A recent study published by the Environmental Defense Fund outlines the financial benefits of cover crops in a row-crop operation. This, coupled with the environmental benefits, creates a practice that is both practical and vital to our state.
This study used an agricultural accounting firm, called K-Coe Isom, to take an in-depth look at three producer’s financial books after using cover crops and no-till. One of the farmers in the study is from Nevada, Iowa and the other two farmers are from Kansas and Ohio.
Items that were considered for the study were fertilizer costs, herbicide costs, and crop yields after long-term use of cover crops and no-till. The budget categories identified were revenue, input costs, variable costs, and fixed costs.
Key Findings from the study include:
- Conservation practices can pay. Farmers who adopted conservation practices – combinations of no-till, cover crops, nutrient optimization, and crop rotations – reported a cascade of cost savings throughout their budgets, including lower fertilizer, labor, fuel, and equipment costs. They also saw an increase in their farms’ soil structure and health, which in some cases resulted in increased or more resilient yields, losing less yield in bad weather years. Some costs did increase, such as cover crop seeds and herbicides, but in each of the cases studied, the benefits of conservation practices outweighed the costs.
- Payoffs come at the farm level. The farmers emphasized that conservation often requires a total management changes, and the whole of that change is greater than the sum of its individual in a couple of budget categories, but found cost savings in multiple budget categories. This analysis shows that the farm enterprise scale may be more likely to show the financial value of conservation because it captures the holistic conservation management system.
- Getting it right takes time and effort. It can take time to determine the right mix of practices or the necessary adjustments to fit conservation practices into the specific farm and rotation. It also takes time for the benefits of the practices to outweigh the initial cost of implementing them. Once farmers figured out the right combination of practices for their operations, the benefits were substantial.
- Conservation benefits are often unrecognized and unrewarded. In addition to the direct benefits of conservation to farmers, there are significant benefits to the broader farm financial system that often go unrecognized and unrewarded. Farmers who adopt conservation practices provide significant benefits to landowners, lenders, and insurers by lowering costs and increasing profits and asset values. Unfortunately, many of the current practices and policies of these business partners do not recognize these benefits and even discourage farmers from conservation adoption. Such practices and policies should be modified to recognize and encourage opportunities for conservation to add financial value.
- Conservation is a material issue. Materiality is a concept from corporate financial and sustainability reporting that proposes a threshold for reporting on issues that may affect the company and its investors and other stakeholders. The financial impacts of conservation matter for farmers’ budgets, as well as those of the businesses and individuals in the broader farm financial system. Recognizing conservation as a material issue to landowners, lenders, crop insurers, and others presents opportunities to increase the environmental and financial value generated by farmers who adopt conservation practices, while avoiding the risk associated with sticking to the status quo.
- Creating incentives for conservation is in the financial interest of businesses and individuals with financial ties to farmers. There are a number of ways the farm financial sector can encourage farmers to adopt conservation practices that benefit the entire value chain. Lease terms, land appraisal practices, crop insurance policies, and other financial instruments could all be adjusted to provide incentives for farmers to adopt conservation practices. Those innovations offer the opportunity to share the costs and risks of conservation adoption more equitably across the farm financial system, as well as generate more financial value and risk reduction for farmers and their business partners.
To read more of this report, visit this website.