Dr. Mitloehner clears the air on ‘net zero,’ sees narrative changing on America’s cows

Dr. Frank Mitloehner is a foremost authority on animal science and greenhouse gas emissions. Find him on Twitter @GHGGuru and @UCDavisCLEAR (Screen capture from American Dairy Coalition webinar)

‘Climate neutrality, not net zero carbon, should be dairy’s goal.’

By Sherry Bunting

‘Net zero’ seems like a simple term, but it’s loaded, according to Dr. Frank Mitloehner, professor and air quality specialist with the Department of Animal Science at University of California-Davis. 

He firmly believes dairy can be a climate solution, but the first step is to accurately define dairy’s contribution to the climate problem. Setting the record straight is his prime focus, and he also researches ways dairy, like every industry, “can do our bit to improve.”

Presenting on what ‘net zero’ really means for dairies, Mitloehner answered questions during the American Dairy Coalition (ADC) annual business meeting in December, attended by over 150 producers from across the country via webinar.

Based in Wisconsin, ADC is a national producer-driven voice with a regionally diverse board. President Walt Moore, a Chester County, Pennsylvania dairy producer, welcomed virtual meeting attendees, and CEO Laurie Fischer shared a federal dairy policy update. 

She said the ADC board is nimble, moves quickly, and wants to hear from fellow dairy farmers. She encouraged membership to make ADC stronger and shared about the organization’s federal policy focus in 2021 — from pandemic disruptions and assistance, Federal Order pricing, depooling and negative PPDs to real dairy label integrity, whole milk choice in schools, and farmers’ questions and concerns about dairy ‘net-zero’ actions.

“Too often, farmers think they may not understand something, so they don’t speak up,” said Fischer. “But we get calls and so much great advice from our farmers. We know you get it, you know it, because it is happening to you.” 

From this farmer input, the net-zero topic became the ADC annual meeting focus.

“We are rethinking methane, and this is influencing and shaping the discussion,” Dr. Mitloehner reported. He urged producers to use the information at the CLEAR Center at https://clear.ucdavis.edu/ and to do better networking, to have a better presence on social media. 

This is necessary because the activists are well-connected, and methane is the angle they use in their quest to end animal agriculture. He said Twitter is a platform where many of these discussions are happening. His handle there is @GHGGuru and the Center is @UCDavisCLEAR.

“This is something I have told the dairy industry. They say ‘net-zero carbon’, but they shouldn’t say that because it is not possible, and it is not needed. We need to be saying ‘net-zero warming’. That’s the goal. Then, every time you reduce methane, you instantaneously have an impact that is inducing a cooling effect,” said Mitloehner.

‘Climate neutrality’ is the more accurate term he uses to describe the pathways for U.S. dairy and beef. But it requires getting accurate information into policy in a fact-based way. 

It requires arming people with the knowledge that the constant and efficient U.S. dairy and livestock herds produce no new methane, that they are climate-neutral because not only is methane continuously destroyed in the atmosphere at a rate roughly equal to what is continuously emitted by cow burps and manure, that process involves a biogenic carbon cycle in which the cow is a key part.

One of the issues is how methane from cattle is measured, he said. Current policy uses a measurement from 30 years ago that fails to acknowledge the carbon cycle and ‘sinks’ alongside the ‘emissions.’ 

Mitloehner said accurate information is beginning to change the narrative. This is critical because methane is the GHG of concern for dairy, and the narrative about it has been incomplete and inaccurate. 

As a more potent heat-trapping gas than carbon dioxide, methane becomes the ‘easy’ target to achieve the warming limits in the Paris Accord. Methane was the focal point of ‘additional warming limits’ during the UN Climate Change Summit (COP26) in Glasgow in November.

Putting together the inaccurate narrative alongside international agreements to specifically reduce methane, it becomes obvious why cattle are in the crosshairs. Producers are already in the middle of this in California as methane regulation and carbon credit systems began there several years ago.

As the narrative is beginning to change, Mitloehner sees opportunities. He described the current California ‘goldrush’ of renewable natural gas (RNG) projects where large herds both in and out of state cover lagoons to capture and convert biogas into RNG. The state’s investments and renewable fuel standard provide a 10-year guarantee with the RNG companies typically owning the offset credits that can be traded on the California exchange from anywhere.

Getting the numbers right is mission-critical

“We are far and away an outlier because of our efficiency in the U.S with all livestock and feed representing 4% of the GHG total for the U.S,” Mitloehner confirmed. “Dairy, alone, is less than 2% of the U.S. total.”

