The farmers' trap

In the heartland of America’s Midwest, a pernicious cycle we call the ‘farmers’ trap’ undermines the foundation of rural agriculture and community stability. Characterized by a feedback loop of socioeconomic and environmental stressors, this dynamic decreases farming profitability, propels rural-to-urban migration, consolidates farmland ownership, and stifles the adoption of next-generation farming practices. This exploration is part of our regenerative agricultural prototype.

By Andre Ticoulat

The farmers trap is a vicious loop driven by interconnected economic pressures and unsustainable agricultural practices. At the heart of this cycle lies short-term contracts and loans, which dominate the U.S. farm operation and financing landscape–with approximately 40% of U.S. cropland leased and figures reaching as high as 60% in states like Illinois. Short-term leases favor short-term funding, and they are incompatible with the time needed to transition land to regenerative practices (read more about this here). These fleeting arrangements force farmers to prioritize short-term yield maximization over long-term regenerative practices, driving them towards intensive farming methods that degrade soil health.

Short-term yield maximization harvesting techniques deteriorate soil health and increase dependency on synthetic fertilizers and pesticides to maintain production levels, further compounding the damage to the land and escalating input costs. These dynamics create a vicious loop of continued short-term optimization at the expense of long-term soil resilience.

These rising input costs, alongside ever-increasing land prices, squeeze farm profitability, making it increasingly difficult for farmers to sustain their operations or consider expansion. This economic strain leads to a concentration of land ownership, where fewer entities control larger swathes of land, further raising barriers for new or existing farmers who wish to expand or transition to more sustainable practices.

“In 1990, small and medium-sized farms accounted for nearly half of all agricultural production in the U.S. Now it is less than a quarter.”

This land concentration and corporate monopoly have extinguished many small businesses at the expense of farming communities. This has exacerbated the rural-to-urban exodus as individuals, particularly the younger generation, leave, searching for better opportunities in urban centers.

“We’ve become poorer. Our communities are basically shattered and in more than just an economic way—in a social way too”

This migration reduces the pool of potential next-generation farmers, creating a demographic vacuum in rural areas. The remaining farmers, often bound by the same short-term constraints and steeped in conventional practices, continue to employ intensive agricultural practices that promise immediate returns but jeopardize long-term resilience.

Breaking this cycle necessitates systemic changes that go beyond individual farming practices. This includes implementing supportive financial policies, community-based initiatives, incentives towards small businesses, and innovative financing and assistance that supports decentralized farmland ownership.

Below is a visual representation of these nodes and connections that describe the farmers’ trap. This illustration is part of our regenerative agriculture transition map, which we will be releasing soon.

Breaking the cycle: improving access to land

We will now zoom into one leverage point to address the farmer’s trap: increasing access to land ownership and facilitating sustainable long-term leases. Access to land is a pivotal factor in the transition to regenerative agriculture, as owners are more likely to invest in the land and adopt sustainable practices when they can reap the full benefits of their investments.

One key intervention strategy is to support equitable access to land for new, young, and historically disadvantaged farmers. This addresses entrenched power imbalances and promotes diversity and inclusivity that can enhance community and ecosystem sustainability. With only 2% of rural land in the US owned by people of color, innovative financing strategies such as community land trusts, cooperative ownership models, and targeted financing are critical for facilitating equitable land ownership.

Additionally, offering technical assistance for land acquisition is crucial. This support helps farmers navigate complex processes, access financial resources, and build confidence and networks. Such targeted support is especially beneficial for historically disadvantaged groups, enabling them to overcome systemic barriers and increase land ownership.

Financial support and innovative loan programs will also be vital. One possible tool is lease-to-own programs that can lower the barrier to land ownership by allowing farmers to lease land with a structured path to ownership. This model will enable farmers to gradually build equity in their farmland, making it more affordable and accessible.

Other examples are loan terms that valorize regenerative agriculture, which might include reduced interest rates, extended repayment periods and lower down payments to make land ownership achievable for farmers committed to regenerative practices.

Strategic investment portfolio

Disrupting a systemic challenge like the farmers’ trap will require a portfolio of interventions, as single-asset investments or even multiple assets within a similar area are highly unlikely to transform systems. Other nodes, such as farmer community networks, small businesses, and regenerative farming capacity-building programs, must also be catalyzed to introduce new dynamics capable of shifting systems. This is necessary to alter the system’s structure and, consequently, its rules and behavior.

In traditional finance—whether conventional or purpose-driven—the dominant portfolio composition paradigm is risk reduction through diversification. In systemic investing, the paradigm shifts to value maximization through synergy. In a strategic investment portfolio, the assets are selected according to a theory of transformation. In other words, for each asset, there is a narrative about how that asset is expected to contribute to change effects in line with the investor’s hypothesis of how systems change might happen, both on its own and through ‘combinatorial effects’ generated with other assets.

