The Melting Pot of the Ethics, Incentives, and Regulations of Ag Stewardship and Sustainability

Part three of a seven part series — Fields, Finances and the Future

Along the vast landscape of agriculture, the intertwining concepts of ethics, incentives, and regulations form a delicate balance that influences the stewardship and sustainability of our nation’s farmland and natural resources. Darrell Holaday, President and Analyst at Advanced Market Concepts, and Mac Marshall, Vice President of Market Intelligence for the United Soybean Board provide unique perspectives on this complex interplay.

Marshall and Holaday agree that it is important to acknowledge the deep ethical connections farmers hold for the land they cultivate.

“That’s been something that’s very important to producers for a long time; that they work the land they’re going to pass down to their kids and grandkids and really practice good environmental stewardship.”

Often, policymakers are too quick to discount that ethos, and when they do, taking a regulatory approach can have a significant impact on farmers, according to Holaday.

“Regulations can both drive the trend towards larger farms and promote sustainable practices,” Holaday explained. “Larger farms have more resources to comply with regulations, as well as the ability to adopt sustainable practices to benefit the environment on more acres.”

Marshall’s belief in the ethic of doing the right thing echoes throughout all sectors of agriculture. Many farmers have discovered doing what’s right for the environment is also good for their bank accounts.

“The ethic of doing the right thing is all about reducing inputs and using everything as efficiently as possible, protecting the environment as well as your family and community’s health.”

Incentives also play a role in encouraging farmers to adopt sustainable practices. Marshall sees the need for input innovations and business models that promote risk-sharing that reward farmers for their longer-term efforts.

“Those are good approaches, and they consider more than one year’s crop,” he said. “They are thinking about longer-term potential over a couple of seasons. They reward farmers and empower them to better manage their risks and help prepare for possible production hiccups and then enable them to come out in a more revenue-resilient place, so they’re better off.”

Longer-term vision will also help U.S. agriculture move toward a carbon-neutral goal. Marshall believes the sector can lead the charge.

“With all the innovation and risk-taking, U.S. farmers can not only achieve carbon neutrality but also become net positive contributors to a better environment,” Marshall said. “I think there’s a path to get there. I think it’s challenging, but the U.S. is certainly one of those centers of production that have shown an opportunity to accomplish that through innovation. I think our farmers and U.S. agriculture has a pretty good sustainability profile when it comes to food production.”

On the other hand, Darrell Holaday urges caution about potential regulations that might occur if sustainability incentives run their course.

“Taking incentives for things that we’re already doing that are economically viable leads to more regulation,” Holaday explained. “I’ve seen it. The data shows it to be true. And I think we’ll probably continue to do that. But I think regulations are one of the biggest threats to U.S. agriculture in the long run.”

One particular set of regulations at the state level concerns Holaday. California’s Proposition 12, which imposes stringent standards for egg, pork, and veal production is an example of how regulations can have detrimental economic consequences.

“Prop 12 in California is a real disaster–a bigger disaster than people think economically,” Holaday said. “What will it lead to for animal production? For crop production? For fruit production? For nut production? When a state says it is not going to allow the sale of a farm product, for instance milk, because it wants that cow’s milk to be produced in a certain way, that’s very, very dangerous for us as a country and has tremendous economic ramifications.”

On the flipside, regulations have created opportunity as well, again in California. That state’s push to decarbonize its economy by 20% by the end of 2030 has led to increased demand for soybean oil, due to a push for renewable diesel fuel.

“Over the last two years, this has caused a reevaluation of how important soybean oil is,” Marshall explained. “With that increased demand, it’s created an environment where crushers and traditional petroleum companies and refiners are starting to come together recognizing the promise of renewable diesel expansion. That’s going to be beneficial for a lot of farmers.”

As a result there have been numerous announcements about increased soybean crushing.

“Those announcements are not actual realized capacity at this point and capacity does not always equate to actual production utilization,” Marshall said. “There are still a lot of uncertainties, but it is very exciting if we actually realize that 30% increase in incremental crush.”

But that positive situation is also one that could be diminished in the future depending on the speed of electric vehicles coming onto the market.

“If we see increased electrification on a broad scale, I think the impact is going to be felt more on the ethanol side of the biofuel spectrum,” Marshall said. “That means there’s potentially less ethanol demand, and that has an impact on corn.”

It is an intricate landscape, and USDA plays a crucial leadership role in the overall sustainability environment by offering voluntary programs and services that help agricultural producers and land managers enhance their environmental performance.

USDA programs that support environmentally sustainable practices in areas such as soil health, water quality, air quality, wildlife habitat, and greenhouse gas emissions are vital, but they do not replace efforts to provide an economic safety net for farmers. It is important that USDA strikes a balance between incentives and regulations in agriculture.

“As we consider the statistics surrounding agricultural conservation and sustainability, we realize the magnitude of the challenges ahead,” Marshall said. “Sustainable practices such as conservation tillage and managing input applications through data science offer additional protection for our natural resources and that could lead to a more resilient and prosperous agricultural sector.”

The agricultural economy can be a bumpy road, but through innovation, optimism and a spirit of resilience, America’s farmers are poised for the challenges and opportunities that lie ahead. Stratovation Group can help your company or organization strengthen your connection with farmers through research-informed strategies and consulting services. If interested in hearing more connect with Cam Camfield at [email protected].

Next up Part Four: Ag Trade, Infrastructure, Productivity: U.S. Facing Down a Stacked Deck