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Investing in regenerative agriculture: Benefits and challenges
Looking for a sustainable investment? Here’s how regenerative agriculture may offer both environmental and financial benefits for farmland investors.
You’ve been eyeing your investment portfolio, wondering how to diversify it while making a positive impact.
Real estate might offer stability but lacks the sustainability you're looking for.
Stocks are table stakes — but what’s next?
If you’re seeking an environmentally responsible investment opportunity, your timing is perfect.
Simply put, the stakes for our planet are high.
40% of the world’s land has been degraded.
This dilemma isn’t just “bad news” for farmers…
It impacts half of humanity and poses a $44 trillion threat to global GDP.
Here’s where regenerative agriculture comes in.
Not only does it have the potential to impact climate change and help heal our ailing Earth but also, as an investment avenue, it can increase the value of a farmland asset.
With the G20 nations pledging to reverse land degradation by 50% by 2040, the world is waking up to the gravity of the situation.
In this sense, regenerative farming is catching the attention of investors.
Companies like Tikehau Capital, Unilever and AXA have launched regenerative agriculture funds.
Podcasts, like Investing in Regenerative Agriculture and Food, are also sprouting up.
As a sixth-generation professional farmer who’s helped investors acquire $35 million of farmland, I have first-hand insights into the potential of this sector.
I’ve also formed landowner partnerships that underscore the value of such investing in regenerative practices.
(More on that below…)
So let’s dig into the benefits of investing in regenerative agriculture.
What is regenerative agriculture?
Regenerative agriculture is a holistic approach to land management and farming that goes beyond sustainability.
Think of it as “compound interest” for your farmland, creating a sustainable asset that appreciates over time not only by maintaining but also by actively enriching its health.
Here’s how Gabriella Ludwig, our production agronomist, sums it up: “Regenerative agriculture minimizes soil disturbance, integrates operations like livestock and crops, and maximizes biodiversity.”
Why does this matter for investors — particularly those with a long-term perspective?
The answer lies in the soil.
Regenerative farming practices strengthen soil health, which, in turn, influences the quality, consistency and yield of crops.
This increase in productivity can increase the farmland’s profitability. Over time, this has a domino effect on the asset’s value
Of course, yields and profitability can vary widely based on multiple factors…
However, some data supports a link between profitability and regenerative farming.
A 2018 study found that corn grown via regenerative methods yielded profits 78% higher than conventionally grown corn.
And a 2023 report, Cultivating Farmer Prosperity: Investing in Regenerative Agriculture, highlights the financial and environmental benefits of regenerative agriculture. In the report, researchers note that farmers who adopt regenerative practices can see an uptick in profits and crop yields by up to 25%.
This increase in profitability and yield stability gets passed down to investors/landowners through land appreciation and lower market volatility.
How does regenerative agriculture work?
Regenerative farming is tailored to the specific needs of each plot of land.
It’s the opposite of a one-size-fits-all approach.
This means that practices vary from region to region, and even from one farm to the next.
At its core, regenerative agriculture is an outcome-based farming approach. It aims to generate agricultural products while improving various facets such as:
- Soil health
- Biodiversity
- Climate
- Water resources
All while supporting the livelihoods of farmers.
Gabriella, whose work helps us achieve optimal crop yields and productivity, breaks down the four core principles of our philosophy at Weiland Farms. While I’ll admit that these methods are evolving, they’ve proven particularly effective for the 60+ farms we manage across seven counties in north-central Iowa:
- Increase crop diversity
- Protect water resources
- Preserve the soil
- Foster land conservation
1. Increase crop diversity
When it comes to regenerative agriculture, diversifying crops is key. But that doesn’t mean introducing this diversity comes without challenges.
The Corn Belt, for instance, has a long history of being dominated by:
- Monocultures: growing one crop per field
- Cash crops: cultivating crops primarily for profit rather than for local consumption
It isn't that farmers here prefer to grow just one or two crops…
It’s that the strong financial rewards and minimized risks associated with this approach have historically made it more attractive.
However, relying solely on a few crops can pose long-term risks, both in terms of climate change and crop price volatility.
So to mitigate these risks, my team and I are actively exploring and integrating alternative crops into our rotation on many of the lands we oversee, including proso millet and specialized soybeans.
