306 Fernando Russo - From selling Playboy's to growing coffee, cacao, credit and lots of cows

A deep dive conversation with Fernando Russo about the reasons why he is going deep into coffee and cacao without being a coffee drinker and how he turned from being a Playboy’s salesman and a travel entrepreneur to an impact investor in the regenerative agriculture and food. We also talk about fashion and heights, the Amazon, deforestation, reforestation, the role of cattle—the good, the bad, and the ugly—and, of course, the potential and why he is in the water camp, not the carbon camp.

What is driving one of the most active impacts investors in the regenerative space? What Fernando tells fellow impact investors when they ask him about this regen thing? 
Getting credit and other finance into the hands of farmers and land stewards who want and can change is way more important. Let’s get to work.

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Transcript

Speaker 1: 0:19

Wow, we cover a lot in this deep dive, so grab a cup of coffee, which is super appropriate, as you will discover later as we cover quite a bit of this remarkable bush slash tree Fascinating from a carbon perspective and really interesting from a potential margin perspective. What is driving one of the most active impact investors in the regenerative space? Why is he going deep into coffee cacao without being a real coffee drinker? And why does this former Playboy salesman and travel entrepreneur ended up in the regenerative agriculture and food space to begin with? What does he tell his fellow impact investors when they ask him about this new hip regen thing? We talk about fashion and our heights. The cow ones, not the ones with fear, could be the driver for regeneration in cattle. And, yes, we talk a lot about the Amazon, deforestation, reforestation and the role of cattle, the good, the bad and the ugly and, of course, the potential. And why is in the water camp, not in the carbon camp? And no VC investing in ag tech and food tech isn't the most impactful thing to do. Getting credit and other finance into the hands of farmers and land stewards who want to and can change is way more important and impactful. So let's get to work.

Speaker 1: 1:33

This is the Investing in Regenerative Agriculture and Food podcast. Investing as if the planet mattered. 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 gumroadcom slash investing. Welcome to another episode Today with a good friend of the show and supporter, and we do this in person, so there might be some background noise.

Speaker 1: 2:52

We chose a quiet spot, but I hear some seagulls outside Doesn't mean we're at the sea, it means we're in the city center of Amsterdam, and I'm very happy to be joined by Fernando, who's an entrepreneur, impact investor and runs a Brazilian family office, but has a base here in the Netherlands to do a lot of the work as well. So I caught you in a quiet moment in one of your many, many travels. You spent a lot of months abroad learning. You share a lot of LinkedIn I would definitely put that in the show notes as well Fascinating stories on carbon, on coffee, on cattle and a lot of other things. So thank you for joining us today and share a bit more about your journey. Well, it's a pleasure.

Speaker 2: 3:30

I followed the show for a long time, so it's really good to be here and happy to have a conversation.

Speaker 1: 3:37

Yeah, you know the drill. We like to start with a personal question how do you spend? I sort of tweaked it recently. Usually it's like why do you spend so much time on soil, your career? But I, like I've noticed with people that they that it's almost better to ask it. Like how come you spend most of your awake hours thinking about food systems, change agriculture, smaller farmers, soil? Like how come that became more than than work? And it's not even a passion, like it's really driven by a purpose. Like how did that? How did that turn out to be that you were bitten by a bug at some point, like the soil bug? Was it a gradual transition? And yeah, let's, let's unpack that part of it?

Speaker 2: 4:20

yeah, no, so for me it was quite of a long ride. My background is business, and so I work for corporates. I work for the beer industry. I set up my own company at some point. I was marketing manager for playboy magazine in brazil, so I was not doing very impactful stuff.

Speaker 1: 4:37

So to say I mean there's, there's an, there's an argument there on impact. Yeah, maybe the net positive side is to be discussed, but yeah, you knew how to sell things which is very useful.

Speaker 2: 4:47

Yeah, so I have this marketing sales background and one point in my life, after exiting my own business, I was studying at INSEAD, doing my executive MBA, and then just working a lot on my inner development, my self-development piece, and it was a story of regeneration. So how do I come from being a stressed entrepreneur, almost burning out, almost working myself to death, to really connecting to myself again, to my body again, and looking at my health and starting regenerating myself?

Speaker 1: 5:22

Was it triggered by the sale already before, by the exit? Like what triggers that feeling okay, I have to work on my like? I know many entrepreneurs as well that are happy with the super stress and they take a holiday every now and then and then they're sort of fine and still they work whatever hours in the week, and they just never get to that point maybe a really severe burnout, but they never get to the point that that they might take that inner journey. Like what was it always there? Like what triggered that that inner journey? Like, okay, I need to work on on myself because I have a problem or problems or actually I'm sub, like I could live better in a better way. What's? What was the reasoning behind? Okay, I need to look inwards and not just sell Playboys.

Speaker 2: 6:05

Yeah, I had this kind of awakening moment while I was driving. I had a live marketing agency in Brazil and then we won this prize of doing the best incentive, international incentive program, whatever it was with Bierdorf, nivea like big client. And then I saw this picture of myself in a magazine holding this stupid crocodile trophy this was the award with my business partner and I looked obese. I was 15 kilos more than I am now. I was swollen. I was a disaster. So I was in my early 30s and I saw myself almost 55 years old on that picture and I said what the hell am I doing?

Speaker 1: 6:48

Were you happy when you got the award, like when they took the picture on that stage? Because you look at yourself later from another angle, which is unique, because somebody took a picture but mostly we can't do that but at that moment itself, when they gave you the crocodile, yeah for sure.

Speaker 2: 7:09

But it was the typical moment of you're also always seeking for something and when you get there it's empty. So this is the typical moment of someone who's just driving on fifth gear all the time as an entrepreneur. And then, while I was in INSEAD I tapped and it was funny that that happened in the business school I had this really interesting professor, neil Be bearden, who was teaching the decision making class, and he will make you find, uh, like, take a decision from the core of the fundamental objective in your life. So he will really make you dig in deep why you were doing and why this is important for you, like for any decisions, no. And then, working with him, I tapped into eastern philosophy. That led me to.

Speaker 2: 7:50

I was already doing meditation for a long time and I think that was one thing that sparked the awakening moment. Uh, and then in seattle I had finally the time to work with myself. I was not running a business like crazy anymore, I was just studying and just doing the work. And then I reconnected to nature, because this was the thing in my childhood. In my childhood I was super connected to nature. Everybody thought I was gonna be a biologist. I even thought about going and studying agriculture, but then I went to business just because being cool was more important when I was young than doing something that was closer to my heart, my purpose, and then, when I tapped into this nature piece, it was almost like I received a calling that I needed to do something for the planet, for the forest, and was very linked to nature, very linked to nature.

Speaker 2: 8:49

So the beginning of our journey in impact was really, can I move from being the crazy entrepreneur who's driving things to be more an enabler, kind of an investor, now that I have the capital? Because, coincidentally, on the same year, my father had a liquidity event. His health company in Brazil was much larger than my small startup, and then he had the capital. We formed the family office and we kind of together made this pledge that we were going to invest this in something meaningful for the planet, and the beginning of the thesis was can we find businesses that grow in partnership with nature? This is where we started. This is where we started and as I started drilling down and seeing that food systems was the biggest leverage to achieve the environmental impact I wanted, once I discovered the story around soils and regenerative agriculture, it completely clicked.

Speaker 1: 9:35

Do you remember, like soil and agriculture and food, when those words sort of clicked together, or is that much more normal? And agriculture and food, when those words sort of click together, or is that much more normal if you come from a nature background in Brazil and like I remember when I saw soil and food for the first time. But that's not something maybe now, but let's say they did teach you in school that the first six inches of topsoil is probably the most important thing we have. Do you remember when that clicked in place?

Speaker 2: 10:06

Yeah, so I was already, as we were starting to do direct deals in Impact.

Speaker 2: 10:13

The first deal we did here in the Netherlands when we started Meraki Impact was in packaging, so it was already related to food.

Speaker 2: 10:20

It didn't go so well, but that's another conversation. But then, as I started exploring deals in food and I wanted to learn from people who knew what they were doing, I got connected to CommonLand, which is an important foundation doing landscape restoration here, and I was really blown away by the work they were doing. I did a course they had with Erasmus University around regenerative agriculture and that completely clicked and immediately weeks later I was in their Spanish project talking to farmers like Alfonso from La Junquera, looking at La Menderesa and all these things and really eager to do an investment on that side. And then the first investment we did immediately after was Wide Open Agriculture, which is the Australian project that came out of Commonland. So it was really funny the first deal we did in regenerative agriculture was on the other side of the world, opposite from the deal as far as you can get away almost, and we still haven't had wide open egg on on the show.

Speaker 1: 11:26

we'll have dirty clean food like their spin-off now soon, and and also willem ferret at the founder of common land soon as well.

Speaker 2: 11:34

so there are a lot of connections yeah, you should ban and mask the founders there.

