I recently had the honour to be the keynote speaker at the 5th Aegean Economic Forum. Below you will find the video of the session dedicated to agriculture (my presentation starts at 23:45 and lasts until 26:00). This was the first time I had an assignment with a Turkish organization and I encourage you to watch the video if you have 2 hours available. It was an outstanding session and I was quite pleased to be involved with a group that focused on essential topics before focusing on first world problems and first world solutions, unlike it often is the case in North America or Europe. I have added the text of my presentation below the embedded video, and I have highlighted in bold letters my main messages.
Text of my presentation:
Tonight, I will quickly tell you what changes I see coming and what is needed to adapt to a different future.
We have gone a long way since the beginning of agriculture. For centuries, agriculture worked in local and closed systems at the level of a region. With the development of industrialization, we started to open the loops, and not just in agriculture. We actually created two problems, not just one. On the one hand we have depleted natural resources and on the other hand, we have created piles of waste. We went from a circular to a linear system.
To make it worse, we never looked at the long-term effects and costs of this linear system. We never included these externalities in the production costs. So, waste became an accepted part of consumption society. And we waste lots. In the case of agriculture, the number that comes back regularly is that 30 to 40% of the food produced never gets eaten.
The issue of food waste is twofold. In developed countries, it is a behavioural and organizational problem at consumer, retailer and restaurant level. In developing countries, the main cause is post-harvest, either rotting on the field or because of poor storage and logistics. It is an infrastructure and money problem.
Regardless of the causes, food waste is not just about food, it is about all the water, the energy, the money and the land used to produce, transport, process and sell it.
For consumers, it is about throwing away a third of their food budget. For a household spending 12% of its budget on food, it means that they voluntarily throw 4% of their budget in the garbage bin. That is rather silly, isn’t it? The total price tag of the wasted food alone amounts to about one trillion US Dollars worldwide. But beyond the money, let’s just think about what a third means.
A third of the world agricultural land is about 10 million km2 wasted (Added note: world arable land is about 14 million km2 and grasslands twice as much, so 10 million km2 is a conservative number, out of caution). This is 60% the area of Russia; it is the area of Canada or the Sahara; it is slightly bigger than the USA or China or Brazil; it is 2.5 times the size of the EU and 3 times the size of India. Because of waste, we need to put more land in production. So, indirectly, food waste is a significant source of deforestation.
Now, if we look at a third of the world population, we are talking about 2.6 billion people. It is almost the combined population of China and India, and more than twice the population of Africa.
Where else than by solving food waste, do we have 33% room for improvement in food and agriculture? It is only a behavioural, an organizational and an infrastructure investment issue. It is not rocket science. All it takes is money and discipline.
Right now, people are gathered at COP26. Unlike what they claim, what is at stake is not the planet, it is the biosphere, which is soil, water, organic matter, climate and of course life.
There is not only one food production system. There is a huge diversity of production systems and they do not pollute equally. There are huge differences between the different regions of the world. Even within one particular system, different farmers have different production and environment performances, and impacts. We need a targeted approach.
The proper way is to look at the different situations and through innovation and knowledge transfer level up the playing field and help producers improve. We must do more to help farmers succeed. They know the problems; they often know the solutions, but often lack the needed support. There is great potential in this field, especially with the introduction of new technologies.
Previous periods of modernization of agriculture were about adding muscle, first with animals, and then with machinery, it literally and figuratively was about adding horse power. The current transformation of food and agriculture is about adding a nervous system and synapses. Drones, satellite imaging, robotics, driverless vehicles, sensors, artificial intelligence and data collection are all extensions of the farmer’s senses and brain, but far beyond human capacities. The principle of precision agriculture is about taking the right action at the right time at the right place. This actually offers the best of all worlds. It helps producing the highest yields by using the very strict minimum of inputs. It helps reduce the use of fertilizers and pesticides; it helps reduce the amount of energy, therefore reduce greenhouse gases and it helps reduce the use of water. These technologies go beyond production alone. They also can help monitor the environment and help detect possible impact on the environment immediately. The main issue with implementing new technologies is their cost.
