Short-term financial investment for farmers can reach nearly USD $40 per acre, but long-term profits can grow 120%; public and private sector assistance needed to de-risk transition to regenerative practices
Washington, DC, 24 May 2023: Farmers could expect a 15-25% return on investment after transitioning from conventional to regenerative agriculture systems, however the transition can take three to five years, according to a report and economic analysis released today by Boston Consulting Group (BCG) and the World Business Council for Sustainable Development’s (WBCSD) One Planet Business for Biodiversity (OP2B) coalition. The new report, “Cultivating Farmer Prosperity: Investing in Regenerative Agriculture,” examines the major financial advantages and systemic barriers for farmers trying to adopt sustainable farming practices and offers public and private-sector solutions to assist farmers in the transition period.
The report, which surveyed and interviewed over 100 U.S. farmers, found that early adopters cited tangible benefits from regenerative systems – notably healthier soil, reduced input costs, fewer complications from fertilizer run-off, greater biodiversity, and better resilience to extreme climate.
Based on the surveys and interviews with farmers and a financial analysis of wheat farmers in Kansas, the report found that there can be a positive business case for regenerative agriculture in the long run, with profits reaching as much as 120% above the earnings of farmers using conventional practices.
“The time to support large-scale transition to regenerative agricultural practices is now,” according to Doug Petry, report author and manager, One Planet Business for Biodiversity (OP2B), WBCSD. “Our findings show that there is a positive business case to be made for transitioning to regenerative agricultural practices – but farmers need more help. The short-term risks during the transition period are significant, which is why we must provide a support structure that includes both financial and technical assistance. We can’t let our farmers shoulder the upfront financial costs of transitioning to regenerative agricultural practices on their own.”
The report found that during the three-to-five-year transition period, farmers can expect up to nearly a USD $40 per acre profitability loss due to decreased crop yields and capital outlays for specialized equipment. But the short-term financial risk to transitioning farmers can be mitigated by a myriad of support options including cost share programs, sustainable leases, improved insurance terms, regenerative crop warranties, government subsidies, price premiums, lending programs, and ecosystem services markets.
“Our goal should be to de-risk the transition from conventional to regenerative systems for farmers,” said Sonya Hoo, managing director and partner, BCG. “Both companies and governments need to step up to the plate to lessen the burden on farmers and accelerate the overall transition to more sustainable farming practices. Our economic modeling shows that in the long run, the switch to regenerative farming is a win-win for farmers, consumers, and the planet.”
“As a 7th generation Iowa farmer, I’m seeing firsthand the opportunities to use regenerative agriculture practices to be more profitable and resilient,” said Mitchell Hora. “With our use of no-till, cover crops, and other soil health building practices, we’ve decreased our fertilizer use by 50% and our pesticides by up to 75% while increasing our yields. We had hiccups early on but overcame the logistic and economic risks and have found success.”
“The urgent need to transition to and maintain regenerative agriculture requires multiple players providing educational and financial support to farmers to help mitigate the risks and reward positive outcomes. This report shows the value and economics to help enable us to collectively support farmers,” said Hanneke Faber, Nutrition Business Group President, Unilever.
“People are the foundation of the world’s food system and PepsiCo’s business. That is why it is critical to ensure that each farmer has the livelihoods they need to grow, thrive and ensure the long-term health of the global food system,” shared Rob Meyers, VP, Sustainable Agriculture, PepsiCo (an OP2B member). “As shared in this latest report, mitigating the financial risk and learning curve associated with transitioning to climate-smart practices is key to ensuring our farmers’ success. Driven by PepsiCo Positive (pep+), we work with credible partners to enable the transition to sustainable and regenerative agriculture practices through expert technical assistance, upfront investment in outcomes, peer-to-peer networking and inclusion of farmers experienced with sustainable and regenerative agriculture systems.”
The global environmental, health and socioeconomic costs associated with the current food and land use system total nearly USD $12 trillion per year. Sustainable farming practices can help mitigate that damage while restoring ecosystem health. With the increasing frequency of extreme weather events (such as droughts, flooding, and extreme heat), combined with the immense loss of biodiversity due to agriculture over the past several decades, regenerative farming practices can be a powerful tool for farmers to adapt to a changing climate and increase profitability by doing so – for legacy and novice farmers alike.