183 Johannes Scheibe on using carbon credits to transition from understocked and overgrazed to zero input grazing

A conversation with Johannes Scheibe, founder of Ruumi, a satellite grazing app, about financing land regeneration and how Ruumi works with farmers and companies to create the conditions for a better future.
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We know grazing can dramatically improve grassland and store massive amounts of carbon. There are great examples around the world from Gabe Brown in the US to Kenya, Australia, the UK, etc. But how do we get thousands of farmers/ranchers to change their grazing practices in the next couple of years? How do we use the exploding soil carbon markets and satellite tech to make this happen?

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Transcript

Why are you doing what you are doing? Why Soil?

SPEAKER_01 0:00

We know grazing of ruminants can dramatically improve grasslands, which are the majority of our agriculture lands, and store massive amounts of carbon. There are great examples around the world, from Gabe Brown in the US to Kenya with Savory, Australia, UK, etc. But how do we get thousands of farmers slash ranchers to change their grazing practices in the next couple of years? One-on-one trainings are just not going to scale fast enough. And even after training, most farmers, rightfully so, won't risk these massive changes on their farm because because they carry all the risks. So how do we change this paradigm and how do we use the exploding soil carbon markets and satellite tech to make this happen? This is the Investing in Regenerative Agriculture and Food podcast, Investing as if the planet mattered, where we talk to the pioneers in the regenerative food and agriculture space to learn more on how to put our money to work to regenerate soil, people, local communities and ecosystems while making an appropriate and fair return. Why my focus on soil and regeneration? Because so many of the pressing issues we face today have their roots in how we treat our land and our sea, grow our food, what we eat, wear and consume. And it's time that we as investors, big and small, and consumers start paying much more attention to the dirt slash soil underneath our feet. To make it easy for fans to support our work, we launched our membership community. And so many of you have joined us as a member. Thank you. If our work created value for you, and if you have the means, and only if you have the means, consider joining us. Find out more on gumroad.com slash investing in RegenAg. That is gumroad.com slash investing in RegenAg. Or find the link below. Welcome to another episode. Today with Johannes Scheibe, the founder of Rumi, the satellite grazing app, financing land regeneration. Rumi works with farmers and companies to create the conditions for a better future. Welcome, Johannes. Hi. Nice to be on. And yeah, so nice to have you. I mean, the satellite grazing app, already those two words together, satellite and grazing, we're going to unpack that for sure. But I would love to first unpack a bit your background story. How did you end up founding this company, first of all, working on this issue? And when did you get hooked on soil? That's always my first question. How did you get into this crazy rabbit hole that soil carbon can be and soil in general can be?

SPEAKER_00 2:31

Yeah, so we are three co-founders at Rumi and we met while working at Daimler on self-driving taxis. Very different sector. Yes, very different. And yeah, we had an office in Berlin and in late 2019, there were these massive protests from farmers in Berlin protesting against the new legislations that are coming which is I guess similar to what's happening in the Netherlands right now so you've probably heard a lot about that also in the media recently and so the three of us turns out we have some background in farming or like I grew up in a really small village we had sheep when I grew up Patty second co-founder they have beef cattle in their family Daniel also small village where he grew up farmers all around and in the family and to us this really made a big impact and we just felt like we perhaps have been a little bit too far removed from where we came from during our professional life right so we just lived in big cities yeah only working there working on problems for cities or like solutions for problems that exist only in cities and then we have farmers right who produce our food who take care of the majority of our ecosystem, right? And they are really having big problems and are in trouble.

SPEAKER_01 3:56

And they don't really need self-driving

SPEAKER_00 3:57

cars. No, exactly. That's also something we thought, what are actually the applications for what we're building here? Who's going to use this? And is it really going to make this massive impact to justify us devoting our lives to it? And we decided that not. We need to do something different.

SPEAKER_01 4:14

But all three together as well. Was that an interesting, was that a sort of, I wouldn't say aha moment, but like, Because it could be like one of you said, okay, I'm no longer going to work on self-driving taxis. I'm going to leave and go on a journey to figure out farming. But actually you decided as a group

SPEAKER_00 4:29

to do it,

SPEAKER_01 4:30

which

SPEAKER_00 4:30

is interesting. Yeah, so first it was Danny and I and actually two others who thought, hey, let's try this together. Then two people left and it was just Danny and I, but Paddy joined instead. But we all knew each other and been working on this or discussing this topic. And we were just trying to figure out also by talking to farmers what the problems are right and why are all farmers so dependent on these agricultural inputs right like yeah

SPEAKER_01 5:00

how did you land on that like how did you because going from okay we need to do something about the issues farmers and challenges farmers have going to do something actually like physically like it's a big step like you went on a learning journey you remember when that hit you that the input side is both the challenge and your virginity?

SPEAKER_00 5:20

I think it was just talking to a lot of farmers so we actually first we thought we're going to do something with organic wine producers and using drones to help them apply fertilizer like organic fertilizer but then we thought okay the market is too small drones are too difficult kind of thing and then just talking to farmers and the family also to Benedict who's been on your show a couple of times and we just basically learned yeah just by talking to all kinds of farmers and understanding how they see the world, but also just looking at statistics. And that kind of made us understand that that's a problem and maybe where the problem comes from. So if a farmer is dependent on these inputs at the same time the government is saying, you need to stop using those inputs, then you have a massive conflict. But we also saw that there are some farmers who do things differently. And first we thought, okay, we're going to help all kinds of farmers to move away from these inputs and to help them detect basically when their crops are in bad health, when they need water and all these things. And we learned, okay, you can't actually irrigate arable land in Germany in most areas. There's just no water close enough. So just like learning, you know, getting into a completely new industry and knowing nothing. Yeah. And then I guess like at some point it made click that the ruminants, like, so that's why we also called Rumi, right? That they actually need to be at the heart of the solution right they're not the the the problem right like it's been said many times before this like it's not the cow it's the how right you and and we need to it's even a

