We Need Regenerative Agriculture, But How Can Farmers Fund the Transition? - Modern Farmer

We Need Regenerative Agriculture, But How Can Farmers Fund the Transition?

“It’s always us asking the question of what do we want to do? And then going out and trying desperately to find some money to offset the capital that it takes to run a farm.”

Growing Gardens, a non profit community farm in Boulder CO, specializing in regenerative agriculture education.

“Of 400 farms in our county, only five are organic,” says Matt Fitzgerald of Fitzgerald Organics in Hutchinson, Minnesota. His 2,500-acre family farm is patchwork across 40 miles of land the family owns and leases, and grows organic corn, soy, wheat and specialty crops such as beans and peas.

Getting funding to transition to regenerative organic practices can be a challenge for farms of all sizes, but it’s a necessity if we want to have abundant harvests for generations to come. 

Fitzgerald says that while the farm  mainly works with a community bank, the lenders don’t understand its  operations to accurately assess risk of organic and regenerative farming operations. Plus, Fitzgerald explains that the typical bank is looking to lend only a 12- to 18-month credit. This can put regenerative farmers in a bind as it takes multiple years to transition land or reach profitability with new processes. 

There is never a silver bullet solution to any environmental issue. Regenerative agriculture in practice looks different depending on the unique situation of the farm, and so does the funding for it. 

Image courtesy of Mad Agriculture

Multi-year credit helps established farms 

Recently, Fitzgerald Organics acquired 140 acres of farmland, and needed financing to transition the plots to organic, as well as implement cover crops and plant pollinator strips. In the first year, the farm grew yellow peas as a transition crop and had a hail event that wasn’t covered by crop insurance in Minnesota. Then it grew winter wheat in the second year, which isn’t as profitable as other crop types.

“Historically, when we’ve transitioned farms, we’ve just eaten those losses annually,” says Fitzgerald. But the farm  developed a partnership with Mad Agriculture, which  helps farmers get access to the resources and knowledge they need to implement regenerative practices. One of four branches of the MAD! ecosystem is Mad Capital, a private investment firm that finances regenerative farmers. 

Fitzgerald emphasized that Mad Capital’s model of lending multi-year credit with the choice of interest-only or revenue-based repayment relieved pressure and enabled him to keep going despite challenges. 

Matt Fitzgerald, image courtesy of Mad Agriculture

“All we do is work with organic farmers. We understand the risk. We understand the challenges and the types of capital it takes to facilitate [a regenerative] transition,” says Brandon Welch, co-founder and CEO of Mad Capital. “We know on the other side of that, there’s a positive return.”

To date, Mad Capital has supplied more than  30 farmers across 15 states growing on more than  79,000 acres with $25 million in loans for operating expenses, new equipment, real estate and expansion and regenerative transition expenses.

Learn More: Dive into Mag Ag's resources for farmers

“We really listen to the needs of the land and the farmer in a way that most companies just don’t,” says Philip Taylor, co-founder and executive director of Mad Agriculture. 

He highlights that they seek to accelerate the process for farmers who already care about sustainability. “Somewhere between 10 million and 20 million acres is, we believe, possibly a tipping point where regenerative organic ag could become inevitable,” says Taylor. 

And they’re ready to fund more farmers. Mad Capital recently announced a $50-million investment round for its  Perennial Fund II, with investor commitments from the likes of the Rockefeller Foundation, Builders Vision, Lacebark Investments and nearly a dozen others.

But not every farm is the right candidate for a loan. Luckily, more avenues for funding exist. 

Using corporate dollars 

“Food and even fashion companies who source from agriculture have realized that, to meet their environmental and social commitments, they need to work with their farmers,” says  Lauren Dunteman, senior associate of Regenerative Supply at Terra Genesis, a consultancy helping brands source from regenerative agriculture. 

Sourcing can significantly impact sustainability outcomes for brands. But for this approach to work,  there must be transparency, says Dunteman. “Farmers don’t always know where their crops go, and brands don’t know what farms their crops come from.” That issue prompts brands to fund regenerative practices either directly or indirectly.

If a brand can’t trace ingredients to the farm level, it  may pick any farm or group of farmers and fund their regenerative practices. But if it  knows its  farmers and can directly invest in regenerative practices, it has  options, such as: 

  • Paying upfront for farmers to adopt regenerative practices
  • Agreeing to purchase at a premium once producers have aligned with intended regenerative practices or outcomes
  • Signing multi-year contracts to give farmers income stability needed to invest in new initiatives and de-risk transition years

Including producers from the beginning and honoring traditional knowledge is key to the success of initiatives like this. “There needs to be a shift in power dynamics,” says Dunteman. “Less dictating to producers and more collaboration.” 

