[Disclosure: AgFunderNews‘ parent company AgFunder is an investor in CH4 Global.]
Red seaweed (Asparagopsis) is widely recognized as one of the most effective tools for reducing methane production in ruminant animals (burping cows). The challenge is growing it at large scale.
CH4 Global, which has operations in the US and Australia, has developed a proprietary land-based production system that cofounder and CEO Dr. Steve Meller claims is significantly more efficient that competitive approaches to growing seaweed for feed supplements.
“We have shown that we can efficiently and effectively grow it at a much larger scale, frankly, than anybody else. And we can do so in a way where we don’t limit the propagation and the growth rates of the seaweed.”
Speaking to AgFunderNews at the Asia-Pacific Agri-Foods Innovation Summit in Singapore last week, Dr. Meller explained: “We are building ponds at our new facility just north of Port Lincoln in South Australia that are 160,000 liters and designed to optimize the current and fluid flows so you can still get light penetration even as you double and continue to double and replicate. So there are no dead zones, no spots where current doesn’t flow, no locations where light isn’t penetrating at a certain intensity.
“Our profit margins will be in excess of 40% and our COGS (cost of goods) are four- to seven- and in some cases 10-fold lower than anybody else in this space.”
The seaweed supplements generated at CH4 Global’s new facility, which will be operational in the middle of 2024, have already been allocated to three buyers, he said. “100% of the output has been aligned with three commercial partners.”
The next facility, phase 2, will be significantly larger, supplying enough feed supplements for up to four million cows.
On methane: “Cows burping is the single largest source of methane globally,* larger than all of the methane emissions from the oil and gas sector. So it’s a major problem. But it’s also a major opportunity if you happen to have a platform that can reduce it in a cost effective and safe way. That’s what we do.”
On Asparagopsis: “The actives in Asparagopsis – and there are more than 100, don’t let anyone tell you there’s just one… they all interfere with that enzymatic assembly of methane [within the cow rumen] in a very well-known biochemical approach. So if you have the right amount of the material in the right concentration, because your processes defined it, you can now have a very effective solution… much more so than anything else on the planet today.”
On methane reductions: “Published studies that have been done primarily in beef feedlots, less so in dairy, but there have certainly been some, they all support effectively 80 to 95% methane reduction with good quality [Asparagopsis] material. You’ll see reports saying 38% or 30% or 40%. That’s generally coming down to the fact that it’s poor-quality material, the bioactives are either not stable or they’re not at the right concentration.”
Growing Asparagopsis at scale: “What is CH4 Global doing differently? It’s really both in the growing and the processing. Both are significant drivers of cost. Cost in terms of the hardware, cost in terms of the land, cost in terms of the energy required to drive the systems.
“In [land-based growing systems], you’re limited on the size because of light penetration problems that you have when biological systems grow. So we’ve chosen to build systems into the earth… and created certain conformational shapes and sizes and depths and a variety of other characteristics that are all part of patent applications that really describe how do you maximize the penetration of all of the nutrients – dissolved CO2, the nitrogen, the phosphorus and importantly the light – and how do you do that in a cost effective way where you can bring COGS (cost of goods sold) down 7-10 fold?
“That was the objective which we’re able to meet. We’ve got prototypes of those [growing systems] built, we know what achieves high levels of growth with those types of cost reductions.
“On the [downstream] processing side, people have tended to use freeze drying, which is incredibly energy-intensive and not a commercially feasible way to do this at scale. Others have looked to extracting certain bioactives using an oil base. We think that takes you down a regulatory path, that.. why do it if you don’t have to? Plus there’s really very little data published that tells you about what comes across its profile, its stability, and we also know that there’s a reduction or loss, and these 30-50% losses in processing, frankly, are unacceptable from a manufacturing standpoint.
“We’ve filed some key IP around two different ways to deal with it [the harvesting process]. Both of them have been widely used commercially for decades. It’s not a new whiz bang technology that we can patent. But we’ve patented the approaches for the applications we’re using and brought COGS down significantly, making it affordable for farmers and profitable for us.”
The manufacturing set up: “The series B is ongoing. We announced an early close of $29 million; we’ve continued to raise more money and we’re very close to our $45 million goal now at a time and environment where it’s incredibly hard to raise money.
“What that’s enabled CH4 Global to do is to build the world’s first commercial scale facility, which we call an eco-park. Eco-park one, which is our first one, already has 100% of its output pre-assigned to three commercial partners, [enough to feed] about 10,000 cattle for each of the three partners.
“That facility, when it’s fully up and running, should generate close to $20 million in revenue. But the really important goal is to validate the financial metrics. We’ll know CapEx, we’ll know OpEx, we’ll know what the pre-sold prices are. We’ll be able to define its profitability in terms of its gross margins. But we already know today it’s going to be net positive in terms of gross margins.”
The attraction to farmers: “There are several levers… What we know from the work Ch4 Global has been doing on Australian beef as the first market we’re going into, is that somewhere between a 2-3% premium is all that’s required to cover 100% of the total costs of the product. More than that, farmers put money in their pocket, so they’re incentivized.
“The second lever is feed efficiency [farmers can use less feed to achieve the same results]. It’s in the low single digits as well, to 100% cover the cost.
“The third lever is the value of carbon, and the carbon reduced from a cow when you’re at 90% [methane reduction] is somewhere in the range of $130-140 a ton.
“The fourth lever is the impact of taxes [on greenhouse gas emissions]. We know that New Zealand and California have both established taxes [on emissions from livestock]. In the Netherlands there are ongoing protests about the acquisition of up to 25% of the farms by the government [the plan includes paying farmers to relocate or exit the industry, and helping others transition to more extensive methods of farming]; they set aside 25 billion euros for that in 2021.
“We know that Ireland has recently been in the news… about [considering] culling 200,000 cows [to reduce methane emissions]. So this is real and it’s happening now. The EU implemented, earlier this year, carbon taxes [tariffs] on [imported] steel and cement. I believe from some information we have, that this will extend to agricultural products next year.
“So these things are going to impact farmers. They may not today, but [in future] you may have markets closed off from you [if you fail to reduce livestock methane emissions]. If you have a cow that has very low levels of methane production, not only do you generate additional revenue and value, but you would avoid taxes and potentially have [more] markets open to you.”
*Enteric methane from ruminant animals including cows is one of the leading sources of methane emissions, according to a 2021 report from the UN environment program.
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