SYCAMORE, Ill. — Carbon programs are here to stay with the increased government and corporate focus on agriculture as a climate solution.
“The Fortune 500 companies have made corporate commitments to greenhouse gas reductions and they are driven by consumer demands and employee retention,” said Joe Winchell, conservation agronomist for AgOutcomes and the Soil and Water Outcomes Fund.
“For companies like PepsiCo or Target, 80% of their footprint happens out of their direct control through goods and services they purchase, which at the root of that is the farmer,” said Winchell during a presentation at the Better Beans event hosted by the Illinois Soybean Association. “PepsiCo doesn’t have a team to work with farmers and that’s why they need to come through organizations like us.”
The Soil and Water Outcomes Fund started in 2020 as a 9,500-acre pilot.
“We expanded to 120,000 acres last year and we worked in Illinois, Iowa, Ohio and the Chesapeake Bay watershed,” Winchell said. “In 2022, we’re going to expand into Indiana and there will be 50,000 acres available in Illinois.”
This carbon program pays farmers based on outcomes — not practices.
“What makes us different is we stack the carbon program with a water quality program,” the conservation agronomist said. “We pay up to $40 per acre with the average in 2021 across 120,000 acres of $35 per acre, so that’s the value of the water piece.”
The U.S. Department of Agriculture is a large buyer of water quality improvements, Winchell said.
“In Iowa, we work with the city of Ames and Cedar Rapids wastewater treatment plants and we also work with the Iowa Department of Agriculture and Land Stewardship,” he said.
Once the fund establishes outcome purchase agreements with customers, then they can target a geography and enroll farmers.
“I sit down with farmers to understand what they are currently doing and what they want to add,” Winchell said. “We have no maximum or minimum and we can scale a program across your whole operation.”
Every farming operation is different in the type of practices that are utilized and the changes that the farmer wants to make.
“We enter information like fertilizer or manure applied, tillage practices and the planting and harvesting operations to get a baseline crop rotation,” Winchell said. “We also enter the new practices such as going from conventional tillage to strip-till or planting a cover crop.”
Two USDA-supported models are used to determine the greenhouse gas emissions and how the changes in farming practices will impact the amount of greenhouse gas emissions, as well as the amount of nitrogen and phosphorus loss.
“That’s how the payment is calculated,” Winchell said.
“Tillage emits carbon dioxide into the air, so you can sequester carbon by reducing tillage or adding a cover crop will take in carbon dioxide and it creates biomass,” he said. “So, we buy carbon credits from you and we sell those carbon credits to a company.”
Once farmers know the potential payment, they have the option to decide if they want to sign a one-year contract.
“It is about a 24-hour turnaround for the model results, so we can have a payment estimate in 24 to 36 hours,” Winchell said.
After signing a contract with the fund, the farmer receives 50% of the payment upfront, which they can use to help pay for the implementation costs.
“We visit every field in the program and once we confirm you did everything you said you would do, we pay the second half of the payment,” Winchell said.
Since weather has such a large impact on farming activities, sometimes all the practices planned by a farmer cannot be completed.
“If you have to do an unforeseen tillage pass, we rerun the models and calibrate the second payment appropriately,” Winchell said.
“A lot of companies are getting more interested in biodiversity, so that is something we’re working on pretty hard,” he said. “Practices that also create biodiversity benefits could be stacked on to increase payments to farmers.”
As more carbon programs develop, Winchell said, farmers should talk to someone they trust, look at the contract terms and length and determine what happens to their data.
“Our commitment is to always pay the farmer the most we can,” Winchell said. “If we negotiate a price with PepsiCo next year that is higher than what we got this year, then the farm payment goes up.”
The most important step for farmers to take now, he said, is to organize their farm data.
“One of the most time-consuming parts is entering your data so we can run the models,” he said.
Winchell expects the demand for low-carbon commodities to increase, including renewable fuels such as ethanol and biodiesel.
“As things evolve, payments are going to be tied to the commodity,” he said. “Ethanol plants may tie a premium to a bushel of corn that has been produced with sustainable farming practices, so that will require accounting and tracking of how that corn was produced.”
For more information about the Soil and Water Outcomes Fund, go to www.theoutcomesfund.com.