Carbon - More than just hot air

By Caile Ditterich - AgriChain

For a long time, the team at AgriChain have sat and watched as the Ag community began to come to terms with the impact that carbon will have on their business. Now, before you tune out or close the tab on your screen, this article is not about carbon as it relates to weather events or how much money trading credits will cost or make Farmers. This article is about the effect that the end consumer is having on the Agricultural industry in ways you may not be aware of.

Social responsibility matters and despite what we may think (or have experienced at times), no one knows this better than the banks and the wider finance industry in general. We recently met with a number of large banks in Australia to help solve some of the rather glaring issues that their current software (or lack thereof) and processes are causing for them with respect to all things commodities, trading and valuations. Whilst the solution was a bit of a no-brainer for them in many ways, the motivation to fix their current issues was overshadowed by their desire to manage and understand all things carbon. Their internal budget for all Ag expenditure appeared to be very very skewed towards all aspects of carbon, carbon trading and carbon accounting and unless there was a carbon element to our proposal, it was going to very quickly fall into the 'too hard" or "no budget" bin.

Fast forward 24 hours, and in a meeting of the larger malt houses and flour mills in Australia, the same story played out. Although far from a total carbon dominant discussion, it was clear that their customers were getting greater pressure from consumers to do more with respect to social responsibility and understanding their carbon emissions with emphasis on understanding carbon at a farmgate level.

Big deal, I hear you say. Well, let's chat about a couple of impacts.

1. The clear indication we received is that banks may look to apply certain discounts to their customer's interest rates based on the Farm's carbon footprint. One other alternative that has been suggested is that banks may not provide discounts to Farmers based on their carbon footprint but may instead look to increase the interest rate to Farmers who have a less favourable carbon footprint
2. Certain banks are already providing sharper interest rates in relation to Machinery finance based on a combination of the Machine's efficiency rating and the Farmer's current carbon footprint.
3. Super funds and other capital providers have already started to assess investments and attribute different internal rates of return based on the impact carbon plays.
4. If, indeed, these malt houses are truly driven by the desire to understand carbon at a Farm level, they will need to alter their procurement strategy to accommodate accordingly. This will ultimately lead to different market forces being applied in certain areas, which will lead to variations in farm gate prices among farmers. 

Rightly or wrongly, the big institutions, the big gatekeepers of capital, are hell-bent on providing consumers and investors with a positive narrative with respect to what they are doing to help tackle climate change. You will have all seen one of the hundreds of super funds advertising that a certain percentage of their investments are "clean and green" and carbon neutral. This has a significant impact on how capital is distributed.

From a malting perspective, with each business in the supply chain now trying to work out how to account for and manage their carbon footprint, it is becoming increasingly important for each participant in the supply chain to get their house in order because each party relies on the other parties in the supply chain to calculate their own footprint.

So we understand the why and, and we understand the who, but what no one has been able to solve is the HOW.

Let's use a Farm for this example.

How can you collect all the relevant data off a Farm, including their inputs, diesel burn, fertilizer usage, transport and supply chain costs, water usage and a whole lot more? 

Without this data, nothing is possible. Without this data, tracking accurate Scope 1 and 3 emissions is a pipe dream at best.

Fast forward 2 weeks from our meeting with the banks, and we are sitting among the leading industry ag bodies, listening to them put all their extensive knowledge and resources to work, all trying to work out how to capture this data from Farmers. It was, of course, no surprise to see that the end result was an online portal/website where Growers could log in and add all the key data points, paddock by paddock and then the system would be able to work everything out for them. Groundbreaking stuff, but considering it took us 4 phone calls to get a grower to email us their details for some free AFL tickets they had won, we find it very hard to fathom that a Grower will log into yet another portal to accurately input (without adding or removing any mayonnaise), every single detail in relation to each crop in each field. Now, we certainly don't want to knock our leading Ag industry bodies, but we just could not help but see a few flaws in the process.

For this to work, the solution needs to be automated, unadulterated and scalable. So, in yet another world first, AgriChain has teamed up with I-Ag and a number of progressive farmers in Griffith NSW to do just that.

"This is something we have been working on for a long time, and we feel that now the time is right to demonstrate to the ag community what can be achieved through collaboration and true paddock-to-plate traceability," said Caile Ditterich, CEO of AgriChain.

I-Ag's Anthony Rudd Explains. "Our platform specializes in pulling live, unadulterated data from all different types of Combine Harvesters, Spray Rigs, Air Seeders, Tractors and more. So, given we have so much data available in relation to what is happening in the field, by partnering with AgriChain, we can attach this data to trucks that leave the field at harvest to provide interested parties with the data needed to accurately calculate scope 1,3 and 4 emissions."

At the time of writing this, the POC is well underway and both AgriChain and I-Ag look forward to building out a scalable solution to ensure tracking emissions becomes the norm and not just another puff of hot air.