Monetizing Soil Health: An Innovative Strategy to Drive Greater Adoption of Cover Crops and No-Till
Cover crops (CC) and no-till/reduced till (NT) are two practices with great potential to reduce nitrate and phosphorus leaching to Iowa’s waterways. However, their actual scale of adoption is low. In part, this is due to the fact that water quality is a public good and the overall private benefits to farmers are not fully understood. One critical aspect currently missing from the literature on the private benefits from CC and NT is the potential increase in farmland value due to improved soil health resulting from those practices. The key challenge is that farmland value, measured either by sale prices or appraised value, does not reflect long-term productivity or soil improvements due to conservation practices, but is overwhelmingly determined by soil type or CSR2 index, comparable farm sales in the area, capitalization rates and other factors.
The objective of this project is to explore the potential to incentivize adoption and sustained use of no-till and cover crops through a market-based approach, by explicitly tying land appraisal and valuation to soil health indicators. The focus is on rural appraisers as potential change agents in providing price signals conducive to promoting no-till and cover crop adoption, and rewarding improvements in soil health to landowners who invest in these management practices.
Up to four farms with different management practices will be chosen. Soil samples from the four farms will be taken in October 2018, and analyzed for soil health. At least eight rural appraisers will be recruited to participate in this study. In April 2019, they will appraise the four farms similar in most respects other than their record of conservation use. They also will complete on online survey to assess their baseline knowledge about soil health topics. Between November 2019 and March 2020, all appraisers will participate in four training sessions on using traditional soil fertility tests and how these relate to yields. Half of the appraisers also will be trained on the importance of soil health and linkages between soil health, yields, cover crops and no-till. New soil samples will be collected from the same farms in October 2019. In March 2020, the appraisers will reassess the values of the four farms they appraised a year earlier. In June 2020, they will retake the online survey to assess changes in their knowledge about soil health.
Since the dollar value suggested by a rural appraiser typically anchors the negotiation between seller and buyer around the appraised value, rural appraisers play a critical role in the determination of farmland prices. Furthermore, although all certified appraisers must follow strict guidelines, a substantial portion of each appraisal is subjective. This project focused on evaluating the impact of training rural appraisers in the linkages between productivity, soil health and conservation practices, on their (subjective) appraised farmland value.
We hired nine certified rural appraisers to appraise three farms with different long-term CC and NT practices, in 2019 and 2020. In October 2019, three appraisers received training on soil fertility, three appraisers received training on soil fertility and soil health and their interaction with CC and NT, and three appraisers did not receive training. We found that structural barriers in the rural appraisal business related to the methodology that certified rural appraisers need to follow to maintain their certification impede the monetization of soil health. In particular, certified rural appraisers are required to justify the value they assign to a land based on comparable sales for which no soil fertility or soil health data are available.
A necessary condition for certified rural appraisers to start incorporating soil fertility and soil health into their valuations is the availability of comparable data from recent sales. That would require the development of databases of soil health and soil fertility measures for each appraised farm. It would also require that those databases become available to certified rural appraisers (similarly to the dataset on soil composition and CSR2, currently available through the Farm Service Agency). Finally, certified rural appraisers would need to be trained and updated in the use of soil fertility and soil health metrics, and their connection with conservation practices.
We are not aware of any other research project in the nation exploring this topic, nor on any initiative to move the rural appraising profession towards the use of soil fertility and soil health metrics in their appraisal reports. This constitutes a barrier to the monetization of soil health.