Tag Archives: Economy

Reducing waste works – The example of Hormel Foods

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Hormel Foods issued a press release yesterday about their packaging waste reduction program, and the amount of packaging material that they saved is simply impressive. Reduction covers cartons, paper sleeves, thinner glass jars, plastic trays or shrink-wrap.

Not only this program has a direct effect on the packaging of Hormel products, but it indirectly also saves a lot of resources, such as a significant reduction of paper fiber, less trailers on the road using fuel and less petroleum for plastics of all sorts.

The only detail that do not mention in their press release is the money savings. You can be sure that they would not go through all this effort if it was not bringing significant savings.

Economy meets environment and vice-versa. This only proves that common sense and a clearly defined strategy deliver positive results.

Yes you can! You just need to want to!

Click here for the complete press release from Hormel Foods

Nobel Prize of Economics: Back to the basics

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This year’s Nobel Prize of Economics to Elinor Ostrom and Oliver Williamson seems to have attracted more attention than previous years, and by reading the comments, I have the feeling that everyone saw signs of what they find important. I believe that the reason for this is that both recipients worked on broad subjects, that have become mainstream, thanks to the climate change issue and the Great Recession of 2008-2009.

The title in this week’s The Economist is “The bigger picture”, and the subtitle is “This year’s Nobel prize has rewarded the use of economics to answer wider questions”. This sounds to me like common sense having turned into some revolutionary concept for some people.

Per definition, economy is the management of natural and human resources to sustain human population. Therefore, it is the very essence of economy to address wider questions and the big picture indeed. To that extent, their receiving the Nobel Prize definitely makes a lot of sense, especially in a time when common sense (aka wisdom) has been widely forgotten and economy has been reduced to just money and profits. What we forgot in our drive for instant gratification is the long-term consequences, and the costs associated to those.

The definition of economy tells it all: it is about the Earth, money and people and it is sustainable. Well, this sounds a lot like the triple bottom line concept, doesn’t it?

Triple bottom line and sustainability are not ideological concepts, and those who try to make it so, are probably making as big a mistake as those who ignore them. Needless to say that reducing such concepts to PR and to marketing are even bigger mistakes, because such an approach only serves the short-term.

Economy, triple bottom line and sustainability are about just one thing: life and survival of our species; and that requires integrating the long-term vision of our societies. If we ignore the future, we will not have any. It is all back to the basics.

Copyright 2009 The Happy Future Group Consulting Ltd.

Let’s not confuse efficiency and intensification!

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Although it may sound like a bit of semantics, the difference between these two terms is quite important when it comes to agriculture and food production.

Let's not confuse efficiency and intensification!Since WWII, much progress has been made to increase food production, such as genetic improvement, production techniques and mechanization, use of fertilizers, chemicals and pharmaceuticals, the development of animal nutrition, and of course government incentives. This has resulted in our ability to produce more efficiently and face a previous doubling of the world population. It has helped reduce costs and made food more affordable to more, although unfortunately not to all.

The main driver behind this evolution has been to shift from a mostly labor intensive food production to a mostly capital intensive one, and this why it had to become intensive. The labor force moved to urban centers where they could find jobs in manufacturing and later in services. Thanks to mechanization, less people were needed to work on farms. This has led to a sharp drop of the population active in agriculture from above 50% of all actives to less than 5% in Western countries within 30 years. Moreover, as the standard of living increased, labor costs increased and made a labor-intensive approach too expensive to fit in the type of society that we created, and the only, apparent, solution has been to further intensify and mechanize.

The strong development of manufacturing that went along with the rise of the consumption society increased the standard of living and the disposable income. In the same time, in constant currency, food became relatively cheaper and much more affordable. This led to a change of diet from mostly starch-based to protein-based, and we have seen recently a similar trend in emerging countries.

Clearly, all of this has improved the quality of life, maybe a little too much too fast though. Intensification has brought its share of problems as well, as it always does with progress. For instance, I can mention soil erosion and loss of organic matter, soil fertility and ground water quality affected by manure (especially minerals) surpluses, reduced genetic diversity and possibly lessened resistance to diseases, to name a few. Of course, for each of the problems, we come with a solution mostly based on technology, which usually fits in and reinforces intensification.
Unfortunately, Nature does not work that simply. All it needs is time to process and eliminate problems through its cycles in the soil and in the water. Nature can handle quite a lot, but it can handle only that much. This is where the difference between intensification and efficiency becomes obvious.

