Land O'Lakes Takes on Carbon

Farmers are increasingly in the crosshairs of climate advocates who point to dangerous greenhouse gas emissions from ever increasing numbers of dairy cows and beef steers.  Land O’Lakes, one of the largest dairy cooperatives in the U.S., is coming to the rescue with its TruCarbon credit program.  The idea is to inform the member farmers on environmentally sound land and crop management programs that qualify for carbon credits.   The platform instructs on how to build profits through such credits, which Land O’Lakes intends to sell to large corporations looking to offset their own carbon emissions. 

Land O’Lakes has partnered with the Soil Health Institute is providing the knowhow on capturing carbon in the soil.  It is a feat captured mostly through land management approaches.  As part of the photosynthesis process of plants, considerable amounts of carbon end up in the soil.    Land O’Lakes farmers will be encouraged to use organic compost, manure and crop residues even more carbon ends up in the soil.  The farmers will also be told about the merits of no or reduced tillage as well as contour plowing and terracing to keep carbon from escaping the soil.  Cover crops help soil grab more carbon and retain it. 

Once farmers get the credits streaming it will be incumbent upon Land O’Lakes to trade those credits.  In July 2020, the company announced a multi-year strategic alliance with Microsoft, which will provide valuation data for precision farming and crop analysis.  Importantly Microsoft has also agreed to purchase up to 100,000 metric tons of credits.

Land O’Lakes will need to land many more big fish.  Its cooperative membership is 300,000-strong and controls more than 150 million acres of productive cropland.  There are plenty of other corporations that are reportedly interested in carbon credits, including Shopify, IBM, JPMorgan Chase and Barclays.  Unfortunately, these companies have already committed to buying carbon credits from Indigo Agriculture and its Indigo Carbon program.  Indigo has its own soil enrichment program, which is a natural extension of its services as a consultant to farms on natural microbiology and digital technologies for agriculture.  Bayer AG, Nutrien Ltd. and Cargill, Inc. are also trying to direct traffic at the intersection of farmers with their vast carbon-grabbing fields and large carbon-emitting corporations.

With so many coming to the party, it is indeed disappointing that there are so few investment opportunities for investors.  It would seem that carbon sequestration on the farm is a low-cost endeavor.  None of these players seem to find the bills for their programs beyond their already ample financial resources. 

Bayer AG (BAYRY:  OTC) is among the few public companies with a stake in the agriculture and carbon, but the stock turns more on the company’s life sciences and consumer health segments than its plant traits and weed control products.  Nonetheless, the developments in the agriculture sector are important to investors as a vital             

 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.