Carbon takes center stage at Commodity Classic

Carbon programs continue to be a hot topic for the agriculture industry as more options for monetizing carbon sequestration become available. Four farmers sat down with Matt Sutton-Vermeulen, partner at The Context Network, on the Successful Farming First Floor Stage at the 2024 Commodity Classic to discuss the role carbon plays on their farms. 

What’s driving carbon markets? 

The surge of carbon sequestration opportunities can be traced back to investors looking downstream to understand climate risks. Today, more than 14 private programs, as well as USDA grants and climate smart commodity projects, aim to reduce agriculture’s carbon footprint and diversify farmer’s income.

“Somewhere around 50% to 60% of the carbon footprint is associated with supply chains in food and renewable fuels,” Sutton-Vermeulen said. “If you start thinking about the ways to change that industry average, progress will be made over years. It’s very slow compared to the commitments that are out there.”

Carbon program diversity

No two carbon programs are alike, making the choice to sign up even more difficult for farmers. Finding a program that aligns with farm goals is key. 

Kelly Garrett of Arion, Iowa, is involved in what some may consider to be traditional carbon programs. An early adopter of carbon farming, Garrett was one of the first farmers to sell a carbon credit through Truterra in December of 2020. He views carbon programs as a way to cash in on practices he was already implementing. 

“I think the best way to farm is to be in collaboration with Mother Nature instead of in competition,” he said. “That idea really fits in with the carbon programs, so it's easy for me to do.”

Through his two businesses, fifth generation farmer Travis Milne of Oregon, Missouri, also provides agronomic and input support for more than 100,000 farm acres. His interactions with farmers in his area led to changes to his own farming practices. He is part of the Soil and Water Outcomes Fund, a subsidiary of the Iowa Soybean Association. 

“They’re a very civil program to deal with, and are obviously farmer-minded,” Milne said. “That has made it an easy transition for us to start to dabble in this market.” 

Chad Basinger of Pretty Prairie, Kansas joined a pilot program with Ecosystem Services Market Consortium (ESMC) and General Mills after consultants explained the potential benefits to soil health. He grows wheat, soybeans, and milo in a no-till rotation; utilizes cover crops to build soil health; and has implemented rotational grazing for his 300 head cow herd. 

J.C. Crowley of Poplar, Montana has tapped into the renewable fuels market, an emerging faction of the carbon industry. He grows camelina as a Climate Smart Commodity in addition to his spring rotational crops and cattle. 

“We really try to focus on soil health, because we only see 13 to 15 inches of rain,” Crowley said. “We try to scrape everything we can.” 

Payment processes 

For most of the panelists, a simple contract with straightforward payment terms were essential. For Milne, that meant a one-year contract and knowing at the start exactly what he was being paid for. He’s paid half his payment at the start of the year, followed by a second payment following proven practice changes.

“The companies that had talked to us in the past had really complicated systems where you don’t know who sets that market or why it’s that dollar price,” Milne said. “I was kind of against this whole thing in the beginning. Having such a simple system is what allowed us to get started.”

Some programs, like ESMC, have a flat per acre signup payment in addition to credits based on carbon sequestration. While Basinger has not seen an income beyond his initial signup payment, he’s excited about the prospect of a diversified income stream. 

“I like stacking enterprises on top of each other, and this looked like a way to get paid for some of the things we were already doing,” he said.

The models used by programs to predict carbon sequestration is a key component of payouts made. Garrett and other long time participants of carbon programs have seen a steady rise in the value of carbon credits. He’s seen prices increase from $15 to $30 a credit over the past four years.

“To me, the models are almost more important than the dollars per ton or dollars per credit,” Garrett said. “The models that are being used now suggest that we’re sequestering a lot more carbon than we were in the original contracts I was involved with. It’s turning into more dollars per acre, which of course is nice with $4 corn.”

In a league of their own, programs funded by Carbon Smart grants are researching and creating value from the carbon intensity of specialty crop production. Instead of being paid directly for sequestering carbon, Crowley is working in conjunction with sustainable oil companies to receive a set carbon intensity score, which he hopes will drive profits down the chain. 

“That project is involved in a channel that goes into the low carbon fuel standard,” explains Sutton-Vermeulen. “That has a different pathway with mechanisms that are associated with regulations and a marketplace.” 

Tools of the trade

Livestock 

All four panelists have implemented cattle on their operations. Livestock with rotational grazing patterns can improve residue breakdown, increase soil biodiversity, and limit the need to haul feed. 

“Carbon is neither created nor destroyed, it's just transferred, and the cattle speed that process up,” Garrett said. 

Biologicals 

Some research has suggested biologicals can help speed up carbon sequestration and provide additional benefits to things like yield and nutrient availability. However, the state of the soil can have a big impact on the success of adding biologicals. 

“Our soils vary a lot. On acres where things are really depleted, biologicals have given us a boost right away. On acres we’ve been cover cropping or using different rotations with the no-till, we haven’t seen as much of a response,” Bisinger said. 

Trusted Advisers

Like any facet of agriculture, a good relationship with carbon experts can lead to more success. For all four panelists, working with a program they trusted allowed for more confidence when signing their contracts.

Beyond the carbon programs, learning from other farmers familiar with a variety of practices has helped Garrett make sound decisions.

“I’ve leaned on Temple Rhodes out of Maryland. The way they have to farm because of certain water regulations in that region uses a lot of the practices that we’re adopting,” he said.

Why join now? 

For many farmers, carbon programs remain a source of uncertainty. Payments for carbon sequestration are harder to trust than payments for tangible commodities like corn and soybeans. Despite the skeptics, it appears that programs driven by sustainability are here to stay. 

“There’s millions of dollars pouring into this space in agriculture, and you might as well be standing there ready to take advantage of it,” Milne said. “A lot of us are already doing these things and not getting paid for it. If we go into this trend where the next three or four years could be down, $40 an acre could be a huge deal.”

Beyond the paychecks, many farmers see substantial agronomic benefits from practice changes required for most carbon programs. Increased yields, soil health, and biodiversity have all been reported by farmers. 

“We’re all trying to do better for the future,” Milne said. “It’s everybody’s dream to pass the farm on to the next generation, and to leave it better than when we got it ourselves.”