Home » The Business Case for Agroforestry

The Business Case for Agroforestry

How to help growers transition acreage to agroforestry

By Harry Greene

How can we fund regenerative agroforestry?

Agroforestry is the intentional integration of trees and farming. It produces on-farm income and ecological benefit, without much compromise between the two. Practices range from multi-species orchards to windbreaks, silvopasture, alley cropping, forest farming, and multi-strata agroforestry. A constellation of private businesses, nonprofits, and the USDA have set out to accelerate agroforestry. They’re seeking to answer questions like, How can agroforestry become fundamentally accessible to farms and financial institutions? How can trees re-enter the current working iteration of agriculture in the United States? How can we establish agroforestry as a cornerstone of agriculture? If farming is land stewardship, to what end are we stewarding our landscapes? What is our collective holistic context?

Right before our eyes is an incredible opportunity to create functional landscapes that yield clean and stable watersheds, biodiversity, carbon drawdown, and — at the same time — meaningful work, thriving rural economies and the ability of a household to thrive. 

Traditional agricultural lending doesn’t always align with the timeframe required to realize the benefits of regenerative agroforestry, though. Here’s the business case for agroforestry and how we can collectively fund ecologically sound farms that create shared value.

Agroforestry Planning Solutions

Regenerative agriculture and agroforestry create their own positive feedback loops. While the definition of “regenerative agriculture” is as diverse as the farmers that employ it, its common themes involve a marked increase in both profit and ecosystem services over time, along with a healthy allocation of that value throughout the associated human communities.

We must then ask the question, to what extent is an agroforestry system regenerative? And who is it benefitting? The answer lies in understanding the economic value: costs, revenues, net income, yield, labor and infrastructure — along with the ecosystem services created: water filtration, biodiversity, flood control, stream perennialization and more. Carbon storage is often a good proxy for these benefits and is generally straightforward to measure when it is visible in aboveground woody plants. Agroforestry is at least often regenerative, if not inherently so. Understanding the economic benefits opens our doors to funding, and understanding the ecosystem benefits opens the doors to society. We must quantify both as best we can.

Business planning is imperative in agroforestry. We can quantify the benefits and map out the implementation of a tree-centric farm. Fortunately, doing so is now faster than it used to be. Until recently, agroforestry planning almost exclusively centered on conservation. A trained analyst could quantify the economic value of tree systems with GIS and spreadsheets. It would take 40-80 hours to plan a farm. The process was time-intensive and inaccessible to most. 

Agroforestry contractors are helping move the industry forward. In the same way that irrigation and fencing contractors offer their services, these private and public TSPs (technical service providers) utilize their experience to reduce risk. There is a remarkable business opportunity for resourceful farmers to plant trees on their own land and on neighboring parcels. Planting trees the right way, the first time, ensures smooth operational success over the long haul — and that often means contracting work out.

Through a combination of venture capital and grant funding, though, geospatial agroforestry software is now available to help farmers do this. Maps are the input, and 30-year financial projections are the product. A user can log in and access a variety of templatized crops or can create their own adventure. Crop options include cold-climate products such as chestnuts, black locust timber and mechanically harvestable shrub fruit, as well as tropical species. Financial projections enable project development. In the same way that an architect creates a house’s to-code blueprint for a building contractor and a bank, the farmer can now plan a long-term tree-crop enterprise, be that an orchard, silvopasture, windbreaks or multi-strata agroforestry.

Agroforestry Contracting

Good site preparation is imperative when planting trees. Adequate soil structure and biology will accelerate growth rates enough to compensate for waiting an additional year before planting. Cover cropping with summer annuals, for instance, will increase permeability via root action. Leaving a mowed cover crop on the soil surface will increase water retention. Inoculating that carbon, living and dead, with indigenous microorganisms, moves dead subsoil toward chocolate-cake topsoil. Chestnuts, for instance, are mulched with woodchips and tree-tubed for deer protection. 

The capital required for a largescale agroforestry planting is substantial, and trees pay back over a long time period. At-scale projects are accessible to NGOs, brands and individuals with the ability to fund large tree systems. As agroforestry matures to the point of trees being standard farm infrastructure, though, capital will become more available to a wider range of farmers and landowners. This is admittedly a chicken-egg scenario: the desired proof of concept is in tension with the needed startup capital; this has spurred action by both the private sector and USDA.

Agroforestry Financing

For the past 20 years, while interest in agroforestry has generally been high, the rate of adoption hasn’t been anything to shake a stick at. Given that agroforestry produces both market goods and pollution-reduction benefits, we encounter the perennial question of how trees should be funded. When farmers make it clear that ecology is important, the public sector will respond (this is happening in real time). In this regard, the private sector can take decisive action on profitable tree systems in the near term. 

A new program called Agroforestry Partners is pioneering equity financing of agroforestry systems. Equity financing allows an investor to purchase shares of an enterprise — in this case, tree assets — and expect a return, either via selling their shares at a later date, a percentage of revenue generated, or something akin to a dividend. Agroforestry Partners raises funds to deploy directly into tree assets, with a long-term lease on the land underneath. The business engages with high-quality, vetted, low-risk land partners. 

The idea is to establish trees as a bankable asset, with both equity and debt options. Over the next five years, the industry should get to the point where a qualified farmer can apply for a tree mortgage the same way they would for an equipment or building loan. The objective is to de-risk agroforestry for traditional agricultural lenders and to drastically increase the rate of adoption. It is much easier for USDA to subsidize a practice that farmers are actually doing.

In October of 2022, U.S. agroforestry was awarded a grant of $60 million. Led by the Nature Conservancy and Propagate Ag, the Expanding Agroforestry Production & Markets for Producer Profitability and Climate Stabilization project is funded through the USDA’s Partnerships for Climate-Smart Commodities initiative. This is a sweeping subsidy for the planning, installation and success of useful trees across the eastern United States, Midwest and Hawaii. Direct-to-farmer incentive payments come in at $36 million. CSC is explicitly designed to catalyze further investment into agroforestry, while increasing on-farm income and providing ecosystem services. 30,000 acres of new agroforestry plantings should spur hundreds of thousands more.

“The capital required for a large-scale agroforestry planting is substantial, and trees pay back over a long time period. As agroforestry matures to the point of trees being standard farm infrastructure, though, capital will become more available to a wider range of farmers and landowners.”

It is safe to say that USDA views agroforestry as both a leverage point in quality of life across rural America and as a climate solution — and it is seeking to prove the science accordingly. Lastly, the program is designed to be highly collaborative: between businesses, academic institutions and nonprofit organizations, we’re looking at a constellation of capacity, desire and action.

How Farmers Can Plug In

There are numerous ways to get involved with agroforestry, from planting trees to launching a career as an agroforestry contractor. For more information and resources, those interested should reach out to Climate Smart Commodities regional partners: Tuskegee University in the Southeast, University of Missouri in the Southern Midwest, Savanna Institute in the Northern Midwest, University of Virginia in the Mid-Atlantic, Propagate Ag in the Northeast, and the Hawaii Ulu Cooperative in Hawaii. 

The United States needs agroforestry contractors. From machinists to foresters to lifelong farmers, there are great careers open to those with interest and talent in working with trees. And there’s always room to start or expand a tree nursery, focusing on in-demand stock.

Lastly, don’t be afraid to plant a few trees. Or a few thousand! 

Harry Greene is the chief research officer at Propagate Ag, a software, development and financing company that makes it easy for farms to transition acreage to agroforestry (propagateag.com).

This article is printed in the May 2023 Issue of the Acres U.S.A. magazine.