Speaker 1: 11:38

Yeah, remarkable stories to show and and so you started making investments. And then what You're based here in Amsterdam, you have a Brazilian family office. How do you navigate that? Or how do you like some direct deals? I know from experience, or I've seen that many times, like it's quite time consuming to do a lot of direct deals Like did those few experiments at the beginning then shape, let's say, the rest of the family office journey? Like how, what were big next steps in that?

Speaker 2: 12:11

Yeah, it was through trial and error. This is how I normally operate. I found out in this journey that I'm horrible at picking direct deals because I get too enthusiastic. This is just who I am. I'm a visionary. So it's very easy for an entrepreneur to tell me his vision and I'll be building a whole business on top of his vision, even though that's not the business he wants to build.

Speaker 2: 12:36

So we did some very bad not very bad, but bad investment decisions in direct deals and almost push back the family office on the strategy in the beginning. And the way we correct course was let's do impact funds instead, let's trust fund managers who know more about this new topic for us and let's work with them. And this was great, also in my learning journey, so like really working with these fund managers, looking at what they were investing. And we built a big portfolio of impact funds around venture capital for regenerative agriculture, for food, and then we went as far as supporting two new fund managers, which is now something we call TFT the first 30, that can we look at regenerative agriculture technology as something important for the journey? This is how we started, so to say.

Speaker 1: 14:00

It's interesting to acknowledge the tendency of a certain group of people, and yours included and myself as well to get very enthusiastic about direct deals and then sort of I see that with the syndicate as well like I just want to do them all, and luckily we have Anthony and Naeem to slow that down a bit. But it's not the healthiest, let's say, investment approach to just do all of the direct deals and then, but then how difficult is it for you to work with fund managers that say no, a lot of course, because that's their job and and like how, what was the learning there or the journey there that you, like you brought for sure deals to them as well, to many of them and they often would end up saying no, protecting your investment as well, because you're an investor in the fund. Like, how does that work and how does that make you also a better investor in general?

Speaker 2: 14:57

Yeah. So it was really interesting, especially when we started deploying capital in European funds, like the Dutch funds, and then we moved to Brazil as Brazil was starting to develop the impact strategy. So in the beginning we had generic impact funds in Brazil that we started to support because we needed the whole impact space in Brazil to grow. And then really taking these fund managers to see that the food thesis is something important because Brazil is a massive agriculture powerhouse, and then seeing the different aspects of the thesis, the agitech story, and then trying to push that more to agroecology and what was needed.

Speaker 2: 15:41

So, yeah, there was a lot of learnings, but I think the direct deals taught us a lot and the moment I started going more to farms and engaging more with farmers and this is something I started even before Meraki so one thing that really sparked me to create Meraki was a volunteer gig I did for a microfinance institution in Cambodia with smallholder farmers, rice farmers and just working with these rice farmers for two months already pushed me that okay, that's something related to the farm that needs to be done.

Speaker 2: 16:12

So I didn't spend too much time on this fear of just talking to the fund managers and just looking at the tech deals and just talking to the entrepreneurs, but really going to the farm, and this is what changed our strategy. Today, much of my time and I will say, the most important investments we have, they are not related to technology. They are not VC impact funds. They are not VC impact funds. They are really about getting money to farm projects. So now I even became a cattle farmer in this strategy, in this journey of regeneration, so it's really dedicated to the farms. That's important.

Speaker 1: 16:46

And because that's what you see as the missing, not the missing link, but the piece in the puzzle, in the finance puzzle, that's mostly neglected, like the end up, like the financing for the farming side of things.

Speaker 2: 17:02

Yeah, sure, for me, the most important thing we need to do right now is make sure that we get capital in the hands of the farmers who are doing the transition, the agroecological movement. So debt finance is a very important piece of that, but, of course, creative debt finance, like blended finance structures and things that are more longer term. And I'm struggling myself, as I become an investor in farms, and then even large scale, very professional farms how hard it is to get the right finance piece in. And I feel sometimes investors are too stuck in this vc mindset. Equity deals that yeah, they're important but uh, it's not gonna change. It's not gonna change the food systems if we just move the technology you know.

Speaker 1: 17:49

So how do you then, how do you talk to people like that Because it's very easy from like a comfortable office in Amsterdam, milan, london, new York, sao Paulo to say, okay, you invest in technology companies that promise the stars and the moon like the decks always look amazing in the ag tech space in general, but in general as well, and you sort of get pitched by people that look similar to you in a sense, like it's easy to relate, even if they grew up somewhere else, but they speak the same technology hockey stick language and investors like we got used to that a bit over the last decades to do that and a lot of people made a lot of money.

Speaker 1: 18:29

Of course, a lot of people lost a lot of money as well. So how do we connect with investors to say, okay, beyond that small part of your portfolio, very important, but there's a whole world of debt finance, creative other structures loan like how? How do we connect investors to to the reality on the ground that even for a professional cattle farmer in brazil, it's difficult to access that finance if you want to speed up your transition?

Speaker 2: 18:54

Yeah, I think what we're missing and I try to do this more and more is we need to take investors to farms. So we did a program in Portugal with Orgo, which is an organization that I really admire. They're very advanced regenerative farmers in Portugal.

Speaker 1: 19:14

Shout out to the four amazing Orgo guys. We need a girl there as well.

Speaker 2: 19:15

Actually, one of them is hosting an event, I think now next week, which is going to be really interesting. I thought it was sold out A farm day.

Speaker 1: 19:21

Yeah, it was sold out, which I like for the first time. Anyway, when this airs, this is already over, so you cannot go and it was sold out. But anyway, go and visit Orgo if you have the chance yeah, and then it's.

Speaker 2: 19:31

It's interesting when you take an investor to a farm and they understand the beauty and the complexity of regenerative farm and then you show them okay, this is a monoculture farm, which is usually. There's something that they're more familiar with and this is what a regenerative farm even a transition, a farming transition looks like. He switches things around.

Speaker 1: 19:50

You know, have you seen it after that visit? Because I was there, I was lucky enough to be there and you, a mix of investors, tonic members, mostly after our annual global gathering, visiting this farm, walking the land literally and asking a lot of questions to the farmer and the farmers. Have you seen follow-up after that? Have you seen a conversation with people that were there? That that's clicked something.

Speaker 2: 20:14

There were a lot of impact that was made. It's hard to calculate, but there were some people who were there created very important carve-outs in their portfolios to do regenerative agriculture. They kind of rethink their strategy and that's super important. And if we can do that even in the global south, then it's even more powerful. So that's why, together with Earth University, right now we're thinking of a program for next year, like early February. Can we do a deep dive in Earth University, which is a 3,500 hectares campus with different types of farm operations, from conventional to sustainable to regenerative, and just have investors doing a deep dive with the students to really understand where are we now in this food system story, what's transition, what's the vision that we want to achieve and what can be done right now. And that's so much that needs to be done and a lot of it is farm level.

Speaker 1: 21:12

So that's the yeah, because it feels like regen ag is having a moment in in google searches, documentaries etc. But it hardly ever feels like holistic enough in in. Like you mentioned agroecology and region ag agroecology it's been for way longer. I think it's a bigger umbrella term. It goes way deeper than RegenAg, like the sort of simple form of RegenAg that now making around. Oh, you're also interested in RegenAg. It worries me a bit because it misses a lot of the depth. Like if we do a bit of no-till or low-till, then we're fine, but at the same time, I welcome more people into the tent because we need way more people. How are those conversations when you have them? Because they seek you. Often We've had conversations about this.

Speaker 1: 22:01

It's one of the reasons you supported the video course. Thank you for that too. You had a lot of intro conversations with people that. Oh, I also heard about soil. Tell me what you're doing. How can I also get active? And there's a lot of basic education needed. What do you normally tell people when they knock on your door and say can I have a coffee with you or tea and learn about this regen ag thing? What's your? What's your go to answer? Or like let's go visit the farm or go for a walk Like what's your, because you cannot push people that down the rabbit hole, you have to get hooked with a farm visit. But of course few people can do that or few people can join like from like. How do we? I guess my question is, how do we scale that, that, um, those, those light bulb moments, and that is region, I guess, super important, but it's a very, very deep rabbit hole.

Speaker 2: 22:51

Yeah, it has to start with a philosophical conversation and it has to do with how nature works. And then we have this complete division of humanity and nature today, which is an issue, and we tend to build models that are all based on scarcity. They're all based on efficiency scarcity. Everything, capitalism, socialism, everything we do tend to go to these lenses.

Speaker 2: 23:16

And regenerative agriculture flips the things around, because now you show that it's possible it's been possible forever, but now we're starting to make this more mainstream that you can produce coffee or cacao or an apple or whatever, in a way that your soil is getting better as you produce. So now you, we, we have the opportunity to get to a point in time where drinking coffee is gonna help the climate, you know, if we do coffee the right way. And then you have crops like cacao that today are villain of deforestation. They are linked to massive tragedy, tragedy in africa of deforestation, and they shouldn't, because cacao is a plant that comes from the forest and then, if you done right in an agroforestry system, it can become a climate solution.

