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331979

Great carbon expectations

The next time you buy a product, look at its label. It may include a claim of carbon neutrality.

Such a declaration doesn’t just signify the company is trying to be a good environmental steward. It also indicates the firm believes it can increase the product’s value through a carbon-neutral claim.

This is reflected by the number of companies planning to pay or already paying farmers to operate in ways that sequester or nix greenhouse gasses – carbon dioxide, nitrous oxide, and methane – that fuel climate change. These companies coordinate with myriad businesses selling everything from carpeting to coffee in an attempt to claim the mantle of carbon neutrality.

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“It’s almost the Wild West, where there’s a new company getting involved that wants to buy your [farmer] carbon credits,” says Justin Bash, CEO of Ag Consulting Group who also farms in northern Kansas. 

Bazaar, Not a Market

Carbon is an increasingly key driver for strategic decision making across the agricultural value chain, according to an analysis by The Context Network, West Des Moines, Iowa.

Still, confusion reigns. Carbon contracts being pitched to farmers vary in contract length, payments, and practices to sequester or prevent greenhouse gas emissions. Companies vary how they pay for carbon. Some firms pay solely on carbon-friendly practices, such as no-till and/or cover crops. Others attempt to measure soil carbon.

Headshot of Iowa farmer Kelly Garrett standing in a tall green corn field with a checked red logoed collared shirt
Photo credit: XtremeAg

“Some companies will come out and take a soil test,” says Kelly Garrett, who farms with family near Arion, Iowa. “Other companies will go [pay] off an algorithm. They will want to look at your yields, they want to look at your rotation, they want to look at your soil type.”

Carbon contracts widely vary in length and specifics. Some go year-by-year, while others extend up to 10 years. Exit strategies also differ.

“Right now, it is a bazaar, not a market,” says Matt Sutton-Vermeulen, partner, The Context Network. “It [carbon] will evolve into a market with well-defined quality specifications, accountability, and liquidity on supply and demand sides. Today, though, it is relatively weak compared to a mature and robust market.” 

Currently, many farmers stand on the carbon market sideline. A 2021 Purdue University survey of 1,600 farmers found 39% of all farmers are aware of such opportunities, but only 1% of farmers have signed a carbon contract. That means about 60% of farmers are unfamiliar with carbon market opportunities.

“Lack of information is probably the biggest obstacle for a lot of farmers right now,” says Autumn Mager, who farms with her family near Rockville, Indiana, and is also a crop insurance agent.

Current Carbon Commerce

Garrett has been an early adopter of a carbon market. The Garrett farm was the first U.S. farm to sell carbon credits on the open market in 2020 through the Nori carbon marketplace, he says.

For Garrett, carbon markets represent another revenue stream on top of soil benefits he gleans from no-till and cover crops. 

“I believe this is the right way to farm,” he says.

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Mager and her husband, Stuart, have participated in carbon markets through Truterra.

“Our local agronomist who we’ve known for a long time contacted us and thought it would work on our farm,” she says. “My husband and I looked at it, and these were practices we were already implementing or had started to [adopt] in the past few years.”

Find the Right Partner

One knock against some carbon programs is that farmers who have practiced conservation tillage for decades are ineligible for payments. Some programs, though, backdate for conservation practices before the contract year.

Bash says it’s important to work with a firm that understands production agriculture.

“What I have found is that if you get the right partner and sit down with them and explain your situation, you’d often be surprised that you are eligible,” he says.

All this focuses on how carbon keys an agronomic system, says Garrett. “We’re pretty worried about our N [nitrogen], P [phosphorus], and K [potassium], and the most important element that you can put in soil is carbon,” he says. “That’s what makes the N, P, and K work. Retail ag can’t sell you the carbon. So they don’t really talk about it as much, and farmers don’t think about it.”

So Far, Low Carbon Payments Rule

Carbon payments currently aren’t padding the pocketbooks of farmers. Many U.S. farmers are paid just $10 to $15 per acre in these programs.

“The United States has a voluntary system and we’re competing against forestry credits, which are much, much cheaper for the buyer than agricultural credits,” says Justin Bash, CEO of Ag Consulting Group.

In Canada, farmers are paid more for carbon credits because of government support, he adds.

“I think most people here would like their credits to be worth more, and they’d also like the government not to be involved, but you can’t have it both ways,” he says.

Carbon Market Coverage

This marks the debut of a joint carbon market project between Successful Farming magazine and The Context Network, West Des Moines, Iowa. We are developing editorial content regarding existing carbon markets and carbon programs available to farmers. Each month, Successful Farming magazine and Agriculture.com will contain stories that enable farmers to dig deeper into carbon markets. The mid-November issue of Successful Farming magazine will also feature carbon market stories. Future carbon market coverage may also convey information through other media platforms.

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