An example is investments in small businesses that create quality jobs and strengthen rural communities. These businesses could supply inputs for regenerative practices, local seeds and equipment, offer consulting and technical services, or process and market regenerative products. By creating a network of support around regenerative agriculture, these businesses help stabilize the local economy, making it less reliant on conventional agricultural practices and more resilient to market fluctuations and environmental changes.

Moreover, these small businesses often act as community hubs, providing education, resources, and support for regenerative practices. They foster a sense of community and collective action toward sustainable agriculture by organizing workshops, training sessions, and community events. This engagement empowers local farmers and residents, building a shared commitment to environmental stewardship and sustainable development. Aggregating these interventions can help retain young people in rural areas and attract new residents.

Conclusion

Realigning incentives within agricultural financing and land tenure systems can create a landscape where regenerative practices thrive, empowering farmers to drive the transition toward a more sustainable and just agricultural paradigm. Supporting historically marginalized farmers helps to restore power imbalances and improve land stewardship.

Combining these efforts with investments in small businesses that provide high-quality jobs in rural communities, alongside the development of rural networks and community hubs, can foster economic growth and well-being. These new dynamics could reduce rural-to-urban migration and equip next-generation farmers to lead the shift to regenerative agriculture. This transition promises enhanced soil health, reduced dependency on synthetic inputs, and offers a blueprint for revitalizing rural economies while strengthening the resilience of food systems.

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Do you want to collaborate with us?

There is an urgent need to rethink the way we deploy financial capital for transformative impact in human and natural systems. The field of systemic investing has garnered significant momentum, and now is the time to scale deep and scale out. So we invite challenge owners, systems thinkers, innovation practitioners, investment professionals, ecosystem shapers, and creative voices to join us in figuring out how to redeploy financial capital in service of a prosperous and sustainable future for all.

How is systemic investing relevant to

Foundation

...because the pots of capital operating under a philanthropic logic are orders of magnitude smaller than those operating under an investment logic, so systemic investing is a way for foundations to leverage their capital in the systems they care about.

Corporations

...because their supply chains are becoming increasingly fragile and societal expectations of business are growing. This requires companies to deploy all the tools in their finance toolbox (incl. direct investments, advanced purchase agreements, and supply-chain financing) and partner more strategically with governments, foundations, and NGOs.

Impact Investors

...because single technologies, start-ups, or social enterprises—no matter how ingenious their solutions and how brilliant their teams—are unlikely to change systems by themselves. So what matters is that these single-point solutions are synergistically nested within a broader systems change effort.

Institutional Investors

...because mainstream ESG investing doesn’t benefit places and communities at the pace, scale, and quality required, so institutional investors must channel more capital into real-economy assets in a strategic and collaborative manner.

MDBs and DFIs

...because sustainable development in a VUCA world requires portfolio approaches to systems innovation, and those need to be funded with a different investment paradigm than those dominant in development finance institutions today. And because the public sector cannot finance sustainability transitions alone, so systemic investing is a way to crowd-in private-sector capital in a smart way.

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About

Who We Are

The TransCap Initiative is a think-and-do-tank operating at the nexus of real-economy systems change, sustainability, and finance. We operate as a multi-stakeholder alliance coordinated by a backbone team and comprised of wealth owners, innovation leaders, system thinkers, research institutes, and financial intermediaries. Our community is open to anyone committed to our cause and values.

Why We Exist

We exist to improve the way sustainable finance is purposed, designed, and managed so that money can become a transformative force in building a low-carbon, climate-resilient, just, and inclusive society. We believe that the key to accomplishing this vision is to inspire and enable investors to leverage the insights and tools of systems thinking and complex systems science for addressing the most pressing societal challenges of the 21st century.

What We Do

Our mission is to build the field of systemic investing. This means developing, testing, and scaling an investment logic at the intersection of systems thinking and finance. We do that by convening a multi-stakeholder alliance to develop a knowledge and innovation base, test novel concepts and approaches, and build a community of practice.

Our core ideas borrow from the disciplines of systems thinking and complex systems science, challenge-led innovation, human-centred design, new economic frameworks, and financial innovation. Our experiments are contextualised in those place-based systems that matter most for human prosperity—such as cities, landscapes, and coastal zones—as well as in value chains and other real-economy systems. We hope that our work produces knowledge and insights, methods and tools, and a self-organising community of inspired and enabled change makers.

The places and value chains we intend to transform act as centres of gravity for our work. In each of these systems, we will work with challenge owners, communities, innovators, investors, and other stakeholders to design, structure, and finance strategic investment portfolios nested within a broader systems intervention approach.

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TransCap Core Team
community@transformation.capital