WASHINGTON, DC — Transitioning to regenerative agriculture systems from conventional systems should increase profitability for farmers in the long run, but they will need assistance from ingredient suppliers, food companies, government agencies and insurance companies during a transition period that lasts from three to five years, according to a report released May 24.
The Boston Consulting Group and the World Business Council for Sustainable Development’s One Planet Business for Biodiversity (OP2B) coalition created the report. PepsiCo, Inc., Mondelez International, Inc. and Nestle SA are some of the companies in the OP2B coalition.
“People are the foundation of the world’s food system and PepsiCo’s business,” said Rob Meyers, vice president, sustainable agriculture for PepsiCo, Purchase, New York, US. “That is why it is critical to ensure that each farmer has the livelihoods they need to grow, thrive and ensure the long-term health of the global food system. As shared in this latest report, mitigating the financial risk and learning curve associated with transitioning to climate-smart practices is key to ensuring our farmers’ success.”
Regenerative agriculture aims to promote carbon sequestration, reduce greenhouse gas emissions, enhance biodiversity, improve water retention in the soil, reduce pesticide use, improve nutrient use efficiency and support farming livelihoods, according to the report. Cover crops, diversified crop rotations and reduced tillage are some examples of regenerative agriculture.
The report included surveys and interviews with more than 100 US farmers and a financial analysis of wheat farmers in Kansas. The report found early adopters to regenerative agriculture cited benefits in healthier soil, reduced input costs, fewer complications from fertilizer run-off, greater biodiversity and better resilience to extreme climate.
During the transition period farmers should expect a loss of nearly $40 per acre due to decreased crop yields and capital outlays for equipment. Support options include cost-share programs, sustainable leases, improved insurance terms, regenerative crop warranties, government subsidies, price premiums and lending programs. Consumer packaged goods companies could work with their suppliers to offer a price premium to farmers.
“Our goal should be to de-risk the transition from conventional to regenerative systems for farmers,” said Sonya Hoo, managing director and partner with the Boston Consulting Group. “Both companies and governments need to step up to the plate to lessen the burden on farmers and accelerate the overall transition to more sustainable farming practices. Our economic modeling shows that in the long run, the switch to regenerative farming is a win-win for farmers, consumers and the planet.”
Now is a good time to begin the transition to regenerative agriculture since wheat prices and farmer profits are near all-time highs, according to the report. The high prices could serve as a buffer to minimize the revenue impact of any initial yield declines and new costs.
Farmers in the long run could expect an increase in profitability of 15% to 25% after transitioning to regenerative agriculture. Reduced costs could come through several practices. Diversifying cash crops by moving to rotations that integrate corn and soy along with wheat could lead to selling three crops in three years, compared to two crops in a three-year conventional system. Reducing tillage could result in lower fuel and labor needs. Integrating grazing systems for external cattle, with herds from nearby ranchers being an example, also provides benefits.
The report concluded by pointing out the Paris Climate Agreement seeks to limit global warming to 1.5°C, which requires global greenhouse gas emissions to decline by over 40% by 2030. The transition program of three to five years would take industry to 2026-28.
“The time to support large-scale transition to regenerative agricultural practices is now,” said Doug Petry, report author and manager of OP2B. “Our findings show that there is a positive business case to be made for transitioning to regenerative agricultural practices — but farmers need more help. The short-term risks during the transition period are significant, which is why we must provide a support structure that includes both financial and technical assistance. We can’t let our farmers shoulder the upfront financial costs of transitioning to regenerative agricultural practices on their own.”
The companies in the OP2B are Arla Foods, BNP Paribas, Danone SA, Diageo, DSM-Firmenich, Friesland Campina, Groupe L’Occitane, HowGood, IKEA, InVivo, JDE, Kering, L’Oréal, Livelihoods Funds, LVMH, Mars, Inc., McCain Foods Ltd, Mirova, Mondelez International, Nestle SA, PepsiCo, Symrise, Unilever and Yara.
Source : WorldGrain