This is much smaller than the 14.5% figure that is thrown about recklessly. That is a global number that includes non-productive cattle in India as well as the increasing herds in less efficient developing countries. This number also lumps in other things, such as deforestation.

He said the true global percentage of emissions for livestock and manure is 5.8%. Unfortunately, activists and media tend to use the inflated global figure and conflate it with these other things to inaccurately describe the climate impact of U.S. dairy and livestock herds as 14.5%.

The efficiency of U.S. production and the nutrient density of animal foods must be part of the food and climate policy equation.

Methane is not GHG on steroids

“Without greenhouse gases, life on earth would not be possible because it would be too cold here,” said Mitloehner. “We need GHG, but human activity puts too much into the atmosphere, and the toll is large concentrations.” 

The way all GHGs are measured has to do with their intensity as determined 30 years ago when scientists wanted one global warming potential (GWP) unit to compare cows to cars to cement production and so forth. They came up with GWP100, which converts methane to CO2 equivalents based on its warming potential.

Methane traps 28 times more heat than CO2, but it is short-lived, Mitloehner explained.

“Looking just at the warming potential, you get this idea that methane is GHG on steroids and that we need to get rid of all of it and all of its sources,” he said.

But is this the end of the methane story? No.

Sinks and cycles must count

Mitloehner described how ‘methane budgets’ look at sources and their emissions but ignore the carbon sinks that go alongside and ignore the chemical reactions that result in atmospheric removal of methane as well.

“Plants need sunlight, water, and a source of carbon. That carbon they need comes from the atmosphere to produce oxygen and carbohydrates,” he said, explaining how cows eat the carbohydrates and convert them to nutrient dense milk and beef. In that process, the rumen produces methane.

“Is this new and additional carbon added to the atmosphere? No it is not. It is recycled carbon,” he said.

“Say you work off the farm. You drive and burn fuel, adding new CO2 in addition to the stock in the atmosphere the day before. Stock gases accumulate because they stay in the environment. Currently, agencies treat methane as if it behaves the same way. But methane is a flow gas, not a stock gas. It is not cumulative,” said Mitloehner.

If the same farm has 1000 cows belching today and 1000 belching 10 years ago, those 1000 cows are not belching new methane because in 10 years it is gone from the atmosphere. It is cyclical.

“The take-home message is the carbon that our constant livestock herds produce is not new carbon in the atmosphere. It is a constant source because similarly to it being produced, it is also destroyed. The destruction part is not finding its way into the public policy system… but it will in the future,” he predicts.

Methane drives Paris Accord and COP26

Methane targets are driving intergovernmental agreements wanting to limit the “additional warming impact” of nations and industries.

Currently, cattle are viewed as global-warmers because they constantly emit methane. However, as Mitloehner drilled numerous times, this is not new methane, it is not additive, it is not cumulative. It is recycled carbon.

“If you have constant livestock herds, like in the U.S., then you are not causing new additional warming,” said Mitloehner.

Burning fossil fuels is much different. 

“Fossilized carbon accumulated underground. Over 70 years, we have extracted half of it and burned it, so where is it now? In the atmosphere. We added new and additional CO2 that is not a short-lived gas. It is a one-way street from the ground into the air,” he explained.

The problem for dairy and beef producers is their cattle are being depicted as though their emissions are additive, cumulative, like fossil fuels, which is not true, he said.

Signs the narrative is changing

One promising sign that the message is getting through has come from Oxford researchers acknowledging the constant cattle herds in the U.S. and UK are not adding new warming.

They acknowledge the GWP100 “grossly overestimates” the warming impact of cattle and are working on a new measurement that recognizes constant cattle herds are not adding new warming, said Mitloehner.

Another promising sign is that the International Panel on Climate Change (IPCC) issued a statement recently acknowledging that the current GWP100 overblows the warming impact of cattle by a factor of four. This new information is not in current policy, but it is making its way there.

Tale of two bathtubs

Mitloehner believes it is important to visualize climate neutrality. He described two bathtubs. One has a CO2 faucet with no drain, the other a methane faucet with a drain. Open the faucets, and even at a slow and steady rate, the CO2 bathtub continues to rise, while the methane bathtub drains as it fills to remain at a constant level.

He also explained that over the past 200 years the U.S. hasn’t seen any real change in that methane bathtub because prior to settlement in America, 100 million ruminants — buffalo and other wild herds — roamed. Today, there are around 100 million large ruminants in the U.S. dairy and beef industries.

What has changed is the U.S. does have more liquid manure lagoon storage that is producing more methane than solid manure storage. “But we know of ways to further reduce that,” he said.

