An overview related to current initiatives around sustainability in Agriculture

Sep 20, 2021

In recent months, several articles have been dedicated to 'regenerative agriculture'* following the entry of companies in this market through projects and partnerships, hence the genesis of this article.

In addition to the criteria for selecting these projects detailed below*, these initiatives have also been divided according to the status and maturity of the project. We hope that this will highlight the current market and the path taken by these companies.

Pilot projects

A project that aims to identify agricultural practices, cultivation programs that move towards a more sustainable crop production.

Pilot projects are underway in different locations, mainly initiated by food and beverage companies, such as Heineken, Mars, Nestlé, around the production of barley, wheat and milk respectively. The main expected outcome is to define adapted cultivation programs. One of the first challenges mentioned is to identify practices that can be modified to reduce greenhouse gas emissions while maintaining or not jeopardizing production yield.

The participation of these companies in these initiatives can be explained by the fact that most of them have made GHG reduction or carbon neutrality commitments. Scope 3 emissions represent most of the emissions of companies in these sectors, particularly fertilizers, which is why these companies are focusing on these emissions at the farm level.

These downstream companies will therefore seek to reduce the carbon footprint of their raw materials used. Here, partnership is mentioned as key by the companies in the initiatives, both in identifying practices as well as in bringing about change at the farmer level.

Low carbon input

Inputs that can support the improvement of sustainable farming with a low carbon footprint

The microbial input sector has received significant venture capital funding, with companies such as PivotBio.

Chemical companies (Corteva, Bayer) are also expanding their offerings in these segments (biostimulant, biofertilizer).

More recently, companies such as Yara are launching pilots for the production of ammonia and thus low-carbon ammonitrate.

Traceability project

A project where the emphasis is made around the traceability of either or both farming practices and/or the grain.

We can easily understand that traceability at the farm and field levels is key in order to assess actual practices, track and confirm any changes and a compliance regarding a crop program and to bring this information to downstream partners and the consumer. Some European, French initiatives have been implemented, notably around barley. It is interesting to note here that in addition of companies commitment regarding beeing neutral, the malting market is driving a demand for more local and sustainable production due to an increase of the craft market, which can support even more those projects.

Those projects seems to have a focus on blockchain technology to support this tracking along the supply chain. Partners are not mentionned here but the French startup Connecting Food is the leader in Europe.

Farmer advisoring for sustainable production

Programs involving downstream partners that support sustainable crop production.

In parallel of those technology projects around blockchain, initiatives are ongoing at the advisors / offtakers level in order to leverage digital. Here this is done through process of bundling of physical products with digital tools like assurances, decision tools (VRA, drone...) in order to both improve yield and decrease input.

In addition of pushing further at the farm level a more sustainable production, those offers are necessary at the offtakers / distributors level in a context of a market share erosion for agricultural input products and a need to increase loyalty from farmers.

At this stage, those initiatives (traceability and advisoring projects) are supported by offtakers, but no mention are made regarding additional paiement for them or either to the farmers.

At this stage we can question the fact that offtakers/farmers will be able to improve the commercialisation of products from food/beverage companies, knowing that generally consumers are not ready to pay more for the same products in addition to the fact that no standard already exists to assess a sustainable or low GHG production. On the others side, those projects may be considered as a necessary first step in order to assess the actual situation, without standard, and next to be able to open the negotiation for premiums by offtakers with upstream partners.

Paid marketing Upstream downstream project

Programs involving downstream-upstream partners that support sustainable crop production with a premium on the market.

Sustainable programs that enables an additional premium at the farmer level are an emerging market and yet not common, only a few have been identified :

A local partnership in one region in France between an input provider, an offtaker and a milling company,
Farmers Edge and Merit in Canada,
More notably, a well developed supply chain around biofuel production, framed by a regulation (RED for Renewable European Directive) that has enable to support this emerging market for low carbon biofuel production. Upstream company like Renault Trucks find there an interest in order to decrease their emissions using this biofuel.

Just recently, Nestle announced that the company is going to dedicate a budget of 1.1 billions euros to regenerative agriculture with a significant part allocated to premiums those commodities. Nestle definitively will look to theirs suppliers that can already engage and track regenerative agriculture. Companies that have already engaged those projects are already better positioned.

Cargill is the second major player to have announced a program that will enables both insetting and offsetting.

Again, without standard and at least without clear definition of regenerative agriculture, the question remain what the market will be willing to pay for which practices.

Paid offset carbon program

Programs involving downstream-upstream partners that support the improvement of carbon storage with a premium on the market.

Programs that enables farmers to be paid for storing carbon after a change in practice are still an emerging market but are developing at a fast path. This market has first emerged with start-up like Indigo, input prodivers has taken the path like Corteva, Nutrient, Yara with Agoro. Some concern have been raised regarding its actual limit due to the principle of additionality, multiple standards and methods, as well as a risk of just moving the problem by offsetting but not decreasing concretely the footprint.

The question will be at which extend companies will be incitivate to reduce their scope 3 emissions through the supply chain and enabling to develop low carbon grain offer with a premium (the previous case), due to higher price of carbon which will make more expensive to offset instead of decrease its scope 3 emission. The question of the amount of premium and the capacity to incitivate farmers to switch practices.

Sources :

Climate Smart Ag Newsletter

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