SPEAKER_01 6:58

documentary and a book actually yeah definitely recommend it if you want to learn more about that yeah definitely i'll look into that um but did you did you like when did that click because it's very easy i think i'm just generalizing like you're in a big city in berlin um relatively far away from farmers i mean you're going to visit them etc but it's potentially easy to to go for a fast, easy solution might be a bit naive and to start a vegan brand or to go for, okay, we have to cut out the animals because the animals are the issue. But to go beyond that and go to, I mean, of course, if you visit Benedict, you will get a one-on-one on what's the role of animals, but that still you need to be able to, you need to be open to absorbing that and then working on that instead of saying, no, no, no, we have to cut out all animals. Like, did you go into it with a certain idea or it's better to get rid of the animal piece or did you go into it okay we have to find a way to make them part of the solution instead of part of the problem

Barriers unleash the power of ruminants

SPEAKER_00 7:57

I think so one thing is that so I'm not a vegetarian or anything Daniel actually is our third co-founder but I always felt like because I grew up in a village animals are part of what you do and you can actually keep animals in a sustainable way that was just my conviction that it must be possible and I think so Paddy he is a and he just does a lot of user interviews. He's probably done like a million or so throughout his whole career, right? And just to keep digging and keep digging and keep asking questions, that's really what he's really good at. And I don't know, we probably had 100 pharma interviews within two months or so, right? That was in early 2021. Just to really, really focus on what the issue is. And I think that's helped us just to the curiosity to understand first. And I guess that was really driven by by Paddy and they just keep asking these questions like we had like sometimes three four hour interviews with farmers right they love talking about this issue and they were kind of also excited to see like someone from completely outside of the industry is showing so much interest

SPEAKER_01 9:05

sitting down and really asking questions which is not I mean I think many people come up and come with their drones to help or get fertilizer and try to sell that or come with their super technical solutions without ever taking the time to do a hundred farmer interviews use of three hours and really digging digging digging keep asking why why why and I mean it's famously said I think if you ask why three times you get to a very core of the issue and in this case you discover the core of the issue for you is that the ruminant side is not being it's part of the problem instead of part of the solution and something or many things are blocking farmers and ranchers or whatever we want to call people that have ruminants to I would almost say use them optimally use the of course, between records, but to unleash the power, let's say, of the ruminants. So what did you discover as were the biggest barriers there for farmers to use that power and to work in the ecosystem instead of fighting against

SPEAKER_00 10:03

it? So one thing we've found is in talking to a lot of German farmers that the wisdom currently seems to be that it's the best thing to keep your animals inside. And if you want to have like an organic label or what's called vitamin, right? So like the milk that gets produced from animals that are outside, they have pretty small requirements, right? So it's like 12 hours a day for, I don't know, 160 days a year, right? But the wisdom- The bare minimum. Exactly. And what we found is also like, so for beef cattle, it just, for most farmers, just seems to be okay. We have some pasture where we can't really do anything else. So we just put some cattle there, but but it's completely irrelevant to our whole business. So that was kind of devastating for us as well to see. And what we found is that in the UK, it's very different. There's just like a different culture around grazing with beef, sheep, and dairy cattle. You have longer grazing seasons, it seems like to us, and grazing is more part of the farming culture as well. And I think there we... Could you say

SPEAKER_01 11:18

stayed more part? Like it'd be... I mean, I'm imagining 100 years ago was pretty much the same. And so how did that, why did that not maybe change so much in the UK or was it that, is that cultural connection to, I don't know, seeing animals in the land or do you have any idea if this is pure speculation? Like why those two countries went so far apart? That's interesting, yeah.

SPEAKER_00 11:40

Because Netherlands and Germany are quite similar, right? As one example. And there's a big difference. And you also see, like in Germany, you see a big difference between East and West, right? where you have much bigger farms in the East where the communists used to be. I don't know, it could be a cultural thing, right? So to try to optimize production and to make things more predictable, maybe that's a German thing to do, I'm not sure. The engineering

SPEAKER_01 12:10

mind. But then you found a very, let's say, open mind or much more interested group of farmers in the UK. Was that a sort of desperate move? Like, okay, we we don't really we keep knocking on doors in Germany and nobody opens the door they keep saying okay animals should be in what are you like what are you telling me a grazing app I don't need a grazing app I need a barn app yeah okay let's try another country like how did that come about like

SPEAKER_00 12:34

why the UK I think I mean we it's maybe it's a bit opportunistic but also like from the hindsight strategically it makes a lot of sense so subsidies for example they have changed a lot in the UK thanks to Brexit right like a wave from okay you own a piece of land you're gonna get some money you need to now show that you are um the methods that you're using to treat your land are actually sustainable before you get any subsidies. And there are different tiers for it. In the UK, it's called the Sustainable Farming Incentive, which is the same kind of incentives that they want to have in the EU now as well, but it's going to take some time. But what we saw is, okay, so now these subsidies are gone. The basic payment scheme for farmers in the UK are gone, so they need to change now. And maybe that was also a catalyst, so that there was more urgency for the farmers in the UK. And we're just like we had just much more open doors maybe that's also a cultural thing that farmers were way more willing to talk to us in the UK so we just learned a lot more about UK farming than you know like yeah and and We just gathered, I guess, also more early adopters in the UK than we ever could have maybe in Germany.

SPEAKER_01 13:52

And so now, what is Rumi as we currently speak? I mean, obviously, in the life of a startup, it changes constantly. We're now at the end of the summer in 2022. How would you describe Rumi at the moment to anybody that's completely new to the space?

SPEAKER_00 14:08

So I would say that on the one hand, we help farmers implement sustainable grazing. And on the other hand we're going to create a proof for them that they have done so and with which they can get financing to finance this basic transition towards sustainable farming yeah

SPEAKER_01 14:26

so the so it's really the double the double piece exactly implementing sustainable grazing or holistic grazing or better grazing we're going to unpack why that's so important but also that's been going on for quite a while mainly through trainers through sessions through a lot of but a lot of one-to-one or one-to-a-few. And I think we can all agree that it needs to go faster. What's the role of technology there to unlock it? But is it also possible, and I think you're showing that, to do that faster? And it's not necessary to have somebody as a coach on the ground to follow your every step as a farmer to go through a process. How are you unlocking that to go faster than it currently is? Because it is spreading. People are changing their grazing practices. It's just way too slow to have the impact we need to have.