Mitloehner pointed out how the current GWP100 poorly estimates the warming impact three example scenarios. If, over 30 years, methane is increased 35% from a source, or reduced 10%, or reduced 35%, the GWP100 would show significant continuous addition of cow-sourced methane in CO2 equivalents for all three scenarios because the destruction of the methane – the drain that operates with the faucet – is ignored.

The proper way to look at this, if the methane increased a lot, is that it would add a lot. But if it is balanced, then there is no new or additional warming. And, in that third scenario, he said, “where we pull a lot from the atmosphere when we reduce methane, it has the same impact as growing a forest.”

Bottom line, said Mitloehner, “We can be a solution and take it to the market and get paid for that,” but current policy does not yet reflect the neutral position of the constant and efficient U.S. herd.

Bullish about the future

‘Net zero’ is a term that is not yet clearly defined, said Dr. Frank Mitloehner several times during the American Dairy Coalition annual meeting by webinar in December. He sees the real goal as “climate neutrality,” to communicate the way constant U.S. dairy herds contribute “no additional warming,” in other words “net zero warming.”

The climate neutrality of U.S. cattle must be part of public policy, he said. Only then will dairies truly be on a path to marketing their reductions as ‘cooling offsets.’

Mitloehner, a University of California animal scientist and GHG expert is bullish about the future of “turning this methane liability into an asset, so if we manage toward reducing this gas, we can take that reduction to the carbon market,” he said.

“When we hear ‘net zero’, we think about carbon, but that would mean no more GHG is being produced, and that is not possible. I have told the dairy industry this for years. Why is (zero GHG) not possible? Because cows always belch, and we can’t offset that, and furthermore, we do not need to offset that because it is not new methane,” said Mitloehner.

On the other hand, “If we replace beef and dairy made in the U.S., this does not create a GHG reduction at all. This is because we are the most productive and efficient in the world,” he said.

Just stopping beef and dairy production here in the U.S. — and picking up the slack by producing it somewhere else or producing something else in its place — creates ‘leakage.’ This leakage, he said, is where the biogenic carbon cycle becomes disrupted. In other words, the bathtub has a faucet that is out of sync with the drain.

California’s RNG ‘goldrush’

Mitloehner touched on the strict California standards that mandate a 40% reduction of methane be achieved by the state by 2030. Again, methane is targeted because of its warming potential per the Paris Accord.

The good news, he said, is California is using incentives to encourage covering manure lagoons to capture a percentage of the biogas bubble so that it doesn’t go into the atmosphere but is trapped beneath the tarp and converted into renewable natural gas (RNG) that can be sold as vehicle fleet fuel to replace diesel. 

Because this RNG comes from a captured and converted methane source, it is considered a most carbon-negative fuel in the state’s low-carbon fuel standard. 

Those credits equate to $200 per ton of CO2 replaced with a carbon-negative renewable, said Mitloehner.

“This is a huge credit. This is why dairies are flocking to get lagoons covered to trap and convert. These credits are guaranteed for 10 years in California, but the anti-agriculture activists are fuming over them,” said Mitloehner.

Of all California investments made toward achieving the 40% methane reduction goal, dairy has received just 3% of funds, but has achieved 13% of reductions so far.

This “carrot” approach has incentivized the biogas RNG projects assuming $4000 income per cow, making an estimated $1500 to $2000 per cow per year on a 10-year California fuel standard guarantee.

Mitloehner noted that the carbon intensity of the reduction is presently viewed as greater when RNG is used in vehicles vs. generating electricity, but right now there is not enough RNG suitable for vehicle use. He sees the fuel use increasing in the future and explained that dairies anywhere can sell into the California market if they capture biogas and convert it to RNG.

The state’s 10-year guarantee has stimulated companies seeking to invest in RNG projects on large dairy farms, where they then own or share the credits.

Mitloehner answered a few questions from producers about the caveats. If the bottom and top of the lagoon are covered, what happens to the sludge that accumulates? He acknowledged there is no satisfactory answer to that question presently.

Another drawback is the technology only works for larger dairies because smaller lagoons won’t have the same breakeven. Community digester models are emerging as well, he said, but they also use clusters of large farms working together.

Soil carbon sequestration

Mitloehner cited soil carbon sequestration as a way dairy farms of any size can be a solution.

It’s the process by which agriculture and forestry take carbon out of the air via the plant root systems that allow the soil microbes to take it into the soil — unless the soil is disturbed by tilling or it is released through fires. With good forest and grassland management, as well as low- and no-till farming practices, carbon can be sequestered to stay in the ground forever, according to Mitloehner.

