Breaking Down Barriers to Adoption
In praise of Canada's new On-Farm Climate Action Fund (OFCAF)
With $75,000 per farm on offer, OFCAF is a big deal - but it’s not a surprise.
It sucks that the only stuff we have heard from the talking heads in western Canadian agriculture on climate adaptation is whining over the carbon tax. Meanwhile, groups like Farmers for Climate Solutions have been helping Ottawa to devise new ways to incentivize landowners not just to reduce carbon emissions, but to help sequester it in agricultural soils, and keep it there.
It is a startling fact that almost nobody in conventional agriculture has seen this program coming, even though the $200 million plan was announced in the summer of 2021. It’s probably because Farmers For Climate Solutions has the support of groups like the National Farmers Union, the organic farm and trade associations, and ones that promote farmer-saved seed.
There is still a wide chasm in agriculture that prevents those with the money from noticing those doing the innovating. I believe this stems from party politics, the old Wheat Board debate, and the echo chamber that dialogue in agriculture has become.
While studying the latest announcements since mid-August, I’ve been reaching out to my old friends in commodity agribusiness. Having found almost nobody yet with a clue what OFCAF is about, I sat down to write this report because as an industry, we need to understand where it came from, its impact on farm economics, and who is positioned to benefit.
Another Blunt Instrument
OFCAF is going to have a significant impact on farm economics. Put another way, consider this program a ‘blunt instrument’.
The last time we experienced this type of policy in western Canadian agriculture was when the previous Conservative government mandated that the railways haul grain to alleviate a backlog on Prairie farms. It worked, but with some ‘unintended consequences’.
OFCAF is fairly comprehensive, and straightforward in most regards. For example, you can put up new fencing to graze cropland, install a watering system for the animals, seed a pasture mix, hire a custom seeder, and a grazing consultant, send in your receipts, and the local Watershed District Manager will approve the plan and issue a reimbursement for all of it.
Note I didn’t say it would be simple for the majority of grain farmers out there, profitable and content producing just wheat and canola. That’s where the blunt instrument comes in. The carrot for simple monocrop farms in the OFCAF framework is $35/ac to add a pulse crop to the rotation.
Just for that.
Straight. Up. Cash.
The Economic Impact on Planting Decisions
Let’s run through an example. Suppose you farm 6,000 acres in a canola-wheat rotation. Next year, displace a third of that for yellow peas, and in addition to saving on nitrogen and fungicides, the government will pay back your seed costs, custom seeding expenses, and other new things you need to get that crop established, inoculant for example, up to $75,000.
If the peas yield 35 bu/ac and are sold for $11/bu picked up, gross revenues are $385/ac, plus the $37-ish per acre expense repayment. This incentive to add pulses to the rotation is available to farms for both 2023 and 2024.
OFCAF payments aren’t eligible for the same practice on the same field in subsequent years, but who would plant peas back-to-back anyway? The farm in this example could plant 2,000 different acres of peas in 2024, again gross over $420/ac, and reduce the nitrogen rate applied on the canola/wheat on the field that produced peas in 2023 (because pulses fix atmospheric nitrogen into the soil).
That’s the idea here, see? Fertilizer is expensive. Nitrogen in the atmosphere is free. Planting a pulse crop as part of the rotation takes advantage of nature’s symbiotic abilities.
Perhaps a moral to this story is, there’s more to the Fed's fertilizer emission reduction targets than mainstream agriculture is giving them credit for. The economics around all of this look highly compelling to me.
Unintended Consequences
I have no inside information into how federal programs are developed, but my analyst brain makes up a pretty good story about somewhere in a planning session this past year, it being noted that Canada’s new ‘protein industry’ could use a little help with origination. Prices have roughly doubled for yellow peas compared to when Roquette first started contracting with producers, and more plants have come online since then.
So it would appear that an untargeted beneficiary of this subsidy to add a pulse to the rotation will be the domestic fractionation plants. The unintended consequence here could be on pulse prices to producers as production increases, especially if the current trends continue in the markets for plant-based meat alternatives, i.e. declining sales, share prices, and brand value.
We are also going to see an increase in the supply of grass-fed beef, ‘pastured protein’, and farm-branded direct-marketed meat, because the rotational grazing subsidies are also very enticing. There are lots of farmers in the regenerative movement who would have ruminants grazing their croplands already if they could justify the added expense.
The most impactful unintended consequence in my mind is that the farmers and agroecologists who fully understand how this works can become paid grazing and agronomy consultants. Farmers who want practical advice from people who have the experience can submit expenses for professional advice and be reimbursed for 50% up to $10,000, per year.
Leading regenerative farming expertise and agroecology consulting haven’t been financially established as of yet, despite snowballing interest in the movement and the thirst to understand best practices. This area of the OFCAF program will bridge that gap by turning leading practitioners into paid advisors.
Thus, there will be new competition in the field of agronomy services, in the form of consultants that practice agroecology. Traditional agronomists sell crop input products or services along with providing advice, allowing them to discount or bake consulting costs into their selling prices. Subsidizing farmers to hire actual leaders in best practice adoption will produce more effective choices and better plans to transition into new practices.
Disrupting this system could break one of the strongest cultural barriers to change in industrial farming, but it will take time. Within OFCAF’s broad suite of eligible activities, the impact of the funding incentives will range from immediate to long-term.
The Political Spin
In almost every conversation I have about OFCAF, I’m asked if I think this has anything to do with Ottawa’s plan to reduce fertilizer emissions by 30%.
Of course it does! The timing of that announcement was no accident.
The OFCAF program details were presented within a week of announcing Canada’s goals on fertilizer emissions reductions. If mainstream agriculture had any other channel besides incessant ridicule of the left and complaints about Trudeau, they would have heard the whole message.
I heard, “here’s what we’re going to do, and here’s how we’re going to do it.”
Also not a coincidence is the next federal election in 3 years, and OFCAF being a 3-year program.
For readers who don’t follow climate science, stakeholders and scientists have found common ground (pardon the pun) on the topic of soil carbon sequestration:
Nitrogen production and application methods are the largest contributor of the agriculture sector to greenhouse gas emissions.
Keeping soil covered keeps the carbon in the ground.
Adaptive multi-paddock grazing systems, or rotational grazing, is the fastest and most effective way to reverse lost soil organic matter and bind carbon molecules in the soil.
See where the three buckets of OFCAF funding came from? They might be unfamiliar to most in modern Prairie agribusiness, but they’re not random. Organizations working on regenerative agriculture as a solution to climate change, all over the world, are also supporting these key areas of practice adoption on farms, because there are proven successes and data to support them on a long list of ecological outcomes, including but not limited to carbon soil sequestration.
Here’s where I see this going. When the OFCAF program ends in 2024, the fields that received funding can be added up and spun to the public nicely. Again I’m not at all political and have no connection with any party, but my mind makes up another nice pre-election story about how OFCAF helped so-and-so many acres to adopt this-and-that improvement, and that x number of tonnes of carbon were sequestered, while y were kept from being released.