SPEAKER_00 15:13

So during the interview, it's we found that a lot of farmers, they went to, for example, to Gabe Brown's farm to learn, okay, what is he doing and how can I just do it on my farm? Some were even paid to do that by supermarket chains. And then they tried it themselves on their farm and couldn't make it happen, even after maybe they tried to get help from a consultant. Unforeseen things, different soil types, different grass types, can really have a massive impact on your journey. So we think that this kind of having a good consultant who understands basically the science behind sustainable farming and how you can actually make it happen and then help you implement it, that's very important. So we found that in our first investor who was a grazing consultant in the UK who basically helped us also understand what is the actual mechanism behind it, right? And so getting away from like a text or like a, let's call it like a rule book or like gospels or whatever you want to call it right if you only do this you'll be safe yeah it's like where you have to follow this this is exactly what you need to do and it's going to work to okay so I understand those are your exact characteristics on your farms this is what you've been trying and it didn't work which is what

SPEAKER_01 16:38

we want to do children to do as well like it's not if you want them exactly to okay if you do this this and this and this then this answer comes out of your mathematical model but if that answer doesn't come it would be nice if you actually understand them all like what are the the mechanisms behind growing grass and growing healthy grass and keep like optimal and but without going through 10 years of education and study to understand that because we don't have time. So what did he see in that? What did he see in that to join you? Because I could also see quote unquote as a threat because he probably has enough work for the next 50 years, doesn't have to worry about that because these really good consultants are full until 2020 2030, basically. And yet there was an interest, okay, how can I leverage technology and how can I sort of augmentate myself or repeat, like sort of clone myself as a consultant and work with way more people without working with way more people.

SPEAKER_00 17:34

Yeah, but that's exactly the ambition, right? So he felt like, okay, I want to scale myself faster. This has to happen faster, this process, the same urgency around climate change and farmers in peril, right? And he felt like, okay, I can actually scale myself through this application. right so we're basically so his name is James Daniel so we in the beginning we were just joking okay we're gonna build James Daniel as an app essentially right and so at least the stuff that we he

SPEAKER_01 18:01

shows up at a hologram when you're in your land

SPEAKER_00 18:03

yeah yeah maybe not quite that far but yes like basically getting all his knowledge in and also like just him teaching us and then recording or like giving webinars recording different content that we can also then share with farmers basically, right? And kind of systematically breaking down what works and why it works so that we can understand it and we can fill it into the app, right? And we can also expand it to farmers in a good way.

SPEAKER_01 19:12

And so how does that work? And actually, let's start with it. Does it limit you now? We have a lot of this. I don't know, James, but we have a lot of the gurus in the space that are quite, like, it has to be like that and not like that. Like, does it limit you working with one person, sort of recreating him in the app, between brackets, obviously? Or are these relatively, let's say, general rules about grazing and, like, you can start implementing other philosophies about grazing in other areas or, like, how does it limit you or actually it doesn't and it's quite a let's say he's not the guru that's going to be offended if you change certain things about him in

SPEAKER_00 19:50

the end so i don't think he would consider himself a guru i think he so he has a bachelor in engineering um so he's like more of a scientist as well like from from the way he approaches things right so so that that works for us um so that we don't have to say okay you need to do mob grazing otherwise you can't be part of the program or you need to do holistic grazing that's the thing right so So we can actually just talk to farmers where they are now, figure out why are you where you are? What is your willingness to change? What is the possibility to change on your farm? And then figure out how do we get from where you are today to something ideally zero input farm and how fast can we achieve that? Because

SPEAKER_01 20:33

just to be clear, many grazing operations, maybe if you're not running a grazing operation, you don't know, but use an immense amount of inputs to keep the grass, the monoculture grass growing. Just to give an idea to us, the listeners, if you work on a typical farm of one of your farmers you work with, what would we see and how much input goes into that? How many cows are there? How would we see the current situation before they go into any kind of transition? I know they're all different, but just a general, and try to make it visual because you're between our ears. So

SPEAKER_00 21:07

bring us on a journey. So the ideal farmer for us is the one who does everything in the worst possible way, which I'll describe now. So he is ideally set stock grazing, meaning he's not rotating animals at all between fields or maybe only once or twice a year. So for our climate here, that's very little. And that means there's a lot of compaction happening in the soil. The animals are constantly on it. More compaction means less water in the soil. It's like a sponge. You can imagine if you compress a sponge, there's no water that can go in. If the sponge is expanded it can soak up a lot and it stays like available to the plants yeah and then you

SPEAKER_01 21:50

so this summer is an issue if you have compacted soil I think everybody in Europe is suffering from drought and too much rain at the worst moments and nothing is getting soaked in so it's very and the grass how does it look like do you see a lot of is it like a very nice like from an outsider does the grass look okay or is it like with a lot of let's say uncovered ground and bare soil in between

SPEAKER_00 22:12

like what's the worst situation exactly that would just describe like the the grass is no longer green right the um it's super dry like we've seen actually pictures on a side note from farmers where leaves are falling from the trees as if it's autumn already just because of this insane dryness um yeah but uh yeah exactly so if you do set stock grazing you're basically gonna have a lot of bare soil all the grass is uh yes super dry you're not growing anything right and and your your animals are gonna try to eat the last stops of the completely dried grass right And that's even going to ruin your grass sword for years probably. For a long time, it's not going to recover on its own very easily. Then you're probably going to use a monoculture perennial ryegrass, meaning relatively shallow roots. But if you give it enough nitrogen, it's going to grow quite fast. And that's why you use a lot of fertilizer to make this grass grow. But if you have no water, obviously it's not going to grow anyway. So that's why it's a problem. And then... And fertilizer, nitrogen is very expensive. Yes, that too. That's another incentive actually for farmers right now to change, which is great. Yeah, so we see farmers who use 50 to 100 kilos per hectare, right? In nitrogen fertilizer, which is a lot. Yeah, and then... Yeah, so I talk basically monoculture, set stock grazing, so bad management and... Yeah, no biodiversity, right? single grass. And that's what we change, right? So we say, okay, based on your soil type.