“Agriculture and forests are the only two ways to do this,” he said, adding that USDA seeks to incentivize practices that take and keep more of the atmospheric carbon in the soil.  

Answering questions from producers, he noted that he has not yet seen a scheme that would incentivize soil carbon sequestration through marketing offsets, but the discussions are heading in that direction.

“Many of the environmental justice communities are running wild on this. They do not want farmers to get any money for it. They are putting on significant pressure and threatening lawsuits, so it’s not settled yet,” he reported.

There is also a lot of confusion around soil carbon sequestration and “regenerative” agriculture. One big problem is that producers who are doing some of these things, already, won’t get the opportunity to capitalize on those practices when offset protocols are eventually developed — if those practices are not deemed “additive.”

“If you are doing something now and are not covered by a policy of financial incentive, then four years from now, if it is developed, they’ll say you don’t qualify because you are already doing it,” said Mitloehner. 

“They are calling it ‘additionality.’ It’s about the change to doing it to qualify. That seems crazy, but it’s like if you bought an electric vehicle 10 years ago when there was no tax credit, you don’t get a tax credit now for already owning an EV because the improvement is not ‘additional,’” he explained.

What about the burps?

For farms with under 1000 cows, other technologies like feed additives can be used on any size dairy with effects realized within a week, said Mitloehner, noting one product that is commercially available and several others on the docket.

If a 10 to 15% reduction can be achieved in enteric (belching) methane reduction, then it will be marketable. Right now, these reductions are not marketable. If an offset protocol is developed for this in the future, it will be taken to the carbon market, he said.

In the meantime, incentives are being offered within supply chains, according to Mitloehner. Companies like Nestle, Starbucks and others are doing pilot projects and buying feed additives for the farmers within their supply chains to reduce their products’ GHG. He said there is some evidence these products can enhance components and feed efficiency. This is a big area of research right now.

A question was also asked during the webinar, wondering about Amish farms using horses instead of tractors. Are they contributing to cooling?

Mitloehner replied that he has not yet seen a calculation for this, and while the impact of horses would be less than the impact of burning fossil fuels, there is still an environmental impact to calculate. 

Since the international focus is on ‘additional warming impact’, methane is – like it or not — the target. Whether a dairy farm is managed conventionally or in the Amish tradition, the cows, the methane, and how governments and industry measure the ‘additional warming impact’ of cow-sourced methane, is still the crux of the issue for all dairy farms. If efficiency is reduced, then the ability to position the dairy farm as ‘cooling’ may be more complicated, or less significant, he said.

In addition to accurate definitions that acknowledge climate neutrality of constant cattle herds producing no new methane, Mitloehner’s wish is for federal policy to also take productivity (and nutrient density) into stronger consideration when evaluating emission intensity “instead of just counting heads of cattle. 

“This can be good for large or small dairies with a high or low footprint. When the relative emissions are determined by how you manage the dairy, the hope is that this is more about the how than the cow.”

-30-

Feb. 2022 Class I ‘mover’ clocks-in at $21.64, but formula shaves 51 cents

Class I price under the new ‘average-plus’ formula vs. the previous ‘higher of’ formula and the net loss dairy farmers have missed out on over 34 months — May 2019 – Feb 2022

By Sherry Bunting

USDA announced the February Class I ‘mover’ on Jan. 20 at $21.64. The good news is this is $1.93 higher than the January mover and $6.10 higher than a year ago. The Class I mover is the base price paid for milk going to fluid beverage use before location differentials are added.

The bad news is the February Class I mover is 51 cents less under the current ‘average-plus’ formula ($21.64) than it would have been under the previous ‘higher of’ formula ($22.15).

During the Georgia Dairy Conference this week, retired co-op CEO Calvin Covington, author of the Dixie Dairy Report, gave a positive outlook for 2022. He noted the year begins globally with modest product inventories, reduced production of milk and strong demand for dairy.

When asked about risk, Covington noted that it doesn’t take much change in these factors to swing markets the other way. The higher milk prices go, the more downside risk there is for producers to protect.

When asked about federal order reform ‘consensus’ building and the Class I mover formula, Covington said the reform process was navigated in the past through a hearing process involving the USDA Dairy Division. He also said the Class I mover formula should return to the previous ‘higher of’ method because the costs of serving the Class I market continue to climb while the Class I price takes a back seat to other classes in some months under the ‘averaging’ method.

That may be the case in January and February when final prices are announced, and the possibility exists that this inversion could continue.