Speaker 1: 24:07

So that's the the beautiful story of it and OK, so you share that story with someone and they they either buy it and go OK, like, show me something, or the scarcity mindset of an investor kicks in and says, yeah, but then how do we feed the world? Or how does that work in terms of the competition mindset, scarcity, like the pie is only this big and is getting smaller. What do you tell them? I'm asking for a friend aka me, because we get that question all the time. Of course you can see almost that. You can see in their eyes of people that they want to believe, that they haven't seen it. So they think maybe it's naive and it's a lot of hippie talk. Like, okay, but how do we counter that narrative of feeding the world and scarcity?

Speaker 2: 24:56

Yeah, there's also. There's a lot of confusion among investors among everyone, but it's crucial in investors around organic and regenerative. So this story is interesting. So people immediately they come with we cannot feed the world narrative because they they think organic and this is actually not true.

Speaker 1: 25:17

Also, the organic uh that doesn't help your, your explanation, when you say, actually what you believe is not true and it's even better like that sort of but it's, it's true. Maybe we'll go like, by definition, it's less yeah.

Speaker 2: 25:28

So one thing that eases the conversation, especially like my. One thing how I got my my business partner to pledge that all his 16 000 used to be 20 000 hectares we can do a regenerative strategy. He's saying look, I'm not talking organic here. Eventually, when the system goes abundance, yes, it's gonna be natural that we do organic path. But, like, regenerative agriculture is about looking at the system right now and trying to work in a way that the soil is going to improve, and we have to do this with steps. So I think a good analogy that is done.

Speaker 2: 26:09

When I was talking to this amazing professor, professor Elias von Katje, he mentioned that around coffee. He says it's almost like you're getting a drug added and you're telling him tomorrow you're not going to do drugs anymore, you're going to go vegan, you're going to start practicing yoga and we're going to do all of that in one day if you go organic right from the get-go. So the way you need to do is is can you start improving, increasing the complexity? Can you start adding some trees, legume trees that are going to help with nitrogen soil, and then, as you take it step by step, the system starts regenerating and this is how we start getting a win-win of ecosystem services and more profit, and the more profit is more related to reducing costs. And this we do as we start not needing so much pesticides, not needing so much chemical fertilizers. So that's the road, but to convince investors.

Speaker 2: 27:06

Many times, I bring to the table also VC deals, Because now you have the space of bio stimulants, you have all the fungi startups and then there's amazing stories right there. You have business innovation stories, fintech stories. We have other stories. You can also show that this region, like space, is massive.

Speaker 1: 27:28

And it's interesting, the addiction analogy, which, of course, could mean you can also go cold turkey if you have the means and you probably would go faster. But you need very good transition finance to get you through a number of years and you're going to have explosion of weeds, have a lot of unexpected because, yeah, especially trees, but plants and soils that have been that's fed unnatural or a lot of inputs chemical inputs they're going to take a while to respond and they might die. Like there's not a, it's not an easy ride off, but what you're saying and let's get to your Brazilian side of things like what, what? What are you doing in Brazil Apart from investing in impact funds in general? Like you became a cattle farmer. How did that happen?

Speaker 2: 28:18

Yeah, so I was really close to this other family office from Brazil too, that they had in their portfolio large conventional cattle farms in the state of Mato Grosso so this is the heart of agribusiness in Brazil and they were not proud about this operation. And I see this more and more like with Brazilian and wealthy families.

Speaker 1: 28:36

So just to paint a picture because it's an audio medium, when you say a large conventional cattle farm, what should we picture?

Speaker 2: 28:45

Yeah, picture 16,000 hectares like the size of the city of Amsterdam, more or less. It's massive and it was done. So you have a lot of like grass-fed beef done in a very inefficient way, A lot of deforestation, of course, and just like an operation that yields a 5% return if it's done very professionally. And these guys they were doing management-wise, professionally. They were in that road of professionalizing the operation. And then the regenerative agriculture piece entered.

Speaker 2: 29:27

First I was just trying to catalyze the impact, so we got some people together. We started with filipe from renature and then we had preta terra guys coming in brapa, look out for touching the mic, yeah. And then we we just had a lot of great minds around regenerative thinking in the farm for a day and we're thinking let's do a pilot. That was the idea, let's do an agroforestry pilot. And then that led to my partner from Luxor Agro telling me okay, how about we get a 1,200 hectares farm that we have here today, which is kind of a degraded farm that we're not using too much, and you buy half of that farm and then we do a joint venture and then we do a 50-50 new project. Then you can play there. And this is what we did and this was the birth of the Pasto Vivo project, where we were really trying to do a very complex agroforestry intense system and using the savory method to do holistic grazing.

Speaker 1: 30:27

Because that's the entry point right, because in this case, like, relatively efficient grazing, like is that also the entry point to say, okay, with practices that hopefully regenerate, we're going to reduce costs. Or is that, in cattle, less of a thing? Is it more, we're going to improve output? Or like, when you go into it, okay, we're going to use holistic. Or like, when you go into it, okay, we're going to use holistic managed grazing, holistic management decisions. What's the? Is that the output side or more the input side? Because I don't know, in cattle, in semi-professionally run cattle operation, is the cost a big issue the input.

Speaker 2: 31:00

Do you bring in a lot of feed?

Speaker 1: 31:02

Or like is that a big put or is it more like you're not optimally using? Yeah?

Speaker 2: 31:07

what's happening that is driving deforestation in the Amazon. So the reason I went into cattle was really that we know cattle is the major source of deforestation in the Amazon, so we need to work with that somehow and find a way that this doesn't happen anymore or happens less. And also, the soybeans part is important and came later, but when it's like in soybeans, just to like.

Speaker 1: 31:30

Does it usually follow after the cattle?

Speaker 2: 31:32

yeah, after a while, after, and then it's, it's, and it's even worse because the few trees are still standing in the pasture land. They all go you need to pass the machines.

Speaker 2: 31:41

That's just massive. But then, when it comes to cattle conventional cattle happens. Your pasture land goes degrades, degrades, degrades, degrades, because the cattle is just standing there and it's not being managed well, so it's overgrazing or undergrazing some plants. And then, every five years more or less, you have to do a reform on your pasture land, which means you have to get rid of all the weeds that grow really fast, because, remember, this used to be forest in the past. So they say the cattle growers, my pasture land is very dirty. When you look at it it's almost becoming a forest again. That's the jargon.

Speaker 2: 32:19

So then, what you need to do? You need to go over the machine, get rid of all these plants, put a lot of chemicals in, plant the grass again, and this is very expensive and this leads farmers to bankruptcy. And if you can do holistic management correctly, especially if you increase the complexity looking at, can we have a mix of grasses that is not only a monoculture of grass as well, can we think of the grass as a canopy? Can we start moving the cattle in a way that is respecting the recovery of the grass and is allowing the cattle to properly eat that grass when it's there so that we have a more packed herd. And this is going to allow us for two things One, we're not going to need to reform the pasture anymore every five, maybe every 10, and maybe at one point we don't need to reform the pasture anymore. So this reduces costs.

Speaker 2: 33:09

And the other thing allows me to have more heads of cows per hectare to intensify my cattle operation and because I'm doing the agroforestry and I'm connecting corridors of natural land and I'm fencing reserve areas, I'm planting a lot of trees. The crazy thing that was even a surprise for me that we can go from a net positive carbon emitter because of all the methane and everything you're doing with the cattle, and even intensify that, have more cows per hectare and be close to carbon neutrality just because of all the vegetation, the trees, the cover crops, everything you're doing with that. And it gets even more powerful because the soybeans, inevitably, is going to be in the picture, because that's the road in Brazil and forest cattle and soybeans is like the normal journey.

Speaker 2: 34:04

And normal, like when the smallholder farm of cattle ranches they start going bankrupt. Uh, the the big, large professionals, soy growers, they come and they buy the land or they lease the land. And this is how it goes. And we know when in brapa preaches this a lot that if we integrate cattle with soybeans, it's already more sustainable, more powerful, because the soy is going to help your soil with nitrogen, and then when you come with the grass after the harvest of the soy first, the soil is never bare anymore, so you do kind of a cover crop play. So just by integrating these two, you already have a positive impact.

Speaker 2: 34:44

But we are taking this beyond, because this is not going to take us to regeneration alone. So how can we do this? Integrated also with agroforestry, and the agroforestry goes in parts of the land, because everything is about landscape design, where we need to create more water, so that's a lot of water farming, thinking around it, and also parts of the land that makes no sense to rotate the cattle too, because it's just too costly, it's too far away, it's little batches, because in Brazil we have a very good forest code that already tells you that you need to keep 20 to 50% of your farm wild the native, like most people, a lot of people don't respect it, but if we reinforce it, it's pretty good. So that's how we do it?

Speaker 1: 35:31

And if it's wild or native, does it mean you can do agroforestry?