Intensification tends to continuously load and overload the system, which is why we hear so much talk about sustainable agriculture nowadays. Food production cannot be sustainable if it does not allow its natural environment to process and eliminate the contaminants. Similarly, Nature cannot replenish on its own what we take out, unless we create the conditions for this.

Efficiency, on the other hand, integrates performance and sustainability. It allows having a high production, not so much by using massive amounts of water, fertilizer, energy or other production inputs, but by using them when needed where need and just as much as needed. This way, we can grow plants or animals with the minimum amount of waste and respect the ecosystem. Efficiency also comes from optimization, and to this extent, efficiency and intensification go hand in hand, up to that particular point when any incremental input does not produce more in the same proportion. More importantly, once we produce beyond the optimum, we take the chance of creating a stress. This is very clear in animal production, when densities exceed a certain point, the animals’ organism defence becomes weak and makes them vulnerable to diseases.

Copyright 2009 The Happy Future Group Consulting Ltd.

Feeding the world in 2050 – FAO coming summit

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This question seems to keep many people busy, and this article sums up a number of conclusions drawn by the FAO about the subject.

The information that I find the most interesting is their estimate of the percentage of the world population living in cities, moving up from 49% today to 70% by 2050. Expressed in number of people living in rural areas, this means a drop from roughly 3.2 billion people today to roughly 2.9 billion people in 2050, or around 10% less! This clearly indicates that the future of food supply is not with small farms, but that large units will have to do most of the work in order to feed everyone.

When it comes to their estimate of a necessary increase of 70% of agricultural production to meet the food demand, I have some reservations about their expectations. I doubt that with such a tight supply, people will eat as much meat and animal products as they claim. I believe that money will talk and meat being more expensive that they expect, the diet will probably include relatively more vegetal products and relatively less meat than the numbers that they present.

As I showed at the end of my previous article titled “Price of fish and meat: up”, a healthy readjustment of the Western diet will free a lot of food to feed many more people. As per today, we already are much closer, theoretically, to be able to feed these 9 billion people than we think. I say theoretically because the main problems are:

  1. Guaranteeing access to food through proper infrastructure, which in large part rests on the shoulders of politicians, and
  2. Ensuring that people have enough money to pay for food.

For those who claim that we need three or even four Earths to deal with the problem, clearly, their assumptions are based on having the whole world on the American diet, but that will not happen. We have only one Earth and that will not change. Other things will, though.

The hot regions of the future

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Food strategies for the world

Food strategies around the world

In this article, the term hot does not refer to climate, but to strategic and active food producing regions. Not only is the population growing, but also the demographics vary greatly between regions and this will change deeply where from and where to the trade is going. Here are, briefly, the main changes as I see them happening as we go forward.

The aging and increasingly health-conscious West will not show any increase in consumption per capita, and very likely it even will drop, as older people need less food than the youth and also because the shift from quantity to quality will continue. Of course, immigration policies in these countries might offset this somehow. The direct consequence of this is that suppliers are going to have to look for alternative markets for agricultural products. They should not have to worry too much, as there will be plenty of people to feed in other regions.

Asia, with about half of the world population is definitely a huge market, although it presents a great variety of conditions and situations.

The largest economy in the region, China, is developing a middle class with more disposable income. This results in a change of diet, with relatively more protein, especially animal protein than by the past. Although being the largest meat producing country in the world, China is struggling to feed its population, and I expect that it will remain a net food importer. Further, the country has major challenges to overcome when it comes to availability and quality of water. However, in the long run, the past one-child policy will affect the Chinese demographics and influence their need for food, as well as the dynamism of their economy at large, by the way.

The second largest economy, India, is very dependent on the monsoon for its food supplies, and climate will remain a challenge. They seem to struggle to be able to secure their self-sufficiency, rural development is still a challenge and poverty remains a concern to reach prosperity.

Emerging South Asian countries, on the other hand, for instance Vietnam, show a different picture. They have a young population and want to benefit of the economic momentum coming from China. They are actively developing agricultural and aquaculture production for export purposes, and they keep on this policy. Aquaculture is very active, as some of these countries have a very extensive shoreline, like for instance The Philippines.

Although food security in the region remains uncertain, and the scare of last year’s food price increase, some countries are trying to establish structures to protect from such risks. For instance, a number of ASEAN countries are trying to set up a rice cartel, some sort of an OPEC for rice, in order to have more control on the market and the prices. Of course, we will have to see if this will work as planned.