New technologies and precision are the ideal tools to address waste, simply because waste and efficiency are two sides of the same coin. When we reduce waste, we are more efficient, as we need less input for the same output. It really comes down to producing more with less.
In my opinion, there is no reason to sacrifice yields. Not everybody agrees. The USA think along the lines of increasing efficiency and producing more to meet future world demand. The EU, with its brand-new Farm to Fork policies seems to prefer to reduce production as the way to reduce greenhouse gases. Personally, I am surprised by the EU’s choice. The EU has a highly efficient agriculture, with some countries being the very top, and its carbon footprint is relatively low compared with many other regions of the world. Indeed, the EU, like all other regions, needs to reduce the use of inputs but in my opinion, the EU’s agriculture problem is not so much a carbon footprint one as it is a problem of distribution of productions, in particular a few areas having too high a density and concentration of intensive animal farms. They mostly need to rebalance animal farming and crops. The reason is, as I mentioned earlier, that loops that have been opened.
The future will be about repairing the damage done. We will have to replace the consumption economy, which is about quantitative growth -about “always more”- by a maintenance economy, which focuses on qualitative growth, or on “always enough”.
Closing the loops is about the biosphere, with a financial element on the side. It is about preserving and regenerating soil, water, organic matter, while mitigating climate and by including the externalities. This means changing the economic equation. The economy is a combination of three components: resources, labour and capital. Next to this economic equation, markets determine prices through supply and demand. The math for both the economic equation and the markets are influenced by policies which set the rules of the game through rewards and penalties, and future choices of the reward/penalty system will strongly influence how agriculture will be organized and how it will perform, because producers will choose what returns them the highest income. A change I expect is the implementation of taxes on some product categories and production systems, mostly because governments need more money. To some extent, it will also influence consumers’ choices although consumers are subject to many more stimuli to make their choices.
Setting new rules require thinking carefully about how they change externalities and therefore what the long-term consequences will be. It also means looking at the bigger picture. Climate change will affect the food world map. Some regions will not be able to keep producing what they produce today. They will have to choose for different crops and combinations thereof. Other regions will be more suitable to take over. Water availability will be a crucial factor in the future food map. How long can regions that produce and export large volumes of water-rich products to far away markets, from which the water will never return can continue to do so?
New strategies are required. It can be the adoption of new and better varieties that can resist drought. It can be the use of different production systems, such as the use of cover crops, the use of mulch and organic matter. It can be the development of plants that use fertilizers more efficiently or that have higher photosynthesis efficiency. It can be different irrigation systems and move to a crop-by-drop approach. It also can be production systems that reduce evapotranspiration, for instance by combining a low-level crop under a cover of trees. It also can be desalination of sea water for irrigation purposes.
The list of solutions is long but the redistribution of the world food map will have consequences far beyond the field. It will redefine geopolitics. All countries will have to rethink both old and new alliances. Feuds and partnerships combined with new natural conditions, and therefore trade, will affect food security.
It is also important to realize that food security, food sovereignty and self-sufficiency are different concepts. It is impossible for all countries to produce everything, simply because of different natural conditions. With more extreme climatic conditions, choices will have to be made. This is why I think that trade will be essential not only for food security, but also to mitigate the effect of climate change.
Until now, the economic model has been “to produce where it is cheapest to produce”. As such not a bad idea, except that it opened the loops and did not include externalities. True sustainability means closing the loops and including these externalities. In the future, the concept must evolve to “producing where it is the cheapest to produce sustainably”. And this word, sustainably, is going to make all the difference. It will affect availability; it will affect costs and it will affect prices. And as always when prices increase, it offers opportunities for alternatives and also for resourcefulness.
