Carbon evaluated

Philip Hopkins

CARBON capture is struggling to attract farmers in the US, according to a recent article in the Wall Street Journal (WSJ).

Patrick Thomas wrote in the WSJ that agricultural companies were investing millions of dollars to develop farming programs designed to capture more carbon dioxide in paddocks, as a possible solution to mitigate climate change. The article was reproduced in The Australian.

The challenge: convincing farmers it is worth their time, the costs of new farming practices and potentially losing out on some of their harvest in the process, WSJ said.

Iowa corn farmer Chris Edgington told the newspaper he had looked at carbon programs over the past year, calculating the risks of reduced crops as he adjusted the way he managed his crops and the potential compensation for the carbon his paddocks could capture. So far, he hasn’t signed up.

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

WSJ said agricultural companies such as Bayer are developing systems that aim to create a farmer-driven carbon market. The idea is to turn paddocks into carbon sinks: plants take carbon dioxide from the air and combine it with water and sunlight to produce energy through photosynthesis, which embodies carbon in the dirt through the plants’ roots. Soil can retain the carbon for years if left undisturbed.

In this way, farmers could be paid and become part of the potential solution to the threat of climate change, while carbon programs would give companies a potential new revenue stream.

Companies maintain that farm-generated carbon offsets would draw demand from food manufacturers, airlines and tech companies seeking to offset their own emissions.

WSJ said the market for carbon credits, including forestry and other carbon-capture projects, could reach $US 50 billion ($A71b) by 2030, according to a 2021 study from consulting firm McKinsey.

“Agricultural companies say farmers will share in proceeds from the sale of carbon credits,” Thomas wrote.

Less than 5 per cent of the 1300 US farmers surveyed by McKinsey said they took part in a carbon program, and more than 50 per cent said an unclear return on investment was one of their top reasons for not participating.

The number of farmers signing contracts for a company’s carbon market was flat at 1 per cent from January 2021 to August 2022, according to a survey of hundreds of farmers conducted by Purdue University.

However, agricultural executives said their farmer sign-ups were on track or exceeding expectations, with demand for carbon credits tipped to rise along with the price farmers were paid, WSJ said.

They were flexible, for example grandfathering farmers into programs who had been using carbon-capturing ‘no till’ farming practices for years, or by offering more flexible contracts.

They said farmers’ pay cheques would rise over time as would the health of their soils, another long-term benefit. New production techniques included avoiding tillage and planting cover crops in winter.

Farmers were generally paid $US15-$US20 per tonne of carbon sequestered under agricultural companies’ programs, a senior analyst at Bank of Montreal, Joel Jackson, told WSJ.

He estimated that farmers need to earn more than $US50 a tonne to make carbon programs economically viable. No-till farming, depending on the farm, sequesters an average of 0.3 tonnes of carbon per acre a year, according to the Soil Science Society of America.

Chief strategy officer at agricultural company Indigo, Chris Harbourt, told WSJ that carbon should be priced at $US75 per tonne for farmers to take notice. “At $US100-plus, farmers need to think about it as a serious part of their farm planning,” he said.

Australia’s reported ACCU spot price had been generally averaging in the low $30 range since the announcement on contract milestone exit arrangements until it settled at just over $35 after 23 May 2022.

Kevin Prevo, a farmer in Bloomfield, Iowa, said he was paid $US3000 through Indigo’s carbon program in 2021 and $US6000 in 2022. It was a promising start, but the money so far wasn’t enough for some farmers to justify overhauling practices on their fields, he said.

WSJ said when the carbon programs were launched several years ago, farmers were encouraged to generate extra cash when commodity prices were low. However, grain prices were now high, boosting farmer income levels and reducing the need for extra cash.

The carbon market remained undersupplied partly because of the complex process to verify carbon credits from paddocks, causing delays, Nutrien’s vice-president of sustainable agriculture, Matthew Marshall, told WSJ.

Companies are now 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 the head of Bayer’s carbon business model unit, Leo Bastos.

“It’s still a nascent market,” he told WSJ.

Gippsland Farmer

The Gippsland Farmer is a monthly agricultural newspaper reporting on rural news and distributed FREE and direct to an area covering from Cann River through to South Gippsland. For more than 40 years Gippsland Farmer has reported on a range of issues and industries including dairy, beef, vegetables, sheep, goats, poultry, organic farming, and viticulture.