Tom Hall, Senior Agronomist, Rooster Strategic Solutions
Remember the “good old days,” before the Ukrainian invasion, when inflation was a comfortable 2 percent, and nitrogen fertilizer was neither scarce nor expensive? Yeah, that was 6 months ago. The world seems to have been turned upside down since then, and agriculture and the global food supply is one of the most-affected sectors. In times of inflation, high prices, and shortages that cut into your ROI, reviewing farm management processes – what my father used to call, “stop doing the stupid stuff” – is more important than ever.
For instance, savvy farmers have known for years that improving their soil health has a direct connection to profitability. Healthy soils promote soil drainage, improve the availability of phosphorus and nitrogen, and reduce stresses from insects and weeds. All this translates into potentially higher yields with reduced inputs.
My own soil health epiphany came during a series of visits to a Central-Kansas farm. Over the 13 years I visited, this farmer with 3000 acres of wheat, corn, soybeans and alfalfa constantly adjusted his crop rotation, including cover crops, and reduced his tillage to minimize compaction. In doing so, he lowered his fertilizer bill, eliminated fungicides, avoided weeds and bugs, and eventually parked all his tillage equipment.
But what really jumped out at me was the improvement to soil tilth. There are several tests that will measure overall soil health, but my method is much simpler. Brush the residue off the soil surface and grab a handful of soil; if it breaks into small clumps in your hand, that’s healthy soil. If you find a hard, cemented surface, you have a lot of work to do. This farmer’s soil was excellent.
5.2 billion reasons to sell carbon credits. This farmer would be an excellent candidate to start selling carbon credits, if he hasn’t already started. And he wouldn’t be alone. One estimate suggests that U.S. farmers have the potential to generate $5.2 billion in annual revenues by sequestering 250 million tons of carbon dioxide, which equates to roughly 4 percent of the country’s emissions. A large market with at least 12 program-ready buyers of carbon credits already exists. Conservation tillage and cover crops are practices accepted by all these programs. Some programs also offer credits for nitrogen management, managing pastures, restoring livestock areas, agroforestry, land retirement, and extended rotations.
Having said that, there are any number of farmers who should probably stay out of the carbon market. For instance, if you’re nervous about eliminating tillage; if you don’t believe in the potential benefits of cover crops; or if you’re hesitant to share your farm data with a third party. For all others, though, it’s worth considering. Here’s a breakdown on the markets today and steps to take as you evaluate your own operation.
When is the best time to sell carbon credits? There is no “best time,” but you’ll want to pull the trigger on a carbon contract before you make changes to your practices. Some programs pay for “look back” practices or for carbon stored in the past, but most programs only pay for new carbon that will be stored from new management changes.
What’s the first step to selling carbon credits? We recommend downloading a report written by Iowa State’s Dr. Alejandro Plastina, “The U.S. Voluntary Agricultural Carbon Market: Where to From Here.” It’s essential reading for any farmer and provides an overview of the companies that buy credits. One of the items the reports stresses is that before entering into any agreement, farmers must understand a concept called MRV:
- M=What will be measured to quantify the amount of carbon sequestered
- R=Where the measurements will be reported
- V- How the measurements will be verified
All U.S. carbon programs require that a contract be in place that outlines the compensation for implemented farm practices, that farmers share the practices they’re making on a field basis using an online data platform, and that the carbon program uses this online data to calculate compensation.
Once farmers understand the carbon market, it’s time to start the search for companies to buy their carbon credits. We included a chart from the Farm Foundation that summarizes the different options at the end of this story. To get the most return from selling carbon credits, it pays to look past dollars paid-per-ton. You want a partner with a program that helps you improve soil health, too. There is no “easy button,” but having access to experts who can guide farmers through the contracts to sell carbon credits and have the agronomic expertise to simultaneously improve soil health is essential.
We like the hands-on approach that Indigo Carbon takes with farmers. It integrates modeling with on-farm soil tests and verification. It helps farmers find the right contract and has the agronomic expertise necessary to help farmers achieve the even greater economic benefits that come from improved soil health. By partnering with companies like Corteva and Granular, Indigo Carbon provides more data for farmers as they navigate the carbon market. Also, in my opinion, Indigo Carbon has more realistic views on verification, which can lead to higher values for their credits.