An example is urban farming and there are all sorts of projects. It is estimated that 20% of all food produced in the world is produced in urban areas. Next to food production, it also has a social function and can help mitigate some of the effects of climate change. The question is often to figure out how to organize urban farming. There can be community gardens, people can also use their balconies to grow food, or old buildings can be transformed into farms. In cities, the roof surface is huge and roofs can be an ideal location to set a garden. Actually, some supermarkets are already growing perishables such as tomatoes, lettuce and strawberries on their roofs and sell them day-fresh to the consumers visiting their stores.
On the consumer end, there is plenty of activity, too. Suppliers offer products with green claims, true or not by the way. There are campaigns of information as well as disinformation about the impact of various food groups. Protein is one of these areas, and the fight to meet the need for protein is on between animal farming and alternatives.
But what do consumers want? They want food to be available, affordable and safe. There is also strong demand for natural, although natural is a rather unclear term, and most of the time, it means “not artificial”. They want healthy foods, and the rise of obesity and diabetes reinforces this demand. Because of climate change, consumers have become more discerning or at least try to be about which products they consider responsible or which ones they see as harmful for the environment. Production methods will matter more and more and a good example of this is the growing concern for animal welfare. Another strong trend is authenticity, which is also an unclear term rooted in some nostalgia and often means that it must not be “industrial”, or at least not be perceived as such.
Other areas that consumers look for are value and values. Value is not new but it becomes more complex. It is rooted in perception and psychology, not to say ego and status. Values have become increasingly relevant with the presence of social media. Consumers buy from suppliers that are aligned with their values. They are keen on knowing the food producers’ views on their role in society and environment. For a food producer, this can be tricky, as often it will take only one word or message that goes against the consumer’s values and they decide to stop buying. Social media have made people extra sensitive and touchy and bad publicity spreads like fire on social media platforms. This is a new dimension that food producers need to consider very carefully. Social media can make you and can break you in a heartbeat.
Transparency is important. Most suppliers see it has providing consumers with every bit of information but this is a herculean task and one can wonder if this is the right approach. Let’s face it, only very few consumers want to know everything from beginning to end about the history of the product they buy. Transparency is not so much about information as it is about trust. They want to know enough about the producer to feel confident buying the product. They want to have the assurance that the producer has nothing to hide and will answer honestly all questions. The food producer’s business needs to be on display as if it were behind a clear –transparent- window where consumers can look at anything they want in complete freedom.
Traceability is a cousin to transparency. It is essential to trace the source of a problem, should one arise, but it must be much more than that. It must be a proactive tool. Knowing why something went wrong is nice but it is after the facts. A good traceable quality assurance system is what producers need. This is where new technologies – “the nervous system”- can be useful by allowing a full online in real time quality control that has the ability to flag any deviation and stop the production line immediately. Having a proactive system that will prevent quality issues to be sent to the customer will spare many frustrations and save lots of money.
But next to better production methods and new technologies, one area that needs to improve in the future is to help people eat better. It should be the moral duty of food producers to take good care of their customers. In this area, we are still in an era of marketing-driven business, which is about having consumers buy more. It will have to change from quantity to quality, and the promise will have to be kept, indeed. An advantage of social media is that it will expose those who make false claims and false promises. Consumer information is going to be another front for suppliers. A system like NutriScore is drawing more and more criticism. It seems to have become a marketing tool and is no longer a true nutrition tool. If it does not get fixed, it will lose all credibility and in fact reinforce the feeling that the industry is always trying to deceive consumers.
So, what segments can be the winners of the future?
The points I have presented before, such as quality, clean, healthy, authentic will do very well. Foods and recipes that are rooted in nostalgia and tradition have great potential. This is especially true in mature markets that I see evolve into a mosaic of niche quality specialties. Of course, because not everybody is wealthy, there still will be a large market for low-cost staple foods sharply priced, but with increased standards about health, environment and ethics.