SPEAKER_01 23:47

And some willingness to change. Yeah, that would be it. The farmer needs to at least have an image or an imagination of what could be possible. Maybe he's seen other farms, maybe he's been to Cape Brown, maybe he's tested something, but there must be, I mean, they must pick up the phone and call you otherwise, or pick up the phone and download the app. Yes. But there must be some step because otherwise, so let's say this farmer calls you, what happens then?

SPEAKER_00 24:11

Yes. So we would first try to understand, okay, where, how big is your farm? How much grassland do you have? How many animals do you have? What is your stocking rate? What type of grasses do you have? You know, like all the characteristics I just described. What has been your historic management? What are you planning to do? You know, how do your finances look like? Everything needs to be taken into consideration in our viewpoint. A farmer, like who only has beef or only dairy cattle, right? He's really going to care a lot about, you where the inputs come from, how expensive they are and how productive they can be. So you cannot look at those things in isolation. If you have the luxury, let's say, to have enough money to just play around with animals and to say, okay, this year I'm going to have 10, maybe next year I'm going to have 30, depending on how I feel about it, but actually your main operation is somewhere completely different, then it doesn't matter so much. But if this is your only way of making income, then you need to look at the animals, the grass and the business at the same time. Yeah. So I kind of lost my thread here.

SPEAKER_01 25:22

And then what happens? So you get this full picture of the financial situation, of the farm situation, and then you're... I wasn't going to say guru anymore. What happens then? How do we come up with a transition plan? Exactly, yes. And then, of course, the finance piece of it, but we get to the finance. Then, okay, you use this amount every year. Input is costless at the moment. How do we get you off this quote-unquote drug as fast as possible? but of course it means changing the practices quite a bit like what would you and but not making it too risky because then as a farmer I would say no no I'm not going to risk this because I've seen others that tried and failed or maybe I tried it myself and failed as well like how do I get over that very very rightfully so very scary bump of okay I'm going to quite completely throw my organization or my my my life around

SPEAKER_00 26:11

yeah exactly yeah so after we have all this data we create a transition plan right where we figure out what can be done without jeopardizing operations how fast can it be done how many and then also how many carbon credits would that be right and how much revenue could you get from that and what could they finance right so that we can say this is your business case

SPEAKER_01 26:34

you don't see but Johannes is doing a very nice movement of bringing back things so finance is great because it it brings things backwards basically forward to us now like you can get some finance now to put solar panels or to change practices and they pay over a year over time If you can get that finance, it moves to you. But he makes a very nice movement towards himself. Like, how do we bring this back in time, the potential benefits or the benefits that come over time? And that's the click there. You can finance these things. So that's what you discovered and that's what you're building through carbon, which mainly come, I think, from the fertilizer, rejuice fertilizer and the soil carbon. I think those two are the ones that work together there. Or is it separate? Or let's say, how difficult is it to make that transition plan? Is it very relatively standard or is it super, super, super specific like on where people are? Like, do you need somebody on site to really build that? Or have you figured out, okay, if you do these 10 things, if you take these variables into account, you can get to a pretty, you can get to 80%, let's say.

SPEAKER_00 27:36

Yeah, that's what you said at the end now, basically. So we did around maybe 100 of those transition plans now, right? And we've seen a lot of different types of cases, edge cases, but also we can start grouping farmers into different uh kind of um yeah groups i guess cohorts yes um so now like for 90 of the cases we we can be pretty quick at saying okay this is what's possible right um so for example let's say you have 100 hectares right and then the question is okay how do i get from monoculture ryegrass to completely perfect diverse uh you know grass with nitrogen and everything in there right so i don't need fertilizer anymore So you can't just, if you want to have an operations, you can't do the whole thing at once. It's not possible. So you need to think about, okay, do I do 5%, 10% or 15% of my grazing platform per year? What can I actually sustain? And that's what we can essentially just calculate based on productivity and how the grass has been managed before. So if it was set stock grazing before and used this much fertilizer, then we can say, okay, there's actually, you have whatever, 30% room in improving your management practices and grass utilization. That means we can actually produce this much more food from forage and that's available to your animals. And that means we can reduce, for example, the total platform by 30% during a year without risking any reduction in productivity.

SPEAKER_01 29:28

And does these crazy droughts model into that? Do you take into consideration the crazy climate we currently live in? Or how does that work? Or everybody suffers, obviously. But maybe if you're in transition, you suffer more or less. How have you seen that this year in 2022?

What is possible with satellites, remote sensing and grazing

SPEAKER_00 29:47

So you might suffer more, actually, which is really bad. And that's one of the reasons why some farmers give up. So what we want farmers to do is we want them to follow the the plan as closely as they can, but obviously we want to have a conversation with them as well. If you didn't follow the plan, what happened? And we will be lenient when it's things like this drought, right? But we can see actually the farmer did reseed, as we said. He did reduce fertilizer. He just couldn't do the rotations as planned because it was just too dry. He had to graze not... He couldn't leave, let's say, 15 centimeters of grass. He had to graze down to five. It just was... wasn't possible otherwise as one example right so and then at the end of the year they will always get the payments for the carbon credits

SPEAKER_01 30:38

yeah and you say we can see we get to the payments everybody who's listening on the finance piece we get there but like when does the we say we can see does it mean is this the piece where the satellite comes in and how does that help you because we haven't really covered it until now like what is possible now with satellite and and grass like what I don't think you can count the different grasses but I mean I know you can count trees from space, but you can't really see what happens underneath. Like how, why is this possible now? And describe for people, I'll put a remote sensing episode we did with Ishan and Tom as well in the show notes. But why is this possible now that it wasn't possible, let's say five or 10 years ago?

