land base in America that’s just plastered in chemicals?"

To see what he means, look at the stats. Over the past decade, organic food sales in the United States doubled to more than $50 billion in 2019, according to the Organic Trade Association’s 2020 Organic Industry Survey. The number of individual organic farms has surged as well — climbing by more than 50 percent from 10,903 farms in 2007 to 16,585 farms in 2017 — according to the U.S. Department of Agriculture’s latest data, released in October. And yet, there are still only 5.5 million certified organic acres, up from just over 4 million acres over the same time period, a swath of land that represents less than 1 percent of the 911 million acres of total farmland nationwide. 

Ben Dobson, Stone House Grain

Ben Dobson, founder of Hudson Carbon, also manages Stone House Grain, a certified organic, non-GMO producer that grows barley, corn, soybeans and wheat. Photo courtesy of C.J. Clouse

Granted, this data does not include regenerative farms not certified as organic. The two farming systems are similar but not exactly the same. Some organic farmers till the soil to control weeds, while no-till farmers sometimes use herbicides. Still, both systems aim to farm more sustainably, and many farmers use methods from both. Often, no-till farmers want to eventually eliminate chemical inputs, while organic farmers are trying to reduce tillage by incorporating certain cover crops, which help control weeds, into their rotation. Some of this is being done out of need, as farmers look for ways to deal with "superweeds" that have become resistant to herbicides. 

Dave Miller, founder and CEO of Iroquois Valley Farmland REIT, understands well the disconnect between consumer demand for clean, healthy food and available financing. 

For nearly 15 years, the Illinois-based specialty finance company has provided leases and mortgages to organic farmers. One of only a handful of companies with a history of specializing in sustainable farming finance — others include Farmland LP and Dirt Capital Partners — Iroquois Valley has invested in more than 60 organic farms comprising nearly 13,000 acres all over the country. Over time, it became evident that limited access to capital was holding back farmers’ growth, Miller told me. So last year, Iroquois Valley began offering operating lines of credit as well. 

"All of our farmers want more land," Miller said when we spoke by phone in April, as he hunkered down on his farm in Iroquois County, about an hour and a half south of Chicago, during the first wave of COVID-19. "We saw operating credit as the biggest barrier to growth in sustainable agriculture. It’s great to have a market for your product, but if you can’t get funds to operate and to grow, then you’re SOL."

Frustration with traditional agriculture finance has led others to step up as well. It motivated the 2019 launch of Steward, a crowdfunding platform for sustainable farming that has raised more than $2.6 million for roughly 20 farms, and this year’s launch of rePlant Capital, a new farmer-first financial company that aims to deploy $250 million to producers converting to regenerative or organic practices. RePlant has partnered with Danone North America (another ESMC member), committing to invest as much as $20 million over the next few years to help Danone’s suppliers transition. 

How Goliath won the battle for America’s farmland 

America’s industrial agriculture system dates back to just after World War II, when federal farming policy began to focus on quantity. The shift to synthetic pesticides and fertilizers, along with advances in mechanization, created the type of efficiency and scale the U.S. government hoped for. In a way, some farmers benefited as well, with increased production and easy pest control. But farming families also paid a big price, as the number of farms in the U.S. dropped by half from 1950 to 1970, and the detrimental environmental and health impacts of these chemicals played out.

Still, the mantra "get big or get out" stuck — Sonny Perdue, Donald Trump’s agriculture secretary, repeated it just last year. And this policy shaped the country’s system of agricultural funding. Federal subsidies that keep commodity prices low and the federal crop insurance program promote monocultures by making it difficult for farmers to plant a variety of crops at once or to include cover crops in their rotation. Many farmers have taken on huge debts to purchase conventional farming equipment or land, which essentially locks them into the status quo. Meanwhile, banks and other financiers often have denied loans to small operations or organic/regenerative farmers they view "too niche" in their practices. 

We saw operating credit as the biggest barrier to growth in sustainable agriculture.

"Federal farm programs make it more attractive to stay in the system you’re in," Lisa French, a Kansas farmer, told me during a phone call in October. In terms of federal crop insurance, "you almost didn’t want to tell them you were planting cover crops because it might make you ineligible for payments. …. Or the banker may not want to loan money for cover crop seed because he doesn’t understand why you want that extra expense, when in fact you may be reducing other expenses in the process."