Another region that is showing booming demographics is the Arab world and the Middle East. Many countries in the region are wealthy thanks to oil, but also have the disadvantage to be located in desert areas. Attempts to increase food production have met their limits, and they do not guarantee food security. The main reason is the shortage of water and trying to grow more food would create a drinking water crisis. This is why some Arab countries are developing other strategies to “outsource” their food production like mentioned in the article “The Great Unseen Land Grab”. Other countries, like Qatar, are considering investing in food companies in order to secure their food supplies.

Some players are already making their moves

Some players are already making their moves

I expect stronger ties between the Middle East and former soviet republics. Russia, Ukraine and Kazakhstan are joining forces in the “Black Sea Wheat Pool”, another agricultural OPEC. Although we will see how this combination works. Another area that I see booming in the future is the Mediterranean region, which is the interface between Africa and Europe. Although immigration has been a hot issue in the past, there is a great potential for a win-win situation for both sides if managed properly. The idea of creating an Economic Zone around the Mediterranean has already been brought forward and considering the demographics of the region, it makes quite a lot of sense.

Africa, although plagued by many problems, be it natural, social, political, humanitarian or health, as a huge untapped potential. The plans of Arab and Asian countries to lease land on this continent and develop agriculture for their needs, could give the necessary impulse to develop African economies. I also believe that South Africa has the potential to be the driver of the economic surge for the continent.

Last but not least. South America and Brazil in particular, is going to play a major role in agricultural production. They have an amazing potential, but also many issues to solve, especially on the environmental and political level. Their position of producers of basic commodities as well as high value products like meat gives them a strategic role in the international food trade, and the upcoming merger between JBS and Pilgrim’s Pride in the US and between JBS and Bertin is another step in the creation of agribusiness giants, following the merger between Perdigao and Sadia.

Copyright 2009 The Happy Future Group Consulting Ltd.

Bringing cities to the countryside: Infrastructure will help rural development

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Although the title of this article many sound a contradiction in terms, agriculture (in which I include aquaculture as well) needs cities and vice-versa. Rural development is more than just agricultural activities; it is about creating and improving a cluster of many economic activities that are necessary for the proper functioning of a community.

As such, this should not be a surprise, because in the history of man, human settlements always have been linked to drinking water and sufficient food supplies. By developing agriculture, the very first “farmers” created the conditions for sedentarism, instead of continuous migrations. On these sedentary communities, other activities developed later to cover the needs of the locals. Maslow's pyramid of needs - Picture WikipediaThe hierarchy of the needs that we must fill can be easily identified according to the pyramid of Maslow: food and water, shelter and physical safety. Once this is achieved, adding other activities become more natural and simple.

This is why developing large urban centers is no guarantee of prosperity. Like all things in life, the key is about balance. Of course, over the last 150 years, the focus has been about growing the industrial capabilities and this has been the engine for a massive migration of population from the countryside to the cities. Although the conditions were far from stellar, many companies in the early industrial development were providing their employees with housing. Their ways may not always have been very social, but they were showing some level of social responsibility.

With the ups and downs of industries, cities have increasingly faced a problem of poverty, as the development did not include a sense of community anymore and company loyalty towards their employees disappeared as the workforce became expendable and factories could move to other countries.

This industrialization and urbanization have also affected the rural areas and the agricultural world. Many rural areas have faced and are still facing isolation and poverty. Although in many cases there have been many efforts made to improve this situation, the situation has not always improved.

Yet, we now see the challenges of feeding an ever-increasing population, we all recognize that we will need to cultivate more land and water, but this still does not seem to make things turn around.

In my view, the problem is that, too often, we restrict rural development to agricultural development, and by looking at this part in a separate way, instead of focusing on integrating agriculture in the development of the whole local economy, we just do not create strong enough chances of success. Having large urban centers with their problems on the one hand, and remote and depopulated rural areas with their problems on the other hand, should be the clear sign for all of us that our economic model is out of balance. There can be life outside a huge metropolis where everyone has become an anonymous person, resulting is a dislocated social fabric. What has made the success of our species has been our ability to act as groups. As isolated creatures, we probably would not have survived very long.