SPEAKER_00 31:18

Yeah. So we're using two different types of satellite imagery. One is multispectral, which is really good at detecting biomass above ground. And the variation of... Which is great for you to figure out, yeah, grass, like, and see, okay, is something changing? And it gives you also some indication of moisture. So, like, you can figure from it, you can figure out what is the dry part of the biomass, right, which is essentially what you need as a farmer to know, okay, how much can I feed my animals every day? They typically know, okay, I need 2% of my animal's body weight in dry matter every day. Yeah. So from there, we get the variation, but the resolution is only 10 by 10 meters. So that sounds a bit crazy, but on a massive grassland, it doesn't really matter so much. And we can do some machine learning trickery to increase the resolution a little bit, something called super resolution for those who are interested. And then we combine that with radar satellite imagery. So the problem with the multispectral data is that it's an optical sensor. Whenever you have clouds or anything in between, it's going to be, you can't go see anything. That never happens in the UK. No, there's almost no clouds in the UK. So that's why we need the radar imagery, which can penetrate clouds. And it's more accurate for seeing height differences. You still can't get to a centimeter resolution, but you can, for example, see, okay, I went down from half a meter to 15. Those drops you can see. You wouldn't be able to see the variation of the biome map biomass. I mean, I went down, meaning it's been

SPEAKER_01 33:02

literally that. Wow.

SPEAKER_00 33:04

Yeah. So we can see what has this field been grazed or not. Right. And we can, and the radar can

SPEAKER_01 33:10

be, can work every day. Like that's, that's one that, that doesn't care about clouds. Correct.

SPEAKER_00 33:16

Yeah. You have other types of interferences and it's not super easy data to work with, but if you combine it together with this multispectral imagery and because we have a lot of measurement data from farmers about about grass heights historically and current as well, that we can basically, we built this model just for this purpose, right? To figure out how much grass do you currently have. And then now we can do things like, we have an internal grass growth model based on like temperature and what we see on multispectral and so on, right? And then if we- Internal grass growth model. Yeah, we have an internal grass. Of

SPEAKER_01 33:53

course, model. What do you model? I model grass. That's what we do, right? It's really important. But it's the foundation of a big chunk of our life. It's very interesting that we don't discuss that more often. Or tree growth models. It's very interesting. How do you turn sunlight into something quote-unquote useful is everything we do. That's the whole point. And yet we're laughing when you say a grass growth model because we don't discuss it very often. So it's something we should do way

SPEAKER_00 34:24

more. Yeah, I agree. And what happens above ground gives you a good indication of what happens below. So for example, with this growth model, we can say, okay, your grass should grow this much every day currently. But then suddenly, we see that your grass grows way faster. So that means we can actually say, you put fertilizer on there, and we know pretty much how much nitrogen it was as well, right? So then we can say, okay, that impacted your soil negatively as well, right? And it obviously created emissions from fertilizer itself, from the fuel you use in your tractor to spray the fertilizer and so on, right? So That's where the grazing management or the farm management data goes into carbon credit verification. Our view is if you want to do very high quality verification, you need to know about what the farmer is doing at any point in time. Because if you want to do it in a way that's scalable, we talked earlier about all the different emissions that go into these carbon credits. One is solar gun and carbon, it's like 80-90%. But then it's the methane emissions from enteric fermentation. It's the, you know, from the fertilizer, the emissions from the manure, how you store it and for how long. Like if you have an open slurry pit, right? These gases that go into the air that like, if you go to a village, you know, but when it smells like that, that can't be healthy. And it really isn't, right? Whenever an animal... So you take all of that

SPEAKER_01 35:52

into account and look at the net improvements and take into consideration, okay, we know that this farmer spray NPK X amount of time with this amount so we know more or less what that is we know the diesel we know how he or she stored the manure if he or she had that we know the soil carbon part and then we do the calculation and we come out hopefully with a plus and that's able to that we're able to sell that and finance with that and then I make the movement again refinance the transition with that which I think is very interesting because normally we but let's unpack that a bit So, and how, because many people say, I mean, we come back to the, it's the cow, not the how, like, what do you see in those numbers from a very bad case, like the worst case you could see, but still a farmer willing to change, like how meaningful are these, is the carbon potential there? Like, do you see, are they significant enough to, of course, otherwise it wouldn't be working with you, but are these significant enough to, but maybe they only work for the savings of the fertilizer, which is also okay, but are these significant enough to make people move? Like, what do you see there in terms of, of potential, let's say on that 100 acre farm or an average one you work with.

SPEAKER_00 37:04

From a business perspective or from a carbon

SPEAKER_01 37:06

perspective? Yeah, just if somebody has been using the worst practices and going through this transition with you, like how much are we saving? How much are we storing? How much, on average, more or less, are you able to verify? Because you're able to check if somebody put the carbon or the NPK there because you have the

SPEAKER_00 37:24

satellite. So let's say we're talking a dairy farmer in Europe. They might have something like eight tons of CO2 equivalent in emissions per hectare per year. During the transition period, the increase in solar carbon is going to ramp up as you have more and more species on more and more of your grazing platform, and you're going to be able to reduce your fertilizer emissions more and more as well, also gradually. So it's a double one. It stores and you reduce, which is great. At the five-year point until 10 years after we started, that's where you're going to have the biggest drawdown and the biggest reduction. So there we can be around zero. So we're going from eight to zero based on what's possible with increasing solar organic carbon and reduction fertilizer. Then afterwards, it kind of depends on where your initial solar organic carbon was and where you're basically going to find your equilibrium. Because over time, you're going to reduce the amount of increase per per hectare per year, right? So, but even afterwards, you can find farms that can be carbon neutral for a decade or two, right? And then maybe they will end up, if you take enteric fermentation into consideration at around maybe two, three tons of CO2 equivalent per hectare per year, right? If you keep the stocking weight the same, right? So animals per hectare, that's the assumption right now, right? So if you were to reduce your animals, of course, then, you know, that's a completely different story, which we think is...

