Building Team Chemistry: The Bigger Picture Behind Cows & Climate
Conor McCabe
Animal Biology Graduate Student, UC Davis
There is no empirical correlation between good soil health practices like cover cropping, reduced tillage and crop rotations and their impacts on crop yields. As a result, agricultural lenders and insurers who price risk do not currently factor in incentives for the risk reduction generated by improved soil health management practices.
There is currently no economic rationale agricultural lenders and insurers to offer farmers financial incentives, such as better terms or lower loan rates and insurance prices to producers adopting good soil health practices. Additionally, U.S. tax dollars currently subsidize billions of dollars in crop insurance payouts, largely due to flood and drought, which good soil health practices help mitigate. The U.S. Department of Agriculture’s Risk Management Agency, which is committed to increasing the availability and effectiveness of Federal crop insurance as a risk management tool, does not have a way to reliably quantify field-level risk reduction from good soil health practices that that could potentially save significant taxpayer money.
To solve for this, Land Core is creating an unprecedented market-based, actuarially-sound model that can determine the risk-mitigation benefits and related cost savings associated with specific soil health practices.
The marketplace for agricultural lending and insurance is enormous. Agriculture debt was valued at $467.4 billion in 2022 according to the U.S. Department of Agriculture Economic Research Service, with around $20 billion in new loans issued annually. Capturing even a fraction of this existing market through de-risking represents a large funding potential to spur the transition to a soil-health centered agricultural system.
Land Core is partnering with Compeer Financial, an agricultural lender and insurer, and the third-largest farm credit system cooperative with $30 billion in assets, to support the development of the model including providing appropriate parameters for analysis and ensuring its usability within the industry. Through this partnership, Compeer Financial has become the first major agricultural financial services provider to approach risk assessment through the lens of soil-health.
Land Core is also co-developing and piloting with Compeer Financial and its Midwest farmer clients an array of soil health-adoption incentives based on this research. Additionally, Land Core is working with a growing network of regional farming partners to seek feedback on these piloted incentives and assess the impact of these new program and product offerings in influencing adoption.
Paul and June Rossetti Foundation, Mighty Arrow Family Foundation, J.M. Kaplan Fund, Great Island Foundation and Records-Johnston Family Foundation