Agriculture is a cornerstone of society. One in four people in the workforce globally are farmers dependent on land for their livelihoods. And the world’s growing population depends on the agriculture industry to meet the ever-rising demand for food: it is projected that demand for crops will increase by as much as 61 percent by 2050.1
Despite the industry’s importance—and perhaps because of it—agriculture is also one of the largest contributors to the issues affecting the Earth’s natural systems (which include the atmosphere, oceans, ecosystems, and biodiversity).2 In fact, agriculture’s greenhouse gas emissions, nutrient pollution, and land and water use currently exceed the limitations necessary to sustain human development.3 Without intervention, the industry could facilitate irreversible environmental effects.
Regenerative agriculture (which includes practices such as cover cropping, the elimination of tillage, strategic grazing, and nutrient management) is one way to help mitigate and reverse the industry’s negative nature impacts. McKinsey research shows that applying regenerative agriculture practices to US corn and soy farms—among the largest crops in the country—could not only help limit the industry’s effect on the environment but also provide promising returns for most of the farmers across the country, bringing an average of $20 to $60 per acre annually for the first ten years.4 Without support, however, farmers would have to invest up to $200 per acre up front in regenerative practices and assume the risks from sporadic weather patterns and market conditions, highlighting the need for a more robust network of support mechanisms and short-term financial incentives to increase adoption.
This article discusses the potential of regenerative agriculture practices in the United States—specifically cover cropping and no-till farming—as well as the barriers to full-scale adoption and the mechanisms stakeholders across the agriculture value chain can employ to advance adoption further (see sidebar “Approach to assessing economic and nature impacts for farmers”).
Regenerative agriculture in context
Regenerative agriculture can help improve soil health and reduce the use of chemical inputs, such as chemical fertilizers and pesticides. Regenerative agriculture refers to several different practices that help revitalize soil fertility and food systems while conserving water, minimizing disruptions to natural ecosystems, and mimicking the Earth’s natural growing patterns. Because these practices replenish important nutrients and prevent damage to the environment, they can help generate higher and more-stable long-term yields for farmers, foods that are denser in nutrients for consumers, and more-sustainable ecosystems with better biodiversity.
Of course, regenerative agriculture is not a new concept—Indigenous people have been farming this way for centuries. While this article focuses mostly on addressing carbon and improving popularized farming practices through regenerative agriculture, these are only two pieces of a larger puzzle to create sustainable equity across America.
The following sections focus primarily on no-till and cover-cropping practices because these tend to yield more crops for farmers growing corn and soy on land in the Corn Belt.5 No-till farming grows crops without digging, disrupting, or overturning the soil, which helps reduce soil erosion. Cover crops are planted to protect and revitalize soil rather than being harvested or consumed. This improves microbial activity, enhances nitrogen availability, and reduces pollution risks.
Corn and soy are two of the largest crops in the United States, covering nearly 180 million acres across the country.6 By achieving 80 percent adoption of no-till and cover cropping regenerative practices, American corn and soy farmers could reap an incremental economic value of up to $250 billion7 over a decade because of the potential for net income increase, land value appreciation resulting from higher productivity, and ecosystem payments (such as carbon credits and biodiversity credit payments). According to McKinsey analysis, farmers who implement both no-till and cover cropping can anticipate yields that are 10 to 30 percent higher, on average, than those of their conventional peers, which means that the same amount of food can be produced using 10 to 25 percent less land.
While the results of regenerative agriculture practices have been promising thus far, their scalability remains a topic of debate. Field trials show improvements in yields and sustainability, but critics question whether these practices can be applied extensively across all farm acres or whether they meet the demands of a growing global population. Challenges such as up-front costs, labor intensity, and varying yield impacts across regions will be discussed in later sections of this article. Ongoing research and pilot programs aim to adapt regenerative practices for broader use, emphasizing the need for tailored approaches based on each farm’s specific crops, soil, and conditions rather than pushing a one-size-fits-all model.
The untapped potential of America’s crops
Regenerative farming practices are widely recognized for their natural benefits, but there is a varied consensus regarding their economic returns. According to a recent McKinsey survey, only one-third of US farmers have a positive view on the ROI for cover cropping, and less than 60 percent hold a similarly positive perspective toward reduced-till or no-till farming practices.8 Stakeholders across the agriculture value chain are using subsidies and carbon payments to encourage adoption of regenerative practices, but in the United States, adoption is still not yet at scale, with 40 percent of cropland remaining tilled and 80 percent of cropland not yet planted with cover crops (Exhibit 1).
While major returns are possible, the amount is entirely dependent on the region a farm is in, the techniques farmers choose to incorporate, and the state of the market.
How different regions can benefit from regenerative agriculture practices
The main parameters that determine the effectiveness of regenerative agricultural practices are natural factors, including precipitation (wet versus dry), temperature (cool versus warm), and soil texture (coarse versus fine). Counties in the US Corn Belt typically fall under five categories: wetter-cooler-fine, wetter-warmer-fine, wetter-cooler-coarse, drier-cooler-fine, and drier-cooler-coarse (see sidebar “Land composition across the US Corn Belt”).
