After a two-year break, it was nice to get back together with old and new industry colleagues to discuss the state of technology in agriculture, the opportunities and challenges it faces.
In the spirit of sparing your (reader's) time, I'll jump straight to a few key takeaways that I think are worth sharing to align our industry and propel innovation.
Here are three themes that stood out to me:
- Connectivity and traceability will pave the way to sustainability
- New opportunities are emerging in carbon and ecosystem markets
- Industry transformation is dependent on training and enablement
Let's unpack each of them.
Connectivity and traceability will pave the way to sustainability
Supply chain connectivity is not just the ability to trace ingredients farm to fork using digital technology. Whilst this is an important use case, this is not the one I have in mind here.
Climate change awareness and covid-related disruptions triggered a wave of supply chain changes and shifts in focus both for consumers and major brands.
There hasn't been a time when food companies wanted to be closer to the farmers or partners they are sourcing from. Why?
- There is a growing understanding that for us to keep living on this planet we must reduce our GHG emissions, and hence, many leading brands have developed net-zero emissions goals.
- For most major food and CPG companies, a large portion of their emissions is coming from the farms they work with. This is where they need to focus to reduce those emissions.
- In order to be able to meaningfully impact the emissions coming from farms, food companies need to have a good level of connectivity with the upstream supply chain partners. They must also have a connection with their farmers to implement projects, such as those aiming to achieve reduced emissions through the adoption of regenerative agriculture.
Emerging carbon and ecosystem market opportunities
Growing awareness of climate change brings opportunities and new revenue streams, such as carbon and ecosystem markets. These markets offer the farmers access to additional revenue in exchange for ecosystem services.
What are the things that are of service to the ecosystem? To name a few — avoiding and reducing existing emissions, sequestering carbon in the soil, and planting pollinator habitats and buffers to promote biodiversity or improve water quality. All these practices lead to outcomes that are "invaluable" to society — clean air, clean water, and a lower risk of climate-related disasters. Some of these ecosystem benefits are easier to quantify than others. We have reached a point, it seems, where there is a general agreement that we should find ways to compensate farmers for their role in reducing carbon emissions.
There is an ongoing debate about the nature of carbon or ecosystem markets, being focused largely on "net new" ecosystem benefits that meet the criteria of additionally, i.e. the reduction in emissions or sequestration would not have occurred without the additional financial incentive (market incentive, credit). This also means that markets can not incentivize producers that have been practicing regenerative agriculture for years.
What will motivate them to continue doing the right thing? We at Regrow get this question a lot.
There are more revenue opportunities and incentives than just carbon markets for producers who have adopted sustainability practices on their operations. To highlight two, which we believe are particularly promising:
- Sustainable or Identity Preserved (IP) commodities/products
- Low-carbon biofuels.
For example, farmers who have been using no-till practices, cover cropping and optimizing the rate and placement of fertilizers for years would have achieved a near-optimal emission factor for the commodities they grow, meaning that the same commodity grown somewhere else is more likely to have a higher emission factor. Being able to offer low emissions products to buyers is a very strong competitive advantage in a climate-concerned world.
CPG and food companies have only so many ways to reduce the emissions associated with their products. Working with their existing farmers to implement sustainable practices such as regenerative agriculture is one viable option. Another option is finding supply sheds with lower emissions associated with the same quality product.
[Small plug, it is to address these two problems that we at Regrow developed our MRV and Sustainability Insights products.]
The same logic applies to the biofuels side. The lower the carbon intensity of the biofuel, the higher the price the farmer can get for it (within the limits of what the market can bear).
Industry transformation is dependent on training and enablement
The final theme, which cannot be emphasized enough, is that for the whole industry to get behind a new "green revolution", there is a lot of training required for folks interacting with farmers on the front lines of this revolution — crop advisors, precision ag managers in ag retail, grain buyers and others.
Many companies who have made sustainability a significant part of their farmer offering in the last two years are spending time educating their teams on the benefits of regenerative agriculture and highlighting ecosystem markets as an opportunity for farmers.
What does this practically entail, you ask? What do these partners need training on, if all the data is (likely) already there? Agronomy. Agronomy, or the science of soil management and crop production, is a cornerstone of any decision that touches soil or crops on the farm. Regenerative agriculture prefers some agronomic practices to others, but it is still in essence based on agronomy.
When a farmer and their advisor are making agronomic decisions, they usually perform some ROI analysis and scenario planning. (At Regrow, we have built the MRV enrollment module to help with this.) They also need to know what entering into any of these market arrangements implies on a contractual and financial level in order to make an informed decision. Given that regenerative agriculture programs offered to farmers are quite new, and the incentives they are offering are promising but not yet at a point of being a "no brainer", farmers and their advisors need all the education on the programs as well as principles of regenerative agriculture that our industry can provide.
These themes — establishing connectivity, taking advantage of ecosystem markets and enabling industry transformation — will be essential in empowering progress and innovation in precision agriculture.
Explore more event recaps and learnings on our blog.