SPEAKER_01 39:02

Yeah, or I mean... And the methane equivalent, that's a very big discussion if we should include that or not and how methane works. But if you look only at carbon, you're going to be carbon negative if you take the methane out of the equation.

SPEAKER_00 39:19

So if you only want to take carbon, then we only take the fuel and the increase in solar carbon into account. So the fertilizer is typically nitrous oxide and other stuff.

SPEAKER_01 39:33

And so when you sell these credits is you mostly sell reduction ones because you reduce so much the input side or you sell sort of a combination of and does it make that complicated

SPEAKER_00 39:44

yeah so it's a combination of removal and avoidance right which does make it sometimes complicated for some buyers but we're trying to also like help shape that conversation because in our view right so the nature-based solutions you need both what do call it in the carbon market is the only thing that's available right now which we can scale. There's a lot of technology that's still in its infancy and we need to scale it up to get to something meaningful. But today we can make these changes right away. And discussing, okay, should we have fewer animals or not? It should be different. Let's say we were to reduce our livestock today. That means on some project area, let's say in the UK we reduce all livestock by 50%, then, okay, what's going to happen? It's not like people will eat less meat all of a sudden. It means someone else or some other country will actually pick that up and will just increase the number of animals. So you have this kind of leakage problem, which means you actually probably want to kind of maintain the livestock numbers. In some areas, they should probably be reduced, right? So if your own land cannot maintain the number of animals that you have, you should probably not have that many animals. But we need to figure out where do we just place it then the carrying capacity exactly where how do we account for this kind of leakage problem and and how do we make up for the loss and proteins as well

SPEAKER_01 41:14

right

SPEAKER_00 41:14

and

SPEAKER_01 41:15

how have you seen that from some some of these farmers because we've heard stories people like increasing the stocking rate and the carrying capacity dramatically by changing their management while reducing or going to zero with inputs which is a very interesting which suggests that you're taking more sunlight and transforming into something very very useful which is nutrient dense protein, et cetera. Like, have you seen that as well in the UK or is it mostly like say American stories or other stories where we actually, what we could do on this piece of land is much more than we could imagine until we tried. And then we saw actually we could produce way more grass and thus support way more animals than we thought

SPEAKER_00 41:49

before. Yeah. So we do also have this kind of understocked and overgrazed farms. Absolutely. Like we see that a lot.

How easy is it to sell these soil carbon credits

SPEAKER_01 41:59

Which is just to get it in your head, like everybody's like understocked and overgrazed. Is it crazy phenomenal? I think the first time I heard somebody, probably listening, young Gisbert, said it, like most farms are understocked and overgrazed. It sounds crazy. But I think Gabe Brown has said it and some of the savory people obviously as well. So which suggests that we're damaging our farm and getting way less animal protein of it than we could. Plus having a lot of input and all the other externalities that we don't have. So which is sort of the wicked, like why? So they exist. Many of them are understocked and overgrazed.

SPEAKER_00 42:32

Absolutely, yeah. And so Mariko said that in the previous episode as well, right? So like reducing inputs, that's the main thing. I think she was talking about it shouldn't just be, no, yeah, it shouldn't just be CO2, but I think that's a different topic, sorry. Yeah,

SPEAKER_01 42:47

the chemical side as well. I mean, that's a whole different one, the chemical input side. But the whole input industry, yeah, we were completely addicted to the trucks coming on our farm, dropping a lot of different things that sort of, and then we're still understocked and overgrazed. Yeah, exactly, yeah. And so on this credit piece, you've been selling the first ones. How has it been going? How difficult, quote unquote, is it to have this story? It's not the how, it's the how. Because I'm imagining many of these companies that are buying from you are in big cities, very far removed from the farms itself, just like you were, but maybe even further because they didn't grow up on a farm. How difficult is it to sell, quote unquote, this story of you actually should invest in room and in transition if you want to have a meaningful dent in the next couple of years?

SPEAKER_00 43:33

years. So one thing that's difficult is to explain how important the increase in solar organic carbon is because it's not something you can just see directly like a tree. So that's a kind of difficulty for us. What is easier for us is that actually the project sites where these companies can invest in essentially with their offsets, they are typically way closer to the headquarter than a project that's maybe halfway around the world. So that's actually a big plus. So imagine if you're a company and you want to attract new employees and you want to tell the story or make it part of your brand that you care about sustainability, then you also want to be able to show that what you're doing is meaningful and that it's actually happening. And what we are able to do because we're so close to farmers is we can actually tell much or help do much better storytelling. And it's much more relatable to say, hey, I'm actually supporting this founder that's 10 kilometers away from where I work, rather than maybe there's going to be some trees in Bolivia.

SPEAKER_01 44:50

Right? No, it's very close. And then... So what is the, not the trick, but what's the mechanism here? You calculate with the farmer what is possible in five and ten years, and then it's not that you promise him or her, okay, in ten years we're going to pay. You say, no, let's bring that forward now so you can actually make these transitions. How difficult is that? Because it means you're sort of pre-financing these carbon gains or carbon avoided emissions and stored emissions that didn't really happen

insetting vs offsetting

SPEAKER_00 45:23

yet. Yeah, exactly. So we basically also pre-sell these credits right so that means we even though we only verify the emission reductions after they have happened right so we can still convince buyers of these carbon credits that we will make them happen right and so that that seems to work quite well because like we can show that from our track record of selling credits right we're selling them at twice the price of our closest competitor in the kind of livestock space and we haven't been having trouble let's say five finding buyers which is really great because it means that there's people willing to invest into farmers to change their practices voluntarily which I think is fantastic it just shows that maybe the kind of zeitgeist is changing that we want to get closer to where the food comes from we actually want to support one another and I think that's fantastic

SPEAKER_01 46:26

And the companies you sell to, are they typically in the food space? Are they in media? Because you said you want to get closer. Is that literally like they are in the food space? They're interested because of that? Or they are generally, let's say, very conscious companies that want to voluntarily obviously offset or inset and actually offset if they're not in the food space. Like what do you see as a typical, like why do they come to you?

