Developing market systems that support regenerative agriculture

The statistics are startling. 78% of the world’s poorest people remain reliant on agriculture, 33% of the world’s soils are degraded and agriculture contributes to about a quarter of global climate emissions (stats from the World Bank, the FAO and the IPCC respectively).

This is not the result of an accident. Market systems have driven the development of an industrial agricultural system that has excessively low unit costs, at the expense of environment and people. In 2021, at both the UN Food Systems Summit and COP27, the international community recognised an urgent need to transform food systems. For transformation to happen, we need market systems that drive regenerative agriculture. Regenerative agriculture is a sustainable alternative with the potential to create resilient farming and food systems that protect environmental resources, provide nutritious food, protect public health, provide small scale farmers with decent livelihoods, and create vibrant and circular rural economies.

How does regenerative agriculture differ to ‘conventional’ agriculture?

Regenerative agriculture aims to optimise production whilst looking after soil quality, biodiversity, water and the wider ecosystems within which farming takes place. It uses the cycling of nutrients and resources to improve efficiency and sustainability. In contrast, conventional, or industrial agriculture, aims to maximise profit from individual commodities, using linear production systems that rely on external inputs to achieve high yields.

A shift to more regenerative agriculture has implications for market systems (see Fig 1).

Fig 1: Shifting from markets that support industrial agriculture to markets that support regenerative agriculture

Market systems entry points for supporting regenerative agriculture

Practical Action has five strategies that use market systems to support regenerative agriculture.

Facilitating shorter value chains in domestic markets

There is plentiful evidence from around the world that consumers demand for low impact agriculture is rising as a result of concerns over the environment, climate change and food safety. In Kenya, almost 90% of people in a recent survey  expressed concern about food safety. In recent years this demand has partly been met by growth in organic markets. In Europe, demand for organic agriculture now exceeds supply from European farms. However, regenerative agriculture is a more complex concept and is often not 100% organic. As a result, simple market mechanisms, such as certification, are difficult to apply to regenerative agriculture.
An alternative way to take advantage of the interest in more healthy and sustainable food is to support markets with short value chains. Reducing the distance between producers and consumers, gives consumers greater confidence and makes traceability easier. In Kenya and Nepal, Practical Action has supported the development of competitive local market systems that promote regenerative agriculture and increase inclusivity. In Kenya for instance, support to the local poultry sector, takes advantage of increasing demand from urban centres and through a Participatory Market Systems Development (PMSD) approach, this has mobilised businesses, farmers and Government to collaborate and develop new models for marketing, production support and finance.

Influencing corporate business model

In addition to domestic markets, there are opportunities to work with large companies, who can be a catalyst for change, often in export markets. They provide opportunities to really shift the needle, by changing farming practises at scale and by influencing the knowledge and attitudes of millions of consumers. They can directly support the transition to more regenerative practises by paying a premium for produce or by subsidising the services or inputs needed for regenerative agriculture, as seen in recent commitments from Nestle and Unilever. They can also shift market incentives by buying multiple commodities from farmers, thereby encouraging diversification. For instance, Practical Action is working with Yogi Tea to diversify the practices and outputs of tea farmers in Rwanda. In a two-year pilot initiative, we are testing approaches for diversification and composting that can then be scaled up. We are interested in working with influential companies like this to explore how changes to their business models may then stimulate the development of input and service markets for regenerative agriculture (e.g. organic fertilisers).

Developing new Input and Service markets

Whilst some of the inputs required for regenerative agriculture come from within the farm (e.g. compost from crop residues), other inputs and services are needed. However, these are different to those used by conventional agriculture and new input and service markets are needed.

For example, Practical Action, in Kenya, is supporting the development of businesses that produce poultry feed and organic fertiliser from local resources, demonstrating that circular alternatives to intensively produced inputs exist. In Nepal we have worked with government on the incentives and regulations needed to enable organic fertiliser to be produced and used at scale.

There also needs to be innovation in the way farmers gain and use information based on systems that make more use of local knowledge, and farmer to farmer dissemination. These systems need to be embedded into market systems. In Kenya, Practical Action are testing different models for community-based extension services with a variety of incentives being provided by both public and private actors.

These include:

-An aggregator model in which intermediaries also provide extension services to their suppliers.

-An agent model in which community extension workers earn commission from an agro-dealer for the sale of organic inputs.

-A public model in which community extension workers are recognised by Government and benefit from training and stipends.

Building the voice and role of small-scale farmers

Many market programmes focus on private companies and see farmers as recipients, not actors capable of driving change. In reality farmers are the holders of the regenerative agricultural knowledge and skills that the private sector needs to meet their ambitious regenerative agriculture targets.

The Practical Action Participatory Market Systems Development (PMSD) approach facilitates the engagement of farmers and other marginalised groups in market development: firstly, by strengthening their market literacy and providing them with the skills needed to engage with market actors; and secondly by running participatory market forums giving farmers fair opportunity to engage with and influence others.

Creating a level playing field through policy change

All of the strategies described above have to contend with an existing system that is biased and distorted against them through subsidies, tax breaks and other preferential policy support which favour industrial agriculture. For instance, in Rwanda, as revealed in an internal Practical Action scoping study, subsidises encourage the use of chemical inputs whereas locally produced organic inputs only have incentives for export.

The creation of a ‘level playing field’, a policy environment that does not distort the market towards industrial agriculture, is required. There are a number of strategies that can be used to do this, including:

• Increasing awareness of the huge ‘invisible’ cost of industrial agriculture: the Sustainable Food Trust estimate that damage from nitrogen across the EU costs up to 320 billion Euro a year.
• Increasing awareness of the multiple benefits provided by regenerative agriculture: including soil improvement, job creation, lower input costs and reduced carbon emissions.
• Using concerns over climate change to shift the narrative: In Nepal Practical Action used climate change policy development as a means to persuade government to start recognising the importance of regenerative agriculture.
• Targeted policy development: In Nepal a multi-stakeholder process has been used to highlight the constraints that exist in organic fertiliser markets, including subsidies for chemical fertilisers.

Conclusions – Recommendations for market systems programmes

There is no silver bullet that will enable the development of markets that support regenerative agriculture but there are a number of principles that can be adopted by Market Systems Development (MSD) programmes that will help.

• Don’t be neutral – recognise the links between market systems development and the type of agriculture that is then normalised. Recognise and pursue the multiple social and environmental benefits provided through regenerative agriculture.
• Support local market systems where possible, taking advantage of demographic trends (e.g. urban expansion) and changing consumer demand.
• Use market systems analysis (using tools such as those found in PMSD) to identify where interventions may lead to unsustainable agriculture and where they may encourage regenerative agriculture.
• Stimulate the development of catalytic business models that encourage diversification or that provide inputs that support regenerative agriculture.
• Facilitate the development of innovative knowledge systems that combine farmer led knowledge with scientific research and that can be incentivised.
• Increase the role and voice of farmers in market systems development processes.
• Influence policy so it is based on the real costs and benefits of different forms of agriculture and supports agricultural that is going to be sustainable and good for people and planet.
• Bring together coalitions that allow change at scale across market systems.

Practical Action is building a range of partnerships to further develop and scale regenerative agriculture based on our decades of experience of working with farmers and facilitating positive market systems development. If you would like to talk about using markets to scale regenerative agriculture, please contact John Chettleborough who leads our work on MSD or Chris Henderson who heads our work on agriculture.