Farmers Business Network To Spin Out New Venture To Track Carbon Footprints Of Crops And Help Farmers Make More For Low-Carbon Ones

Agtech unicorn Farmers Business Network is spinning out a new sustainable farming company, called GRO Network, that will track and score the carbon footprint of specific crops down to the bushel and allow farmers to make more for their crops that have lower carbon footprints. In a phone interview, FBN cofounder and CEO Amol Deshpande described the new business as a way to help reward farmers for their efforts as environmental stewards. The San Carlos, California-based company plans to announce the spinout later today.

“Farmers deserve more opportunities to be recognized for sustainable practices,” Deshpande, 42, says. “The extra incomes and premiums could be the difference between running a profitable business and losing money.”

That’s especially true these days as the economic downturn has squeezed family farms. Corn prices have fallen to $3.50 a bushel or less, while the prices of seeds and other inputs, like fertilizer and pesticide, have not dropped.

Devin Lammers, FBN’s president of crop marketing and financial services, who helped to create and launch the new business, will serve as GRO’s president and interim CEO. The new venture will ultimately bring in a new CEO. “Agriculture can be a solution to the climate challenges we face today,” says Lammers, who grew up on a bison ranch in South Dakota. “Consumers are looking for sustainability in all the products they buy.”

Supply-chain issues in agriculture are extraordinarily complex. In major crops like corn and soy, farmers generally drop off their grains at depots that don’t distinguish between those that have been grown using a lot of chemicals versus those that have been grown using more environmentally friendly farming practices. For farmers, worried about yield of their crops during tough times that makes switching tacks a risky choice as it could depress yield or squeeze already-thin profit margins. FBN, whose entire business is based on data and loads of it, had long discussed how its data might help farmers make — and be paid for making — more sustainable decisions.

Since its 2014 founding, Farmers Business Network has grown from a small data provider to farmers to one of the largest venture-backed agtech startups, worth a reported $1.75 billion at latest fundraise, of some $250 million led by BlackRock, in August. FBN’s 14,000 members farm some 40 million acres in the U.S. and Canada. It was on track for $200 million in revenue in 2018 when we wrote a magazine feature on on the company; Deshpande declined to disclose an updated revenue figure.

It has battled against the large agricultural players, positioning itself as an upstart working on behalf of farmers against an entrenched system with transparent pricing. But it has also struggled as the large name-brand seed producers have refused to sell through its digital store. After FBN purchased a Canadian distributor, major suppliers including Bayer, Corteva and Cargill stopped selling to it, leading to a civil investigation by Canada’s Competition Bureau and, even catching the eye of the U.S. Department of Justice antitrust division, according to the Wall Street Journal. “The tech industry is helpful to the consumer compared to the ag industry,” rails Deshpande. “I was like, ‘My god, I understand everyone is mad at these big tech companies, but you should see how these big ag companies behave.’”

FBN had incubated the idea for GRO internally over the past few years, testing and refining the concept with farmers, but ultimately decided to spin it out as a separate entity. “It’s basically a new company that we are the sponsor of,” Deshpande says. He declined to disclose FBN’s ownership stake in GRO.

Farmers will share information on their practices — including fertilizer usage and tillage — with GRO Network, which FBN then runs through algorithms that leverage its massive database of farm data to distill it into a single score. That score helps buyers like Tyson Foods and Unilever source premium grain, while helping farmers make more money for taking sustainability seriously. One method of carbon scoring that GRO uses is based on a model developed by Argonne National Labs, but it expects that different customers will choose among a variety of models. “The score is associated with a bushel of grain from that farm,” says Lammers. “We are building the technology, and have built much of it already, that will preserve the information as it moves through the value chain.”

Matt Alford, who farms some 1,300 acres of corn and soy in southern Minnesota, is among those who signed up for the pilot projects and plans to work with GRO Network. “Part of my frustration with the current farm system is there is no incentive to do things the quote-unquote right way or environmentally sound way,” he says. While Alford, who is 32, changed his own farming practices, to use less fertilizer and to do strip tillage, which leaves he majority of land undisturbed, he wasn’t able to be paid more for those choices when he brought his grain to the local elevator. “I haul my grain to the same places everyone else does even though I more than likely am using less fertilizer, my ground has less erosion and I am releasing less CO2 into the atmosphere due to my farming practices,” he says. With GRO’s incentives, he hopes that will change — and will also spur other farmers to think differently about the risk-reward of chasing yield.

Biofuels giant POET, based in Sioux Falls, Dakota (where FBN has an outpost), was one of the project’s earliest customers. It began working with FBN on a pilot project in South Dakota more than a year ago that helped the two determine that GRO Network could work. POET bought a total of 8 million bushels of corn from farmers through the FBN program that scored farm practices. Now it’s gearing up for what both hope will be a larger effort with GRO. “Many states could adopt low-carbon fuel standards to create even lower carbon biofuels,” says POET founder and CEO Jeff Broin. “We’re all looking for solutions to make a significant impact on climate change, and this is a very exciting program for that.”

California’s policy on low-carbon fuel have pushed cleaner liquid fuels, but the program currently scores all grain inputs for biodiesel, ethanol and the like the same. FBN is pushing to get scoring of grains included in the calculations, which would give a regulatory push to its work and a method of incentivizing farmers financially for making better environmental choices. Steele Lorenz, FBN’s head of sustainable business, says the company hopes to get the sign-off from regulators in 2021 for use in 2022. “It is a natural extension of what the intent of the policy is now, made possible by technology,” says Lorenz, noting that Oregon also has a low-carbon fuel policy and other states, including Minnesota and Washington, are considering them.

In the pilot project in South Dakota, farmers got approximately 22 cents premium per bushel of corn, Lorenz says, a big bonus at a time when corn prices are around $3.50 per bushel. FBN expects that farmers would get around 10 cents per bushel extra over time, a still substantial amount at a time of low commodity prices. For markets other than biofuels, such as consumer products or animal feed, the premiums will vary based on the customer and market demand. GRO Network will generally take a small cut of the premium for its role in doing the carbon scoring and tracking the low-carbon grain.

“We want to create an opportunity for farmers to participate in all this interest that consumers and corporate America has in sustainability,” Deshpande says. “Farmers are very critical environmental stewards. It’s really key that we find a way to recognize their efforts.”