SPEAKER_00 46:51

Yeah, so it's kind of geographical closeness. That's what we see at least for carbon credits, right? And here we speak of the offset. So location, location, location. And story, story, story, right? You need to be able to tell a good story. It's part of the marketing strategy, right? It's oftentimes, of course, they care what one thinks, right? But at the same time, it's part of the marketing and PR. But that's on the offsetting side, right? So like where anyone technically could buy these offsets anywhere on the planet, any kind of company, any industry tree, right? Even though we want to make sure that it's only companies who also can show either already a track record or have some believable strategy for reducing their own emissions, right? But then you also have the second kind of distribution channel, if you will, which is within the food supply chain, right? And there you typically speak of insetting, right? Because it stays within the supply chain. These carbon credits stay, yeah, in the supply chain. And there, yeah, we see equally good traction, right? So we we are using the same type of pricing as for the voluntary carbon market. And companies want to reduce their own emissions, right? Typically they have goals for, okay, I want to reduce my emissions by 50% by 2030, right? And oftentimes a lot of these emissions come from how the raw materials are produced or the inputs are produced, right? And that then comes down to the farmers. That means we need to reduce emissions for the farmers, but they don't know how, right? So that means they actually pay us to onboard, farmers and help them go through the transition plan. And here again, it works with the financing, right?

SPEAKER_01 48:34

They will be interested in buying these raw materials, in this case, animal protein, which is much more traceable. Of course, you have all the traceability and has a really, really good story coming back to the story. And they can inset part of their emissions they get down the line.

SPEAKER_00 48:50

I would even say, so today, you actually see a lot of dairy or beef companies in the supplied chain who want to and maybe already are paying for sustainable products but they don't actually know whether anything is happening with that money that they're paying this premium that they're paying right

What should smart investors, who want to invest in Reg ag and food look out for?

SPEAKER_01 49:09

maybe they paid one of these farmers to go to gabe brown's farm and they never had nothing or they paid these trainings which are great but then if they don't follow up with a concrete transition plan and all the work after and the verification it's very i mean we all know that we go to amazing courses etc and then on monday morning you show up again at work or in your farm and yeah to implement it is very very exactly you sort of give them a tool to follow through for at least a group that wants to and wants to potentially get premiums as well because i think not only reducing drastically your input of course get paid for the transition which is great but also if the supermarket chain or whatever can say okay but if you reach this in this level we we have a certain premium ready for you which which drives the market exactly and you see that happening already like that those forces are starting to pull and push

SPEAKER_00 49:56

absolutely What we also see is that some companies, they try to also implement it by having pilot programs, right? So maybe a handful, sometimes 30 farmers, right? But they're really asking themselves, how are we going to do this for thousands, right? Because if you want to reduce the overall emissions by 50%, it's not enough. If you do it with 30 farmers, you need to do it with all of them.

SPEAKER_01 50:19

Yeah. And so what would you say now in this space of a carbon hype and a lot of attention, droughts, et cetera, what would you say? I always ask this question in this. Let's imagine we're in a theater. Let's imagine we do this in person soon. And we have a lot of smart investors in the room investing their own money, investing other people's money, et cetera. What would you, obviously without giving investment advice, but what would you tell them to do once they leave? Like, okay, what would be the first step? Is that doing long interviews with farmers, like you said, like going deep into the space or what are spaces or places that you say okay they really deserve more attention and more interest more resources more energy and potentially more money as well

How Johannes would invest $1B

SPEAKER_00 51:01

I think if you look at the carbon market there's a lot of investments basically going to downstream innovations like marketplaces brokers rating agencies whatever but there's very little on the supply side right on the actual supply like you know you're actually creating the credits that need to be then so gold rated, whatever. So I think in investing and figuring out how to best invest into a credible supply, that's very important. And I think looking at kind of hands-off approaches is very difficult or like, I don't see that that can be successful based on how we talk to farmers, like saying, for example, you only provide financing and you don't even talk to the farmer necessarily. You're basically a bank. where you're saying, okay, I'm going to help you get money because some people want to pay money for regenerative grazing, but then you just need to do some credibility check as bank, so to speak, but you don't actually then figure out, okay, what is the farmer going to do? Because the risk is going to stay with the farmer. He has to figure out how am I actually going to do that? How am I going to generate, let's say, these many credits? Or how am I going to actually make these emission reductions happen? Or how am I going to run a business with these different practices? How am I actually going to transition? So I think that's why these hands-off approaches, in my opinion, are very difficult. So I would look for companies maybe who can show that they can either attract a large enough segment of a very particular type of farmer or who can show that they have been able to speak to or attract a lot of different types of farmers, right? It's a way you can just, okay, they understand farming, right? They understand, like farmers want to work with them and they actually understand how to generate the supply That's what I would say.

SPEAKER_01 52:54

And so what would you do if you would be in charge of a billion dollars or billion euros, let's keep it, or a billion pounds sterling as you're in the UK? What would you do if you had to invest that? You have to put it to work with a very long lifetime if you want to, or very short, maybe say most impact can be made now. Would you just buy all these credits? Would you set up a lot of roomies around the world? Or would you shoot some more satellites into space because you need better than 10 meter accuracy? Or would you just spend it all on or invest it all in machine learning? Like what would or maybe consumer awareness around these things. What would you do if you had to put that to work?

SPEAKER_00 53:29

I think more satellites would definitely be good and making it available and making it cheap and also easy to use. Are they getting

SPEAKER_01 53:37

there? Is this 10 meters or something? If we would discuss this in a year, it would be to eight or five. Is this a continuing progress? It's getting better over time or is the machine learning and the software getting better to identify 10 meters and let's say upscale it to Is it a continuous improvement like Moore's law?

