Letters to the Editor
Factoring Conservation Data Into Farm Finance Determinations
The views expressed are those of the individual authors and not necessarily those of DTN, its management or employees.
To the Editor:
My family has a corn and soybean farm in central Illinois where we've seen our fair share of weather events. From floods to droughts, it can be difficult to predict the size of an upcoming harvest. We are always looking for ways to build our resilience as the climate continues to change. That's why we started using conservation practices. We can't predict the weather long-term, but we can take steps to help our farmland be more resilient in the face of torrential downpours or prolonged dry periods.
We are fortunate that our country has consistently invested in agriculture and that a key part of that investment has been to support conservation practices. In addition to government investments in conservation, major food and agriculture companies are now recognizing the benefits of these practices and are providing incentives for conservation and regenerative practices on farmland.
While there are many conservation practices being used, no-till and cover crops are the soil health practices most used on crop fields. Over 100 million acres of U.S. cropland are farmed no-till and over 20 million acres of cropland are currently planted to cover crops. What we are finding is that these soil health practices not only improve conservation outcomes, they can also help a farmer's bottom line.
A recent Meridian Institute report entitled "Conservation and Crop Insurance Research Pilot" (https://foodandagpolicy.org/…) that I collaborated on provided strong evidence that using cover crops and no-till farming practices has a positive economic impact for producers. As data analyses on conservation practices continue to accumulate, the insights provided can better inform the farm lending and finance community on how conservation practices, particularly no-till and cover crops, can improve on-farm profitability.
Traditionally, the pricing and structuring of rental arrangements, agricultural loans, and farmland valuations/appraisals, have not incorporated the impact of farm conservation practices. Using recent farm economic case studies and other conservation practice data provides a real opportunity to incorporate the economic benefits of conservation methods into the methods and calculations used by those working in the farm finance sector.
From having worked in sustainable agriculture and conservation for over three decades, it's clear to me that better use of available economic data on conservation practices could help with farm financial reviews. Such data can help with more accurate appraisal of farmland value, more insightful loan underwriting processes, and more effective cropland management by financial institutions and farmland management companies.
There are many external factors, predictable and unpredictable, that can impact conservation practices. For example, impacts from conservation approaches depend on the type of crop, when it was planted, where it was planted, the weather that season, etc. But, with improved data we can better analyze and understand how conservation decisions can impact farmers' profitability. As we know more about the impacts of these practices, financial institutions can use this information to better evaluate farm finance decisions: a win-win for lenders and farmers.
To help those working in the farm finance sector in evaluating conservation approaches, I worked with the Meridian Institute to release a new paper entitled "How Conservation Practices Influence Agricultural Economic Returns Implications for the Farm Finance Community" (https://foodandagpolicy.org/…). This paper is intended to help financial institutions better assess on-farm risks and opportunities related to conservation. Research on conservation practices like cover crops and no-till is helping farmers reduce planting risk and increase profitability across the country. Let's make sure we make good use of conservation data and insights to keep investing where it most matters.
Rob Myers, Ph.D.
Director of the Center for Regenerative Agriculture at the University of Missouri
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