Brief: ‘Low ROI’ Still the Top Reason Farmers Won’t Engage in Carbon Projects, Says Purdue Survey

by Jennifer Marston (Ag Funder News) - Nearly 10% of farm producers have engaged in talks about carbon capture, says the latest Purdue University/CME Group Ag Economy Barometer report. -The percentage of producers discussing carbon contracts in 2024 is consistent with survey responses from previous years. - Low adoption is likely due to the economic and logistical burdens placed on farmers in order to participate in carbon sequestration programs. - The Ag Economy Barometer calculates data from US agricultural producers that participate in a survey each month.

For the Jan. 2024 Barometer report, 8% of respondents said they have discussed carbon capture and carbon contracts with a company.

While Purdue did not state specific reasons behind the numbers, cost is most likely the biggest reason for the single-digit percentage of producers interested in carbon. In a McKinsey survey from last year, half of farmers surveyed cited “low ROI” as the top reason for not participating in carbon programs. Agricultural carbon credits account for just over 1% of total carbon credits issued.

The majority of producers to Purdue’s Jan. 2024 Barometer said they were offered a payment rate for carbon of “less than $10 per metric ton,” while just 12% were offered a rate of $30 per metric ton.

Farmers have stated in the past that payments don’t justify the extra expense of compliance and other tasks associated with carbon programs. And a 2023 report from Nature on farmer sentiment noted that, “The most consistent complaint that participating farmers raised about carbon markets was that the payment was simply too low” to “incentivize new activities that a farmer was otherwise not inclined to adopt.” READ MORE

Excerpt form Frederick News Post: For farmers, this means a lot of cold calling, advertising, and messaging from these companies looking to generate credits.

No doubt, this provides an opportunity for the modern farmer looking to both generate real ecological benefits and an additional source of income from their operation. Some companies offer outstanding financial incentives that are hard to fathom and turn down.

Importantly, this column is not meant to discourage, but rather present the considerations of enrolling with a carbon credit seeking company.

The current landscape for these companies and their respective carbon credit market participants is relatively open. There is no devoted governing body that oversees these markets and credit generation mechanisms, other than the common laws of society.

On the farm, these uncertainties come in the form of differing requirements, including changing agricultural production practices to varying degrees depending on the company with whom the farmer chooses to work.

For instance, some companies only recognize future practices to improve soil organic matter, and not those practices already in place.

In our region, the majority of our acres are in no-till production (a great conservation practice) and have been so for more than four decades. This practice on these acres would not be considered in the credit generation for some companies, effectively penalizing farmers who already are conservation minded.

These details and many more are far more complicated than presented. It speaks to the variability and base uncertainty of these markets, right down to the farm level. More conversation and clarity is needed for more agricultural operators to enroll in these programs. READ MORE

Excerpt from Ag Web: While precision agriculture technologies have been available since the 1990s, only 27% of U.S. farms or ranches used precision agriculture practices to manage crops or livestock, based on 2023 USDA reporting. The following top five states for tech use account for approximately half of the 2022 U.S. cash receipts for corn (52.6%) and soybeans (45.7%):

Most northeastern states have adoption rates below the U.S. average of 27%. Lower adoption in the Northeast might also be explained by smaller farm sizes and multiple crops in the region. GAO says farm sizes smaller than the national average could have less benefit from precision agriculture technologies.

Similar to the Northeast, many southern states have adoption rates below the U.S. average. Lower adoption in the South might be due to the concentration of small, minority and under-resourced farmers lacking access to basic tools, such as computers, and continued use of outdated technologies and practices, according to academics from a southern state. READ MORE