Speaker 2: 36:09

Yeah, you can restore. There's one piece that we do which is just rewilding, because the forest is there but it needs to be fenced so the cattle doesn't go in anymore and a lot of it is able to go back by itself. And then there's areas that are too degraded that we need to intervene, and then we choose. Are we going to plant agroforestry system where we can harvest timber trees? In Mato Grosso we're trying baru nut, which we really believe, because I would love to be able to have a protein growing on trees so we don't rely on so much on animal protein. Yeah, so then we do this agroforestry systems that are also for economical reasons and they are part of the regeneration package.

Speaker 1: 36:54

How we we do it and and so, and so how is it now? Like you said, we convinced this other, the family office, we set up this sort of carve-out basically of the farm and it became a joint venture. Like how on board? Like what are the results until now and how on board is the other half of the joint venture?

Speaker 2: 37:18

Yeah, it was super interesting road. At the beginning we were trying to make this Passo Vivo as a standalone profitable company in the 1,200 hectares. It was a big journey because the first designs we tried of agroforestry they didn't do so well and this is the normal learning journey of adapting the design to the reality of the location. They were also too costly because they were more complex. So we went on the road of simplifying them and really rethinking how we do that. But as we do that, the 1,200 hectares already became net negative carbon emitters. We just got the report from Radical and I was positively surprised with that. The quality of the coughs that are being born because we're doing the first stage of the cattle production in this farm the quality of the young coughs that come out of this farm is remarkable because of course we're also working with genetics. But the quality of animal welfare we have there just makes Animal welfare we have there just makes the cattle much more healthy and stronger, even less grass fed.

Speaker 2: 38:27

And now it's clear for my business partner that the regenerative road is the only road to go because of climate resilience, because of the climate shocks we're having, the events and how this affects the 1,200 hectares farm compared to the 13,000, the big operation. So we made a pledge together that, okay, let's turn the whole 13, the whole 16,000 hectares into Regen. Let me convert the 50% position I have in this Pasto Vivo enterprise. Let's make this the innovation hub for the big Luxor Agro. And I became a partner in Luxor Agro, so now I'm in the board of Luxor Agro. We have this challenge of turning these 30,000 hectares into regenerative At the same time that we also have a coffee operation, that we're doing the same in the context of coffee in Minas Gerais.

Speaker 1: 39:19

So that's the big challenge. We're doing the same in the context of coffee in minas gerais. So so that's the big challenge. And then what is the biggest challenge of scaling or replicating something that hasn't been completely figured out yet, like you're in the beginning of a journey of pasta vivo. Then get the opportunity to to six exit, no, yeah, almost. And so, or at least four or five like what. Like, how do you do that? How do you? What technology do you need? Or what, what, how do you even start when? When you come to the conclusion okay, actually this seems to be working, let's do it on 13 000 like what, what's? What's the biggest barrier?

Speaker 2: 39:55

yeah, we're very lucky to have the right people on the right time. So the key is, like the farm manager that we have today, leandro, working at Pasto Vivo, he's just the perfect combination of a farmer and a scientist in one person, so it's really rare. So talent is something that is a gap and it's a bottleneck for regeneration. So we need regenerative talent and in this case, we're lucky enough to find so he's leading past to vivo as an innovation hub. Everything that we figure out that works in this smaller farm, we probably we turn into a product, a manual and a training and a set of of practices.

Speaker 2: 40:36

So what we did already was okay, holistic management with the support of the Savory Institute, is working this San Benedito farm, the 1,200 hectares, the Pasto Vivo farm, and now Leandro trained all the ranchers from the 13,000 hectares. How many people is that? Yeah, we had like the supervisors, because you have all the chain of command of a regular cattle farm, and then we had like 22 people going through this training and then you have different levels of management. How does it?

Speaker 1: 41:06

land as in. They can see the difference Like they can easily travel. Of course it's the size of Amsterdam, but they can see in their own backyard. Yeah, but still it's a radical transition from overgrazing and understocked.

Speaker 2: 41:20

Yeah. So that was the interesting part of it, that in the beginning you say, okay, there's going to be a lot of resistance because these guys, they've been cattle ranchers for generations, they're not going to like what we're doing. But because the training is done by a guy who speaks their language, who is a farmer, who is doing the work, and they get the training on the farm and they see the difference of the pasture land and the animals, the effect was much better than we expected.

Speaker 2: 41:50

Of course we have to take it also slowly, in the sense that we cannot completely implement and start intensifying the amount of cattle and the herds and just Because ideally we want to move one or two herds in the whole farm and today that's not what happens. We're doing pasture rotation but there's many herds and many different. So ideally we want to do that, but then we have to go little by little. In the beginning it's all about the understanding that they have to have a grazing plan. They have to know and plan where the animals are going to be.

Speaker 2: 42:24

And they have to start being able to read the land. So then you have these ranchers coming down from their horses, kneeling down and then looking at the canopy of grass and it's remarkable, and they have natural sensitivity because they live there in nature much more than we do. So it's not that impossible. It's a journey. And then this goes for everything we do. So the agroforestry designs. We had a multiple of them In the Passo Vivo project. Leandro has flexibility. Together with Filipe, who is our chief regenerative officer. They are thinking of new designs and trying them. As they feel confident about the designs. We have the nursery facility in the Paso Vivo farm. Then we start implementing them large scale. And now we are in this process of hiring a forest manager for the large farm with a whole team to start implementing the agroforestry systems large scale. That is so much you have to do. A lot of it is about fencing the farms.

Speaker 1: 43:25

It's bringing the water to the pasture land.

Speaker 2: 43:27

So it's just endless work on the journey.

Speaker 1: 43:32

Coming back to that investor piece, actually have you brought investors there local investors from outside as well, to really see what regeneration at scale means?

Speaker 2: 43:43

Yeah, now we have a lot of them knocking on our doors. So you have nature-based solutions companies in Brazil, some of them way ahead of us, who are becoming even hype deals, you know, and you start having massive funds trying to deploy investments in these strategies. Some of them like they want to do equity, but they have no clue how they're going to be a partner in a kind of a land project.

Speaker 2: 44:08

They don't want to hold the land. And then another one's a debt finance, but it's still with a very traditional. So there's a lot of confusion still in the market, and now we are getting visitors from institutional investors, all types of investors, and the question right now is we are being very diligent that the first step of this project for the next three years, we have to make the farms that we own lighthouse farms, using the concept of Waringen University. We have to make these farms like a reality of the vision that we have, before we start saying we can operate neighbors, we can train neighbors, we can spread this, because that's ultimately the goal. I want to take this outside of our farms, because to do only on our farms is not going to make an impact.

Speaker 1: 44:58

Yeah, but you don't want to go around and we've to. Yeah, but you don't want to go around and we've seen that many times, teaching things that you're not really sure about yet. Then it goes wrong exactly and then people like, ah, this region thing doesn't work exactly. Yeah, but it was out of the context. And I mean that's the big danger. Seeing that something works on your farm doesn't mean it works on on somebody else's and doesn't mean it works in the context because they don't have Leandro. Is there like a big pool on talent as well? Like, does Leandro get offers left and right? Because if you say that's the crucial piece, like how do you train more of him and hers to make sure you have a good farm manager?

Speaker 2: 45:39

It's like worth gold. That's why the education piece is so important. So I was recently in Costa Rica which is really well ahead of the whole world in terms of regenerative thinking as a country as a hub, and there I met Edward Miller, the founder of UCI, and he's tackling the education piece. So UCI is an online platform to train everything from rangers to an army of regenerators. He says so it's a really interesting guy you should have in the podcast because he has a lot more experience than I do in this field. So the education piece is key and the same you see in Earth University.

Speaker 2: 46:18

Earth University is a different program. It's an undergrad program of four years in agriculture with an holistic approach Agriculture, ecology, entrepreneurship, business for the sons and daughters of smallholder farmers from the global south. So can they become the leaders in agriculture? So the people, the young people coming out of Earth, they are the talent we need, the people that are going through training with UCI. And then sometimes it's very hard to find these people and we were lucky enough in the two operations we have. I talked about Leandro and Kato, but in coffee we have Eduardo, who is a fifth generation of coffee grower, of coffee grower, and he already had the regenerative mindset from his own experience and him coming to Europe to study about coffee and getting in touch with coffee growers from all over the world.

Speaker 1: 47:10

Larry said you come to Europe to study coffee.

Speaker 2: 47:12

He went to the I think it was the Lili school in Italy, and then he started experimenting with agroforestry in his own way and then this is when we decided to look to invest and really capitalize this design and try to create kind of an operation of coffee that is regenerative. And he has just moved around talking to a lot of other regenerative coffee growers in Brazil and what he found out? Yeah, the regenerative thinking is there. There's a lot of farmers doing different things. They are not talking to each other. The knowledge is not being shared. You have Katia with like a 23 years experiment in agroforestry and coffee with seven different designs that found out scientifically what really works and we want this knowledge to get to the Brazilian growers and this is not happening for some reason. Also that there's something there that can be done so let's talk about the coffee one.

Speaker 1: 48:11

We talked about the past survival. What? What made you I mean apart from it or other this decide to to step into coffee?

