3 Barriers to Sustainable Agriculture Adoption
Transitioning to a sustainable agricultural economy will require change at many levels. There will need to be more equitable access to agricultural funding, a development in the social structure of growers, increasingly water-resilient irrigation methods, market shifts, and more. But the barriers to sustainable agriculture are many, including financial and social pressures to keep doing things the way that they’re currently done.
Sustainable agriculture practices double as risk mitigation strategies and have been linked to better long-term ROI for stakeholders.
These methods, however, often involve higher up-front costs. The need for sustainable agriculture will only increase as climate change disrupts weather patterns and worsens drought, as is already being seen. By making a plan to support and invest in sustainable agriculture now, ag lenders and investors can get ahead of these changes and reduce risk.
The Bottom Line
Sustainable agriculture is a necessary response to climate risk and water scarcity, but social and financial pressures, and existing policies, present a barrier to its adoption. By working with borrowers to collect data and develop pathways to sustainable practices, ag lenders and investors can play a key role in driving an industry-wide shift.
This article will explore the benefits of sustainable agriculture, existing barriers, and how data-driven intelligence can inform the transition to sustainable practices.
The Benefits of Sustainable Agriculture
According to UC Davis, the purpose of sustainable agriculture is to “meet society’s food and textile needs in the present without compromising the ability of future generations to meet their own needs.”
But it doesn’t take decades for sustainable agricultural methods to have an impact. In fact, sustainable practices are just as important in the short-term, because they help to ensure that farmers will have the healthy soils and water sources they need to continue growing food one, five, ten, or fifty years from now.
U.C. Davis also points out that sustainable agriculture isn’t an all-or-nothing concept:
“The transition to sustainable agriculture normally requires a series of small, realistic steps. Family economics and personal goals influence how fast or how far participants can go in the transition.”
Just as the expanded adoption of solar energy and electric cars have lowered the cost of these technologies across the entire sector, so too can sustainable farming practices benefit the agricultural economy overall. Farming methods such as circular agriculture help to maintain soil health and reduce the need for expensive and destructive fertilizers. Improved water infrastructure and more advanced irrigation technologies can lead to a more water-resilient future.
Agriculture professionals who don’t proactively make the shift to sustainable practices will be at greater risk of drought, flooding, soil degradation, and other material risks. By delaying investments in sustainable technologies, farmers may face higher water costs, more onerous effects of regulations, reduced crop yield, and revenue volatility.
Many farmers want to transition to sustainable agricultural practices but lack the time, money, or expertise. Likewise, many financial institutions desire to support their borrowers through the transition, but many barriers to adoption still remain.
The Barriers to Sustainable Agriculture
Washington State University reports that almost a third of the world’s farms incorporate some form of sustainable farming, representing 9% of agricultural land. But widespread adoption has historically been held back by social, financial, and policy barriers.
Researchers at Colorado State University found that social dynamics play a role in how farmers adopt new sustainability practices:
“Conventional wheat producers experimenting with organic practices described planting their organic fields far from traveled roads so their neighbors won’t see them. These fields look different, often having more weeds, and they want to avoid being judged as a ‘bad farmer’.”
Farmers who had “more social relationships across different socio-cultural groups” were more inclined to experiment with sustainable practices. This emphasizes the role that ag finance professionals can play in building relationships with borrowers to encourage more sustainable farming practices on the farms within their portfolios.
Other barriers include the financial costs of sustainable agriculture. While the long-term benefits of sustainable farming practices are clear, they don’t always benefit the farmer. The Journal of Soil and Water Conservation points out that “rental arrangements where tenants may not reap the benefits of conservation investments … may result in lower adoption rates on rented land than on owner-operated fields.”
Practices such as crop rotation and buffer zones may increase up-front costs or reduce the amount of land available for cash crops. That said, the Journal also notes that many landowners were “willing to incentivize tenants” to use sustainable practices or would expand the amount of land being tended if tax credits were available.
High-tech solutions, such as drip irrigation systems, IoT tractors, and water sensors, require an even higher up-front investment. Ag lenders and investors can play a key role in facilitating this shift by offering favorable loan rates to farmers who can show progress or interest in transitioning to sustainable practices.
A third barrier includes policies and regulations that incentivize conventional farming practices, or at least incentivize the status quo. As a report in Cambridge University Press explains, “farm programs … have economically favored conventional systems. Soil-building crops like forage legumes, most edible legumes, hay, and pasture are excluded,” while commodity crops receive 75% of all subsidies.
Additionally, the federal crop insurance program favors “risky behavior,” according to one report by Guidelight Strategies, because farmers can receive payments to offset crop losses. In other words, a farmer can ensure conventional crops on marginal land more easily than they can insure cover crops used as part of a regenerative farming system. The report calls this “one of the single biggest barriers to transitioning to a regenerative system.”
How Data-Driven Intelligence Can Help
With an increased risk of floods, droughts, and other climate change impacts on the horizon, ag professionals can’t afford to wait for policies to catch up. Ag lenders and investors can take action now by reviewing their portfolios for water and climate risk and working with borrowers to transition to more sustainable farming practices.
One of the most important tools in this process is data — specifically, GIS tools that aggregate data from multiple sources to present a real-time picture of physical and material risk. GIS data can be used to monitor soil and water quality, groundwater depth, water rights, water delivery districts, and more.
This data can be used to provide insight into existing risks, as well as to document the improvements brought about by sustainable agricultural methods. By bringing shareable data into conversations with stakeholders, ag professionals can foster more effective communication, and get lenders and borrowers on the same page about risk.
Learn more about how to conserve water in agriculture in the AQUAOSO Guide
The BlackRock Investment Institute describes portfolio resilience as being “consistent, diversified, risk-aware, and flexible.” As the financial sector faces increased pressure to respond to climate change – including forthcoming ESG reporting requirements and a...
When it comes to assessing loan portfolio risk, the old ways of decision-making simply don’t work anymore. Outdated data management and risk calculation methods don’t take current risk factors into account – such as risks due to climate change – or integrate risk...
Water prices play a key role in determining a farming operation’s long-term viability. If prices are too high, then it may no longer make economic sense to grow water-intensive crops. When prices are too low, water transfers are less valuable on the open market....