Where there’s muck there’s brass! Britain follows India & China’s lead as cow dung becomes tradable commodity

The grit of a Yorkshireman, and his ability to tend the cattle and brave the weather is a stark contrast to the sophisticated, ultra-modern and high tech luxury to which institutional movers & shakers of London, New York and Chicago have long become accustomed. However, the verdant grasslands of North Yorkshire are beginning to give way […]

Moomoo

The grit of a Yorkshireman, and his ability to tend the cattle and brave the weather is a stark contrast to the sophisticated, ultra-modern and high tech luxury to which institutional movers & shakers of London, New York and Chicago have long become accustomed.

However, the verdant grasslands of North Yorkshire are beginning to give way to a very new innovation in financial instruments, based on one of nature’s oldest natural resources- cow excrement.

Indeed, the harnessing of methane gas and other localized applications for reusing cow dung have been trialed over the last twenty years, however this year, what had been regarded as a waste product  only good for adding fertility to soil, it is rapidly rising toward the status of being a tradable commodity.

Farmer David Metcalfe, from Leyburn, North Yorkshire has now made an investment of £1.7 million in order to use cow dung as an energy source in order that powers small businesses as well as provides a facility to sell electricity back to the national grid.

Physical energy resource could be aligned with solid fuel, gas or oil as a commodity?

Unlike the sun which provides energy for solar panels that now grace (or not!) many fields in rural Britain, the energy source in this case is a physical resource and can be sold and traded according to supply and demand, as a futures product.

Mr. Metcalfe is not the first entrepreneur to have – if you’ll pardon the pun – trodden this muddy track. Jack Ma, CEO of Chinese e-commerce giant Alibaba provided an online marketplace for Indian farmers to sell cow dung online as a commodity when Alibaba began to promote its online business projects across India.

In December last year, rural communities across India began the online marketing of cow dung which was mixed with straw and dried, in order that it could be sold for physical delivery globally and used as a tradable energy resource.

Currently, Mr. Metcalfe views his investment into turning cow dung into a fuel to produce electricity as an additional interest to his farming business, however he currently makes £1,000 per day from the project in revenues.

The production process involves removing cow slurry from the floor of cowsheds and piping it into a green domed anaerobic digester which breaks down the product to produce methane gas, thus delivering 200 kilowatts of electricity every 24 hours, the majority of which operates the commerical farming business, and the remainder is sold to the National Grid.

From waste to wealth

Even academic institutions are researching this in detail. In November last year, Dr Samuel Mugo of McEwan University in Canada produced a research piece for the Dean’s Lecture Series about how cow dung can be valued as a commodity which can be used as an energy resource or an asset with an intrinsic value.

Indeed, byproducts of other processes such as molasses, unrefined sugar, grain and solid fuel products have become some of the most traded products on major commodities exchanges around the world, as well as having become very important pinnacles of stability for non-bank liquidity providers which can leverage their less liquid commodities and raw materials business in order to negate counterparty risk for the trading of liquid assets in a secure environment such as FX.

Should these innovative projects become more than just physically delivered energy commodities or methods of generating power to run small businesses and sell energy to the local grid, there may well be a chance that such an abundant resource could become a tradable futures or spot product, and it will be interesting to see which electronic brokerage will take the first step toward listing it on their trading platform.

If this does happen, we will really see the commodity markets begin to mooooo-ve.

 

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