Speaker 2: 48:19

yeah, I was. I was, uh, luxor had already done this move when we started working together and I feel the coffee is the most exciting thing we have as a business, as an investment. Why? Because, for me, coffee is so powerful on the agroforestry system, I thought that's a plant medicine.

Speaker 1: 48:37

It's also quite an addictive drug. Yeah, also I used not drug.

Speaker 2: 48:40

Yeah, also, I used not to drink coffee when I started because, well, I'm exhausted in a coffee company, we need to.

Speaker 1: 48:47

How was your first?

Speaker 2: 48:48

cup. Yeah, actually, two years ago I was only in tea. Now I drink coffee every day. I start noticing the difference. So it's a whole journey and, friends, so it's a whole journey. And what's interesting about coffee is that coffee it's a, it's a product, a crop, where you already have a market for specialty coffee. And the specialty coffee gets even more powerful with the environmental story, the agroforestry coffee. This also influences the taste of the coffee. So there you have willingness to pay premiums for regeneration that we don't have in cattle and we don't have in soy, because we're just doing commodity. So for me, coffee and cacao are the low-hanging fruits to invest farm level in regenerative agriculture. So that's for me, that's a very powerful piece.

Speaker 1: 49:40

Did you come to that conclusion after the investment or before? Like, did you start looking for coffee coffee investments? Or did it come out of the last few years Okay, you see, there's a market willing to pay, there's a story and there's a very strong regeneration story, as you talked before as well, like, coffee can be integrated in a lot of things or did you start looking, okay, mapping different crops and say, okay, where is commodity the least powerful and where can we intervene and what can be grown?

Speaker 2: 50:09

No, it was from. I was already invested and then I got really in touch. I had to learn from it and it was really by visiting operations all over the world as I go on my learning journey and I went to a lot of cacao farms Like the first time I was really in touch with learning agroforestry techniques was in a cacao farm. So cacao and coffee for me they go together on this road.

Speaker 2: 50:36

For me, it's easier to tell the agroforestry story with these two crops and I see a massive business story with these two crops and I see a massive business opportunity in these two crops and the business opportunities around disrupting the big traders that today own the market, crush the farmers and and sell this like crop that. It's an amazing crop, is a cacao, is a sacred crop from the theas and it was something that was related to health, to opening your heart, and now they turn this into the shitty sugary product nonsense. And the same with coffee they over-roast and then we have this it's full of nutrients if you do it in the right way and if you roast it in the right way. And I think now we are already there in these two crops where you have a market disrupting the big traders, the big companies, allowing the farmers to access directly the specialty roasters and even the specialty chocolate makers in Europe and US.

Speaker 2: 51:35

So there's something to be done in this field and it's easier to operate on that than the other challenges we have on soy, if you want to do that on sugar cane, if you want to do that on wheat. It's always more difficult, needs to be done, but it's more difficult.

Speaker 1: 51:50

Yeah, the wheat, one we invested in wild farm. They will be on the show. But there are exceptions, like making wheat sexy is not very easy. Making coffee sexy, we've done, and cacao as well. And there's a luxury piece we were talking before recording like you're, it's much easier. Somehow it seems for somebody to treat themselves in a luxury. Like 250 coffee becomes a three euro or 350, with a really good story and a really deep environmental impact and a really important part from the carbon perspective. We can talk about that. But like people seem to be doing that, like we somehow got used to spending that money and 10 years ago we weren't. But for that money you can get a really good quality coffee and actually pay the farmer really well, which is interesting, from a small amount. And so how important is the coffee in the carbon counting and in diverse agroforestry systems?

Speaker 2: 52:42

Yeah, for me it's a climate super strong climate story because you can also make the claim OK, but we're talking about food coffee Is it really food? Not really food chocolate. But then when you go to the climate angle, we have the opportunity of, like, removing a lot of carbon from the atmosphere if we do these two crops right.

Speaker 1: 53:02

And other crops around it. I'm imagining these are diverse, with which maybe tackles the food question as well.

Speaker 2: 53:08

Are you feeding?

Speaker 1: 53:08

people, or are you making people caffeine drunk?

Speaker 2: 53:12

Because as you increase complexity especially in the story of cacao, it's very interesting when you do that, you increase the complexity. You do these agroforestry systems. Cacao has to be done by smallholder farmers, it's hand-picked. There's no really other way to do that. And then when you do agroforestry with cacao as a cash crop, you can allow the farmer also to feed his family from whatever else you're building around the cacao to support the cacao. You can also work with timber. You can work with different things. In the coffee.

Speaker 2: 53:48

Often we are going to have larger plantations, mechanized in the case of Brazil. Sometimes increasing the complexity too much is going to hurt the business, even hurt the coffee. So you have to find a middle ground and this is what the Katia experiment showed, and that is more about putting legume trees, shading the coffee a bit, creating more climate resilience, working with cover crops. So that's the whole story around it. And then when you look at carbon story, it's really powerful. So today when we take our coffee farm 270 hectares in transition to agroforestry, it's a net positive emitter. And then when we take the report that was done recently by Radical, which is expanding the regenerative agriculture model, that we have the design for the whole farm as we finish this transition. So we look in 10 years what it's going to look like it becomes a massive carbon pump. It's just like the numbers are pretty remarkable, because what's the driver there?

Speaker 1: 54:51

Is it the complexity of more life on the farm Because you have a? It's a current coffee operation that is in transition, like what's the big driver on the carbon side.

Speaker 2: 55:03

Yeah, so you have a few drivers. So the coffee tree as a tree is already removing carbon. But as you start adding cover crops, you add more diversity. Underneath the trees you have the shade trees, the agroforestry. You just add more trees, you restore the native land, you rewild the reserves around rivers, you connect, you create biodiversity corridors. All this is adding to the carbon account. And on top of that, as you start doing that, the first result you get is on reduction of pesticides, because you start having more natural pest control, which already is interesting.

Speaker 1: 55:42

Just to double-click on that For many people, I think, that are not in farming like investors, even the pesticide story like most insects are beneficial, I think. For every one there are seven or 17 of them, and so the fact that you spray everything hurts your operation. In many cases it's not possible to do without. But if you start integrating biodiversity, actually it's interesting that the first thing that moves is the pesticides, because you actually get way more beneficial insects that will take care of a lot of other things. This sounds naive and sounds good to be true, but you see that in reality every day, which means biodiversity has a cost, which is actually the pesticide cost. Yeah, Like if you could reverse it, that's a big save, because it's very expensive. Yeah, it's very expensive, Not only for health also just financially For everything.

Speaker 2: 56:28

And also we forget that biodiversity and carbon are completely correlated. There's carbon in all the insects in every life we have. So if we spray and we kill all the insects, this is also going away as carbon storage. And then we also have the story around fertilizers. So as we start doing these systems, we start also replacing and reducing the use of chemical fertilizers. So all this adds up to a really interesting carbon story that we get to a point where I can service my customer, the specialty coffee roaster in Japan, and he can claim that he's selling the coffee coming from Brazil in Japan. And we're talking about using normal transportation containers, like I'm not shipping anything by sail wind shout out to the chocolate makers that are doing 20% of their beans.

Speaker 2: 57:24

Amazing, it's amazing, but I really think the story around regenerative agriculture, agroforestry. You can just remove all the carbon in the whole supply chain to the point that the customer is going to be drinking carbon negative coffee. The case of chocolate is very similar.

Speaker 1: 57:41

You know the story. And then, in terms of production, coming back to oh, we're going to feed the world like taking this farm, this existing coffee plantation farm, into transition. What does it mean for the quantity of coffee and what does it mean for the quality?

Speaker 2: 57:54

Yeah what we see. And then I think the experiment in Katia is the most interesting piece there because it's 23 years and in our farm we're still in transition. But he was able to find that when you do kind of these models that are in between, that has enough complexity to yield the ecosystem services that you need, but it's not too complex to the point that mechanization is impossible. You lose productivity. In the coffee you can have similar productivity results. But for us I think the best play even is not that we're going to be producing more, but we're going to be producing more of the quality that we need, the quality coffee.

Speaker 2: 58:30

Because in the case of coffee the business case of coffee is often a very good farm, like the one we have that Eduardo always had in his family. It's going to produce like 10% of very good specialty, super specialty coffee. This you can get a crazy premium for. But then how about the good coffee, which is the fine commodity without the agroforestry story, without the environmental story, that today is being sold as pure commodity For the lowest price For the big traders? If we can sell that one, which is good coffee, with sustainability, with agroforest, with a small premium, it changes the whole business model around the world.

Speaker 1: 59:13

We're getting super nerdy about coffee. But in terms of percentages, maybe 10% is super specialty. That's your cash driver. In terms of percentages, maybe 10% is super specialty, that's your cash driver. But then the percentage of good premium coffee of the rest of the 90s at 10%, 50, 60.

Speaker 2: 59:26

No, it can be 50, 60.

Speaker 1: 59:28

So a small premium there drives yeah.

