Agriculture Companies Push Carbon-Capture Farming; Growers Are Skeptical

Source: By Patrick Thomas, Wall Street Journal • Posted: Sunday, January 22, 2023

Executives say programs provide extra cash and offer long-term benefits

Soil can retain carbon for years if left undisturbed. PHOTO: ANDREW CABALLERO-REYNOLDS/AGENCE FRANCE-PRESSE/GETTY IMAGES

Agriculture companies are investing millions of dollars to develop farming programs designed to capture more carbon dioxide in fields, as a possible solution to mitigate climate change.

Iowa corn farmer Chris Edgington said he has looked at various carbon programs over the past year, calculating the risk of reduced crops as he adjusts the way he manages his crops and the potential compensation for the carbon his fields could capture. So far, he said, he hasn’t signed up.

“At the current economics, it will be a real challenge to grow,” said Mr. Edgington, chairman and a former president of the National Corn Growers Association.

Agriculture industry giants including Bayer AG, BAYRY 0.46% Nutrien Ltd., NTR2.44% Corteva Inc. CTVA -0.37% and startups such as Indigo Ag Inc. are developing systems that aim to create a farming-driven carbon market.

The idea is to harness natural processes to turn farmers’ fields into carbon sinks : Plants withdraw carbon dioxide from the air and combine it with water and sunlight to produce energy through the process of photosynthesis, which embeds carbon in the dirt through the plants’ roots. Soil can retain the carbon for years if left undisturbed.

The agriculture industry, which has come under increased environmental scrutiny in recent years, has said that paying farmers to maximize those natural processes can help make them part of a potential solution. Carbon programs also give companies a potential new revenue stream, as they project farm-generated carbon offsets will draw demand from food manufacturers, airlines and tech companies seeking to offset their own carbon emissions.

The market for carbon credits overall, including forestry and other carbon-capture projects, could reach $50 billion by 2030, according to a 2021 study from consulting firm McKinsey & Co. Agriculture companies said that farmers will share in proceeds from the sale of carbon credits.

Less than 5% of the more than 1,300 U.S. farmers surveyed by McKinsey in 2022 said they participated in a carbon program, and more than 50% of farmers said an unclear return on investment was one of their top reasons for not participating. The number of farmers signing contracts to participate in a company’s carbon market was flat at about 1% from January 2021 to August 2022, according to surveys of hundreds of farmers conducted by agronomists at Purdue University.

Agriculture executives said their farmer sign-ups are on track or exceeding expectations. Fertilizer supplier Nutrien Ltd. said it had signed up 110 growers in 2021 to its carbon program and reached 160 in 2022, on par with its goal. Corteva officials said the seed supplier’s program is on track and that demand for carbon credits is expected to rise along with the price farmers are paid.

Executives said they are adjusting to farmer concerns, including by grandfathering farmers into programs who had been using carbon-capturing “no till” farming practices for years, or by offering more flexible contracts.

Company officials say that farmers’ paychecks will rise over time, as will the health of their soils, another long-term benefit that they said will entice farmers to sign up.

To participate, farmers must commit to overhauling crop-production systems to incorporate practices that increase their soil’s carbon sequestration, such as avoiding tillage and planting cover crops during the winter.

Farmers generally are paid $15 to $20 per ton of carbon sequestered under agriculture companies’ current programs, Bank of Montreal senior analyst Joel Jackson said. He estimated that farmers need to earn more than $50 a ton to make carbon programs economically viable for their operations. Though it varies by farm, no-till farming sequesters an average of 0.3 metric tons of carbon per acre a year, according to the Soil Science Society of America.

Earlier: Money is a sticking point in climate-change negotiations around the world. As economists warn that limiting global warming to 1.5 degrees Celsius will cost many more trillions than anticipated, WSJ looks at how the funds could be spent, and who would pay. Illustration: Preston Jessee/WSJ

“Carbon should be priced at $75 per ton for farmers to take notice,” said Chris Harbourt, chief strategy officer of Indigo. “At $100-plus, farmers need to think about it as a serious part of their farm planning.”

Mr. Harbourt said Indigo has raised the amount it pays farmers in the past year from $20 per ton to more than $40. He said the price that farmers are paid will rise as companies pay more for the credits.

Kevin Prevo, a farmer in Bloomfield, Iowa, said he was paid $3,000 through Indigo’s carbon program in 2021 and $6,000 in 2022. It is a promising start, and he recommends the carbon programs for farmers with new land, he said, but the money so far isn’t enough for some farmers to justify overhauling practices on their fields.

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“The money is nothing to brag about,” Mr. Prevo said. “The payments have gone up, which is hopeful.”

When the carbon programs launched several years ago, they were pitched by companies as a way for farmers to generate extra cash at a time when commodity prices were low. Grain prices are now high amid a global shortfall, exacerbated by Russia’s invasion of Ukraine. That trend has boosted farmer income levels and reduced the need for extra carbon-capture cash, agriculture analysts and company executives said.

The carbon market remains undersupplied partly because of the complex process to verify carbon credits from farmers’ fields, causing delays, said Matthew Marshall, Nutrien’s vice president of sustainable agriculture and retail strategy. He said elevated crop prices have also reduced some growers’ willingness to participate.

Companies are trying to ease the transition to more climate-friendly practices by suggesting new pesticides and providing other agronomic advice that would limit harvest losses that could come with switching practices, said Leo Bastos, head of Bayer’s carbon business model unit.

Mr. Bastos said: “It’s still a nascent market.”

Write to Patrick Thomas at