Soil health investment and financial performance of crop farms

Abstract

Soil health investments are promoted for their environmental benefits, but evidence on their financial returns for producers remains limited and mixed. This study examines the relationship between soil health practice adoption and farm profitability, while comparing three classification methods used to measure soil health investment intensity. We combine survey-reported soil health practice data with detailed financial records from 438 Kansas commercial crop farms. Three classification strategies are evaluated: (1) an expert-informed agronomic score grounded in regenerative principles, (2) a rule-based threshold system, and (3) a data-driven k-means clustering approach. We estimate ordinary least squares regressions linking these classifications to the net farm income ratio, controlling for farm and weather variables. Additional analyses explore yield and cost mechanisms, and robustness checks include ordered logit models and continuous treatment of adoption intensity. Only the agronomic score classification shows a statistically significant and positive association with profitability (p < 0.05): farms in the high-adoption group earned a 5.6 percentage point higher net farm income ratio than those in the low-adoption group. Other methods showed no significant relationship. The classification method influenced which farms were labeled high adopters, with only 10% consistent across all methods. Soil health practice adoption is modestly associated with improved financial outcomes, but results depend heavily on how adoption is measured. Expert-informed, context-sensitive classification approaches appear more predictive of profitability than rule-based or data-driven alternatives. Directly comparing classification methods to measure soil health investment intensity demonstrates how methodological choices can influence research findings on economic and policy relevance. The study provides actionable insights for researchers, practitioners, and policymakers designing sustainability incentives or certification programs.