Speaker 2: 59:30

Every farmer is going to have all types of coffee, all the way to the very crappy coffee that we basically collect from under the tree, which is the stuff you get on McDonald's. So that's the really bad coffee, but even this really bad coffee Maybe somebody is now listening and drinking a coffee from McDonald's.

Speaker 1: 59:46

I'm sorry, but yeah, you should know better.

Speaker 2: 59:48

But even this really bad coffee that you can use for cosmetics, for other uses, it's supporting a system of agroforestry. And for the bad coffee, the impact is even bigger because the bad coffee you're taking from under the tree. You're not even harvesting the beans, it's the stuff that falls from the tree and you're turning this, you're roasting that as well, and imagine you're collecting everything from under the tree. Imagine how much chemicals you collect when you do that. And if you're doing it in a regenerative way this bad, cheap coffee it's going to be much better as well. So, yeah, so we should be getting premiums for all the coffee that's coming out of a farm.

Speaker 1: 1:00:27

Yeah, and just to repeat a point that I think is another narrative that many don't grasp yet it's about margins, not about yield. Of course yield needs to be there. You cannot produce 1%, but it's mostly a margin game, and let's talk about that as much as we now talk about yields, and then we can have an economic discussion. And this shows that 10% and then the big drive underneath from the fine premium one like small premium prices there.

Speaker 2: 1:01:00

Change your farmer economics completely, yeah, the poor economics, because today being a coffee farmer is not easy. It's terrible. You lose your production because there's climate events.

Speaker 1: 1:01:11

And you're crushed by price.

Speaker 2: 1:01:13

Commodity prices are going up and down. So today, coffee growers they're suffering, as cacao growers, as soy everybody it's just a normal.

Speaker 1: 1:01:23

So what do you say? Like you see a business opportunity there. It doesn't mean you're going to start a massive wholesaler, a sailing boat, what do you see? Or a specialty coffee place here in Amsterdam. What do you see as a business opportunity? Yeah, everywhere.

Speaker 2: 1:01:37

So for me, me, the most important thing that we should be tackling is how can we get credit, like affordable credit, to these farmers to make the improvements they need, because it costs money to plant these trees, to enhance the quality of the, the processing of the coffee, all this? It's like you need finance for that. So the most important piece now it's finance to agroecology, the whole regenerative space, not only coffee, but, like in coffee, it's maybe easier to structure this type of vehicles. And then so there's like the farm level thing that is disrupting the traders, disrupting the middleman, the commercial play around allowing these farmers to access the specialty markets and the markets in Europe. And then you have interesting business cases like the one of Wakuli, which is the Dutch company that we recently did a soft due diligence on, which is really can we create a structure where we buy, we pay fair amounts to the growers directly from Latin America and Africa, we make their coffee with the regenerative or sustainability story to come along, and because we're doing that, we're cutting the traders, we are able to get this coffee, which is the fine commodity coffee you don't even have to go to the crazy specialty to a fair price for the consumer in Amsterdam.

Speaker 2: 1:03:02

So the Zwakuli guys, they went retail. Now they started with online business. Now you see their stores all over Amsterdam popping up and they proudly say look, this is the only place you can buy a three-euro coffee cup, cappuccino, and it's a sustainable, fair trade, it's a sustainable coffee. Uh, it's, it's a sustainable coffee. You cannot say it's regenerative, yeah, they're gonna get there, I think, but it's, it's an interesting business opportunity, I feel and so what do you?

Speaker 1: 1:03:31

like how difficult is it now? Like how do you circumvent because the market seems to be there? Like the specialty coffee market has exploded. And like how difficult is it to get around to traders? Like is it super complex? You're saying we're selling in Japan, in Europe and in the US Like how easy is it to get it here?

Speaker 2: 1:03:51

Yeah, the hard thing is that today we have Eduardo, who speaks fluent English and is a respected figure in the coffee space, trying to network, go to events and reach out to these traders directly, and he's one of the few coffee growers in Brazil able to do that. Of course there are others, but still. But like this commercial piece, if we help the farmers and put them to work together and somehow I'm not saying create a new trader, but let's allow this conversation to happen, then it's a very impactful way of doing it.

Speaker 1: 1:04:24

And with chocolate, with cacao, I think there's also a similar play Seems a bit more behind, but it's catching up Like the specialty cacao, the bean to bar.

Speaker 2: 1:04:33

Yeah, so you have chocolate markers. It's similar to Wakuli on the way of thinking, very impressive business model as well, looking a lot at the supply chain as a key piece. How do we work with the growers? In Brazil we had the story of Dengo, which came from Guilherme Leal, one of the founders of Natura. It's a very massive cosmetic company in Brazil that has very high standards on terms of building supply chains, especially in the Amazon for cosmetics. He went and decided to create a whole retail business, a whole brand of specialty chocolate, really buying this agroforestry chocolate straight from the farmers, high standards, quality. So he created a business to be able to support the cacao growers. So it's popping up.

Speaker 1: 1:05:23

You said we had.

Speaker 2: 1:05:24

It's still there. It's there. It's successful. You see their stores all over and I think they now opened the first store in Paris. Of course, this is like a highly capitalized billionaire behind this thing and also it's not easy to set up. It still has issues, but you see it starting to pop.

Speaker 1: 1:05:44

But it's interesting. Yeah, what are the first crops that move and you clearly make a case for coffee and cacao, especially in the tropics, like that move the needle on the land at the end that have a lot of social issues, a lot of social potential and have lot of social potential and have relatively fast changing power as well? As soon as you start paying better and you have some credit in place, you see results in a couple of years easily. And so a question we'd like to ask let's say we're here in Amsterdam or we're in London or in Sao Paulo, and we do this in a live setting and we have a room full of investors I mean, you've talked to many in your journey as well with a room full of people that are managing their own wealth or someone else's wealth.

Speaker 1: 1:06:28

We do this on stage, so people are hopefully inspired after the evening, but of course they can't remember everything. What if there's only one thing that they remember, if there's one seed you want to plant in their minds that the next day, when they go back to work, they sit at a desk and have to choose company left or company A or company B, or they have to make decisions like that. What's the thing you want them to remember from this evening?

Speaker 2: 1:06:48

Yeah, I think a very important piece is like stop investing in business models that are based on selling something to the farmer. We have to reverse that. There's so many agitech companies that are selling things to farmers. Okay, sometimes they can be successful because they really hit something, but the models they have to be based on allowing the farmers to make more money. There must be something there.

Speaker 1: 1:07:15

I hear basically Naeem as well, tft, I think it's even in their slides. The farmer cannot be the customer, then you're screwed. Basically, that's super important. I think people lost billions in the ag tech space, imagining they're going to sell a lot and still losing.

Speaker 2: 1:07:30

So there's an overwhelming amount of ag, tech companies, startups, scale-ups trying to enter the Brazilian market with solutions of every crazy way, from precision ag, from like many, many things for the farmers platforms. So it's complex. And then the other thing I would tell investors take a careful look on this credit story. We need to allow the money to get get to.

Speaker 2: 1:08:00

You're not talking about carbon or biodiversity or water credits, you're literally yeah yeah, so that's super important and there's a strong argument that I think should be made around climate mitigation capital, like now.

Speaker 2: 1:08:14

We just had this massive, disastrous flood in Brazil, in the south of Brazil, so a massive city that's called Porto Alegre was completely flooded for 10 days and destroyed.

Speaker 2: 1:08:26

So the amount of money lost on this is immense. And imagine if we take the agroecology producers who are usually around the cities and they are supplying the vegetables and they are supplying things to the city and we help them transit to regenerative agriculture. Many times they are already doing regenerative agriculture, so we allow them to grow their businesses around the city. So we have strong food supply for the cities, but we create having healthy soils around the city. We create a sponge to hold the water when it's excessive, when we have extreme flood like rain weather events like that, and when we have droughts. It also retains the water, reduces the temperatures of the cities. There are just so much benefits. So all this capital that is going to go now to try to mitigate the climate emergency that we are already in, some of that should be going to regenerative agriculture as well, and what is missing there to make that a reality?

Speaker 2: 1:09:32

Yeah, like the whole way. People don't think holistic about things. We put things in boxes, so it's the Newtonian way of thinking, like humanity is stuck on that. So even government is organized like that. So you have an agriculture minister who often is the enemy of the environmental ministry. So I was now talking to there's this initiative in the state of Pernambuco, a very important state in Brazil, that is doing a regenerative plan for the state, which is amazing. I applaud that. It's great the environmental minister is driving that. But then my talk with them was really OK.

Speaker 2: 1:10:11

Everything has to be integrated. It's about sustainable living. It's about rethinking the city. It's about the water. It's about rethinking the city. It's about the water. It's about the people, because also, you have to look at the biodiversity of people living in the city and what are all the systems and how everything is interconnected. You cannot do a regenerative plan for a city that is only looking at environment. It's not going to work. So that's what's missing. We have to start seeing the relationship between things that we put in different boxes. And do you think technology can?

Speaker 1: 1:10:43

help there.