Land composition across the US Corn Belt
According to the cluster analysis for this article, precipitation, temperature, and soil texture are the top three factors influencing the effectiveness of regenerative agriculture practices on corn and soy yields. These factors vary across all counties in the Corn Belt, making regenerative agriculture more successful in some areas more than others (exhibit).
Depending on the location, applying certain regenerative farming practices can increase the farmers’ income over time. In this analysis, the net present value (NPV) is used to represent the expected income over a ten-year period, providing a clear measure of financial benefits. For example, implementing no-till and cover-cropping techniques tends to yield a higher NPV in regions that are drier, cooler, and possess finer soils, such as Nebraska and North Dakota. These areas typically have higher levels of water stress—a condition that may affect more areas in the future but that can be alleviated by implementing no-till and cover cropping. Nonetheless, implementing regenerative farming practices in most of the acres within the Corn Belt, even in areas with less water stress, is anticipated to yield a positive NPV, which indicates that the transition to regenerative practices could produce adequate returns independently, positioning ecosystem service monetization (carbon credits, for example) as a beneficial option rather than a requisite for financial sustainability (Exhibit 2).
Regenerative techniques’ potential for producing higher yields
Minimizing yield loss during extreme weather conditions is crucial for the long-term productivity of farmland, especially in the face of climate change. The success of regenerative farming techniques in dry, warm places highlights the importance of soil water content and its relationship to greater yield stability.
Regenerative practices play a significant role in enhancing soil’s water retention capabilities and can help ensure the stability of crops by maintaining higher soil moisture levels, particularly during periods of drought, underscoring their value in improving agricultural resilience and efficiency.
Techniques such as no-till farming, for example, can enhance the soil’s ability to retain water by improving its structure and porosity, reducing compaction, and maintaining a protective layer of crop residue to help regulate soil temperature. This benefit is especially significant for rainfed farms, which account for approximately 85 percent of the corn and soy acreage in the Corn Belt, according to the 2018 Irrigation and Water Management Survey from the US Department of Agriculture (USDA).9 According to McKinsey analysis, during years of drought, when a conventional farm might achieve only one-third of its typical yield, farms that practice no-till farming and plant cover crops could maintain more than 95 percent of their usual yield. The enhanced yield stability resulting from the improved capacity of soil to hold water is likely to extend to other crops outside the Corn Belt, though the exact range of impact may differ.
Because soil water content plays such an important role in ensuring good yields, irrigated farms—which include about 15 percent of the corn and soy acres in the United States, according to the USDA survey10—see a smaller upside from the regenerative transition because they can compensate for the water needs during drought periods by using irrigated water.
How break-even times may fluctuate between regions
Despite a favorable long-term economic upside, farmers may take between two and five years to break even on cumulative free cash flow; benefits from large crop yields build up gradually and can take a few years to materialize. Farmers may also have to invest in new equipment, such as no-till planters, in the first year, which may elongate the time it takes to break even but which also brings a higher long-term NPV (Exhibit 3). Leasing equipment or hiring planting services would require less of an up-front investment than buying equipment, but this option may be more costly in the long run.
Moreover, the time it takes for farmers to break even, increase incremental income, and benefit from land value appreciation upon appraisal differs significantly across farms and is affected by varying natural conditions across the country, management approaches (such as using specific regenerative agriculture and irrigation practices), and market prices (Exhibit 4). When comparing the NPV across different practices, for instance, McKinsey analysis found that combining cover cropping with no-till techniques yields the best median expected NPV, as indicated in Exhibit 3. No-till alone is typically the next best option: it has a slightly lower expected NPV but comes with a narrower range of uncertainty. And low-till and cover cropping alone had a significantly less favorable outcome.
Obstacles preventing the adoption of regenerative practices
Given that natural factors and the pricing environment are beyond farmers’ control and vary annually, adopting regenerative practices involves inherent uncertainties and risks, which can hinder adoption. Barriers to adoption include up-front investments, a lack of financial and social support mechanisms, and a lack of effective operational standards.
How complexity and uncertainty hinder adoption
During the transition, farmers may encounter economic, operational, and social barriers. For example, farmers may be hindered by the cost of equipment or a lack of the technical know-how to implement practices, requiring both financial support and the behavioral changes necessary to successfully make the transition to regenerative agriculture (Exhibit 5).
Moreover, while the natural potential of regenerative farming practices is widely acknowledged, there is a risk that NPV may not remain robust, especially during prolonged periods of extreme weather conditions, such as drought or heat, and coupled with low commodity prices. Monetizing the benefits of regenerative farming remains a complex challenge for farmers, as well. Despite carbon credits being further along in terms of development and implementation in the United States, there are still many uncertainties and debates on costs for farmers, methods for measuring and quantifying emissions, and verification practices.11 For example, accurately measuring and verifying carbon sequestration in agricultural soils is complex and costly. Some challenges include establishing baselines, monitoring changes over time, and ensuring that carbon offsets are real, additional, and permanent. 12
The ongoing scientific debates regarding the optimal depth for soil sampling adds another layer of complexity. Many current standards require only sampling the top zero to 30 centimeters (cm), but some research papers argue that some carbon sinks lower than 30 cm. While regenerative techniques may hinder the downward movement of carbon, the inconsistency of sampling can lead to inaccurate reporting across farms or can miss carbon that has sunk lower than 30 cm. 13 Retrieving soil samples at this depth is also quite expensive. In addition, the logistical and financial burdens of comprehensive soil sampling add to the complexity of measurement, reporting, and verification (MRV) processes that are vital for validating carbon credits.
