As a regenerative agriculture consultant, my main focus when working with clients is helping them build their farm’s natural capital.
Every farmer essentially shares two core goals: making a solid return on assets and building the long-term value of their land. Surprisingly, up to 80% of your farm’s total value comes directly from its natural capital.
So, what exactly is natural capital, and how can you systematically increase it to drive better production and higher profitability?
First watch the video below from our Agresol Youtube channel.
What is Natural Capital?
A simple way to think about capital in any business is anything that produces value without being consumed in the process.
Financial Capital: Money sitting in a bank account generating interest.
Natural Capital: Natural resources on farm that generate economic value and non-financial value.
For example, beneficial predatory insects that keep pest populations below an economic threshold are a form of natural capital. Trees acting as windbreaks or cycling subsoil nutrients are natural capital. Healthy, aggregated soil that infiltrates and stores rainfall is natural capital. You get the value without consuming the underlying asset.
The Four Ecosystem Processes
I like to divide natural capital across the four core ecosystem processes:
Water Cycling: Soil structure and organic health driving infiltration and moisture retention.
Mineral Cycling: Soil biology unlocking and cycling bound plant nutrients.
Energy Flow: Capturing maximum sunlight through active green leaves.
Community Dynamics: Biological diversity (pests, predators, microbes, plants) keeping the system resilient.
Regardless of whether your farm is managed conventionally or regeneratively, every farm possesses natural capital. The question is whether you are building it up or wearing it down.
How Natural Capital Grows
Natural capital fuels your farm through a simple feedback loop:
Primary production is just a technical term for photosynthesis, plants capturing sunlight to feed themselves and grow. That plant biomass is then converted into farm value, whether that’s beef, wheat, wool, or horticulture.
Here is where it gets interesting: Natural capital compounds just like interest in a bank account.
If you put $1,000 in a bank at 10% compound interest, it grows to $1,100 in year one, $1,210 in year two, and keeps building. Natural capital works the same way:
Plant leaves capture sunlight, producing root exudates.
Exudates feed soil microbes, which secrete glues to build soil aggregates.
Better aggregation improves water infiltration and root depth.
Deeper roots and better water storage yield even more biomass during the next cycle.
Everything in a regenerative system sits downstream of primary production and photosynthesis.
Strategic Reinvestment: Rethinking “External Inputs”
In regenerative agriculture circles, “external inputs” often get a bad reputation. But an input is simply anything brought onto the farm from the outside.
When you harvest product and convert primary production into financial capital (cash), the goal is to strategically reinvest a portion of that capital back into the farm engine.
Key forms of productive reinvestment include:
Upgrading Skills & Education: Taking courses or working with consultants to refine your management.
Infrastructure: Installing fencing and water systems to improve grazing control, resting paddocks, and driving plant recovery.
Strategic Mineral Inputs: Applying targeted trace minerals or soil conditioners to kickstart photosynthesis.
Labor & Management: Hiring help to execute timely operations.
When external inputs are targeted at boosting photosynthesis and supporting plant growth, they build your natural capital base rather than replacing standard ecosystem functions.
The 200-Year Problem (and the Big Opportunity Ahead)
Over the last 200 years of agricultural history, the conventional model has largely extracted value from natural capital without reinvesting into its foundation. Tillage, over-reliance on quick-fix chemicals, and bare fallows have systematically degraded natural capital. To maintain yields, farms have had to substitute natural capital with increasingly expensive external machinery, chemical, and diesel inputs.
This feedback loop can either be positive (grow natural capital) or negative (degrading it).
Why Building Natural Capital is Your Highest ROI Move
Farmland is Expensive: Purchasing additional land to expand production requires massive capital expenditure.
Unlocking Latent Potential: Because most agricultural land has been historical degraded, recovering natural capital offers huge productivity returns per hectare without buying more land.