Speaker 2: 1:10:44

Yeah for sure, especially monitoring technology. Imagine one day like so, space monitoring is getting better and better. Yesterday I was actually looking at the satellite monitoring technologies, how they're evolving and now you get a lot of water data from the soil, from above, from space, which is remarkable, amazing. And then we start. When we start looking at things from space, it gives us a different perspective landscape approach.

Speaker 1: 1:11:14

So, yeah, maybe monitoring is an important piece and flipping the question what if you had a billion dollars? I don't know how much that is in Brazilian, but if you had a significant amount of money? It's not crazy, it's absolutely crazy in one person. But let's say you have to put that to work with current inflation rates, like, maybe I have to add a zero at some point. But the question is still what would you do if you had to put a billion to work and it could be very long term it doesn't have to be, we're not in the crazy VC seven, eight years cycle, but still it had to be put to work. What would you prioritize? What would you focus on? I'm not looking for exact amounts. I'm looking for what would be your top areas of. Okay, I would definitely try to put it to work in XYZ.

Speaker 2: 1:12:02

Yeah, with my impact. First philosophy I would do depth finance vehicle to really get to smallholder and medium-sized farmers in the global south agroecology. We're in the route to do that with some asset managers from Brazil, from Gaia and Fama. The two of them are getting together and creating a very interesting vehicle that we want to bring to European investors. But, like, of course, with a billion, we can do something much more robust. Has to be a blended finance type of vehicle. So working with governments who have this capacity. I think that's the most important piece when it comes to impact. And if I was worried, if I needed to deliver returns, then I would do that strategy with coffee and cacao, with permanent crops as a key driver. You have other crops, you can also look at citrus almonds and then there's a story like a more profitable story if you do that in that context.

Speaker 1: 1:13:08

And how important are the offtake agreements? Or like the buying side of things there to drive the credit, like does the credit come first or the offtake, because if you keep acting and playing in the commodity markets does credit still make sense as well, or is it just not profitable enough for credit to step?

Speaker 2: 1:13:29

in. Yeah, it's great when you have a big vehicle that you can tie things together so you can really tie the offtakers, you can really bring the offtakers, because the offtakers, they want to have access to regenerative, sustainable supply. Everybody, like all the big corporations, they are desperate for that, but they they don't know how to start. And then you, how are you gonna just bundle a bunch of smallholder farmers? How you're gonna do that? Uh, so there's room for that when you have a lot of capital on the table and and definitely that's something the corporates, the large corporates, they don't want to pay for the transition, but they are willing to give off taking agreements.

Speaker 2: 1:14:07

So, like in cattle, for instance, for leather, that can help the cattle industry. Because if you go to the beef industry, then you have these three massive companies, jokers, who are trying to do business as usual. Of course they have initiatives, but it's so bad. They need to disrupt their business to be able to go sustainable, whereas the fashion industry I think there's something there that can drive, so it can drive cattle through leather more than meat.

Speaker 1: 1:14:44

Yeah, I think Timberland has an agreement with Savory as well. There is work and they're able, maybe like the coffee and maybe like the wine industry and they're able to sell, or the alcohol industry in general. They're able to sell a story. And there is, and I don't know, we've done one or two interviews on fashion, one with Arizona Muse which I will link below, and one on shoes, and it's interesting there might be the same discussion as with coffee, et cetera. Like the final price you pay for the hide is not such a big part of your margin If you pay better, you don't really have to double or triple your price to be able to deliver that to a consumer and maybe they're even willing to pay for that. But there's a different margin structure than in commodities because it's not a commodity.

Speaker 2: 1:15:32

And also the power they have. So I would love to have a conversation with Timbaland and these people about what we're doing in Brazil. We'd love to have a conversation with Timbaland and these people about what we're doing in Brazil. Because what happens? You have these three massive beef processing companies who buy the whole supply of cattle from everyone, and these are massive factories. So for them to stop their product line to process my regenerative beef, my sustainable beef, is not possible on the volumes we have, so we have to go a lot larger. But they are also the ones who are taking the leather and providing the leather to the fashion industry. So if the fashion industry makes a push and says, look, we only want to buy, and they're doing that, we only want to buy leather from deforestation-free cattle operations, and they force the beef industry to process this separately, differently. We think the way they process this, that is a great step.

Speaker 1: 1:16:27

It means you have space as well. Yeah, interesting how we went from coffee to fashion and leather, but it's all connected. And then a final question it never is the final question, but a question we like to ask if you had a magic wand and you could change one thing overnight, could be investors take credit seriously, could be all people I don't know have a conscious awakening and take plant medicine, or it could be anything else better flavor We've heard all subsidies gone, et cetera, which I don't think is such an issue in Brazil or better monitoring and reinforcement. One thing, but only one thing. What would that be?

Speaker 2: 1:17:06

Yeah, I was struggling with that because I hear this question every interview you do and I was struggling with two things for days and then I said, okay, let me stick to this one.

Speaker 2: 1:17:14

But for me a very interesting piece is the nutrient density side of the story.

Speaker 2: 1:17:19

So if I could wave the magic wand and make all the supply chains of everything we eat fully transparent to everyone, including the consumer, meaning you can go to the supermarket, scan a product, you know exactly where it came from, where it went to and what is the nutrient density of this product, I think it would change completely the conversation, because then the consumer can see two bags of potato, one coming from the Klonpe farm that we know here in the Netherlands and sells to Albert Heijn, the supermarket, and another one coming from a conventional grower and today sold out as potatoes same price tag and you see the immense difference. Then you start having a very strong argument that that farmer should get more money, the regenerative farmer and that bag maybe should cost more, and then, yeah, it takes the power away from the retailers. I feel, if we have this complete disclosure of not only the retailers but also the big industry, the big corporates and even the super processed food, you start really seeing what is in that stuff. I think it's going to change the narrative.

Speaker 1: 1:18:28

Do you think it will? Because it's the the, the premise of that. I mean we we've done two series on nutrient density and quality and regular talk about it, and I'm just like it's. It's the hope as well, of all of us like as soon as we show what this stuff actually could do in your body positively and negatively. We see now a lot of negative stories with ultra processed food, with um, with all that addiction. But the positive side, is that strong enough then to pull? Or are there enough people that care about this tomato versus that tomato or like? Or is the industry on ultra but like just too good at selling us crap?

Speaker 2: 1:19:05

basically, yeah, I think if we only rely on the consumer caring, then it's too weak. But if we start having full disclosure, meaning we have every supply chain, the blockchain, everything's transparent, we just get rid of all the greenwashing, basically because it's very difficult to do the greenwashing, and then you start having like everything from journalists, who can really use this to create very interesting stories, to governments that can use that to base policy. There's no more. We don't know. You know. There's no more. It's a blur. It's a it's blur, it's a gray area, because these supply chains it is hard to change them because they are, on purpose, made to be super complex, so in a way that the corporates are protected because there's so many intermediates doing the dirty work in between that everything can be blamed down. Downstream. Fashion industry is the same, you know, and if we can make this complete, open and disclosed in a public platform, I think then it's very powerful.

Speaker 1: 1:20:06

And where would it start? Like, what are? Would it start with a specific crop? Or like, if you had to start somewhere, what's the what's gonna get us most annoyed and excited at the same time? Is it coffee? Is it?

Speaker 2: 1:20:19

Yeah, I think it would always have to be on things that we are able to kind of skip the whole middleman, the whole structure of the traditional supply chain, and go direct. So always when it's farm to table, maybe in restaurants, would be interesting, because the restaurants, if you're really doing kind of a high quality restaurant operation food, of course the chefs they care so much about this already there you have willingness to disclose this type of things because they are buying directly from the farms.

Speaker 2: 1:20:54

Probably they already have the names of the farms on their menu, and then we could start there somehow, maybe.

Speaker 1: 1:21:01

Could be interesting to chefs.

Speaker 2: 1:21:04

I know it's super difficult, but if we had this information out there in the face of everyone, things would start moving. I think that would be important, and also the monitoring side. I think that will be important, and also the monitoring side For me a lot of the issues we have with regenerative agriculture. It's very easy to create fake news or create unresolved stories because of the lack of transparency in what's happening. So, yeah, so my second magic wound, if I can mention that, would be really that the satellite technology goes so far ahead, even science fiction way, that we are able to monitor biodiversity in soil, above and below ground, from space, you know, and water and all the ecosystem services and this is also open source completely disclosed. I think it will make a huge difference that we really understand what's there in this land in terms of biodiversity. So I think everything is about making things information completely transparent, to make things move, and that triggered actually a potentially final question.

Speaker 1: 1:22:12

But we like to ask a question John Kempf likes to ask as well in a slightly different way, and this way we can ask for two different groups. Let's say you're where, do you think differently, or what do you believe that others don't believe to be true, and in this case, the others, let's say, in the impact investing world, like if you come to ton of gatherings you're often there PIM, creo, et cetera Like when you talk to fellow impact investors where you think fundamentally different.

