S1:E4 - Matt Nicoletti: The Methadone Clinic for Agriculture

2024-10-18

In this episode, Patrick Smith interviews Matt Nicoletti, Director of Business Development at Penny Newman Grain—a California grain trader founded in 1878 that has grown into a global leader in bulk commodity logistics. We dive into how Penny Newman is both advancing soil health through innovative inputs, and working to transform their legacy business. Their unconventional approach challenges some of the received wisdom in regenerative agriculture: 🚜 𝗜𝗻𝘁𝗲𝗴...

We dive into how Penny Newman is both advancing soil health through innovative inputs, and working to transform their legacy business.

Their unconventional approach challenges some of the received wisdom in regenerative agriculture:

🚜 𝗜𝗻𝘁𝗲𝗴𝗿𝗮𝘁𝗶𝗻𝗴 𝗦𝗼𝗶𝗹 𝗛𝗲𝗮𝗹𝘁𝗵 𝗶𝗻𝘁𝗼 𝗔𝗴𝗿𝗶𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀: Penny Newman is leveraging their scale to produce and distribute innovative biological inputs, integrating them directly into large farming operations without asking for fundamental operational changes.

🐛 𝗣𝗿𝗶𝗼𝗿𝗶𝘁𝗶𝘇𝗶𝗻𝗴 𝗢𝘂𝘁𝗰𝗼𝗺𝗲𝘀 𝗢𝘃𝗲𝗿 𝗣𝗿𝗮𝗰𝘁𝗶𝗰𝗲𝘀: Instead of focusing on cover crops or no-till methods, Matt's team optimizes soil biology through biological inputs. The result is rapid and dramatic improvements in crop yield and vigor, which really grabs producers' attention.

💰 𝗘𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗪𝗶𝗻𝘀 𝗕𝗲𝗳𝗼𝗿𝗲 𝗠𝗶𝗻𝗱𝘀𝗲𝘁 𝗦𝗵𝗶𝗳𝘁𝘀: Matt's approach focuses on delivering immediate economic results rather than waiting for farmers to adopt new practices or change their mindset. Showcasing the power of soil biology opens the door for producers to explore further.

⚡️𝗔𝘀 𝗼𝗽𝗽𝗼𝘀𝗲𝗱 𝘁𝗼 𝗮 "𝗺𝗶𝘀𝘀𝗶𝗻𝗴 𝗺𝗶𝗱𝗱𝗹𝗲" 𝘁𝗵𝗲𝘆 𝗮𝗿𝗲 𝘁𝗵𝗲 𝗺𝗶𝗱𝗱𝗹𝗲: Penny Newman trades and transports commodities into California from all over the world. We discuss some of the challenges they're facing as they navigate their customers' Scope 3 emission reduction programs.

Notable Quotes

(17:16) It's much more difficult to save your way to profitability than it is to grow your way to profitability…one of the mistakes that I made early was trying to get growers to drastically reduce their nitrogen inputs. So let's use the tomato market, for example. If you were to reduce, let's say that tomato grower was using 200 units of nitrogen in the form of UAN 32. That means that they're using roughly 70 gallons of UAN-32 and a gallon of UAN-32 in the current market costs roughly, you know, $2. Okay, so you're spending $140 per acre. So if you reduce your nitrogen inputs by half, you're going to save $70 roughly. Okay, and that's material on a per acre basis, like any grower who you go to and say, hey, I want to take $70 out of your input budget. They're going to like that in concept, right? However, when you look at, you know, where the profitability comes from, going back to yield increases, right? The tomato market is today, $112.50 per ton. Average tomato yield last year was roughly 50 tons per acre. So a, which would mean that a that a five ton yield increase would be a 10 % increase in yield, which is absolutely attainable, right? And at five tons times $112, you're north of $500 in profitability increase, right? So I would rather make $500 than save $70.
(09:57) If I can't show up and show results within – call it the first year of working together – Then I don't get invited back. You know, my customers are not people that say, I want to go regenerative. Let's work with Penny Newman. These are people who are just wanting to maximize profitability on-farm and looking for innovative ways to do that.
(08:40) It's kind of like a methadone clinic, right? You're weaning growers slowly and steadily off of those things, but doing it in a way that you don't see this big yield decline. Because I think one thing that you obviously think a lot about, is how growers manage that perceived risk, right? And when we talk about soil health and regenerative, we're generally talking about management practices that are oftentimes difficult to implement that growers don't have experience with. And in the regenerative ag circles, you hear people talk about this sort of yield dip that is inevitable when you go quote unquote regenerative. And as much as I love that word and I love the movement, I don't necessarily align ourselves with it as much anymore because if that's what regenerative ultimately means, then I can't necessarily claim that what we're doing is quote unquote regenerative. I personally believe that it is because we are emphasizing the restoration of, you know, soil, natural soil biology and creating an ecosystem that more closely mimics what exists in nature and the way nutrients cycle through the soil in nature.
(25:22) It's fun because a lot of times you actually can get that mindset shift after you've shown somebody the power of, call it soil health and emphasizing that. We've seen that in a myriad places with large, call it industrial growers that have started to use carbon -based inputs and have said things like, I've never seen an immediate yield and vigor response from any sort of input like we have when we use this, right? And it was ultimately the power of biology that drove that.
(46:50) I'm optimistic. You know, it's a total mess out there right now. Like I said, it's a bloody ocean, you know, at the crop input level…. there's no doubt about it, that our food system is facing challenges that growers are facing so much economic pressure, interest rates, you know, labor and materials, inflation and input, and inflation, those problems are all real. You know, water limitations in California through regulations like SGMA, problems are all very, very real. But I do believe we're going to innovate our way out of this. The sad fact of the matter is there is going to be a lot of people that don't survive this paradigm shift, right? But I also think that the ones that are most at risk are the ones that are in the current environment that are facing these mounting economic pressures, not willing to adopt these new, call it innovations or embrace this paradigm shift towards a more regenerative future.

Links for Resources Mentioned in the Episode