To rebuild the necessary social fabric in rural areas, we must create the conditions to have balanced and complementary activities. This is why, while some see the future of agriculture as urban farming, I believe that it has to be urbanizing the countryside, not with large impersonal cities, but with human size settlements where we can provide for all the needs.  Isolated farmers with no direct connection with their markets and not getting the value for their products to make a decent living will look for alternatives. If we want more people to produce food, we must understand that they must make enough money to want to keep producing food. By creating a proper infrastructure around agricultural areas, we can create a more local market that will drive production. A profitable market for the farmers’ products also means more money in their pockets, which in turn means more spending power to develop demand for other business, be it for products or services. This is how we will be able to grow local economies and communities. This is not about a romantic or idealistic back to nature movement, or creating local farmers markets purely for marketing purposes, but this is a thorough and integrated process embracing modernity. In the current rural areas and probably in other regions, the future will about bringing the economy to the people before bringing people to the economy.

Copyright 2009 The Happy Future Group Consulting Ltd.

How much can the rule of 80-20 tell us about the future?

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We all have heard about this rule across all industries, including agriculture and food. Eighty percent of the food would be produced on 20% of the farms and vice-versa. If it still applies in the future, it can indicate us how our food production and supplies will look like in the future. Of course, this is always a theoretical exercise, but it is quite convenient to elaborate on our thoughts.

As the population is expected to grow quite strongly in the coming decades, especially in urban areas, this could indicate two dominant trends:
• Further size increase of the largest farms and further industrialization of agriculture and food for global markets, although the number of farms in this segment would not increase strongly.
• Strong increase of the number of small farms involved in specific value chains and strongly linked with their local economy.

Industrial agriculture
Producing more, yet in a sustainable way. That is the challenge!This group will continue to be involved in mass production of commodities for global supplies, like this is the case today.
Yet, they will face an increased pressure to adapt to the requirements of sustainability, which technically is quite possible. New systems and more efficient technologies will be the pillars of its growth and development. They will have to find ways of reducing the amount of chemicals in crops and the amount of pharmaceuticals in animal productions
The requirements for capital will be quite high and the sector will be led by increasing larger corporations, by an increasing level of capital by large private investors and, last but not least, by some governments. This agriculture will innovate further and will be developed thanks to this capital. It will use automation and mechanization to reduce the dependence on labor. Mergers & acquisitions will continue in the agricultural sector and a few large blocks will remain, dominating their sectors.
Their mandate will be about more control the natural conditions of production and about reducing to a minimum their impact on air, water and soil, by using less polluting transport methods, water preservation, effluent treatment and soil preservation. They also will have to engage in maintenance of their environment.
The role of this type of agriculture will be to bring to market large amounts of affordable food for the masses, and should play an important role in strategies around food security, which is where corporations and government will interact on a regular basis.

Local food value chains
Closer to natureThis sector should undergo a strong growth and be build in a market-driven approach. These are the farmers that produce specialty products aimed at serving either a very specific segment of the retail or foodservice market.
This trend, which has been already initiated around concepts such as organic or authentic, will evolve into a more integrated local economy, and the initial concepts will probably become less differentiated as food production in general, be it industrial or traditional, will use more sustainable techniques.
Contrarily to the common belief, this agriculture will be developed thanks to very efficient techniques, but will be centered relatively more about labor and relatively less about capital. In this case, efficiency does not necessarily mean intensification.
We must not underestimate the significance of this part of the food production, as it will play an important role. However, we must not expect this type of agriculture to be the solution to feed the world, and this is not the purpose of the farmers involved in such food production chains.

This type of farming will grow in two different environments:

  •  In “developed” countries to serve a increasing, but aging, population more demanding about the origin and the production methods, and who is ready to pay a premium for the perceived better quality. The angle will be about quality, transparency, sustainability, traceability and as close to zero a use of chemicals and pharmaceuticals. In some areas, it could help strengthening a local economy and local communities.
  • Developing a local economy thanks to agriculture (Picture: FAO) In emerging countries, the development of a local agriculture, and aquaculture, will be a key driver of economic development for under industrialized and/or under urbanized regions. It also will be a way of slowing down the migration of population to urban centers and limit social problems, by creating satisfying economic conditions and by securing food supplies locally. This farming will be about basic needs, before marketing.

Copyright 2009 The Happy Future Group Consulting Ltd.

Ownership of food: the seeds of future conflicts

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From an agriculture that mostly was producing locally for a local market with a straight forward production chain, the organization of food production has become more complex and structured over time. As we moved towards always more integration, traceability and globalized markets, the roles and bargaining positions of the different actors has changed.

bargaining power evolves

Facing the possibilities of more food riots in the future, if we are not in a position to make food affordable for all, we certainly can expect to see new power struggles emerge.