French and her husband grow wheat, sorghum and soybeans, and raise 40 head of cattle on roughly 800 acres near the Lake Cheney Watershed in the south-central part of the state. She’s also served as project director for the watershed for 20 years, because like many small producers, the Frenches don't earn enough from the farm alone to make ends meet. Intrigued by farming in a way that enriches soil and what that meant for nutrient density in their livestock and crops, the Frenches have used certain regenerative practices for years, but they wanted to learn and do more. So they, along with 23 other growers in the area, enrolled in a ESMC-linked wheat pilot program sponsored by General Mills, one of three regenerative agriculture pilots the company has rolled out in the last year. 

A new regenerative normal 

To help its suppliers transition, General Mills contracted the consulting company Understanding Ag to provide training and coaching to the participants. They also assigned local regenerative farmers to act as mentors and help build a community.

"The opportunity to learn from each other and to see what other people are trying is invaluable," French said. And having a program focused on one geographic area "tends to bring along other farmers who are not participating because they see many of their neighbors making changes on their farms. The program makes it more likely that farmers will be successful in their transition, and it makes it more likely that regenerative ag is the norm in the neighborhood."

Ray Archuleta, founder of Understanding Ag, has dedicated his life to teaching farmers about soil health. A conservation agronomist, he spent 32 years working for USDA’s National Resources Conservation Service (NRCS) before retiring four years ago. Now he does the same job as a consultant. 

"You know how I draw people into my classes? I draw them in economically, and later they start to fall in love with the ecology," Archuleta told me when I caught up with him by phone in October. "The ecology was always first, then the economics followed, but we switched it around. And they begin to understand."

There is a long-term economic argument for regenerative ag from the farmer’s perspective, if they can just get over the transitional hump. First and foremost, it reduces and even can eliminate the costs associated with conventional farming, the money spent on chemical herbicides and fertilizer. And even though there isn’t a legal or regulatory definition of "regenerative agriculture" yet, consumers already seem willing to pay more for "pasture-raised" and "grass-fed" meat, eggs and dairy products, for example, much as they do for certified organic produce. 

Some early research also indicates that regenerative farmers can maintain or even improve yields in the long run, because the soil is healthier and can better withstand the severe weather disturbances happening more often due to climate change. 

"If you have drought conditions or heavy rain, land farmed regeneratively is more resilient, because with better management the soil is usable again more quickly," Keith Paustian, a professor in soil and crop sciences at Colorado State University, explained. "If you have heavy rain, there is typically more water holding capacity which reduces flooding. And if you have a dry year, because regenerative farm soil holds moisture longer, it’s less dry than soil farmed conventionally."

Cattle grazing in Kansas

Cattle grazing on the French farm in Kansas. Photo courtesy of Lisa French

Flipping the script to reward positive outcomes

When it comes to soil's potential to sequester carbon, however, any scientific consensus ends. Some declare soil carbon the planet’s savior and others basically call BS on such assertions. As is often the case, the truth likely lies somewhere in between the extremes. "People who say this is a panacea, those numbers are wrong," Paustian told me. "But in my opinion, and I think the data bears it out, there’s a definite role for soil carbon sequestration as part of the solution [to the climate crisis]."

Some people I spoke to seem exasperated by the whole debate. 

"I think there has been a bit too much argument about what the exact potential is," said Jay Watson, sustainability engagement manager at General Mills. "Can we just agree that there is potential, and it’s the right thing to do? I think the General Mills approach has been: We’re committed to learning, but let’s just get started. … The clock is ticking."

Essentially, it comes down to a chicken-and-egg question. Some believe paying for carbon sequestration will motivate a regenerative transition that will bring a whole slew of environmental and social benefits. Others favor cost sharing and alternative financial incentives — payment for water quality and biodiversity, for example — to motivate the transition, which in turn will reduce agricultural greenhouse gas emissions and lead to some amount of carbon sequestration. 

In the end, the goals are the same, and meeting those goals requires a realignment of America’s agriculture finance system to one that rewards positive environmental outcomes and discourages destructive practices. Right now, it does the opposite, by not considering the true costs, the unsustainability of the current system or the benefits of a regenerative transformation. 

In 2018, Farmland LP, Delta Institute and Earth Economics released a report, funded by the USDA, that found $21.4 million in net ecosystem service benefits using regenerative practices on roughly 6,000 acres over five years.