Speaker 2: 1:22:39

Yeah, so I mentioned the organic regenerative story and then another one that's very strong for me is the carbon versus water narrative. So I'm on the water field and most investors are on the carbon field, so everybody's obsessed about carbon. Okay, how carbon emissions and you have the project drowned down, saying the regenerative agriculture is a waste of time.

Speaker 1: 1:23:02

Why do you deal with cattle?

Speaker 2: 1:23:04

Yeah, you have all this. So then you have the vegan investors that just get rid of livestock because it emits too much carbon, and I'll be looking more interested on the water story. So I think the power of regenerative agriculture is that we are able to create more water, and when I use the water arguments to talk to conventional growers, they all understand. If I try to talk to a farmer about carbon biodiversity, I don't get anywhere. But if I tell him, if we do this system, you're going to have access to more water. It's going to help with your irrigation. Have access to more water that's going to help with your irrigation. And water is also from the ecosystem services, one that, at least in the tropics, comes back faster and is badly needed for everything we talked about in climate mitigation. It's the basis of life. So instead of doing carbon farming, let's try to do water farming. Carbon farming, let's try to do water farming. I think it's a much more relevant and impactful way of looking at regenerative agriculture.

Speaker 1: 1:24:05

Does it land in the investor circles? When you say, and carbon and water are, we're not saying carbon is unimportant like water and carbon are super correlated, but maybe the driver or the one in the driver's seat should be water and not carbon. It's a nice passenger, but not the chauffeur.

Speaker 2: 1:24:22

I feel it's even easier to measure the water than the carbon Because it's so controversial, like we are seeing now. Theses coming out of Wageningen University, very interesting Jonas just published his thesis. I shared today on LinkedIn. It should be out the interview with Jonas when we're yeah, he's a great guy, super long experience working in Brazil farm level with research and that's okay. He did this thesis. There's a very strong carbon story around regenerative agriculture. But then you get out into all this blurly controversial of carbon credits and these and so many investors are obsessed about that and this is even pushing money to hype deals in Brazil that are only about carbon farming and I think it's a pity. And then when you look at the water piece, it's such an important ecosystem service, so crucial for everything we do makes a difference for, and it's easier to monitor Not easy, but easy.

Speaker 1: 1:25:19

And do you see people like other investors when you share the case for water in like a minute or two, do they intrinsically grasp it or are they really in their carbon funnel and stuck?

Speaker 2: 1:25:32

Yeah, there's still not enough business cases around there. I saw the other day one from Argentina that was in the Yield Lab invested and I thought it was really interesting that they're creating water credits and they're getting corporates, instead of buying carbon credits, buying water credits. And this is fueling kind of completely different way of designing farm systems, because when you design the farm systems more geared to water than carbon, this is a different thing because if you design a system just for carbon, you can design eucalyptus forest and and great, you have good carbon. Uh removal there no, but, uh but. But is this system regenerative? No, it's not. Is how? How is the system regenerative? No, it's not. How is this system around biodiversity? And then, when you look at water, the biodiversity piece is going to be important, the carbon piece is going to be there and the utility of your system is going to be much bigger. So it's a more interesting story, but it's a complex one which means.

Speaker 1: 1:26:38

So it's a more interesting story, but it's a complex one, which means you're going to get stuck in yeah, carbon discussions, vegan discussions, like very extremist views that a lot of investors hold. I feel that let's get rid of all animals. Everything is bad. Story is getting less strong, like it's sort of losing momentum a bit now, but still it's very. There's many, many funds, like you know them as well, like they wouldn't touch even a super interesting virtual fencing deal because the animals involved, yeah, and it's like, wouldn't even get to their first screening.

Speaker 2: 1:27:11

They're really uncomfortable with um, with life, basically with the animal side, which is a pity because it needs to be tackled yeah, it's a pity because, also, if we have animals in the system because in nature we have animals in systems, in forests we accelerate regeneration. So it's very tough for a farmer to do a regenerative transition without manure, without something to substitute, and you don't want to be sending Trucking yeah, trucking manure. It's pretty insane. So, if you can use any animal as a tool of regeneration, of course we have to get rid of factory farming and all this madness. But, like animals in regenerative systems, they are important and so there is a space for that.

Speaker 1: 1:27:58

And then the other group that I'm curious, where you think different or act different like. Is it within the region ag and food space? Like, where are you contrarian? When you go to region ag conferences, when you are with fellow agroforesters and cattle farms? But in the region journey, like in Brazil, where, apart from the fact that you sold Playboys, but in the regen journey, like in Brazil where, apart from the fact that you sold Playboys, but that's fundamentally different, but where are you really different? Is it the commercial look, Is it the health side, a more realistic view? What sets you apart when you are within your peers, let's say, in the regen space?

Speaker 2: 1:28:34

Yeah. So I try to create a bridge between conventional agribusiness and agroecology, pure agroecology. So in Brazil you have the two fields. They don't talk to each other, they hate each other. So you have syntropic agroforestry, related to ANST, and that's beautiful and fully supportive and I think for smallholder farmers it's a great system to have. If you're going to harvest everything by hand, anyways, there's a challenge on supply chain. Who do you sell all this complexity to? But it's a beautiful system. And then you have conventional agribusiness, monoculture everything mechanized, super efficient. That's how we are in Brazil. But if you can go in the middle ground where you create some type of complexity, kind of a design that's going to yield more ecosystem services, it's not going to go so completely syntropic, we're still going to use the machinery Then we have something middle ground that works, and this is what we're trying to create in Luxor Agro. It's really this bridge between agribusiness and ecology, because we also have to think one thing is the vision that we have for the future, where we love to get, and this is important to have in mind. So we see this beautiful syntropic agroforestry, food forest and everybody's eating from that and we're feeding the world with that.

Speaker 2: 1:29:55

But today? What is the state that we are right now on the food transition and what can we move right now? Today, the fact is we have cattle. Today, we have populations like the Kazakhs. I've been to Kazakhstan. They never saw a vegetable in their lives. They only eat meat, meat, meat, and some potato and some noodle. You cannot turn these guys vegan overnight. So then we have to work with animals. How can we better work with animals? What kind of operations can we do? Soy is a reality. We are exporting soy to feed pigs in China. Would I like to be producing that? Definitely not, but today it's a reality. If we don't work with this crop and make it in a better, regenerative, if possible way, people are still going to be doing conventionally and we're going to be in a mess. So we have to work part of our investments in the transition bucket and part of the investments in the vision of the future.

Speaker 2: 1:30:55

Come up with machines to do stuff, robots and all that, yeah, we have to have a combination, a healthy combination of these two things. And I think sometimes investors, when they first get in touch with this thesis, they get either too idealistic they really see, they go to a firm ah, but this is not regenerative. The guy is doing that, the tractor is still moving diesel, he's not recycling. So we have yes, we have to be a bit idealistic, but we also have to be very realistic and go to farms, understand the reality. And what can we do better tomorrow? That is possible to change step by step.

Speaker 1: 1:31:32

So that's the thing and has this journey, especially the regen bit or Regen piece, over the last years and maybe more than half a decade, made you more optimistic, or less, that's?

Speaker 2: 1:31:49

tricky, super tricky when I'm in the farm, like I was in the coffee farm Flora that I mentioned our Brazilian coffee operation this year. It makes me super hopeful, also because you're drinking caffeine probably.

Speaker 2: 1:32:03

Yeah, but also to see, like in two years, how it changed and knowing that if we had more capital we would change even faster, it's just beautiful to see. You see like, wow, the impact. Yeah, the regeneration is happening. I go to Costa Rica. I see same things going on and I see all these universities and I see the whole Costa Rica story. All this gives me a lot of hope. But in the same time, it's the desperate feeling that, okay, people are still stuck in old models, people are reinvesting fossil fuels, and then you just have all these climate disasters happening and people losing harvest, like this year we had a massive loss on our soy that affected the cash flows. Like we had like a seven million reais loss on the cash flow in Luxor Agro. That is making us review our plans because we need this money to to the transition and this makes me really. For me, it's a drag. I know we will be able to hold much more the next drought, the next El Nino that comes if we push the regeneration faster.

Speaker 2: 1:33:11

But at the same time I understand the financial side of things, that without money we have to slow things down. So that's terrible, you know.

Speaker 1: 1:33:21

So yeah, that's the tough part I want to thank you so much for opening up for opening up your house as well, for recording and for the work you do, obviously, and for coming on here to share. I think it's a fascinating journey, many people can learn from it and we're all learning, so thank you so much no, thank you, it was great.

Speaker 2: 1:33:40

I think we covered a lot. We're not went all over the place. That's what we do. Yeah, because it's a really exciting field. I think it's really there's just so much to do and so many great things, great people working on this field, so we need more though we need to recruit more people to get bitten by the bug definitely thank you thank you so much for listening all the way to the end.

Speaker 1: 1:34:11

for the show notes and links we discussed in this episode, check out our website investing in regenerative agriculturecom forward slash posts. If you liked this episode, why not share it with a friend? Or give us a rating on Apple Podcasts? That really helps. Thanks again and see you next time.