Market Research Shows Agricultural Lenders Should Be Banking on Soil Health

(WASHINGTON, DC — Sept. 13, 2021) New market research shows that Iowa farmers are interested in working with their lenders to better understand and realize the benefits of soil health.

Banking on Soil Health: Farmer Interest in Transition Loan Products, a report conducted by agriculture market research firm Beck Ag in collaboration with Environmental Defense Fund and The Nature Conservancy, analyzes interviews with 100 Iowa farmers to understand their interest in adopting soil health practices and tests multiple ways agricultural lenders could support the transition.

“Practices that boost soil health allow farmers to improve profitability and crop yield resilience while generating critical environmental benefits,” said Maggie Monast, EDF’s senior director of climate-smart agriculture. “However, there are short-term financial obstacles to farmer adoption of these practices. As farmers’ closest financial partners, agricultural lenders have a critical role to play in designing solutions that support farmers in overcoming barriers to reap the multiple benefits of healthy soils.”

The analysis shows that farmers perceive a significant financial transition in adopting soil health practices: While just 40% believe that soil health practices improve profitability in the first year or two of adoption, nearly 90% stated that they improve long-term profitability.

“This is incredibly valuable data for food companies, impact investors and agricultural lenders, as it provides insights on the support farmers need from their business partners to adopt practices that make their farms more resilient — the benefits of which extend across the business chain and positively impact the world’s food system and climate health,” said Stefani Millie Grant, senior manager of external affairs and sustainability at Unilever.

The study utilizes a sample soil health transition loan product to gauge farmers’ likelihood to participate and tests a range of additional incentives like technical assistance, farmer networking, lower interest rates and cost share.

Notably, half of the farmers surveyed were interested in participating when either a 1% reduction in their current operating loan interest rate or $10 per-acre cost share was included in the package. Such incentives may be commercially justified for lenders by the lower risk associated with farmers using soil health practices or could be provided through collaboration with other business entities that value sustainable agriculture.

“These results show that a significant segment of farmers is interested in partnering with agricultural lenders on innovative products that support soil health practice adoption,” said Robert Weaver, Vice President of AG INSIGHT® at Beck Ag. “The insights generated by this analysis will be useful to any agricultural lender interested in developing transition loans for soil health practices.”