North American farmers profit from shoppers placing strain on the grocery retailer to develop into environmentally pleasant
© Reuters. FILE PHOTO: An agricultural combine, tractor, trailer and articulated truck are parked next to corn fields during the autumn harvest as the coronavirus disease (COVID-19) outbreak continues in Livonia
By Karl Plume and Rod Nickel
CHICAGO / WINNIPEG, Manitoba (Reuters) – Beer made from rice grown with less water, rye planted in the off-season, and selling carbon credits to tech firms are just some of the changes North American farmers are making as the food industry is seeking to go green.
The changes allow some farmers to make extra cash from industry giants like Cargill. nutrient (NYSE 🙂 and Anheuser-Busch. Consumers are putting pressure on food producers to support farms that use less water and fertilizer, reduce greenhouse gas emissions and use more natural techniques to maintain soil quality.
Investing in sustainability remains a tiny fraction of total spending in the agricultural sector, which made healthy profits in 2020. They could help avoid more costly regulations after Democratic climate attorney Joe Biden was elected US president.
Some companies, like the agricultural retailer and fertilizer maker Nutrien, are also opening up new revenue opportunities for farmers by monetizing the carbon their fields ingest. Companies say the technology improves measurement and tracking of carbon capture, although some environmental activists question the usefulness of such programs and verifying the amounts of greenhouse gas trapped.
One of the sustainable techniques that farmers use is to temporarily forego tillage in order to save carbon. Some add a cover crop of rye or grass out of season to restore nutrients to the soil rather than applying heavy amounts of fertilizer over the winter that can contaminate local water supplies.
A study by agrotechnology company Indigo Ag estimated that U.S. corn, soybean, and wheat growers who did no-till and cover crop on 15% of their fields would generate an additional $ 600 million by cutting costs, increasing soil productivity, or providing carbon credits to sell .
Indigo has a partnership with brewer Anheuser-Busch Inbev NV, who plans to buy 2.6 million bushels of rice this year, which is grown with less water and nitrogen fertilizers than traditional rice. Anheuser-Busch said that is an increase of 2.2 million bushels last year and represents 10% of its U.S. rice shipments.
Bill Jones, the brewer’s raw materials manager, said farmers who volunteer to grow lower-impact rice along the fragile Mississippi River would have less disruption to supplies than if local authorities required such practices through legislation to change water and nitrogen use .
“We’re looking at supply chain security. I see this becoming more important,” he said, noting that Minnesota and other US states and wildlife sanctuaries that are concerned about pollution of the Mississippi already have restrictions on the spread of it Introduce manure farmers to fields. Arkansas farmer Carson Stewart took advantage of the program for the first time this year and donated his entire 340 hectare rice harvest to Anheuser-Busch. Depending on the grind quality, his rice can make up to $ 1.50 a bushel more than traditional rice, a premium of about 27%, he said.
10 MILLION ACRE SHIFT
While companies expect Washington and Ottawa to step up their efforts to finance and regulate sustainable agriculture, industry insiders and activists say widespread adoption is still a long way off.
“They are associated with high up-front costs,” said Giana Amador, managing director of the climate-focused NGO Carbon180. “We see an enormous quality difference between all of these corporate commitments.” In September, privately owned Cargill Inc said it would help North American farmers convert 10 million acres to regenerative practices over the next 10 years by offering them financial assistance and training.
In response to demand for greener food from food companies who buy their products, Cargill has already signed 750 farmers in green programs that represent 300,000 acres, said Ryan Sirolli, Cargill’s director of row crop sustainability. With projects like one paying Iowa farmers not to till the soil or creating field buffers to prevent fertilizer runoff, Cargill hopes to get 30% of greenhouse gas emissions in the supply chain over the next decade reduce.
“We’ve done a lot to stop soil erosion. And we’ve saved 538 tons of CO2, which is the equivalent of 104 cars,” said Iowa farmer Lance Lillibridge, who estimates he’ll be making about $ 37 an acre all in one Cargill pilot this year.
