Solving the livestock methane problem with seaweed — moonshot, unicorn, or both?
OK, be honest, have we ever talked this much about bovine flatulence in polite company? Climate change and the Green New Deal have a lot of people very excited about, um, cow farts. Who knew policy making discussions could lead to such intellectual topics on a regular basis? From AOC to Bill Gates, everyone is worried about greenhouse gases cause climate change, and some researchers are pushing back on the notion that it’s all about cow farts. It turns out it’s actually about cow belches, so insert joke here about how the big mistake is we focused on the wrong end of the cow.
I’ve been doing some research into the global methane problem caused by livestock, with a focus on cattle. The research made me appreciate, reminded me really, how hard some of these agriculture problems are to solve. As always, it’s good to have some data to scope the problem. First, let’s figure out the size of the methane problem. According to the Food and Agriculture Organization (FAO) of the United Nations, the total emissions from global livestock are 7.1 gigatonnes of CO2-equivalent per year, or 14% of all anthropogenic (caused by human activity) greenhouse gas (GHG) emissions.
Cows are responsible for about 65% of the total livestock emissions (this includes both beef and dairy cattle). The two largest portions of cow emissions are feed production and digestion, at 45% and 39% of total emissions. This nets out as cattle producing 1.8 gigatonnes from digestion each year. That’s serious Animal House-level quantity belching and farting (disclosure — I did not belong to a fraternity at Cal Poly SLO but I have heard stories …) Hmm — is that a shameless attempt at humor just to get an Animal House photo with Belushi into my blog post — yes, yes it is.

So how many cattle are pushing out all this methane? It turns out there are roughly 1.4 billion cattle in the world. So how do we reduce the methane from livestock? Well, one option is to have everyone stop eating meat and start eating only plant-based foods. It turns out researchers looked into that and it only reduces global GHG emissions by 2.6%. Plus, it’s not clear what we would do with all that livestock. As a 5th generation family farmer in California with 300 head of beef cattle, I’m fine eating some vegetables and even kind of like broccoli, but clearly prefer them on a plate with a nice tasty steak or as a fried accessory with something like a tasty In ‘N Out burger. It’s not a “pry the double double from my cold, hard fingers” thing but it’s a pretty strong preference. So maybe there’s a compromise position, where we can continue eating burgers and steaks while reducing the emissions. Luckily, the folks at UC Davis have done some research and found what could turn out to be the magic elixir — seaweed!
Here’s how it works — researchers found out that when they feed seaweed to cows it has a big impact on their methane production. In fact, early results indicate that if only 1% of the feed cows consume is seaweed, methane emissions could be reduced by up to 50% (and this is early data, there’s related data suggesting it could be far less than 1% and less often than daily input). The seaweed turns out to inhibit an enzyme that’s involved in producing methane in the cow’s stomach so the chemical reaction that produces the methane is reduced. So kudos to the kids in the white lab coats for coming up with a way to re-engineer cow digestion to emit less methane. And in case you’re wondering (I certainly was when I first read about the research), they’ve done taste tests with both beef and dairy cattle and so far there appears to be no difference in taste for milk or meat.

OK, so that’s all we need is 1% of cattle feed to be seaweed. If we model the average cow at 1,000 pounds and recognize that cows consume 2% of their body weight daily (20 pounds/day), some quick math tells you cows need to eat about .2 pounds of seaweed per day/cow to get rid of half the methane they produce. Do some more math and you can see this is 73 pounds of seaweed needed per cow per year (365 days/yr * .2 pounds/day). With 1.4 billion head of cattle globally, that means we need 107 billion pounds of seaweed per year to be fed to cattle. If you convert that to metric tonnes (because that is the measurement that is apparently used frequently to measure seaweed production volume), it represents 48.6 million metric tonnes. That’s a lot of sushi, or more accurately that’s a lot of seaweed that needs to be grown on top of what we already produce for sushi and other food products.
So we need 48.6 million metric tonnes (MMT), and the first question you should be asking yourself is “well, how much seaweed does the world grow and consume currently (and how much more growth is needed to produce an extra 48.6 MMT?)” It turns out the global seaweed production is roughly 30 MMT. From a revenue perspective, global seaweed delivered 2012 revenue of $6 billion — $5 billion for human consumption (sushi, et al) and $1 billion for animal feed, fertilizers, and bioactives. So we need a significant growth in seaweed production to meet the 48.6 million metric tonnes target — 162% to be exact to reach the new total needed globally of 78.6 MMT.

