Truterra has launched the second iteration of its carbon farming program with an offering designed to help producers who have just started using new agricultural practices, but are not yet producing credits.
The Land O’Lakes subsidiary announced a program late last year under which farmers considering implementation of climate-smart practices for the first time may be eligible for one-time payments of up to $2 per acre enrolled. Truterra will offer the group a distinct set of agronomic and data management services to help facilitate access to conservation practice finance.
Truterra soil health services lead Nick Reinke told Agri Investor the effort is designed to help organize services it already offers to help clear the way for more farmers to enter offset markets. Plans call for certain of the producers that go through the program to then establish credit supply agreements of varying lengths with Truterra, he explained.
“The intent is for there to be an offer of purchase for that market asset, but it’s not necessarily a commitment to be stuck with our program,” said Reinke, who spent nine years in ag insurance-related positions at St. Paul, Minnesota-headquartered Bremer Bank before joining Truterra in early 2020, according to his LinkedIn profile.
“We very much intend to have the best offer on the market, so we very much expect those farmers to go forward with us into that transaction – be it at $20 per ton or wherever the market may be at that time.”
Truterra sold ag-derived carbon credits to Microsoft at a price of $20 per ton of CO2 sequestered early last year, through the first iteration of its program. In total, its 2021 program resulted in sequestration of more than 200,000 metric tons of carbon and $4 million in total payments to producers that averaged about $20,000 per participant.
Reinke said given the carbon market’s early stage of development – and the inherent variability of agronomic decision-making – Truterra’s focus has been on encouraging farmers to enter the market while offering maximum flexibility. Although credit buyers would be interested to establish supply contacts on as long a term as possible, he said, Truterra’s supply contracts have been for five years or less with annual renewal options for the farmer.
“The trick there is programmatically matching that kind of farmer engagement up with the market side of things, where the market is looking for durability terms of 100 years.
“That’s obviously a non-starter, you’re not going to get farmers to contract out for 100 years, let alone honestly, 10 or 20,” he said. “There are some programs out there that are contracting at that 10-year range, and we’ll see how that plays out in the farm marketplace.”
The biggest change in the carbon market over the past year, he said, has been the increased expectations of buyers regarding credit providers’ measurement, reporting and verification practices.
“Sophistication even a year ago was fairly low and now at least we are getting to a point where we can align on terminology and expectations,” he said.
Reinke added that Truterra supported Land O’Lakes’ recent response to a USDA request for comment on natural capital markets earlier this year. He said the comments highlighted need to support for diffusion of technical assistance, strengthening of rural broadband and other steps to help lower risk of market entry for farmers.
“It has to be driven by sound policy,” he said. “This can’t be a private market alone thing, nor can it be a policy alone thing. It needs to be the two together.”