Over the last few years, perhaps the most disputed battlefield has been protein. Animal farming is being challenged. A lot of investor money flocks to tech protein alternatives. Plant-based imitation meat and seafood has received a lot of publicity. Many claims have been made about their potential. So far, they come short of those claims. The segment has room to grow but it will not replace animal farming. Performance on the stock markets is poor and the investors’ money is now moving somewhere else. I see better potential for smaller private producers with a low profile, catering to the need of consumers with wholesome products instead of high-tech meat imitations. If the stigma is currently on meat, the next category to be demonized will be ultra processed foods. Investors have also moved into what used to be called lab meat, a product that still struggles to find its name. Although they make regular claims about readiness to deliver large market quantities and being price competitive, it is still not really clear whether it will happen on a large scale. Other alternative protein sectors include the use of bacteria to produce specific protein. Perhaps, it will have some potential for animal feed, but more surely in the medical field. And of course, there are insects. There has been a lot of publicity but success is slow to materialize. One problem is the price. Just like all the other alternative proteins, they are not price-competitive with animal products. Producers of insects try to push it in Western countries’ markets but this is not the right place. There, people do not want to eat bugs. Westerners like soft and meaty. That is why lobster and shrimp are in demand. They are large aquatic insects really, but their look does not matter because they contain lots of flesh. Crickets don’t. It is that simple. I see insects having more potential for animal feed, if it can be price competitive.
The protein fight is useful. It has put animal farming on the spot and forced producers to find solutions to reduce their environmental impact, and it works. The sector has already come with innovations to reduce its methane emissions, and although there still is a lot of work ahead, the improvements are getting noticed. This is the beauty of the fight between industry and environmentalists. As long as the industry does not feel threatened, the initial reaction is always : “no, it costs too much”, but when the industry sees that it will lose business and it will cost them dearly, they are actually amazingly innovative, fast and cost efficient.
Perhaps anecdotal is the fact that Bill Gates, who has been an investor in alternative protein and a man behind the claim that it would replace animal farming in a decade, which is not going to happen, has now invested in a cow milk producer (Note: the company’s name is “Neutral”) that gets the milk from farms where new technologies are being used to reduce methane emissions. He is pragmatic and he is moving on. Others will follow him.
As animal products are concerned, all the forecasts for the long term show a further increase of consumption. In particular, poultry is by far the biggest winner. Aquaculture could do very well, too, if consumer prices become more affordable. You are in an area with great potential for the production of fish, shellfish, crustaceans and seaweed.
Feeding a population of 10 billion individuals is a huge challenge. It will require changes in the way we produce and in the way we consume.
My main concern is that the conversation has become more and more polarized and intolerant. Instead of opposing systems and points of views, we need to listen and think carefully. Nothing is black and white and there is no one-fit-all solution. There is no silver bullet that will solve the problems so that we do not have to change. Instead, we will solve the problems through a combination of many solutions. Some will be of a technical nature but technology is only as good as how we use it. Technology is not only about high-tech, and innovation is not only about technology. The key is the way we think, and we need to be flexible with thoughts and ideas.
Pragmatism will be essential. Whatever works is good, even if it is sometimes goes against our prejudices. Remember what Deng Xiao Ping said when he changed the course of China 40 years ago. “It does not matter if the cat is white or black, as long as it catches mice”.
Our attitude will make all the difference. I expect that we are going to rediscover old wisdom and that many solutions will come from the past but in a modern jacket, as it is already happening. Money will make a difference, too. There is plenty of it around. All it will take is some effort.
Succeeding will also require humility and cooperation. Nobody knows everything and nobody can solve all the problems on their own. Engaging in a positive and constructive dialogue is what will shift the conversation from a sterile win-lose debate into a win-win vision.
You can read more about my thoughts and views about the future of food and farming on my website blog and my books.
I thank you for your attention and I wish you a fruitful session.
Copyright 2021 – Christophe Pelletier – The Happy Future Group Consulting Ltd.