For February 2022, the advanced Class III skim milk pricing factor, based on cheese and whey prices in the first two weeks of January, is pegged at $10.43 while the Class IV skim pricing factor, based on butter and powder, is pegged at $12.97. That’s a spread of $2.54 per hundredweight.

This spread has been widening since November — now more than erasing the 74-cent adjuster applied under the current skim ‘averaging’ method. In the February calculation, it was the uptrending butterfat value at $2.7537/lb that softened the blow.

The entire formula figures the average of the two skim pricing factors (Classes III and IV) + 74 cents x 0.965. It also multiplies the butterfat price by 3.5. Then the resulting numbers for skim and fat are added together to form the Class I advance base price – or as it is called, ‘the mover.’ When Class I is highest, milk is sure to ‘move’ to those fresh fluid milk needs, which is one of the main stated purposes of the Federal Milk Marketing Orders.

The February Class I price announcement is the first since June 2021 to fall below the old method using the new method. This happened every month in the second half of 2020 and first half of 2021 as well as three months in 2019. The new method was implemented by USDA in May 2019 due to a legislative change in the 2018 Farm Bill that did not go through a Federal Order hearing process.

From July through December 2021, producers gained 27 to 70 cents from the averaging method as Classes III and IV traded close together. Those brief gains netted around $100 million, which paled in comparison to the approximately $780 million in net Class I value losses to producers from May 2019 through June 2021. With January and February 2022 figured in (no benefit in January and a 51-cent loss in February), the net Class I value loss is now estimated at $687 million for the 34 months since the Class I pricing change began in May 2019.

Supply and demand shocks, supply chain disruptions and other fundamentals are creating the double-impact of rapidly rising dairy product prices and the widening spread between Classes III and IV. The combination is creating a situation where Class I is well on its way to becoming the lowest-priced class, even in some FMMOs after the location differentials are applied.

In fact, if these differences lead to a lot of de-pooling and negative producer price differentials (PPDs), those location differentials will also be shaved in the blend price to producers.

It will be interesting to see how this plays out perhaps differently now that Class IV is leading Class III by a wide margin instead of the other way around as previously.

Here’s what’s been happening since November. 

When the Class I mover was calculated for December at $19.17 based on early November pricing factors, dairy farmers benefitted from most of the 74-cent adjuster because the Class III and IV ‘advance’ pricing factors were close together with just a 12-cent spread. By the time the December class and component prices were announced on January 5, Class I mover was surpassed by Class IV at $19.88 and Class II $19.84, but Class III was still behind Class I at $18.36.

Then, when the January Class I price of $19.71 was announced four weeks ago based on the pricing factors back in the beginning of December, the factors began shaping up for the Class I mover to be dead-last by the time the January class and component prices are announced on Feb. 2. It would have been far behind II, III and IV had the block cheese price not lost 21 cents on the CME Spot market this week, pulling futures markets back $1.00 during the Jan. 19 and 20 trading sessions.

With one week of trading to go before January closes, odds are the Class I mover will be surpassed by all other class prices when the final announcement comes out on Feb. 2. Class IV will likely be highest in the mid-$22s, Class II will be close to Class IV, Class III will most likely be over $20 unless block cheddar takes another hit, and Class I will clock in at the previously announced $19.71.

In the January Class I ‘mover’ calculation of $19.71, the Class III and IV pricing factors diverged by precisely $1.48. This is the magic number because the adjuster to the average is 74 cents and 74 x 2 = $1.48. With the January Class I price spot-on equal to what it would have been under the previous ‘higher of’ method, no benefit was received by producers for that ‘adjuster’, and therefore, the issue of Class I being potentially the lowest priced class in the blend price for January is due entirely to the advanced pricing 4 to 6 weeks before the other classes.

February’s pressure on Class I relative to II, III and IV looks to be steeper and will be based on two factors – the 6-week difference in determining the values in a rising market and the widening of the spread between the Class III and IV skim pricing factors.

Looking out across the milk futures months of 2022, the spreads are much wider now than they looked a few months ago, even as the brakes were applied unevenly putting Class III and IV futures trading in reverse adjustment mode today and yesterday.

(NOTE: The USDA Pandemic Market Volatility Assistance Program, PMVAP, authorized $350 million to be paid to farmers at a rate of 80% of their July-Dec 2020 Class I value loss — on up to 5 million pounds of milk per farm via their milk co-ops and handlers and calculated only on FMMO-pooled milk value. But these payments are delayed in most cases, and will fall well short of the real value missed in the milk checks of many dairy farmers across the country as the Class I losses influenced other aspects of FMMO pooling and payment as reflected in negative PPDs.)

-30-