News

What are farmers looking for in carbon markets?

Carbon markets are helping generate a new source of revenue for farmers, but a Corteva representative says there are many things to consider.

Ben Gordon, carbon and ecosystem services portfolio leader, encourages farmers to look into different carbon programs to determine if they’re eligible and understand what is expected to maintain a contract.

“Start with ensuring that you have the confidence that the program is going to be able to pay and pay in the future as well. It’s asking folks who is the buyer, what is the type of credit you’re generating, and how is the pricing structured. Are you guaranteed a price, are you guaranteed a buyer and what could that look like in 3-5 years from your ability to actually go and capture that upside,” he says. “Make sure you’re not just giving all of your rights to a company that says they’re going to share in the upside but you can’t see that in a contract. That’s the first big piece. The second one is, how much data is it going to take to generate these credits and what does the support look like. Are you able to use your existing agronomist and is there going to be a human on the other side of the program or is it just going to be software? The last piece, and probably the most important for farmers, is what flexibility will you have. Does the program you’re looking at allow you to maintain agronomic flexibility. Make sure you’re able to manage for your crop and for the right agronomy vs. just to a program as well as making sure you’re making sure you’re able to hold us as program providers accountable, so we have to earn your business and so you’re not just locked in. Those opt-outs are important as well as understanding if you are opting out, what are the implications of that from a financial or legal perspective.”

Carbon markets were a big topic of interest during last week’s Ag Policy Summit by Indiana Corn Growers Association and Indiana Soybean Alliance. Gordon spoke during the event. Brownfield interviewed Gordon this week to find out more information.

Gordon says the Corteva Carbon Initiative pays farmers for implementing new practices like strip till, no till, cover crops, or increased nutrient efficiency. The program is available to row crop farmers in Indiana, Illinois and Iowa this year, with the intent to extend to other areas and crops in 2022.

“If you’re adopting those practices, we will guarantee you a buyer for a third-party, independently-certified credit so you get that upside,” he says. “We guarantee $15 a ton. You’re looking at roughly $7-$20 a ton minimum and we’re excited for that to increase in the 2022 crop year. We offer what we think is one of the most flexible, farmer-focused contracts in the market. We guarantee farmers 75% of the revenue and they can also do a two-year contract with an annual opt out after that.”

Farmers are interested in carbon markets.

Nebraska Farm Bureau President Mark McHargue tells Brownfield he sees potential in carbon markets for ag producers.

“I think it is really good,” McHargue says. “I think we need to have the greater conversation. The conversation is happening. How do we measure it? Who is going to broker them? What the actual value should be?”

But, Indiana farmer Mike Beard says there are some frustrations as a farmer who adopted cover crops and adjusted nutrient use and has had no-till soybeans for three decades.

“We’re not sure we’ll qualify because not a lot of programs are giving credit for what we have done; it’s for what needs to be done yet,” he says. “We’ve done all of this stuff, never been compensated for it, and now my neighbors who have been slow to adopt practices could stand to reap $20-$80 an acre. It is what it is.”

Beard says, to be fair, there have been some incentives to being an early adopter through the Natural Resources Conservation Service’s Conservation Stewardship Program.  

“Now we’re trying to figure out which companies offer which programs, what our commit would be, and what the implications are going forward,” he says. “We want to know more about those unknowns.”

Gordon says a lot of people in the industry are working on ensuring there are opportunities for early adopters as well.

“The big focus I have, whether it’s for an early adopter or someone considering these practices, is to start with the overall agronomic and return on investment for the operation or practice because the prices aren’t at a level where folks should be changing their practice for one of these programs,” he says. “Right now, the practice is driving the ROI and these programs are the cherry on top to maybe make that business case a little bit better to create more of a buffer.”

Click here to find out more about the program. Click here for a carbon calculator to find out what you could earn through Corteva’s Carbon Initiative.

Audio: Ben Gordon