Farmers have an appetite for sustainable ag practices, but traditional financing isn’t meeting their needs. According to the 2024 Ag Lender Survey, there’s growing enthusiasm among farmers for alternative financing options – particularly when it comes to precision ag tech (66 percent), no-till farming (47 percent), and cover cropping (47 percent).
Ag retailers can connect farmers with the financing they want. But in order to do so, it’s important to understand the options on the table. In this piece, we’ll dive deep into two: carbon credits and input financing.
1. Carbon Credits: Turning Sustainability into Profit
Carbon credits aren’t exactly new, but they’re quickly picking up steam in the ag industry. They reward farmers who implement practices that lower emissions and boost soil carbon sequestration (via practices like the ones we named at the top of this piece). Farmers can sell credits to corporations looking to offset their climate impact – creating an additional revenue stream that can help pay for sustainable ag products.
The current landscape features a few key players driving momentum:
- One agtech firm connects farmers implementing sustainable practices with corporate carbon credit buyers. They provide infrastructure for tracking, verifying, and monetizing carbon reductions, helping farmers generate new revenue while ensuring corporations can meet sustainability commitments.
- Two biologicals companies empower farmers to quantify the emissions reduction from their products and turn the result into carbon credits, which they can sell directly to corporate buyers. The companies often take a cut of the profit to support their product warranties and input financing options. (We’ll get into the latter in a bit.)
Despite their promise, carbon credits face hurdles that slow adoption. For starters, it’s difficult to accurately measure and verify carbon sequestration. What’s more, some farmers worry that they’re not getting their fair share of the profit from each carbon credit sale.
But the good news is that as verification methods improve, carbon credits are carving out a clearer, more measurable path forward for driving sustainable ag. After all, when done right, they’re a win-win-win for farmers, corporations, and retailers alike.
2. Input Financing: Lowering the Adoption Barrier for Budget-Conscious Farmers
Input financing provides farmers with capital specifically earmarked for essential agricultural inputs, like fertilizers, seeds, and biologicals. Although the concept itself has been around for years, innovative models have recently emerged to better support sustainability-focused outcomes. This makes it financially viable for farmers to adopt environmentally friendly practices and products, even when budgets are tight.
Some companies offer an operating line for regen ag practices in particular:
- One ag ecommerce company offers a regenerative agriculture operating line with a low-interest rebate for farmers adopting practices like cover cropping and nitrogen reduction.
- A bank, a co-op, and an environmental nonprofit have teamed up to develop sustainability-linked loans that reward farmers for measurable environmental improvements.
- An alternative ag lender provides interest-only loans to help farmers transition or sustain organic farming operations.
Growers Edge has also entered this space with a unique approach to input financing. We typically offer two loan structures:
- Recourse loans: This structure relies on ag retailers to partially guarantee loans, allowing for more customized terms (such as flexible interest rates and tailored repayment schedules) in exchange for shared risk. Retailers benefit from more control over financing terms while ensuring farmers can access necessary inputs.
- Non-recourse loans: Designed for retailers who prefer a more hands-off approach, these loans eliminate the need for retailer guarantees, providing an off-the-shelf financing solution with rapid onboarding – often within two weeks.
Apart from this flexibility, we also provide the tech and insights retailers need to make smarter lending decisions. This way, it’s easier than ever to put sustainable products in farmers’ hands – and retailers can convert accounts receivable to cash in a matter of days.
For Retailers, the Right Messaging Matters
While these alternative financing practices are incredibly attractive, even the most sustainability-minded farmers are highly risk averse; they need some assurance that these options will yield tangible benefits.
It’s on retailers to nail the messaging. If you plan to embrace either of the above practices, be clear with farmers about…
- The cash-flow benefits associated with input financing.
- The concrete revenue streams created through carbon credits.
- What your share of each carbon credit sale will go toward (e.g., additional warranties for innovative products).
Retailers who effectively communicate these advantages will position themselves as trusted partners driving meaningful change in ag – crucial for cultivating long-term trust.
Shape the Future of Sustainable Ag
Alternative financing holds enormous promise for the ag industry. For farmers, it means easier access to capital for sustainable practices, making innovation less risky and more rewarding. For retailers, it’s an opportunity to offer solutions that drive sales, improve customer loyalty, and position themselves as sustainability leaders.
If you’re ready to shape the future of sustainable ag, Growers Edge can help. Our Input Financing makes it easy for farmers to pay for the latest innovations on your shelves. And our Crop Plan Warranty significantly lowers the risk of adopting new products and practices.
Want to learn more? Let’s talk.