What Is the ROI of Regenerative Ag?
You likely have some understanding of what regenerative agriculture is – but just in case you don’t – it’s defined as deploying farm practices that improve the health of your soil. Reducing tillage, planting cover crops, and reducing synthetic fertilizers are among the regenerative practices that have been credited with improving soil health. The benefits associated with regenerative agriculture are generally accepted as good but are hard to quantify. The big question is — will these practices increase your bottom line? And if so, how? Let's unpack the different ways that regenerative agriculture can affect the profitability of your farm.
The pendulum has swung back and forth on reduced and no-till tillage practices. According to a 2020 , three-fourths of FBN® members now practice no-till or minimum tillage. Reducing tillage leads to reduced soil erosion and increased carbon in your soil. Short-term ROI is easy to calculate for switching from conventional to no-till. According to a report by the University of Illinois, a disk ripper + field cultivator tillage program can cost over $35/acre. Eliminating this pass may immediately impact your bottom line. In most cases this reduction in tillage will lead to a need for an additional herbicide pass, which can typically cost $20-$25/acre, but that cost is ordinarily more than covered. Additional considerations are required (soil compaction, planter durability), but if no-till can work on your farm, the potential ROI is clear.
ROI Potential = $10/acre per year
Planting cover crops
Planting a cover crop can extend the window of soil coverage on your farm. A well established cover crop has been shown to reduce soil erosion, improve crop resilience, and lead to increased carbon in your soil. The cost of a cover crop is easy to quantify. Prior to recent spikes in input costs, farmers were found to spend anywhere between $15/ac to upwards of $75/ac to implement a cover crop program in their operation. Additionally, NRCS reported state-by-state cost-sharing programs offsetting cover crop seed costs by 50-100% for approved programs in some states. Contact your local NRCS office for more information about cover cropping systems in your area.
"In 2020, a study of FBN members reported corn crops following a cover crop were often more productive with yield averages around 4.5 bu/acre higher. New crop cash corn prices for fall delivery (as of early May 2022) are hovering around $7/bu; in this scenario, taking that yield boost into consideration at these prices, a farmer will see a benefit of $31.50/acre. Based on these findings, ROI potentials can range from $10/acre-$35/acre per year.
Many soybean producers have indicated similar trends equating to positive ROI as well; FBN is currently studying these trends."
ROI Potential = $10/acre-$35/acre per year
Improve crop nutrient efficiencies
So improved yield resilience almost covers the cost of planting cover crops, but a bit more is needed to flip “green” the ROI analysis. Fortunately, planting cover crops and reducing tillage can improve nutrient retention, ultimately, reducing the demand of synthetic fertilizers By improving organic matter and unlocking the nutrients already in your soil and keeping them in place, it's possible to reduce the application of nitrogen, phosphorus and potassium after adopting no-till and cover crops.
Each farm is different; the right factors need to be taken into consideration and test strips should be performed before farm-wide implementation of cover crops and other regenerative practices. In the right scenarios, fertilizer demand can be greatly reduced through incorporating systems that limit nutrient leaching, utilize cover crops that can fixate nitrogen, and improve the overall soil health which may increase the storage capacity of nutrients within the soil.
It's possible to start reducing your P and K in year-three of implementing regenerative agriculture. Reductions depend on your soil and practices, but improved soil health can contribute to 15 pounds per acre of P in year-three and 20 pounds per acre in year-five. A reduction of 10 pounds per acre of K can be achieved by year-three with some long-term scenarios benefiting producers up to 30 pounds per acre.
Reducing nitrogen is a bit more complicated. Implementing reduced tillage and cover crops can reduce the need for nitrogen over time, especially if a nitrogen fixing cover crop is used, but the significant reductions, up to 40 pounds per acre in year-five, will more likely come from precision management and application of nitrogen in addition to regenerative practices. Applying nitrogen using the “four Rs” (right source, right rate, right time, and right place) can lead to immediate reductions in nitrogen.
Reducing fertilizers can provide noticeable returns on investments but are typically spread over multiple years. Patience and continued evaluations of an operation can yield significant savings over time.
ROI Potential = $18-$50/acre/year fertilizer savings over five years, fertilizer savings
In summary, regenerative agriculture can have a positive ROI impact immediately. The range of ROI depends on your operation, equipment, and soil but has the potential to significantly impact your bottom line. The key to successfully adopting regenerative agriculture is to adopt these practices without a reduction in yield. Gradable Plan offers soil sampling and expert agronomy recommendations to help you have a smooth transition.
What’s your experience generating an ROI with various regenerative agriculture practices? Let us know in the Community Forum.
NOTE: Recent, current and future volatilization in markets and costs may impact above scenarios and ROI potential on your operation.
Disclaimer: The views and opinions are solely those of the author as of the date of publication, are subject to change at any time due to market or economic conditions, will not be updated or supplemented after the date hereof and may not necessarily come to pass. Neither Farmer’s Business Network Inc. (FBN) nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in the material and any liability therefore is expressly disclaimed.
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