Saving the Planet Is Risky Business

If farmers are going to save the planet…you’ve got to make it less risky to do so
If farmers are going to save the planet…you’ve got to make it less risky to do so
(Farm Journal)

“The biggest risk is not taking any risk… In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks.”

Those words are from Facebook founder Mark Zuckerberg captured during a 2015 interview. While I am not exactly Zuckerberg’s biggest fan, his words have an incredible amount of utility in the world of agriculture right now.

Farmers, faced with growing pressures from society, government, and last but not least the consumer, are being asked to massively overhaul the way they farm. The once distant drumbeats of change have now become too loud to ignore. 

Truth be told, the word “asked” is too kind and too subtle given the real conversation happening now. Words like “told”, “strongly suggested”, “highly recommended” and now the most dreaded words of all — “required” or “mandated” — are the words that farmers are now hearing when listening to their new “to-do” list in how to save a planet by farming “differently”.

But there’s a problem. Despite all the talk, nudges, encouragement and arm-twisting, farmers still aren’t just rushing to transform massive amount of acres into the regenerative, sustainable “model” farms envisioned by those outside the farm gate. It has conservation groups, consumers, government officials and even the United Nations scratching their collective heads wondering “why” the adoption of such practices aren’t moving faster. 

Anyone who truly understands the psychology of a farmer understands why this is not happening.

It is simple and can be boiled down to a single word — “risk”. Changing a particular farming practice only introduces more risk into an already insanely high-risk, low-margin environment. Telling somebody who has to deal with so many things outside of the their control — like weather, insects and fickle governmental trade and monetary policies — to voluntarily introduce more risk in mass to their business is beyond wishful thinking and flat out naive. It is a bridge too far for many farmers.

If it is being “suggested” by those “outside” of farming that farmers farm “differently” then maybe they need to think “differently” on how to lower the risk for farmers of adopting such practices. No farmer is suddenly going to wake up one day and deploy no-till, create buffer strips and plant cover crops across all their acres when they don’t know what the consequences will be. There’s too many questions and probably the biggest one centers around yield. Preserving yield is para-mount. 

Yes, yield is everything.

Why? One super obvious reason is because it drives the current “safety net” in place meant to deal with the “risk” that a majority of crop producers face. That safety net we all know is Federal Crop Insurance. The irony here is when you really look at the current structure of governmental subsidized crop insurance today you start to realize just how much it is at odds with the sustainability goals currently being preached.

For example, the last thing a farmer would want to do is actually inadvertently lower his Actual Production History (APH) Yield. Every farmer knows the reality that whenever making a major change to practices such as no-till or cover crops there are going to be bumps in the road and a few kinks to work out. That may take a few years but most likely any those bumps aren’t going to be big enough to trigger a crop insurance claim and in the end you could end up with a lower APH. 

That brings us to the real issue and opportunity.

Federal crop insurance was really designed for crop year failures like we saw in the drought years of 2012 and 2013 and the washout year of 2019. Typically, most producers choose policies that preserve income based on 65 to 75% of their APH yield. In the end, that still means a minimum of 25 to 35% of their yield based income is at risk. That “risk gap” is a huge stumbling block for scalable sustainability adoption. Granted, there are many other rules, regulations and reasons within current framework of crop insurance that stymies sustainability. For a more in-depth take on what those are check out this article by the Conservation Finance Network

Now it will be interesting to see if the Biden Administration will try to do some serious realignment of bringing Federal Crop Insurance more in sync with their “green goals”. Given the fact that about 74% of US cropland, or 290 million acres — is covered by crop insurance it is quite likely something will be brewing in this arena. Plus, given the fact that the government pays an aver-age of 62% of the cost of the average premium you now realize that the government holds both the carrot and the stick to make something happen. 

While it seems likely something will emerge at the governmental level, you are already seeing the marketplace respond in very interesting ways with some very unorthodox partnerships.

Take the unique collaboration with a company named Growers Edge and The Nature Conservancy. To help accelerate the adoption of regenerative practices they are starting to pilot innovative risk management products that would cover the APH risk gap. They are currently working with farmers and retailers to roll out this concept. This sounds a bit like the 100 or 105% APH guarantees also being floated by crop input manufacturers or larger ag retailers. What’s different is it centers around practices more than it does products. In some ways that does make it more enticing and liberating. Will it work? Time will tell. But look for more carrots and sticks to come to either entice or enforce a much faster drive toward sustainability and re-generative ag at the farm gate. However, any time you can replace risk with reward — things are bound to happen much, much quicker.   
 

 

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