Seaweed farmers have some real challenges, especially small farmers (sounds a lot like traditional farmers these days). First, the core economics are challenging. You need a lot of money to launch a seaweed farm — up to $50,000 for a 20-acre farm With lease costs, seed expenses, and labor costs for harvesting, the average seaweed farmer is likely to lose money unless they can get $.50/pound wet and yield over 7 pounds per linear feet of line (and they need more than that to recover capital costs). Second, as with land-based farmers, small seaweed farmers struggle to get access to product testing and market contracts, and are often excluded from the marketplace. Big farmers have an advantage. Third, it’s hard for post-harvest processing that can dry or stabilize harvested seaweed so it can be aggregated and sold. Like the cattleman with only 10 head of cattle to sell or the grape grower with only 5 acres of wine grapes, the farmer is in the price taker position because they do not have access to the full marketplace. The post-harvest processing equipment can cost $1–2 million and is hard to co-op or share costs on because seaweed farms are very spread out. Fourth, wild harvesters come in and flood the market with low-priced product because they just harvest wild seaweed instead of having to grow it and invest in the growing season. Fifth, and by now you could have guessed this one, seaweed is largely an over-supplied price taker market for seaweed farmers.
Into all this uncertainty and quite a challenging environment steps Blue Ocean Barns, whose CEO Joan Salwen is working with the UC Davis researchers on the best way to scale seaweed growth. Joan and her team are working with partners on various parts of the food supply chain while they stay focused on seaweed manufacturing. In my opinion, this is the right approach. Focus on the one thing you can do really well and build an ecosystem around it that can solve the rest of the problem. No sense trying to … wait for it … boil the ocean (sorry, I had to …)

Is Blue Ocean a moonshot? Well, they were selected as one of 17 “Earthshot Companies” by Elemental Excelerator, who invested and will work with them to help them scale (like most Accelerators). They are definitely solving one of the largest AgTech problems I have seen in the space. Think about it this way. The problem requires a 1.5x lift in global production of a commodity crop in a price taker market where you have to do things at a completely new set of scale, and that may be the easy part. You have to then integrate that raw product into a livestock feed supply chain with many competitive, well established competitors who fight for pennies. Finally, you have to do all this without negatively impacting the real customer, the farmer feeding stuff to cattle and is also living on some razor-thin margins which makes them very uninterested in higher prices to include additives like seaweed. So, with those 3 variables factored in, I would have to say this easily qualifies as an AgTech moonshot.
Can Blue Ocean be a unicorn? Well, they will have to solve a significant portion of this ecosystem challenge to get anywhere close to a $1 billion valuation (the normal unicorn definition). Remember, the existing market is $6 billion in annual sales, while the needed volume of seaweed required for this problem could be an additional $10 billion in sales. How much of that opportunity can be captured, how much of that can be captured by Blue Ocean (a high-risk, early stage startup), and what kind of sustainable unit economics can be created are all at this point very open questions. At this point, it’s hard to have a clear line of sight to a revenue stream with enough growth to support that $1 B unicorn valuation. I think it is way too early and there are still too many unknowns and risk factors to make that call. If I had to make a bet, I would give Blue Ocean a 1% chance of becoming a unicorn. This is in no way an indictment of the space or the company, only an acknowledgement that unicorns are hard to build in any circumstance and this one has some noteworthy challenges.
What I can say is this — after researching the opportunity and talking to Joan, I’ll be watching to see how this one plays out. Even if she and the team are “only” able to solve somewhere between 10 and 25% of the problem, it’s still a massive accomplishment, regardless of any potential unicorn status. This is exactly the kind of “go big or go home” approach that AgTech needs innovators like Joan taking on to solve some of these really big problems.

I plan to do a future post on the real customer — the cattle farmer who is not interested in paying more for seaweed additives for their cattle. I believe there is a role to play in the overall economics around seaweed as methane reducer for private-public partnerships to make the economics work for the supply chain, including the farmer who eventually feeds the cows. But that’s a different post for another day …
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