SPEAKER_00 53:57

It's happening on both sides, just like with computers and software. The software is getting better and the hardware is getting better, so it's the same thing for satellites. You have more and more satellites being shot in an orbit, and the prices are getting cheaper and cheaper. We're using free satellite imagery from the European Space Agency, which have this relatively coarse resolution, but also there, the technology is moving on not in kind of months but you know more like decades but it's happening right and at the same time image processing um algorithms and so on are getting better right um and and compute powers so you would

SPEAKER_01 54:37

maybe spend it you might maybe put it uh a bit into the satellite space but what what else would you

SPEAKER_00 54:43

do um so we have to like actually you mean except for roomie right um but uh so you can you can you can put like 50 50

SPEAKER_01 54:51

million into room if you want to but i'm curious

SPEAKER_00 54:53

about the rest uh and but it should it stay in the food space? Because I was thinking... Could be

SPEAKER_01 54:59

anything, not really. I'm asking this question because I'm curious how people working in the space would prioritize if they had sort of unlimited resources.

SPEAKER_00 55:09

So what I think is, even though we haven't solved the climate crisis and solved food production or anything like this, it feels to me at least, okay, we can actually solve this within the next 10 years, 15 years, 20 years, I don't know. It's at least, it feels like it's on the horizon and we know how to do it. We just need to execute in quotation marks. And I feel like there's some questions that we haven't solved yet. One is there's going to be a lot of migration that has to happen because of climate change. I don't know how we're going to solve that. You know, like we've seen what happened in, whatever, 10 years ago when there was migration happening after, you know, it was the Syrian war. I can't remember, right? But, you know, refugees coming to Europe, there was a big crisis and it's just going to be 100 times bigger within the next 20 years. How are we going to solve that? That's a big question for me. And another one is how are we going to solve... the issue around basically the consequences of an aging society. I think that that's going to really put us in front of a lot of problems, like how we actually finance that, how we make sure that older people don't live in poverty. With age, you have a higher risk for health issues, like mental ones, like dementia, whatever. So that's just going to require a rethink in how we set up society, right? So right now you have typically young people living in cities, working on tech, and then old people moving out. I was going to say,

If you could wave a magic wand and change one thing in the agriculture

SPEAKER_01 56:53

this gets into a whole different topic, which we should get into, but not this one. Like rural-urban divide and how we shape. And generational divide. But I think what's interesting here, and generational divide, and of course with migrants as well, like how do we shape... the countryside or actually the country we want to. But I think there's a very interesting connection with the way we farm and the way we manage the land. Let's bring it broader. And the reason I'm recording these interviews is because I think regenerative practices and regenerative food is a very nice entry point to ask all of those questions as well. Because you're forced to, after a while, to ask questions about land ownership, to ask questions about why some people were very lucky in life and got a hundred hectares and many others most people didn't and were born somewhere else and many people got access to water or didn't and many people got access to education or didn't many people got access to a lot of money or didn't and and there are big questions around health and big questions around intergenerational living big questions around living in general like what we want houses to be or transport we come back to the uh the flying no sorry the self-driving I think it it forces us to ask all of those questions we want to be dependent on massive input companies that get stuff somewhere that we don't even know or that we want to be like how do we shape that and it forces us to ask those questions it's very valid but as we're almost approaching the hour I would also say let's keep that for another one but as we sit down I think this is a good one to do in person honestly it's better than do through video as we do now so if you had a magic wand I think it's a good final question in this case because it nicely connects to what you would invest in as well like what would you change if you had one thing you could change overnight what would you use that for? And it's a very powerful tool, obviously, but what would you do?

SPEAKER_00 58:47

I think having the perfect food labels is what I would change. Like where as a consumer, you can actually make informed choices about what you're buying. That would be fantastic. Like, you know, like today you have a jungle of different labels and I haven't at least seen one yet where you can actually just look at it and say, that's great. I can make a decision based on that and on that alone. Because I think it's a very complex issue and we tend to oversimplify. That's why companies who produce food can take advantage of that. As one example, you don't know whether a monoculture oat field that you use to produce a milk alternative is actually better for the climate than cow milk that you can buy. You can't make that choice right now as a consumer. Or if you If you eat avocados or lime from Mexico, are you aware that you're probably supporting drug cartels? And I think that's a terrible state to be in. As a consumer, you try to make a good choice, but even if you try it, you cannot make the right choice. And I think that's terrible. So having the perfect food label, I think,

SPEAKER_01 1:00:00

would be a very busy one. It also has to be simple and understandable. And it would be very interesting to that level of transparency. What do you think? you think people would care then not enough people would care now let me read first question to to leave this peanut butter and take another one or to take this avocado and like to make that choice in a supermarket or in a place where they buy i think so yes where we buy honestly do we care

SPEAKER_00 1:00:28

yeah i think so um i if you look at like whatever organic produce for example right then you see okay people are buying that you see people choosing to be vegetarian or vegan because of climate so i think there's the willingness uh to change and I think there's a big group of people who are saying I can't make a reasonable choice so I'll just buy whatever I'll just buy the cheapest right so then I think there's a majority of people who would make a choice based on that label and actually change the way we produce food because the farmer is going to produce what he can sell right so I think it has to start at the consumer level which is obviously then the perception is shaped by marketing from companies right so but those things maybe need to work in unison And I think that food producing companies have understood that sustainability has to be part of their brand now. There's just no way around it. That's what we're seeing from corporates who want to be our customers for the insetting model, right? So it means, okay, we just need to also reach the consumers, right? And then we have to chain complete because a farmer will not produce something that he cannot sell.

SPEAKER_01 1:01:36

I think it's a good moment to end. I want to thank you, Hannah, so much for your time to explain what a satellite grazing app is and how does it work in setting versus offsetting, how grazing can be a huge part of the solution, which we all know, but then how do we practically get there, which is a very different question. And I want to definitely keep, I will send an invite at some point to do the philosophical urban versus rural and migrant generational divide and I will take you up on that at some point. But thank you so much for now and good luck with building. Thank you very much for having me. Thanks again and see you next time.