Under Secretary for Farm Production and Conservation Robert Bonnie has been the public face of the USDA’s effort to generate more proactive support for technologies needed to meet agricultural production challenges exacerbated by climate change.
For much of the past two years, Bonnie has traveled the US stitching together a coalition of producers, lenders, academics, start-ups and strategic stakeholders in and around innovative corners of ag under the umbrella of the Biden Administration’s effort to deploy $3.1 billion in support of ‘climate smart’ agricultural practices.
The Partnerships for Climate Smart Commodities began soliciting proposals in September 2021 for partnerships it could finance for periods of between one and five years aimed at advancing the production and marketing of climate smart commodities in the US. It aims to create new markets and revenue streams for farmers and ranchers managing 60,000 farms engaged in practices including cover crops, no-till, nutrient management and forestry, among others.
Bonnie told Agri Investor that while the USDA has thus far not seen the degree of engagement from ag-focused investors it had hoped for, its recent outreach to agricultural markets has the potential to shape the space for private capital even more directly than its crop support programs. He highlighted widespread recognition that agriculture, forestry and private capital will be central to efforts to mitigate climate change, and described how the policy backdrop has – over the past 15 years – evolved away from a narrow focus on cap and trade.
“The playing field has opened up. That opening up of the playing field allows us to do more stuff and to think creatively about how we scale,” said Bonnie, who joined USDA in 2009 as an adviser to Secretary Tom Vilsack after previous work developing incentives for private land stewardship as vice-president for land conservation at the Environmental Defense Fund, according to his official bio.
“It gets us out of the policy arguments we were in of: ‘How do we make sure a ton is a ton is a ton? Leakage, additionality, permanence?’ All important issues that need to be dealt with at some scale, but the playing field is way more open and that should be the benefit of inviting more people in and more creativity in.”
Gathering Partners
One result of that creativity, Bonnie acknowledged, is that the definition of ‘partnership’ in relation to USDA’s current outreach is a broad one. Partnership can include everything from research and data support and technical advice, to de-risking finance and support for implementing specific key initiatives.
The CSC program ultimately aims to engage about 100 universities including more than 30 universities focused on serving minorities. It also seeks to engage more than 20 tribes, tribal groups and farmers managing more than 25 million acres of land for climate smart production.
Bonnie explained the USDA has surveyed the market for areas of climate smart innovation where its expertise and support could be useful in attracting investment, such as helping address the need for standardization in the growing market for ag-derived carbon credits.
The program aims to support sequestration of more than 60 million metric tons of carbon dioxide over the lives of 141 projects to be supported by USDA. Participants in partnerships include Land O’ Lakes’ carbon-focused subsidiary Truterra, and Archer Daniels Midland and Blue Road Capital-backed Diamond Growers, which was awarded $45 million to support implementation of climate-smart practices.
Bonnie explained that the USDA has traditionally had closer engagement with institutional timberland investors and TIMOs than ag investors. While some degree of resistance on the part of private investors to engage directly with government programs is natural, he added, the program is still in its early stages and likely to evolve over time.
“The model here is a recognition that USDA can put resources on the table, but the big dollars are going to come from the private sector and they’re going to be coming from agriculture, farmers, ranchers and forest owners,” he said. “Over time you hope there is less of a risk of crowding out because we’ve primed the pump and tried to do a bunch of learning.”
‘Europe and others should be paying attention’
Bonnie said the CSC initiative is driven by the growing recognition that land, forestry and agriculture must play an important role in any large-scale effort to mitigate climate change. It is natural for markets to play a bigger role than regulation in driving US policy, he added, reminding that the partnerships program is also just part of a broader conversation about how USDA can “re-think” its overall relationship to markets.
“There’s a role for government. It’s not everything, right? Most of this is going to be private investment and the question is how to position USDA to provide the best support that will encourage investment,” he said. “Our interest is how do we significantly scale up the adoption of these practices using incentives, markets and trying to structure it in a way that brings in private capital. In government, our role could be to juice the market with things like partnerships where we can put money out for projects that do certain things.”
Bonnie is keen to remind that while his role’s ultimate focus is on the domestic impact of USDA farm support and conservation programs, there is also a broader international context to its efforts to engage the private sector. He said while there are other arms of government, such as the Treasury Department or USAID that are better suited to engage internationally on agriculture and climate change, the USDA is involved with AIM for Climate initiative efforts to forge partnerships at the government-to-government level, which the agency hopes to provide a model that could be applicable elsewhere.
“If we can support and demonstrate a market-oriented approach here, that encourages private investment and encourages farmers, ranchers and forest owners to participate, that should have relevance outside our borders. Europe and others, we hope, should be paying attention,” Bonnie said. “Ideally, that brings investment not only to US agriculture, but also to companies.”
‘Let’s execute’
USDA’s investments in support of the CSC program were announced in two batches, with $2.8 billion awarded to 70 projects announced in September 2022 and the remainder distributed to another 71 projects in December of that year. Project awards of under $5 million account for the largest portion of the program’s investments, which also include 14 projects valued at between $70 million and $95 million. As of the most recent update in July, 61 projects that have been awarded funding through the program were already active.
Active projects include a $14 million investment to fund development of climate-smart marketing strategy for underserved farmers in Mississippi; $15 million to help create open-source data on environmentally beneficial hemp farming practices, and a $70 million towards an expansion of climate-smart dairy supply chains in collaboration with Target and Danone North America.
The USDA’s partnerships program has been funded by using the Commodity Credit Corporation in what Bonnie described as “a creative way” before clarifying that the agency has not finalized any decisions about whether such funding will continue.
“We have not announced that we are going to go back and do a second round. Frankly, we don’t know,” he said. “Our focus right now is on, let’s execute. Let’s go out, get these projects up and running, fund them, let the partners go and do their thing, learn from them, and then figure out what comes next.”
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