How Conservation Practices Influence Agricultural Economic Returns5 April 2023
As farmers across the country continue to invest in conservation practices, AGree has sought to better understand the financial benefits of agricultural conservation practices and support the farm finance community in thinking through the implications for their lending practices. A new paper, authored by Dr. Rob Myers, Director of the Center for Regenerative Agriculture at University of Missouri, focuses on the impact of conservation methods on a farmer’s bottom line and considerations for farm lending, providing important insights for the financial sector regarding impacts of cover crops and no-till on short-term financial returns and long-term farm prosperity.
On March 28 at 1:00 pm ET Meridian Institute hosted a webinar to discuss the results of this paper and the implications of its findings on farm lending practices. The webinar was moderated by Meridian Project Director and General Counsel Laurie Ristino, and featured the following panelists:
- Dr. Rob Myers, Director of the Center for Regenerative Agriculture at University of Missouri and author of the report.
- Skya Ducheneaux, Executive Director, Akiptan
- Gary Matteson, Senior Vice President, Beginning Farmer Programs and Outreach, Farm Credit Council
- Maggie Monast, Senior Director, Climate Smart Ag, Environmental Defense Fund
The paper reviews several recent case studies and farmer-based economic analyses that provide insights on how soil health conservation practices impact cropping system profitability. It was found that cover crops pay off under various management scenarios, especially when cover crops are grazed, when farms are working to improve soil moisture during times of drought, and when herbicide resistant weeds are an issue.
One study showed that farmers using these soil health practices reported an 85% net income increase for corn and 88% for soy. Over all the farms, the average net economic benefit for soybeans from using soil health practices was $44.89 per acre.
“Cover crops and no till in particular, along with other conservation practices, are paying economic dividends to producers.” -Dr. Rob Myers
Although improving soil health through conservation practices is an important tool for reducing on-farm risk (among other strategies), the agricultural finance system generally does not consider the potential economic benefits of a producer’s use of conservation practices. Currently, banks and other agricultural lenders do not explicitly recognize soil health when setting the loan terms and rates for their borrowers.
During the webinar, panelists discussed what is needed to expand farmer adoption of conservation practices and the role that lenders can play in this transition.
“The role of all agricultural lenders, farm credit, and commercial banks in agriculture has always included financing innovation–we’re now in a different type of innovation focused on conservation practices…turning out a loan to accommodate the yield benefits or the resilience benefits of that conservation practice is a lending solution…” -Gary Matteson
“If you have conservation practices, your operation is more resilient, and you should be receiving a lower interest or some other benefit from your farm financial lender…” -Skya Ducheneaux
Panelists agreed that more research and financial benchmarking of farmer conservation practice implementation is needed to promote adoption of these practices, which have the potential to provide a triple-win for farm finances, risk-reduction, and the environment.
“Financial information on conservation or climate smart practices is important…how can we expect farmers to adopt conservation practices if we don’t really know what it’s going to cost them?” -Maggie Monast
AGree’s 2023 Farm Bill priorities include additional ideas and policy solutions that build the evidence base for incorporating the benefits of conservation practices in financial lending decisions. Read AGree’s 2023 Farm Bill policy recommendations here.
Watch the webinar recording:
How Conservation Practices Influence Agricultural Economic Returns
Our recent paper “How Conservation Practices Influence Agricultural Economic Returns: Implications for the Farm Finance Community” provides valuable information to the farm finance community regarding how the impacts of cover crops and no-till may be financialized and, ultimately, considered in lending decisions.