Ag Firms Bet on Carbon-Capture Farming

"Agriculture companies are investing millions of dollars to develop farming programs designed to capture more carbon dioxide in fields as a possible solution to mitigate climate change.

The challenge: convincing farmers that it is worth their time, the costs of new farming practices and potentially losing out on some of their harvest in the process.

Iowa corn farmer Chris Edgington said he has looked at various carbon programs over the past year, calculating the risk of reduced crops as he adjusts the way he manages his crops and the potential compensation for the carbon his fields could capture. So far, he said, he hasn't signed up.

"At the current economics, it will be a real challenge to grow," said Mr. Edgington, chairman and a former president of the National Corn Growers Association.

Agriculture industry giants including Bayer AG, Nutrien Ltd., Corteva Inc. and startups such as Indigo Ag Inc. are developing systems that aim to create a farming-driven carbon market.

The idea is to harness natural processes to turn farmers' fields into carbon sinks. Plants withdraw carbon dioxide from the air and combine it with water and sunlight to produce energy through the process of photosynthesis, which embeds carbon in the dirt through the plants' roots. Soil can retain the carbon for years if left undisturbed.

The agriculture industry, which has come under increased environmental scrutiny in recent years, has said that paying farmers to maximize those natural processes can help make them part of a potential solution. Carbon programs also give companies a potential new revenue stream, as they project farm-generated carbon offsets will draw demand from food manufacturers, airlines and tech companies seeking to offset their own carbon emissions.

The market for carbon credits overall, including forestry and other carbon-capture projects, could reach $50 billion by 2030, according to a 2021 study from consulting firm McKinsey & Co. Agriculture companies said that farmers will share in proceeds from the sale of carbon credits.

Less than 5% of the more than 1,300 U.S. farmers surveyed by McKinsey in 2022 said they participated in a carbon program, and more than 50% of farmers said an unclear return on investment was one of their top reasons for not participating.

The number of farmers signing contracts to participate in a company's carbon market was flat at about 1% from January 2021 to August 2022, according to surveys of hundreds of farmers conducted by agronomists at Purdue University.

Agriculture executives said their farmer sign-ups are on track or exceeding expectations.

Fertilizer supplier Nutrien Ltd. said it signed up 110 growers in 2021 to its carbon program and reached 160 in 2022, on par with its goal.

Corteva officials said the seed supplier's program is on track and that demand for carbon credits is expected to rise along with the price farmers are paid.

Executives said they are adjusting to farmer concerns, including by grandfathering farmers into programs who had been using carbon-capturing "no till" farming practices for years, or by offering more flexible contracts.

Company officials say that farmers' paychecks will rise over time, as will the health of their soils, another long-term benefit that they said will entice farmers to sign up.

To participate, farmers must commit to overhauling crop-production systems to incorporate practices that increase their soil's carbon sequestration, such as avoiding tillage and planting cover crops during the winter.

Farmers generally are paid $15 to $20 a ton of carbon sequestered under agriculture companies' current programs, Bank of Montreal senior analyst Joel Jackson said.

He estimated that farmers need to earn more than $50 a ton to make carbon programs economically viable for their operations.

Though it varies by farm, no-till farming sequesters an average of 0.3 metric ton of carbon per acre (0.405 hectare)  a year ($5 to $6), according to the Soil Science Society of America.

"Carbon should be priced at $75 per ton for farmers to take notice," said Chris Harbourt, chief strategy officer of Indigo. "At $100-plus, farmers need to think about it as a serious part of their farm planning."

Mr. Harbourt said Indigo has raised the amount it pays farmers in the past year from $20 a ton to more than $40.

He said the price that farmers are paid will rise as companies pay more for the credits.” [1]

1.  Ag Firms Bet on Carbon-Capture Farming
Thomas, Patrick.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 17 Jan 2023: B.4.