Long-term investment unlocks agricultural profit
Published on: November 17, 2019
Farming is a risky business. Every year, farmers choose agricultural strategies which make a profit from the land. But it doesn’t always go their way – across the globe, from the UK to Thailand, farmers are living below the poverty line.
In the Netherlands, the world’s second-largest food exporter, three to four Dutch farmers go bankrupt every day of the week. And in the world’s top food exporter, the US, a USDA census revealed that just forty-three percent of American farms were profitable in 2017.
It doesn’t have to be this way. Indeed, in places where farmers practice what is known as regenerative agroforestry, farming is not only profitable and economically stable but also more environmentally sustainable and diverse.
First let’s look at conventional agriculture and examine why it doesn’t make farmers money.
Farming is full of uncertainties. A freak storm or a swarm of pests can destroy and ravage crops; varying market prices impact how much a farmer can earn, and government policy can cause confusion.
These uncertainties influence agricultural investment. And with families to feed, farmers choose trusted production strategies that are most likely to return a profit. Conventional agriculture, such as one-crop, or monoculture systems, intensifies farming to maximise production and ensure high yields on the short term.
At first glance, you might expect this to be associated with profitable economic returns.
Yearly investments in “off-farm” resources
But intensive, or industrial, agriculture is heavily dependent on “off-farm” resources, leading to yearly investments.
Each year, farmers loan machinery and purchase fuel, pesticides, fertilisers and GMO seeds – all to intensify production and get the most from the land. The aim is to maximise yield and minimise investment risk. But high overhead costs mean that any income from crops is negligible. In fact, many European farmers “rely almost entirely” on EU subsidies to make a living.
Hidden costs of intensive agriculture
Scientists state that “intensive farming is killing nature”- threatening a collapse of our planet’s ecosystem. Indeed, chemical pesticides sprayed to maximise crop yields are linked to the rapid decline in pollinators – like bees, butterflies and moths. And the UN classifies over half of the world’s farmland as degraded.
But thirty-five percent of the world’s food crops depend on pollinators. And farmers need healthy, fertile soils in order to produce food. So, ultimately, by practising intensive, monoculture agriculture, a farmer destroys the very natural resources on which farming depends. The more soils degrade, pollinators disappear, water supplies decline, the more any profits from farming will be diminished.
Farmers all need to make a living. But we do not need to destroy our planet for food.
What happens if we invest beyond next year, and in the next 20 years? Or the next 100 years? And what if we start investing in the land?
Regenerative agroforestry has that potential. It is a holistic technique that gives farmers the tools to reduce costs, increase income and let the land do the work. Many components – crops, trees, shrubs, soil, livestock, biodiversity, water reservoirs – all become part of a self-sustaining and profitable food production system.
The power of regenerative agroforestry is in diversity. Farmers cultivate a variety of products and this creates a mixture of short- and long-term income streams. Ernst Götsch, the principle influencer behind regenerative agroforestry – suggests that by mimicking diverse, natural forests, agroforestry can return 8-times more profit than conventional agriculture.
Agroforestry profits are not just theory. Long-term studies show that agroforestry is more profitable than conventional agriculture: agroforestry farmers in Bolivia and India have doubled their income. That’s because by diversifying, farmers create various income streams throughout the year.
In Tanzania, agroforestry farmers mix locally sold crops – beans, banana, maize, cassava – with cash crops – such as cardamom – to obtain a diverse income. This amounts to an annual profit of, in some cases, up to 13-times more than their neighbouring farmers.
Some farmers fear that agroforestry takes too long to return investment – typical agroforestry offers profit after three years – but with good planning, farmers can reap the rewards much sooner. In the reNature Bangka project, Indonesian farmers use smart-system planning to incorporate annual crops – beans and corn – and receive a financial return in the first year.
Investing in soil
Soil is the foundation of our supply chains – and a scientific marvel. Every teaspoon of healthy soil is full of more micro-biology than there are humans on the planet. But due to agricultural dependence on mechanisation and chemicals, fertile soil is lost 100 times faster than it can regenerate.
Poor soil is the main driver of food insecurity. So, agroforestry builds from the ground up. Plant diversity in regenerative agroforestry builds and enriches soil structure. When farmers plant trees and maintain biodiversity on their land, they create fertile soil, prevent soil erosion and enhance agricultural potential.
“If we want to grow and harvest crops”, says Ellen Ingham, legendary soil microbiologist, “we have to build soil and fertility with time, not destroy it”.
Moreover, plants constantly produce biomass – leaves and branches – which act as an organic fertiliser. All that “on-farm” resource eliminates the need to make yearly investments in “off-farm” fertiliser, reducing overhead costs and significantly improving a farmer’s profits.
Despite high demand, global coffee prices are at a 14-year low. Many central American farmers, dependent on the coffee harvest are falling deep into debt. And some Guatemalan and Honduran coffee growers have even been abandoning their land to join migrant caravans bound for the USA.
Matt McDonald, a UK coffee importer, explains that reduction in coffee prices is “a detrimental cycle because [the growers] cannot afford enough fertiliser, the quality reduces, the yield reduces. And it gets worse each year.”
Unlike conventional agriculture, agroforestry spreads the financial risk of farming across income streams. So, if one crop fails, there are other components from which a farmer can make a living. And because there’s no need to pay for “off-farm” fertiliser, farmers become more resilient against economic shocks.
Trees are a living bank account
Trees on farm contribute to seventeen percent of the annual household income of Sub-Saharan farmers. Trees offer food, fuel, fodder for livestock and they allow farmers to make the most of all available space; trees can be planted on steep slopes or areas where soil fertility is low.
Over time, the value of a tree increases – just like a bank account. In the Udzungwa mountains in Tanzania, people maintain groves of trees because if there’s a wedding or a funeral to be paid for, trees can be harvested to provide quick, economic capital.
Regenerative agroforestry absorbs carbon. By planting trees and caring for the soil, farmers develop carbon sinks while growing food. Farmers practising regenerative agriculture can make extra income from selling “carbon credits”.
Louisa Kiely, director of Carbon Farmers of Australia, says that there is a “hotbed of potential now” and that “farmers are being paid good money because of the global demand for carbon credits”.
Carbon credits are bought to offset activities – like flying, shipping and mining – and offer a valuable income stream. In Nicaragua and Peru, sustainable reforestation programmes are being funded through innovative carbon credit revenues.
Regenerative agroforestry: restoring the land
Deforestation, overgrazing and poor management have caused soil erosion and degraded vast areas of land. Rene Castro Salazar, assistant director general at the UN Food and Agriculture Association, suggests that, globally, 900 million hectares are waiting to be restored. If all that land was restored with regenerative agroforestry, we could stabilize CO2 emissions for the next 15-20 years.
The solutions exist to transform degraded land into self-sustaining, healthy and profitable food production systems. But farmers cannot be expected to absorb all the costs of converting to techniques that restore the land. We should support farmers, with knowledge and innovative financing, to help them move to regenerative agroforestry and unlock agricultural profit. That’s our mission at reNature because we know another way is possible.
Let’s farm in a way that does not require yearly investment but one, which continues to grow in value year-on-year. Let’s start investing in the land. Let’s work together and let’s reNature!