Environmental groups and consumer activists are skeptical of such corporate sustainability commitments, noting that Cargill has failed to deliver on its promise to remove deforestation from its supply chains by 2020.
The more buyers pay with premiums, the more farmers are enticed into sustainable farming, said Devin Lammers, CEO of Gradable. The input trader Farmers Business Network unit compares farmers who use sustainable practices with buyers like Unilever (NYSE :), Tyson Foods (NYSE 🙂 and ethanol producer POET.
Some farmers make money by checking the amount of warming emissions their fields are absorbing and selling carbon credits to polluting companies that want to reduce their net emissions. Agribusiness companies call this a double win for farmers as their fields become healthier and they make extra money.
This week, Saskatchewan-based Nutrien announced it is launching a sustainable agriculture program on 100,000 acres in the US and Canada. An expansion is planned later in South America and Australia.
Chuck Magro, chief executive of Nutrien, estimated that the program will provide farmers with additional profits of $ 50 per acre – $ 20 per acre for carbon credits and $ 30 per acre for higher crop yields.
The announcement followed Nutrien’s acquisition of the digital farming company Agrible in 2018, which will help farmers reduce emissions and use less water. Magro said in an interview that the goal is to enable farmers to use this data to sell emission allowances. He noted that previous efforts resulted in meager yields that didn’t pay off for farmers flipping hundreds of pages of documents.
Agriculture accounts for 3% of the global emission allowance market, but it is expected to grow to 30% by 2050, Magro said. “We see carbon as the next great agricultural revolution,” he said.
Matt Coutts, chief investment officer of 100,000 acres of Coutts Agro in Saskatchewan, plans to sell carbon credits for up to 10,000 acres of canola, lentil and spring wheat annually through Nutrien. He believes they could ultimately generate at least $ 75,000 in additional annual sales. Ohio-based start-up Locus Agricultural Solutions helped Iowa farmer Kelly Garrett generate 22,400 tons of carbon credits by checking that his fields were locked at around 1.4 tons per acre from 2015-2019, Garrett received one in November Check for 5,000 of these loans after Shopify (NYSE 🙂 e-commerce platform bought them on the Nori carbon trading market for $ 75,000.
“The ability to sell our carbon credits through the Nori system and help the rest of the world be greener is a wonderful benefit to our economy and finances,” said Garrett.
Even so, Nori noticed that Microsoft Corp. (NASDAQ 🙂 closed a deal to purchase most of the remaining credits from Garrett as they have not been verified through soil testing on the farm. Nori believes individual soil tests are too costly and instead reviews credits based on soil type, plants planted and other data, said Alexsandra Guerra, director of corporate development for the company.
Microsoft declined to comment. Few North American farmers have gone through the verification process that Garrett went through, which also limits the supply of high quality carbon credits that some buyers seek. Some critics say that carbon saved by no-till can easily escape when the soil is tilled again. “Statements that soils can bind all of our emissions and more are overrated … There is no way we can make this shift fast enough to tackle the climate crisis,” said Tara Ritter, senior program associate at the Institute for Agriculture and Trade Policy .
PAY IN FRONT
Despite these doubts, food companies are relying more on carbon capture and regenerative agriculture. General Mills (NYSE 🙂 offers technical advice to farmers, while other companies pay growers up front to use greener practices. Quaker oat and frito lay chips maker, PepsiCo (NASDAQ :), pays farmers $ 10 an acre to grow cover crops over the winter, which can help reduce erosion and control weeds and insects.
This will help PepsiCo meet its sustainability goals and secure its food supplies, said Margaret Henry, director of sustainable agriculture. PepsiCo subsidized cover crops like rye and radish on 50,000 acres in the Midwest last year and plans to expand the program further.
Henry pointed out an additional benefit: Cover crops absorb excess moisture and prepare many fields for spring planting two weeks earlier than fallow fields. “We want this to be a win over the long term,” she said.