Executive Summary

Our findings on the farmer business case are based on a quantitative model for costs, yield impact, and investments associated with implementing regenerative agriculture practices for 34 unique country-crop combinations versus conventional practices, based on interviews with farmers, regenerative agriculture implementers, and advisors. The findings on incentives are based on collecting available public and private incentives, based on direct approach to incentives providers and supplemented with desk research. Our main findings include:

Farmer business case and funding needs

• Based on the cases we reviewed, we found that the farmer business case (net profit impact) for implementing the six most common regenerative agriculture practices is positive after 3 to 5 years for all farm sizes versus conventional practices (for the crops in scope of this study). The main drivers of higher profitability are projected yield increases and reduction of costs.
• We encountered differences in profitability which can mostly be explained by crop types, rotation schemes, farm sizes, and stage of transition to regenerative agriculture practices. Profitability is higher for high yield density crops (such as potato, tomato), for crop rotations, and for large farms (>55ha). For similar crops grown across countries, variation in profitability is mainly due to differences in average farm sizes, but is also influenced by yield, crop prices, and input costs.
• Small and medium-sized farms especially can only reach a positive business case by taking prudent investment decisions (e.g., equipment sharing or use of agricultural services to limit investments in equipment) and alternating with more profitable crops in rotations. These farmers need support to manage the transition profitably.
• Irrespective of the net profit impact, farmers are confronted with significant investments before implementing regenerative agriculture practices. According to our research, upfront investments range from ~€2000/ha to ~€5000/ha (pre-incentives) depending on the farmer’s decisions to buy or share required equipment or use agricultural services. When these upfront investments are accounted for, payback period for farmers is approximately 9 years, with ~4% 10- year IRR (p.a.) only, even with investments on the low end of the range.

Incentives

• When looking at the available incentives our study uncovered, we can conclude that there are not sufficient incentives available to cover the costs of the transition at farm level. By applying available incentives, the payback time can decrease from nine years to five years. However, farmers will still have a funding need between ~€1400 to €4100/ha (post-incentives) depending on the extent of investments made.
• Also at a macro-level, there is a significant funding gap, with only ~2% to 6% of total funding needs for a transition to regenerative agriculture practices in arable farming in Europe currently being covered. We however encountered differences in incentives identified between the countries in scope with a greater number of incentives identified in countries such as the United Kingdom, Germany, and France, and fewer incentives for regenerative agriculture identified in Serbia, Greece, Turkey, and Poland.
• Moreover, we found that current incentives are not fit-for-purpose: they focus mainly on supporting ongoing costs rather than on the much-needed funding for upfront investments, and they are often not built around specific farmer needs and desired outcomes of the regenerative agriculture practices, leading to undesired consequences such as mono cropping.
• Finally, we have also observed a lack of transparency of and access to incentives as well as a lack of accountability to monitor and steer the incentive landscape for implementing regenerative agriculture practices across Europe.