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4 reasons we should invest in Regenerative Agriculture

·Finance reporter
·5-min read
A farmer checks on her planted crop (Source: Getty)
Regenerative agriculture may be a solution to stabilise food supplies against a changing climate. (Source: Getty)

Changing climate and the need for ongoing food sources for humans has put a strain on farming supply chains, prompting a push to redefine farmland value to help ensure our agricultural system is resilient for future generations.

Regenerative agriculture - and improving soil health - might be the opportunity to adapt and mitigate the effects of a changing climate, but researchers from the University of Melbourne say scaling the practice needs financial innovation. 

Soil health, and regenerative agriculture more broadly, are becoming part of the zeitgeist with Netflix documentaries like Woody Harrelson’s Kiss the Ground to the Archibald-winning oil painting Soils for Life - which encapsulates farming in southern New South Wales. 

But how can it actually benefit Australian agriculture and is it financially viable?

What is regenerative agriculture?

One of the major hurdles is the misconceptions and multi-definitions of regenerative agriculture although, broadly, it’s a set of farming principles that tries to restore the environmental value of the land, often with an aim to improve soil health.

“Trying to restore the soil health includes things like minimum tillage in cropping systems, eliminating bare soil in pastures, maintaining continuous cover of vegetation, having a more diverse plant mix in pastures and ending crops and incorporating perennials and woody vegetation,” the chair of Forest and Ecosystems Science at the University of Melbourne, Professor Rod Keenan, told Yahoo Finance.

“For grazing systems, that can be things like rotational grazing. But the general principle is to try and work with the natural system in the natural environment. 

"So you're aiming to reduce fertilisers and pest control in agricultural chemicals in general.”

A farmer walks across dusty cropland. (Source: AP)
The main aim of regeneraive agriculture is to restore the environmental value of the land. (Source: AP)

The ongoing disagreement among farmers and agricultural stakeholders is over what regenerative agriculture is and even whether to use that label. This may be part of the barrier to it being more broadly adopted. The other barrier is the setup costs and lack of structured investment models.

So what are some of the positives?

1. Regenerative approach offers consistent results

By working with the environment and using less fertilisers and pesticides, the input costs for each growing season are lower. As the soil health improves, so does the soil's water-holding capacity which improves the land's resilience to drought and other environmental risk factors. 

When conditions are bad, there isn’t as huge amount of funds lost, meaning less variability in income.

“So you might not have the same production levels when all conditions arrive as you might, if you're applying artificial fertilisers, etc, and you don't get those really high peaks but you also don’t get the low troughs,” Keenan said.

“With conventional agriculture, you can be running down the system over time. So by using regenerative principles, you can maintain productivity in the longer term and potentially improve it as the quality of the soil improves.”

2. Better mental health outcomes for farmers

Farmers (and rural Australians) have long been known to be at higher risk of psychological distress and suicide from a range of factors, including unsustainable work ethic, and poor business profitability or financial stressors. More consistent and predictable income from regenerative agriculture may ease that burden.

“There's benefits for the farmer in terms of farmer health and well-being,” Keenan said. 

"A lot of the people who have observed people implementing these systems have found that the farmers feel better about it. They're not as stressed because they're not so concerned about the effects of season on their production.

3. New income streams

Farmers have a unique asset for beating climate change: carbon sequestration - in both soil and trees. Through regenerative agriculture, farmers are increasing their carbon stocks both through soil and planting trees or native vegetation to improve water quality. 

Farmers may be able to trade carbon for new streams of income.

“There's a potential to get income associated with that carbon ... [through] arrangements ... developed over the last 10 or 12 years or so with the carbon market in Australia,” Keenan said.

“The main benefit for them in having that increased carbon on their property is to be able to show that their farm operation is carbon neutral, which is a big drive. 

"The livestock industry now say that they're going to be carbon neutral by 2030. And so if they are claiming that carbon against their own emissions from cattle and other activities on the company ... they can potentially get a market benefit by selling carbon-neutral products.”

4. Paves the way for new financial-lending criteria

The benefits of Regenerative Agriculture may yet pave the way forward to changing the banks' lending criteria to encompass the “natural capital” provided by soil carbon and quality land that produces consistent growing results.

Keenan and his research team held a number of virtual workshops to discuss these challenges and discussed that current banking models may be limited in not being able to currently incorporate the new ideas of natural capital benefits into interest rates.

“In other sectors of bank lending at the moment, they are getting reduced-interest-rate loans for things like investment in renewable energy, and other things that are clearly going to save money on the farm in the short term,” Keenan said.

“It can’t be seen as a sort of a particular model. Organic agriculture needs to be considered as a suite of themes which are a toolbox which farmers can choose from and [to] develop systems that work for both their local environmental conditions and their farming business.”

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