Ep 2 - Matt Rohlik: Producer Compensation in Early Supply Chain Decarbonization Efforts

The Business of Soil Health

Matt Rohlik is the Managing Director of Sales and Strategic Partnerships at ARVA Intelligence.

ARVA plays a key role in the “insetting market” – the market for ecosystem assets *inside* companies’ supply chains. This is a crucial tool for ag-dependent companies to decarbonize their supply chains, which make up a significant amount of their total emissions – in most cases, more than 50%.

Matt has a deeply informed insider’s perspective on how the insetting and carbon offsetting market are shaping up in ag, demand dynamics from ecosystem buyers, and the challenges and rewards of facilitating and supporting producers who are creating and selling this new asset class.

Matt shares his background in farming, finance, and precision agriculture, and dives into ARVA Intelligence's role in ecosystem asset markets.

Matt discusses the complexities of insetting programs, offsets, carbon intensity (CI) scores, and their practical implications for growers, consumer packaged goods (CPGs), and supply chains.

Matt explains the growing interest in sustainable practices like cover crops, nutrient management, and soil health improvement, as well as the financial incentives that are now being offered to farmers to adopt these practices. We talk in detail about what payment ranges producers can expect to see from these programs. And we explore the challenges around regional implementation, trusted partnerships, and the future of ecosystem asset quantification, including carbon credits and CI scores.

The episode highlights the importance of communication between growers and buyers, the need for regionally appropriate practices, and how ARVA is helping bridge the gap between sustainable agriculture and market demand.

Notable Quotes

• [04:44] - in the last three months, we've seen science-based target initiatives, or what's called SBTI go from around 6,500 to 8,000… about 18 to 20% are ag-specific…. (~05:00) …there's a lot of money that's coming into here that is gonna influence supply chains

• [06:36] When you bring farming people to the table with our urban cousins, we find out that we're not actually that very far away in our thinking and what we do for the environment. The problem is we just don't talk….So the transparency of food is just an evolution that's coming. And knowing how my food was raised, is it in some type of a protocol or standard that meets what we feel is generally acceptable? And I think it's actually a really good thing from the perspective they get to see a little limelight of what we do on a day-to-day basis. And when they find out that our tractors are more advanced than their Teslas, I think we're going to have a lot more in common than they think.

• [11:54] $15 to $35 an acre is a potential for farmers in these programs and which in today's world with a depressed economy 12 months ago corn was $2 higher you know so you think about 200 bushels of corn at $2 and that's a lot of money that has gone away where this is definitely helping I'm going to say keep farmers afloat per se but it's definitely helping on the revenue perspective side or the net revenue side
  
• [13:39] And we did a test for five years where cover crops and we implemented no-till, and it did not work very well. And we had all the experts there, and we followed it to the T, and frankly, we lost about $400 an acre…that is not sustainable…(14:39) Now if our farm in Arkansas, we use cover crops, the organic matter is increased by almost a half a point over three years, which is phenomenal.
  
• [15:29] …the program I might have here doesn't fit the program in Boone, Iowa or Effingham, Illinois or Fort Wayne, Indiana or Columbus, Ohio. We have to be very realistic and I think the end buyers and CPG's are starting to see that this is not just a cookie cutter approach. It definitely has to be agronomically led.
  
• [~16:00] And as we go down the path things like biologicals, humics and fulvics, which most people don't even know what they are, in the CPG world, they're building soil health. I can think of four or five companies off top of my head that they are doing a really, really good job of building up soil health that are in return, allowing for commercial fertilizers to be reduced or have efficiency that we're seeing 10, 15, 20%. I mean, that's outrageous. It's not fully recognized by the community…(17:12) of sustainability yet, but it will be because it's definitely something that you know those biologicals are doing a heck of a lot to restore the ground and build a true soil health perspective.

• [24:23] Okay, so let's just, we'll pick on Alabama for the moment. So Decatur, Alabama, let's say that there's a mill there that's processing corn and soybeans going into chickens. They are not like, when I look out my window here and it's all corn and soybean fields, right? If you've been to Alabama, it's not like that. So they probably, let's just say for hypothetically, they take 30% of the grain there. Okay, 30% gets procured locally to feed those chickens. 70% in that case, that grain actually comes from Southern Illinois and it comes in on the CSX rail. So you know, the CPGs are looking at traceability of where the impact of that grain is. You can't put all the scope three emissions right around that plant because that's not realistic. Only 30% is there. The rest of it is actually in southern Illinois. So understanding where the movement is.
  
• [33:22] There's more demand than there is supply. The biggest thing that scares the supply side away is these long contracts. Right, that's the number one killer for the carbon offsets in row crop. Whereas the pasture and rangeland...[37:22] you put some interseeding in there, you do some cross-fencing, you do some water improvements, and you put 30% more AUMs on a pasture, you get a heck of a lot of carbon sink. Doing that, so the carbon credit, that makes sense, right? That's very palatable.

• [43:16] Personally, I'm a very big fan of carbon intensity for multiple, for the inset markets, the biofuels markets, and if you want to throw carbon offsets in there as well, because it's really a true measurement of what's happening and overall true measurement of how efficient you are, how efficient the carbon is. That's the whole point, carbon intensity. The unit of measurement I think is pretty great…(45:02) It sets up a very clean line in order to get there because you're benchmarking the entire supply shed. It's great.

• [56:19] I think one of my favorite stories is… I just got it this past week and as you know, they farm economies down a little bit at the moment and one of our partners forwarded me an email from a farmer and this really hit home to me. He said, “The program you did with X CPG last year in ARVA allowed me to make the payment on my tractor that I'm now sitting and planting my crop for 2024.” And when you think about that perspective, you know, this is, that's a pretty powerful story.