Yet, the system continues to incentivize farmers to plant the same monoculture crops year after year, sapping the soil of minerals and organic matter. To boost production of weak soil, they add more chemical fertilizers, which run off into the water supply and eventually to the ocean, causing dead zones, such as the Massachusetts-sized one in the Gulf of Mexico. At the same time, the U.S. loses top soil at a rate 10 times faster than it’s replenished. And carbon seeps from the plowed, exposed soil into the air, contributing to the emissions rapidly warming the planet.

What’s more, it costs U.S. taxpayers a bundle to bail farmers out when they get hit by floods or droughts, or sharp drops in commodity prices. Farmers affected by severe weather and Trump’s trade war with China received more than $22 billion in government payments in 2019, the highest level of farm subsidies in 14 years. By comparison, government programs that encourage regenerative and organic growing practices, such as the NRCS’s Environmental Quality and Incentives Program and Conservation Steward Program, historically have been funded at a fraction of conventional subsidies. 

Such policies have been entrenched for decades, and changing them will not be easy. 

"Here’s the problem: We have lobbyists … chemical company lobbyists, the fertilizer company lobbyists … they push the senators, and the senators push the heads of the agencies," Archuleta said. "Nobody wants to touch the subsidies, no stinking way. The Democrats and the Republicans do not have the guts to terminate them."

Unfortunately, we hear from a lot of farmers that they’re getting into the soil health regenerative ag space because they feel like they don’t have any other choice, just from a profitability standpoint.

After more than 30 years working for the government, it’s easy to understand Archuleta’s skepticism. However, there are positive signs. New bipartisan legislation that would provide incentives to adopt regenerative techniques has been introduced in the Senate, and President-elect Joe Biden recently reiterated his support for climate-smart farming, saying he would pay farmers "to put their land in conservation and plant cover crops." The think tank Data for Progress also has proposed overhauling the federal crop insurance program to limit the total acreage eligible for coverage, phase out incentives for single-crop planting and create new tax credits designed specifically for family-owned farms. 

If they wanted to, large, powerful corporations that have set science-based emissions reduction targets could push politicians toward a regenerative agriculture transition, although it’s still unclear whether that will happen. In the end, the real push could come from the farmers themselves, as they find themselves struggling year after year to produce sufficient yields on conventionally farmed land. 

"Unfortunately, we hear from a lot of farmers that they’re getting into the soil health regenerative ag space because they feel like they don’t have any other choice, just from a profitability standpoint," General Mills’ Watson told me. "The current way they’re farming just isn’t working anymore. They’re having to apply a lot more input to protect yield, and at some point, that becomes unsustainable." 

Grassroots grass-fed solutions 

Like Archuleta, Dobson doubts real change will come from the top. When we sit down Nov. 4 in the sparse office he uses to manage farm business at Stone House, I ask him how he feels about the presidential election, which won’t be called for three more days. 

"I don’t think we can look up for a leader," he tells me. "The solutions are going to come from people. It would be easier with a Biden presidency to make progress, but I still think it has to come from people seeing a problem and believing we have to do something about it." 

Dobson and Sheffer have been measuring soil carbon at Stone House for five years, and the trends in the data at various sites show the farm is gaining soil carbon at various levels, sequestering CO2 at a rate of about 7 tons per acre per year. Meanwhile, the trend in the data from the conventional farm up the road, which they’ve been measuring since 2018, shows it is losing soil carbon.

This month, Stone House will begin selling credits on the Hudson Carbon marketplace as its first project. The farm and the PMR Foundation plan to divide proceeds from these sales, with the farm’s portion going to overhead, while the foundation’s portion goes to infrastructure improvements and other costs related to its regenerative agriculture mission. The platform aims to add more local farms next year and eventually to go global and include forest carbon credits. 

But will companies and consumers be willing to fork over $100 per ton? 

At least one company is. Hudson Carbon’s first customer, Light Phone, a New York-based technology startup that makes an "anti-smartphone," has agreed to offset its footprint by purchasing credits on the platform. Time will tell whether others follow, or whether we succeed at transforming American agriculture before the planet completely falls apart. 

I’ve not felt optimistic about our willingness to undertake transformational change and save ourselves in a long time, but something about regenerative agriculture does leave you with a sense of hope — a sense that if we can, one way or another, just get farmers through the transitional phase, replacing our industrial agriculture complex with something better is actually — doable.

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