American farmers have led the way in adopting smart-farming tools and practices that have not only helped increase productivity but also sustainability. Still, adoption levels of so-called “sustainable farming practices” remain relatively low, according to a recent report from McKinsey. It found that although 90% of farmers are aware of sustainable farming practices, a lack of operational and financial support remain key barriers. The full survey is HERE. Below are some of the highlights:
What are sustainable farming practices? Practices that are considered “sustainable” include soil sampling, reduced or no-till, cover crops, and biologicals, among others. McKinsey notes that many agriculture players and consumer goods companies have committed to regenerative farming and deforestation-free supply chains. However, average 2021–22 global finance flows for agriculture were only $43 billion, compared with $515 billion for energy systems and $336 billion for transport. And adoption of sustainable farming practices is not increasing fast enough to meet the sustainability goals of food processors and consumer goods companies.
Adoption rates in the US: The survey found that despite recent supply chain disruptions, price volatility, and inflation, many farmers are investing in adopting sustainable farming practices and technology solutions. Sustainable farming practices that require behavioral changes in agriculture lead the way in adoption (for example, reducing or eliminating tillage), followed by practices that require product changes, such as nitrogen stabilizers or inhibitors. Practices that require changes in equipment tend to have the lowest adoption levels.
There are only a couple of practices in the McKinsey survey that farmers were not widely aware of – 46% had never heard of biochar as fertilizer and 29% had never heard of trees in cropland. Around 16% were unfamiliar with biologicals and 11% had not heard of equipment powered by renewable fuel.
Many farmers that adopt sustainable practices implement them on only part of their acreage, which McKinsey says averages around 30%. They also found that adoption is at least +20% greater for specialty-crops than row crops for half of the practices surveyed .
Motivating factors: Not surprisingly, McKinsey says that farmers tend to favor sustainable practices with the highest perceived ROI. Applying fertilizer based on soil sampling, reducing or eliminating tillage, and implementing variable-rate fertilization are among those with the highest rates of adoption. Farmers also expect many of these practices to drive up operational costs but are also expecting long-term payoffs such as higher yields and land values, as well as better crop pricing.
Barriers to adoption: McKinsey lays out several barriers to adoption, though they vary somewhat depending on the size of the operation. Overall, farmers are focused on gaining confidence in the economic benefits of sustainable farming practices before making the full transition. For all farm sizes, compensation is the top obstacle – 51% of medium-size and large farms with more than 1,000 acres and 39% of small farms identified obtaining a market premium for sustainably grown crops or commodities as a top barrier to adoption. Moreover, 45% of medium-size and large farms see generating additional revenue from sustainability assets (for example, carbon credits) as their biggest barrier to adoption. Farmers with less than 1,000 acres are far more likely than those with bigger holdings to face challenges in implementing sustainable farming practices.
Farm size also makes a difference when it comes to incentives. Medium-size and large farms with more than 1,000 acres said that certainty on operational benefits and reliable information on expected ROI are key. On the other hand, small farms with less than 1,000 acres highlighted the availability of financial incentives and assurance of a green premium (higher price) as the top two factors necessary to promote adoption.
Government vs industry programs: McKinsey says government-led programs have far higher participation rates among farmers than industry programs do. Of surveyed farmers, 57% said they were participating in a government program, while only 4% were participating in an industry-sponsored program, including the more than 15 carbon programs launched since 2016. Adoption of sustainable farming practices was at least +20% greater among government program participants than among those not enrolled in any program for ten of the 13 surveyed practices. McKinsey says this could indicate that government programs are driving adoption and that continued programmatic support from governments and industry players may encourage more farmers to transition to sustainable farming practices.
McKinsey also notes that while many agriculture players are making commitments to sustainable farming, partnering with farmers to support them in growth and innovation is key to meeting their goals. Based on the survey response, it suggests that agriculture ecosystem players should consider how they can meet farmers’ expressed need for compensation for investments in sustainable farming practices and provide reliable information about practice implementation and operational benefits.