This approach deliberately integrates rotations that include two types of plants: broadleaves (soybeans) and grasses (proso millet).
Looking through the lens of regenerative agriculture, this strategy serves several purposes.
- Pest management: Rotating crops acts as a natural deterrent, keeping pests off balance and thereby reducing reliance on pesticides or tillage.
- Water efficiency: Proso millet has proven to be highly water-efficient under certain conditions, requiring little to no fertilization when planted in our nutrient-rich Iowa soils.
- Soil health: Varied rotations enrich the soil with nutrients, enhancing its long-term health.
But — and I speak here from personal experience — adopting alternate crops brings its own set of hurdles.
- Equipment and machinery are often optimized for mainstream crops, not alternative crops.
- While commodity crops have been selectively bred over decades to thrive in our soils and ecosystems, alternative crops haven't benefited from the same attention. This can make them riskier.
But while diversifying with alternative crops is a work in progress, we’ve seen some promising results from our efforts.
This includes being able to lower costs and improve soil quality, which not only makes a farming operation more sustainable but also cost-effective. Both factors contribute to an asset’s long-term value.
2. Protect water resources
Water quality is essential for farming, and life on Earth in general. But it can also impact a farmland asset’s long-term value.
So we’re testing methods to help safeguard this precious resource.
One of the traditional methods we use is to strategically plant vegetation near bodies of water, which naturally filter out contaminants. This helps reduce potential risks related to water regulations and treatment costs.
We're also honing the types and timing of our nutrient applications (aka fertilizers).
Additionally, one-third of our nitrogen is naturally sourced, which drastically reduces our dependence on synthetically supplied alternatives.
Taking these steps towards a more natural approach isn't only a sustainable measure, it helps us be more efficient in terms of productivity per unit.
Meaning we make every drop count.
3. Preserve the soil
A thriving farm is rooted, quite literally, in the health of its soil.
But learning how to preserve the soil is a journey — and it’s one we’re figuring out as we go.
Historically, extensive tilling was the “norm” for farmers. But there’s been a shift over the decades.
To that effect, my team and I have progressively adopted no-till or low-till planting methods. To further nurture the soil of the farmland we oversee, we incorporate locally sourced manure to enhance its organic matter. This not only boosts soil health but also helps increase the diversity of beneficial insects, which can reduce the amount of pests that damage crops.
Consistent monitoring is also key. Gabriella and her team also periodically test the soil to ensure it’s receiving the nutrients necessary for optimal productivity.
These practices not only enhance the soil’s fertility and capacity to retain moisture but also set the stage for increased yields. Healthy soil becomes a catalyst for crop growth, making the farmland more productive and valuable in the long run.
4. Foster land conservation
Conservation isn’t just an environmental consideration; it’s a strategic decision that can impact a farm's economic resilience.
We sometimes set aside portions of acreage for conservation in the land we oversee by participating in programs like the Conservation Reserve Program (CRP).
This approach, when eligible, not only supports the farmland's ecological health but removing unproductive acres can enhance a property’s value.
However, I do want to be clear that regenerative farming is a complex journey.
The Cultivating Farmer Prosperity: Investing in Regenerative Agriculture report sums this up nicely, pointing out that, “studies have shown that regenerative farming systems can build resilience for farmers.”
But it also emphasizes its economic challenges, stating that “while the long-run business case for regenerative agriculture is strong, the risks of changing farming practices are significant.”
What are the benefits of regenerative agriculture?
For investors interested in farmland, regenerative agriculture can offer certain advantages compared to traditional cropping methods.
Ultimately, a regenerative approach can result in more efficient, productive, market-resilient farmland.
And the residual of all profits ultimately goes to the land.
As we continue to unravel the complexities of regenerative methods, the underlying asset — the land itself — stands to benefit.
This means that aligning with a farmer-partner who’s at the forefront of this complex journey can help maximize your outcomes in terms of both financial and sustainability rewards.
Here are some of the key benefits of investing in regenerative farming.
Lowered risk with higher ROI
Regenerative practices can breed more consistent, resilient and diverse cash crops. This can offer potentially higher returns and reduce investment risk associated with poor yields.