Timberland, Vans and The North Face are able to support and source regenerative rubber through partnering with Terra Genesis. These brands now pay a premium to rubber farmers who grow using traditional methods that include diverse agroforestry systems and ecological management practices, which incentivizes other farmers to return to growing in this way. 

Read More: Explore one companies commitment to regenerative rubber used in Timberland, Vans and The North Face shoes.

Dunteman highlights another avenue that exists to support farmers who make the effort to adopt regenerative practices: paying to license their climate and environmental outcome data. Farmers gain an additional revenue stream, and brands are able to prove their environmental progress. 

This approach to data sovereignty is being used by Ethos, which Dunteman’s team uses to verify regenerative outcomes. Consumers can look for the Ethos Verified Regenerative label to know they’re supporting sustainability with their purchases.

While this funding approach is creative and helps engage consumers in sustainability when done right, how do small local farms who sell direct to consumers—not to brands—access the funding they need?

Small farms and conservation grants 

“It’s been incredibly frustrating,” says Lauren Kelso, site director at nonprofit community farm Growing Gardens and the policy chair for Flatirons Farmers Coalition, a chapter of the National Young Farmers Coalition [NYFC]. “I just couldn’t believe the red tape involved, the number of conversations we had to have and then what the payments were.”

Image courtesy of Growing Gardens

She says  there are federal and state grant programs available for conservation and soil health initiatives, but they often benefit larger farms with massive acreage and the resources to submit a great application and measure outcomes. Beginning farmers may not have the time or grant writing skills to successfully secure funding. Plus, she notes that many farmers with Indigenous or cultural practices are overlooked, as holistic land stewardship doesn’t always fit the mold of what funding agencies look for. 

Kelso has talked to a lot of other farmers in NYFC and asked if they use these programs. Practically everyone was frustrated at the time and effort it took and the low payments they got in the end. 

“These are farmers that are living month to month,” says Kelso, “and they were still turning down the opportunity to get funding to offset the cost of their practices. That’s really telling to me.” 

Many programs available only give a certain amount—such as a couple of dollars—per acre to fund conservation initiatives. If you’re only farming on a few acres, it’s not worth all the time it takes to submit a grant application. She notes that one of the better options is the Conservation Stewardship Program (CSP) through the NRCS. It  grants long-term cost share contracts for soil health practices and recently increased its  minimum payment to $4,000 per year for smaller farms, making it worth the effort to apply. 

Kelso mentions the Colorado Department of Agriculture STAR program as a good option for farmers, and one that more states should use as a model. It’s a three-year funding program with a minimum payment for small producers that requires farms to work with a technical assistance provider such as Mad Agriculture or conservation district staff. 

With conventional agriculture, we just take and never replenish. Regenerative practice means that farmers are obliged to re-invest in the land, which can mean lost income. If they are unable to cover costs through grants, small producers often counteract it by selling organic and regenerative products at a premium. 

But there’s only so much the consumer market can pay for, especially considering how many people are stressed about grocery inflation. “There’s a fundamental misunderstanding about what the market should be responsible for versus what [farmers] need public support with,” says Kelso. 

Read More: Meet Mark Shepherd who specializes in financially successful regenerative farms that are sustainable for the land and his family.

Holistic support 

Aside from Mad Capital, there are a handful of other organizations investing in sustainable farms, such as the Savanna Institute or Slow Money. Farming coalitions or industry organizations can also de-risk transitions for local producers by purchasing tools and equipment that farms can rent on an as-needed basis, such as the Flatirons Young Farmer’s Coalition Tool Library.

And peer-to-peer learning is of utmost importance. Many farmers who switch to regenerative methods have to learn by trial and error, as they may be the first in their community to do things differently. Creating knowledge-sharing channels through local organizations or even state agriculture departments can help producers implement regenerative practices at scale more efficiently, spurring on a revolution that is necessary for a stable future. 

Ultimately, we need a collage of holistic solutions tailored to farms of all sizes to provide resources, funding and long-term support for regenerative agriculture. 

“We need to get clear on how much public good it does us to be growing in these ways,” says Kelso. “And we need to be OK  paying for it.” 

Wes and Sarah, farm managers at Growing Gardens

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