Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON
  1. Homepage
  2. Equities
  3. Germany
  4. Xetra
  5. Bayer AG
  6. News
  7. Summary
    BAYN   DE000BAY0017

BAYER AG

(BAYN)
  Report
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector newsMarketScreener Strategies

Farmers struggle to break into booming carbon-credit market

04/28/2021 | 09:43am EDT
Earth worms emerge from the soil of a farm field in Butler County

(Reuters) - When Microsoft Corp made a massive purchase of carbon credits in January, it turned to a relatively new source: farmers who plant crops meant to trap carbon in the soil.

The credits are financial instruments generated by projects that reduce or avoid the release of greenhouse gases, such as solar farms or tree-plantings. The projects' owners can sell the credits to companies who then use them to make claims of offsetting the climate impact of their operations.

Microsoft bought nearly 200,000 of the farm-based credits at an undisclosed price - among the largest-ever purchases of agricultural credits - as part of a larger deal to buy 1.3 million credits. But the tech giant rejected far more of the more than 5 million credits offered by agriculture projects because of systemic problems with measuring their climate benefit.

The Microsoft purchase underscores both the promise and the problems of the emerging industry in agriculture-based climate credits.

"For row-crop agriculture, the big opportunity it offers is scale. But it also has a measurement and monitoring problem," said Lucas Joppa, Microsoft's chief environmental officer.

The company received proposals from agriculture projects that made carbon-removal claims without scientific validation, Joppa said. Others led to deforestation or were found to capture some carbon but leak it back into the atmosphere quickly. Simply tilling a field, for example, can release carbon meant to be stored.

Solving such problems will be key to fully capitalizing on what could be a huge opportunity in selling credits to major firms such as Microsoft.

Joppa said the company might need to buy 6 million carbon credits annually by 2030. "And that is going to require a lot greater transparency" on the part of agricultural credit producers, he said.

Each credit should represent a metric ton of carbon dioxide removed from the atmosphere. Companies buy them to appeal to environmentally conscious consumers and to prepare for expected government climate regulations.

Agriculture is among the largest emitters of greenhouse gasses, including those from tractor emissions and from manure and fertilizer applications. But the sector is also a promising part of the solution. Global croplands and grasslands can capture and store the equivalent of up to 8.6 gigatons of carbon dioxide a year, according to a 2019 report from the Intergovernmental Panel on Climate Change. That's equal to about 1.3 times all U.S. emissions that year, according U.S. government data.

BUILDING A NEW MARKET

Farmers of commodity crops can capture carbon in their fields by planting an extra crop in the off season or reducing their plowing. Some programs also issue environmental credits for conserving water or reducing fertilizer runoff.

Typically, farm carbon programs establish a field's soil carbon with soil sampling and laboratory testing. Programs then estimate how much carbon is captured and stored by analyzing everything from weather and seed type to farming practices. They use data gathered by humans, satellites and sensors on farm machines.

Third-party verifiers validate the data and generate credits, which are issued to program managers or to farmers.

The high costs of measuring and verifying soil carbon credits have prevented more farmers from participating in such programs.

The Microsoft purchase showed buyers are willing to pay for high-quality credits, but farmers say they need help covering costs to ensure their efforts are worthwhile.

A U.S. Department of Agriculture study estimated that a shift to sustainable agriculture practices can hurt yields of row crops like corn and soybeans in the first two years they are used. But thereafter, captured soil carbon can improve yields, research shows. When farmers reduce tilling, they allow old crop roots to break down into soils and nourish the next crop, reducing fertilizer costs.

INTEREST FROM BIG AG

A climate push from the Biden administration is spurring more interest in farm-based carbon credits. The administration has, for instance, proposed creating a carbon bank, effectively a guaranteed buyer for agricultural credits. A bipartisan bill proposing the USDA establish science-based standards for carbon-removal claims was passed by the Senate agriculture committee last week.

The USDA is monitoring the success of private-sector projects to potentially expand climate-focused programs in future farm bills.

Agricultural companies from Bayer AG to Cargill Inc have subsidized projects that encourage farmers to reduce emissions, save water and plant off-season crops that restore nutrients to soil and limit erosion. They hope to aid development of a broader marketplace for credits they sell, or keep the credits to counter pollution in their own supply chains.

Lukas Fricke, a farmer from Ulysses, Nebraska, planted rye and tiller radishes this winter as part of a program launched by Land O'Lakes. He is among the farmers generating credits being purchased by Microsoft. But the $20 he expects for each credit will not cover the cost of cover-crop seed and hiring specialized labor to prepare his fields for planting.

"It's very new," he said. "It's still the wild west."

Fricke, however, expects to recoup his investment by growing bigger corn, soybean and sorghum crops as his efforts bolster soil fertility and cut fertilizer costs.

Minnesota farmer Ben Mergen devoted 60 of his 500 acres to oats and rye this winter for a pilot project funded partly by the nonprofit environmental group The Nature Conservancy.