How overhead costs affect adoption
Farmers must also be aware of how costs will change as a result of implementing regenerative agriculture practices. Compared with conventional methods, the largest investment will be in new equipment in both a no-till and cover-cropping scenario. Farmers who choose to hire services rather than buying equipment are expected to more quickly break even because there is no initial capital expenditure requirement; however, they would also see a lower long-term NPV because of higher operating costs. The second highest cost increase would be for chemicals, such as herbicides, but only in a no-till or low-till scenario (Exhibit 6).
These cost implications could potentially affect stakeholders throughout the value chain, presenting opportunities for new revenue streams, particularly for providers of equipment and cover crop seeds.
Making regenerative agriculture possible
To bolster the adoption of regenerative farming techniques across the most expansive crops in the United States, stakeholders across the value chain must work together to provide farmers with incentives to use these new methods, must create financial safety nets to protect farmers’ livelihoods, and must bridge the cash flow gap between adoption and NVP.
Helping farmers plan for the transition. The first step to help farmers prepare for the transition to regenerative farming practices is to address the constraints arising from limited knowledge, unclear ROI, suboptimal outcomes due to not selecting the best practices, and a lack of confidence in the information received about regenerative agriculture. A sufficient and accessible network of trusted advisers—composed of members of the conservation department, retailers or co-ops, and university extensions, for instance—with regenerative expertise can help reduce the amount of trial and error farmers may go through to properly implement regenerative practices. Advisers can assist farmers by offering guidance on what crops to plant, when to plant, what equipment to invest in, and other areas of planning.
Furthermore, both advisers and farmers should be equipped with data-driven tools that provide clear ROI projections to aid in transition planning and reduce uncertainty for farmers. One example of such tools is the USDA’s COMET-Farm. The online tool is free to farmers in the contiguous United States and helps farmers calculate the potential of certain conservation practices for cropland, pastures, rangeland, livestock operations, and energy. Moreover, advisers and farmers could partner with an agtech provider or food processor to help gauge consumer demand, food waste potential, and alternate options for cover crops. These partnerships would also help guarantee sales for farmers and offer them access to MRV services.
Improving the expected NPV. It will be important to establish foundations for ecosystem markets—including standards, certifications, regulatory frameworks, and policy support—to enable the monetization of the positive externalities created by the regenerative transition. Investing in the development of cost-effective MRV tools can provide data to improve practice recommendations and projections. These tools also help lay the groundwork for verifying on-farm practices, which is essential for securing ecosystem payments and allocating funds more effectively through offering incentives for initiatives. Furthermore, research and innovation in inputs and equipment can reduce costs and further boost productivity during the regenerative agriculture transition to reach NPV sooner. For example, universities and equipment manufacturers can invest in innovative products, such as more cost-efficient, no-till equipment and seeds for cover crops that can produce biofuel.
Providing funding support. Considering the time to breakeven and the variability in free cash flow outcomes from the transition, it is important for stakeholders across the value chain to collaborate and create a reliable support mechanism to bridge the gap in free cash flow. These collaborations would not only act as a financial safety net for farmers when needed but also allow other companies across the value chain to benefit mutually from the regenerative farming transition. Input companies, for example, could benefit from the sale of cover crop seeds, and manufacturers could see an increase in equipment sales.
This safeguard is particularly valuable in instances when farmers are facing unfavorable external conditions. In these circumstances, compensation for any extended periods of reduced earnings will help to alleviate the financial uncertainties. This role would typically be filled by insurance plans, interest-free loans from banks, or government programs that provide reimbursements for seed and equipment cost. When the external conditions are favorable, the transition could be supported sufficiently by incentives to kick-start the investment or financing options to defer the repayment until positive free cash flow starts to come in, such as transition loans. Once higher yields are achieved, farmers can benefit from earning additional income from carbon credits or from securing sales outlets that prioritize regenerative farming practices. By pooling together capital with different risk tolerances, stakeholders can mobilize a larger pool of funds to support the transition.
Increasing the adoption of regenerative agriculture practices could help maintain equilibrium among the Earth’s natural systems—and, more so, allow for a more sustainable, more profitable approach to farming. When farmers are equipped with all the necessary interventions to help them gain a deeper understanding of regenerative approaches and fund the transition, they can more seamlessly adopt and sustain regenerative practices at scale. Ultimately, prioritizing these interventions could help usher in a more enduring future to agriculture in the Corn Belt and beyond.
