Well, at the farm, cash is king. It's a business. I'm a farmer myself. I raise cattle, grow corn, I bale hay. But I'm also a banker. And I've financed farmers for more than 30 years.
I actually had the honor to sit at the kitchen table of large and small farmers on all continents except Antarctica -- not many farmers there.
(Laughter)
Well, one thing I can assure you, farming is a risky business. Profits are very small. You are dependent on the weather, and you don't know what that's going to be. You grow a crop, you don't know the price, you don't know the quantity and you don't know the quality. So there's no much room for error there.
And yet, farming needs to change, if we want to reach the goals of Paris and feed a growing population. More than 20 percent of all greenhouse gases actually are emitted by agriculture or land-use change. This includes deforestation, and let's be sure, let's stop that immediately. Chemical fertilizers, emissions from animals, diesel of your tractor. But global farming is also using 70 percent of all water withdrawals. Think about it, how much. It's also a major contributor to biodiversity and species loss. Add that all together ... quite impactful.
However, it's also a big part of the solution. Scientists estimate that farmers can take carbon out of the air by means of growing trees, or put it in the soil. The impact is estimated as as big as wind and solar. Quite something.
So if that's the case, why are farmers not rushing to change their ways and save our planet? The reality is quite different.
First of all, biological processes take time. At least five to 10 years to start changing the quality and the characteristics of your soil. It takes time to change your herd or to grow trees.
Also, biological processes are very variable. They depend on the weather, they depend on fire, rain, drought. Also, we actually have not fully tested all climate-smart agricultural techniques. Some of them have not even been adapted to regional needs.
Then, you have the cost. When you change, you need more labor, you need more new machines, you need training, probably a failure of a crop.
So then, you have the consumer. The consumer today is not willing or able to pay for more sustainable foods. So if you put all this together, it takes a lot of time, effort and money to transition. There is no viable business case at this moment. It costs the farmer more than it pays to transform.
Meanwhile, at the other side of the fence, my neighbor, who didn't change his ways of farming, is enjoying a nice cash flow. I call this the Valley of Death. This transformation is long, and is the best way, actually, of my neighbor to buy me out.
As one farmer once said to me, "The best way of guaranteeing my farm for the next generation is to pay my bills tomorrow." Why should I risk the farm? Would you risk the farm in the transition? Would you risk the farm? Who would risk the farm in the transition?
Let's help the farmer, then, to do the transition. Actually, I'm a true believer. I'm a true believer that we should pay for eco services, that we should pay the farmer for their investments in nature and in carbon.
We do have the instruments already, that are the carbon and the biodiversity credits. But why are they not scaling?
First, we actually don't have standard metrics or accounting rules to measure carbon at the farm level. It even goes further. We actually don't know who really owns those carbon and those biodiversity credits. Is it the government? Is it the farmer, or is it the one that's buying the products? We don't know about the price. We don't have a price transparency. It's actually a big Wild West out there.
If you want to sell corn, you can get the price immediately from the Chicago Board of Trade. If you want to sell a tonne of carbon from your farm, you actually don't know. You really don't know.
And then, we have the discussion about permanence. What is that? Carbon and biodiversity are very variable, and they're dependent on weather and fire, so the farmer needs to be protected against those variations. We need a good insurance scheme.
And last, the government. Governments, please set the basic legal framework for us to be able to use those credits. And, very important, a minimum price for the benchmark.
Farmers are great stewards of the land, good entrepreneurs, smart operators and want the right conditions to be set. I'm absolutely sure they will quickly adapt and change.
How do I know that? While I was at Rabobank, I participated in many structures and schemes to support farmers to transition. Some of them failed, some of them were very successful, but all the good ones, all the successful ones, involved some form of income or risk mitigation.
Let me share with you one successful project, one I'm pretty proud about, and that's Project Acorn. Acorn was designed to pay for eco services to smallholder farmers in small and very difficult countries.
What we have done there is that we used satellite imaging and very simple pictures taken by mobile phones of trees on your farm, cross that data and calculate how much carbon was actually stored. With this calculation, we issued certified carbon credits to the international market, through an auction system, and we just sold them to the highest bidder. We have been able to obtain up to 35 dollars per tonne of carbon. It doesn’t look [like] much, but if you’re living on two dollars a day, it's quite substantial.
Acorn today reaches more than 310,000 farmers and has issued 300,000 tonnes of carbon, and is still growing. I think it's an amazing project, and if we could scale this up to the whole world, customize it to the needs of farmers in Brazil or Bangladesh, I think we could accelerate change.
But let's be realistic. This is not easy. Many carbon and biodiversity credit schemes have failed. However, it's not different than what happened with agriculture commodities, bonds or shares. It took time and effort to get them standardized and quoted on global stock exchanges.
Let's see how all of this comes together, and how I see it working out on the farm level. For that, I want to invite you back to my farm.
On one morning, I'm sitting on my horse, kind of dreaming. I look at the horizon. It's a green horizon full of trees. I take my mobile phone out, I push my app, my trading app, and I see two prices. One of my carbon, and the other one of my corn. In my pocket, I just have my last financial carbon statement, and it showed I did well. I have 40,000 tonnes of carbon in surplus. I have a big decision to make. Shall I sell this carbon or the corn to buy my neighbor?
(Laughter)
That's the farm of the future, where we will be paid for our eco services and to produce nutritional food. On that farm, cash is king. It will cash flow for the generations to come.
Thank you very much.
(Applause)
