July 30, 2020

Steve Falck

How to Farm Beyond the Rent Check: the Value of Soil Health

Soil is the basis of our food system and rural economy. Everyone benefits when this foundation is strong and healthy. Smart conservation practices can reduce soil erosion, nutrient loss, water pollution, and even carbon emissions, making soil health a critical factor in the future of the Midwest.

Conservation farm tillage is not new. Henry Wallace wrote in the forward to the Yearbook of Agriculture 1938, Soils & Men; “The social lesson of soil waste is that no man has the right to destroy soil even if he does own it in fee simple. The soil requires a duty of man which we have been slow to recognize.”

Unfortunately, the long-term benefits of healthy soil are often neglected for short-term gains. In many instances, non-operator landlords are only interested in the rent check. Perhaps there is a way to change that equation, with a market-based approach to preserve the long-term health of the land.

Resources Available for Conservation Minded Landowners

Over half of Iowa’s 26 million cropland acres are now owned by non-operator landowners who lease their land to neighboring farmers. This trend is concerning for several reasons, both for the social fabric of the region and for the future of the land itself. Along with population decline in rural Iowa, the increase in non-operator landlords contributes to the deterioration of rural communities through the loss of capital as rental income is sent elsewhere.

Another concern is that landowners who don’t live on their land are less likely to use wise conservation-farming practices. Several universities have studied non-operator landowners to determine what factors they consider when making conservation decisions for their land. Economics of productivity and cash rent per acre (the most popular lease arrangement) seem to drive decision-making by non-operator landowners rather than educated opinions on conservation of the soil on their land.

Non-operator landlords who want to include conservation practices in their land lease agreements can readily find multiple resources online. Iowa State Extension offers publications for non-operator landowners about conservation practices and the Drake Ag Law center has conservation land leases and other resources that are free for landowners to download and use. However, this requires the non-operator landowner to be conservation-minded.

Market-Based Solutions for Conservation Concerns

Adding an economic value to conservation practices may be a market-based solution to entice non-operator landowners to better conserve soils. At some point, a non-operator landowner may want to sell their land. If land farmed with soil health conservation practices could yield a premium per acre increase in the market price, would that drive increased adoption? How do you monetize conservation practices and which indicators should be measured for soil health so that lenders and buyers will accept a conservation premium?

Creating a soil health index would add an economic incentive to conservation, more accurately reflect the total net worth of soil, and foster credibility in the marketplace, but it must be supported by extensive research and peer-reviewed science. With sufficient research, a single holistic soil health indicator index could incorporate the stacked benefits of soil health including, but not limited to: carbon sequestration, water holding capacity and retention, organic matter, and aggregate stability which when taken all together create a stable habitat for soil microbes.

Taking Inspiration from the Corn Suitability Rating

In 1971, Iowa State University published the Corn Suitability Rating (CSR) as the productivity index for farmland soils and, it has been updated over time. The CSR index calculates potential row crop production based on soil type and inherent soil properties, the slope of the landscape, plus the average precipitation for the region. The CSR index is trusted in the financial industry because the data is backed by extensive research and peer-reviewed science.

Buyers of cropland look for a high CSR and are willing to pay a premium over low CSR land.  It is important to note, using conservation best practices cannot change the CSR, but using conservation best practices can improve soil health over time and will increase the total net worth of the land using a soil health index. This is how non-operating land owners can increase the total net worth of their most valuable asset, the soil.

The CSR’s focus on productivity is an incomplete measure of the net worth of soil. Profitability per acre can vary widely between two fields, side by side, with the same CSR. If one field is tilled conventionally, applied with synthetic fertilizer, and has no crop rotation, the profitability per acre will be less than the field that uses soil health conservation practices. Fields that have healthy soil as a result of conservation practices require fewer inputs of fertilizer and labor and thus fewer costs to produce similar yields, raising profitability. The total net worth of agricultural farmland value should include profitability per acre and productivity. Using the CSR and the soil health index together will reflect the total net worth of soil.

Societal Benefits of Healthy Soil

Soil is also a valuable resource for various wide-ranging, important issues. For one, soil stores the largest amount of carbon of any stock on land. Keeping that carbon in place, or better yet adding more to it – sequestered from the atmosphere, will help keep the climate from warming any faster. Conservation practices can promote increased carbon sequestration by plants and store it in deep roots as part of healthy soil.

Soil stores the largest amount of carbon of any stock on land. Keeping that carbon in place will help keep the climate from warming any faster.

The soil’s ability to hold onto nutrients and water not only increases profitability for the farmer, it also reduces nutrient pollution and helps reduce flooding. Keeping drinking water clean, protecting marine life from oxygen-depleted dead zones, and preventing harmful blooms of cyanobacteria and red tides, are all issues that originate in the stewardship of soil. These problems will only increase with a changing climate. A soil health index would provide market incentives to build climate resiliency in our food system while reducing pollution.

Conclusion

If there were a soil health index tied to the total net worth of soil, non-operating landlords would have an incentive to look for tenants that practice soil health conservation practices. The market would then have motivation to maintain or improve the land’s soil health index, commensurate with the premium placed on healthy soil. This market-based solution would help close the gap of non-operating landlords that do not include soil health conservation practices in their land lease contracts.

Perhaps, 81 years after Henry Wallace recognized that our soil requires a duty of man, we can achieve widespread conservation best practices for soil health with a market-based solution.