Carbon contracts don't pay enough, large-farm survey finds

Comparatively few farmers are actively considering a carbon contract and the vast majority of them want a higher payment per acre than was being offered, said the monthly Ag Economy Barometer on Tuesday. Growers commonly said they were offered $10-$30 for each ton of carbon sequestered through farming practices, a fraction of what they desire.

"Despite producers' ongoing interest in carbon contracts, few have signed a contract," said Purdue agricultural economists James Mintert and Michael Langemeier, who oversee the barometer. "Just 1% of survey respondents reported in January that they had signed a carbon contract."

Carbon contracts are cited often as a way for farmers, ranchers, and forest owners to earn money while mitigating climate change. Growers who adopt practices such as cover crops or minimum tillage can remove 0.2 to 1.5 tons of carbon per acre per year, according to one company offering contracts. Farmers may face additional costs for seed, equipment, and labor when they integrate cover crops into their operations although the expenses are much lower than growing corn or soybeans.

In a telephone survey of 400 large-scale operators during mid-January, 8.5% said they were actively engaged in discussions about receiving payments for capturing carbon on their farm. Only 6% said they were offered $30 or more per tonne of carbon. Two-thirds said the offer was $10-$20 per tonne.

By contract, nearly half said the minimum payment they would accept was "$60 per acre or more." Fourteen percent said their minimum was $30-$45 an acre and 9% wanted $45-$60 an acre.

The Ag Economy Barometer is a monthly gauge of farmer confidence. Its current reading was 130, up by 4 points from the previous month and its highest reading since August 2021.

Purdue interviews operators with production worth at least $500,000 a year for the barometer. USDA data say the largest 7.4% of U.S. farms top $500,000 in annual sales. The survey has a margin of error of plus or minus 5%.

The Ag Economy Barometer is available here.