If we place ourselves in a scenario of food shortage, it is normal to assume that the power would be in the hands of whoever owns the food. But who is the owner, or better said who is actually in charge?

Is it the retailer? Is it the farmer? Is it the owner of the land on which the crops are grown? Is it the futures contract trader? Is it the seed supplier? Because without farmers, there is not much food in the stores; and without seeds, farmers cannot grow much food, and without food, no futures contracts to negotiate.

In the same way, who should decide where to the food would go? Does it belong to the country and the people who produce it, or does it belong to a corporation that prefers to sell it abroad? In a situation of shortage, this could lead to serious conflicts.
Corporations look primarily at markets and try to maximize their profit. That is their mandate.
Governments have a different look at things, as politicians want to have happy citizens, so that their position of power can continue. All they want is avoid social unrest.
Potentially, this can lead to new regulations and even to the possibility of nationalizations if companies and governments do not agree.

To get back to the example of seeds and genetics, there is a growing responsibility resting of the shoulders of breeding and genetic engineering companies. Not so long ago, let’s say a bit more than a century, there was much more genetic diversity in agricultural crops and farm animals. This diversity has shrunk quite significantly and we face the potential risk of not having the right genes available if we were to face a natural situation that would eradicate plants or animals as a result of inability to resist and to adapt to the new conditions these organisms must deal with. The genetic pool used to be a collective asset, but it has moved more and more into a private asset. About this, too, one can wonder who is in charge and who has ownership, and what could the consequences be.

As long as we are not facing any severe supply unbalance, the current situation will probably linger as it is a bit further, with the players having the most power trying to grow their position and influence other deciders to their advantage, but this kind of consensual vagueness about who is the owner of food will sooner or later cause some major shake-up.

Copyright 2009 The Happy Future Group Consulting Ltd.

The lurking menace of weeds – Farmers’ enemy #1

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Here is quite an interesting article from the FAO about the cost of weeds in agriculture.

the more weeds, the less yieldAccording to their numbers, weeds limit crop yields to such an extent that the world misses yearly the equivalent of 380 million of wheat a year, or in money $95 billion. My first reaction was that there is an untapped market for herbicides producers, but the article describes ways of getting rid of the weeds that do not require the use of chemicals.

Compared with the medical cost of obesity in the US of $147 billion a year, or the contribution of the US meat and poultry industry of $382 billion per year to the economy, or the TARP funds for the banks of $700 billion, or the estimated financial toxic assets losses worldwide of $4 trillion, the $95 billion does not seem that big a number after all.

Yet, 380 million tonnes wheat equivalent represent, according to the FAO, half of the 2009 expected world wheat production!

Assuming simplistically that with this wheat we would feed people only a diet of bread, this could feed decently more than 1 billion people! This is all the more amazing as the FAO currently estimates the number of hungry people in the world at 1 billion. Clearly, there should be some possible solutions if policies and politics were targeted at the right goals.

Always interesting to put numbers in a different perspective…

Rebuilding fisheries is a must for the future

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Rebuilding fish stocks will be good for us allAs everyone knows, fish stocks have been depleted to levels that are not acceptable. This is the result of short-term thinking combined with highly efficient but stupid fishing methods. Not only fish is a high value food source, but oceans are complex ecosystems that we cannot afford to lose. Although aquaculture claims to be the way to compensate the supply of wild fish, this is only true within limits, as some aquaculture species are fed with fish meal and fish oil, and replacement of these products is also limited by the quantities that agricultural crops can supply, and consequently their price.

As one of the points that I mention in my presentation “Twelve trends for the future of food production” (under Presentations tab), we can expect that programs will be set up to rebuild wild fish stocks and bring the volumes back to levels with which sustainable fishing methods and quotas will help provide us with more secure supplies. This will be some sort of a stimulus plan for seafood with all stakeholders involved: government, fishermen, aquaculture industry, retailers, food service and consumers.

A recent report published by the Pew Charitable Trusts has reviewed the possibilities and the economic impact of rebuilding fisheries in the Mid-Atlantic Ocean, as well as the downside of doing nothing. A Canadian research has worked in a similar direction and tend to show that rebuilding fish populations is possible, citing a number of successful cases (see article).

All that comes out from these reports is that the situation, although quite serious, is far from lost, but it requires political will and organization to make it happen. This is exactly why all parties involved from whichever country concerned will have to act in a coordinated manner.

Copyright 2009 The Happy Future Group Consulting Ltd.