Potential tax incentives and grants
Many governments offer incentives to support regenerative methods. For example, some states offer tax breaks for farmland dedicated to conservation efforts, like the CRP mentioned earlier. This can benefit landowners by reducing the initial costs of transitioning to regenerative practices.
Land appreciation
Farmland is an appreciating asset. Adopting regenerative practices can boost an asset’s overall health and reduce risk, increasing the long-term value of the land.
Hedging against climate risks
With extreme weather events and environment-related risks increasing, the resilience built into regenerative farming practices can act as a form of insurance for farmland investments.
Premium product pricing
The market is increasingly willing to pay a higher premium for sustainably grown products. Partnering with farmers who prioritize regenerative methods may give you access to higher price points for higher-value crops, which can improve profit margins from yield-dependent cash rents.
Building social capital
The goodwill gained from responsible investment practices may result in easier business dealings and potentially more favorable investment opportunities down the line.
Are there disadvantages of regenerative agriculture?
While the benefits of regenerative farming are compelling, investors also need to consider some of the challenges they may face.
So let’s look at some of the disadvantages of investing in regenerative farming.
Long timeline before seeing benefits
Regenerative farming isn’t a get-rich-quick operation. It’s a long-term investment, and the tangible returns — both financial and environmental — can take years to materialize. This timeline may not align with every investor's goals, particularly those looking for short-term gains.
Challenges in scaling
Scaling regenerative practices to larger tracts of land can prove logistically and financially challenging. Depending on the location and existing state of the farmland, the costs of transitioning from a traditional cropping system can add up and take several years to recoup.
Potential higher initial investment
Transitioning from conventional to regenerative cropping practices often involves upfront costs, such as purchasing new equipment or implementing water-saving infrastructure. These costs might be offset by future profits and farmland appreciation, but they do require initial capital outlay.
Not one-size-fits-all
Each parcel of land is unique, and what works on one acre may not be effective (or even applicable) in another. Investors need to carefully assess whether the land they're considering is a good fit for a regenerative approach. This is why partnering with a professional farmer can be crucial in helping you find the best farmland investment opportunities based on their deep regional knowledge.
An early case study in regenerative agriculture
For the past four years, our farm has partnered with an Iowa landowner who offers us reduced rental rates in exchange for implementing conservation and regenerative practices on their farmland.
We’ve taken this partnership as an opportunity to experiment and learn about the challenges and potential outcomes of full-on adoption of several regenerative agriculture practices. In this specific instance, we’ve transitioned to a complete no-till method, incorporating cover crops, which forced us into planting consecutively for three years soybeans — a practice totally new to us.
It may take 10 or 20 years to see the tangible ROI from these regenerative practices. But this partnership lays the groundwork for a prosperous farming future that benefits both the land and the investor.
Take the next step toward responsible investing
Regenerative agriculture isn't just working toward a solution to our planet's pressing environmental challenges.
It also presents opportunities for those interested in farmland investing.
Intrigued by the potential of regenerative farming? Learn how to invest in farmland by following 5 key steps to building wealth through agriculture
Regenerative agriculture FAQs
Is regenerative agriculture profitable?
Regenerative farming’s focus on sustainable practices tends to produce resilient and robust crop yields over time, potentially translating to steady returns. It represents a forward-thinking investment, aligning profitability with environmental stewardship.
Is regenerative agriculture scalable?
As the demand for sustainable and responsible food production grows, so does the potential scale of regenerative approaches. With the right investments and innovation, these practices can be expanded to larger farming operations, potentially offering a sizable market share in the agriculture sector.
Is regenerative agriculture sustainable?
Regenerative agriculture not only protects the environment but also assures long-term profitability by promoting soil health and crop resilience. This approach helps prevent resource depletion, so the farmland remains productive for future generations.
Can regenerative agriculture reverse climate change?
The regenerative model combines practices that capture carbon dioxide (such as cover cropping) with practices that reduce carbon losses (like no-till farming and soil management). While regenerative farming can’t single-handedly address climate change, together these practices can significantly reduce greenhouse gas emissions.
Reid Weiland is the managing partner of Weiland Farms. He oversees the farm’s day-to-day operations and leads all land management and farmland acquisition efforts.
Disclaimer: This article is for general informational purposes only and does not constitute investment, financial or tax advice. You should consult with a licensed professional for advice concerning your specific situation.