The program, with the help of other grants, will pay Mergen $50 per acre for the environmental credits generated, more than offsetting his $30-an-acre investment in seed and labor.

Without the subsidies, Mergen would not recoup his costs of creating credits. But farmers and program managers anticipate that participation costs will decline and prices offered for carbon will rise.

"I think it will catch on," Mergen said. "The hope is that in three to five years we'll see the benefit of it."

PROMISING PARTNER

Companies and nonprofits have launched pilot projects to cover soil-sampling costs and help farmers find credit buyers.

Verifying carbon-capture claims accounts for about 75% of the cost of generating credits, said Debbie Reed, executive director for the Ecosystem Services Market Consortium (ESMC), a nonprofit group that includes environmental and agricultural organizations along with companies like General Mills and McDonald's.

To cut sampling costs and reassure credit buyers, ESMC is investing in satellite and remote-sensing technologies that measure soil-carbon concentrations. The organization aims to launch an environmental credit marketplace in 2022.

"Until we get to a market where there is liquidity, we will continue to see projects without buyers and we will continue to see buyers without the supply they need," Reed said.

(Reporting by Karl Plume in Chicago; Editing by Caroline Stauffer, Katy Daigle and Brian Thevenot)

By Karl Plume


ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
BAYER AG -1.35% 52.75 Delayed Quote.9.54%
CORN FUTURES (C) - CBR (FLOOR)/C1 3.52% 655.25 End-of-day quote.30.79%
CORN?FUTURES (SETTLEMENT ONLY) (ZC) - CBR (FLOOR)/C11 -5.20% 502.25 End-of-day quote.0.00%
GENERAL MILLS, INC. -2.19% 59.76 Delayed Quote.3.91%
LUMBER -0.45% 900.8 End-of-day quote.3.64%
MICROSOFT CORPORATION -0.56% 259.43 Delayed Quote.17.30%
NESTLÉ S.A. 0.03% 115.5 Delayed Quote.10.74%
OATS FUTURES (O) - CBR (FLOOR)/C1 1.16% 370 End-of-day quote.1.39%
S&P GSCI CORN INDEX 5.05% 476.7801 Delayed Quote.13.33%
S&P GSCI SOY BEANS INDEX 3.73% 521.2897 Delayed Quote.-4.44%
SOYBEAN MEAL FUTURES (ZM) - CBE (ELECTRONIC)/C1 3.49% 374.1 End-of-day quote.-12.71%
All news about BAYER AG
06/18PRESS RELEASEá : BioNTech Announces First Patient Dosed in Phase 2 Clinical Tria..
DJ
06/18CureVac Could Allow Manufacturing Partners To Produce Rival Vaccines
MT
06/17SECTOR UPDATE : Health Care Stocks Add to Afternoon Gains
MT
06/17CureVac may let contractors make rival vaccines if own shot fails -CEO
RE
06/17SECTOR UPDATE : Health Care Stocks Maintaining Modest Thursday Advance
MT
06/17CureVac may let contractors make rival vaccines if own shot fails - CEO
RE
06/17CUREVAC Ná : Reports Disappointing Study Results for COVID-19 Vaccine, Driving S..
MT
06/17Bayer to Continue to Work With Curevac After Covid-19 Study Disappointment
DJ
06/16CUREVAC Ná : COVID-19 Vaccine Only 47% Effective in Mid-Stage Study
MT
06/16CureVac fails in pivotal COVID-19 vaccine trial with 47% efficacy
RE
More news
Financials
Sales 2021 41 349 M 49 036 M 49 036 M
Net income 2021 3 593 M 4 261 M 4 261 M
Net Debt 2021 38 658 M 45 846 M 45 846 M
P/E ratio 2021 15,4x
Yield 2021 3,84%
Capitalization 51 823 M 61 438 M 61 458 M
EV / Sales 2021 2,19x
EV / Sales 2022 2,07x
Nbr of Employees 99 329
Free-Float 100,0%
Chart BAYER AG
Duration : Period :
Bayer AG Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends BAYER AG
Short TermMid-TermLong Term
TrendsBearishNeutralNeutral
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 27
Average target price 64,63 €
Last Close Price 52,75 €
Spread / Highest target 61,1%
Spread / Average Target 22,5%
Spread / Lowest Target -50,8%
EPS Revisions
Managers and Directors
NameTitle
Werner Baumann Chairman-Management Board
Wolfgang U. Nickl Chief Financial Officer
Norbert Winkeljohann Chairman-Supervisory Board
Bijoy Sagar Chief Information Technology Officer
Paul Achleitner Member-Supervisory Board
Sector and Competitors
1st jan.Capitalization (M$)
BAYER AG9.54%62 588
JOHNSON & JOHNSON2.92%435 090
ROCHE HOLDING AG12.75%328 768
PFIZER, INC.5.43%220 997
NOVARTIS AG2.73%210 424
ABBVIE INC.5.57%202 939