Regenerative Farming Through Blended Finance

Conventional farming uses chemical pesticides and fertilizers, usually in monoculture production areas. This approach has eroded soils and led to the loss of biodiversity, which provides essential services like pollination, pest control, and nutrient cycling. The absence of these services undermines the resilience of orange trees to threats such as pests, pathogens, and climate change. Resilience to climate change is crucial, considering the increasingly frequent extreme weather conditions, such as record high temperatures and delayed rains, which have strained orange production in recent years.

The citrus industry globally grapples with the devastating Greening disease, which affects orange production and fruit quality, contributing to rising orange juice prices. Once a tree is infected, there is no cure. The disease degrades the fruit and slowly kills the tree. Eradication of infected trees and spraying pesticides are necessary to prevent spreading. For Agro Sao Jose, the average infection rate in older orchards is 30%, a demonstration of good management in a region where rates can be as high as 60%.

The company also farms over 3,000 hectares of sugarcane. In the traditional, highly mechanized sugar cane industry, monoculture, soil degradation, and excessive use of agrochemicals are common challenges that impact water quality and biodiversity. Agro Sao Jose is a pioneer in adopting bio-inputs, restoring soil structure and biodiversity. These practices, not widely adopted in the sector, significantly enhance the value of insights gained at the farm.

Agro Sao Jose is expanding its transition to sustainable agriculture practices, applying principles of regenerative agriculture. This approach focuses on restoring soil health, increasing biodiversity, and reducing harmful chemicals. The farm uses organic compost, incorporates crop residues into the soil, applies crop rotation, plants leguminous plants between citrus lines, and integrates biological pest control methods. These changes help rebuild soil organic matter, improve water retention, and create a more resilient ecosystem. A successful pilot on almost 2,000 hectares has shown convincing results. Agro Sao Jose is also moving part of the orange production to less greening-infected areas.

Significant investments are needed for the transition to regenerative practices, while it can take 7 to 8 years for these practices to become profitable. The farmer therefore needs a loan with a long repayment schedule. Banks are hesitant to provide long-term loans. However, Agro Sao Jose secured a 10-year loan with the help of Rabobank and the blended finance fund AGRI3. The AGRI3 Fund mitigated part of the risks for the bank, especially related to the longer repayment term. Blended Finance has in fact empowered Agro Sao Jose’s journey towards regenerative agriculture.

The finance deal includes technical support to strengthen the farm’s climate transition strategy and a knowledge-sharing component. Insights from adopting regenerative practices will be shared with scientific and broader audiences. As a frontrunner in the orange and sugar cane markets, the farmer has committed to organizing “farmer days” to show neighbouring farmers the results of the transition, enabling further scaling of these practices.

Agro Sao Jose’s journey exemplifies how food systems transition and innovation in the banking sector can come together successfully. By embracing regenerative practices, the farmer is securing a sustainable future for the farm and contributing to a healthier planet.