Rise of the Asian middle class and the competition for animal protein

The complete story about this topic and how it will influence the future markets can be found in my book We Will Reap What We Sow.

The size of the world population is among the most significant changes for the future. There are many challenges, as the media tell us on a daily basis, but there are opportunities. The first and the main of these opportunities is the population increase itself. In the coming four decades, there will be two billion more people to feed. Never before, has humanity seen such a demand increase. This means that farmers and food suppliers do not have to worry about a lack of market opportunities. Not only the number of people will increase, but the consumption pattern will change, too.

Until recently, most of the consumption took place in industrial countries, mostly the USA, the EU and Japan. For the coming decades, food consumption in these areas will not increase. There are simple reasons for this. One is the demographic stagnation of industrialized regions. Another reason is that people of these regions already eat too much. They have no room for more consumption. At best, they can replace one food by another. Before the economic crisis of 2008, the average daily intake of calories per American was on average of 3,800. This amount is about 50% more calories higher than a normal human being needs on a daily basis. Nobody should be surprised that in such conditions a third of Americans are obese.

In emerging countries, the economic growth results in the rise of a new middle class. A change of diet is the first change that takes place when the standard of living increases. People switch from staple foods such as rice or wheat to higher quantities of animal protein and more fruit and vegetables. The OECD (Organization for Economic Cooperation and Development) looked at the future evolution of the respective shares of consumption by the middle class, between different regions of the world. Their study was for consumption goods at large. The graph is simply amazing.

Click on the picture see the enlarged version

The relative consumption of Western countries will shrink dramatically. While the USA represented about 5% of the world population in 2000 and consumed about 25% of the world resources, they will represent only about 4% of the population and consume about 4% as well. A similar evolution will take place in the EU and in Japan. China and India show the opposite trend. With a share of the total world consumption close to negligible percentages a few years ago, their economic development and the size of their middle classes will transform markets dramatically. Estimates are that the middle class from China and India combined will represent about 45% of the world middle class by 2030! Market demand and therefore world prices will be dictated by the demand from these two countries and not by Western countries anymore.

While the graph covers all consumption items, the situation for food alone might show some differences, but the trend would show a similar pattern. The demand for food in emerging countries will grow strongly. This will not affect only the consumption volumes but also the type of food. The change of the type of food that consumers of the middle class of emerging countries will demand will go beyond switching from a starch-based diet to an animal-protein-rich diet. The type of animal protein that they will eat will change, too. A couple of decades ago, China would import many of the low quality animal products that Western consumers did not want to eat. China used to import products such as chicken feet, chicken wingtips, sow uteri or fish heads. The new middle class is no longer much hungry about those products. They want the prime cuts, too. Instead of being complementary, emerging markets and developed countries will be in competition with each other for the better animal products. This will have profound consequences for the future. It will make the sale of the low-quality products more difficult and affect negatively the profitability of meat producers. At the same time, it will make the demand for prime products literally explode, pushing prices up. Western consumers and Western markets used to set the prices. In the future, Western consumers will have to buy food based on the price set in Asia. Their alternative will be to not have access to these prime products anymore and have a choice between changing their diets or eat less animal products.

This change will make producers and buyers look at business opportunities in a completely different manner than they currently do. All emerging countries show the same trend. Brazil now sees domestic demand for chicken meat increase faster than export markets. Brazilians eat more meat because they become wealthier. Chilean salmon farmers see growing possibilities in the Brazilian market. While their traditional market for Atlantic salmon was the US market, this may change. Since air transport from Chile to the USA is quite expensive, at least more expensive than transport to Brazil, the flow of trade will change from the past. Norwegian salmon might become a better alternative, but the Chinese are now buying increasing quantities. American buyers must prepare themselves to pay much more than in the past to get salmon products.

It becomes clear that the challenge of feeding the world depends for a large part on future consumption of animal protein.

To understand the effect of the increase of consumption of meat in China, a few numbers are helpful. When 1.5 billion people eat on average 1 kg more of chicken meat, world production needs to increase by about 750 million chickens. That represents about 2% of the world production. Similarly, when the Chinese consume on average 1 kg of pork more, the world must produce 15 million pigs more. That number represents 1.5% of the world pig production. The meat consumption in China has already passed the milestone of 50 kg per capita per year, and projections indicate that it would reach 8o kg per capita per year in 2030. Clearly, consumption increase will be much more than just 1 kg. An increase of 10 kg of chicken meat per capita per year in China means that chicken production would have to increase by 20% to meet the new demand! This represents almost the US chicken production volume, and more than Brazilian production. In the case of pork, an increase of consumption of 10 kg per capita means that world pig production would have to increase by 15%. That is 5 times the current pig production of Iowa. That is 60% of the EU production. For beef, the world production would have to increase by 24% to meet an increase of 10 kg per capita per year! This number also represents about 25% more than the current total beef US production.

The Indian population, although still largely vegetarian, is also changing its eating habits. Meat production is increasing there, but not in such dramatic proportions as in China. Nonetheless, with a population of 1.2 billion people, any incremental meat consumption will have consequences.

Different animal productions have different levels of feed efficiency. It takes about 1.8 kg of feed to produce 1 kg of chicken meat. It takes about 3 kg of feed to produce 1 kg of pig meat. For beef, depending on how much grass the animals are fed, the amount of grain used to produce 1 kg of beef varies. With a population of 1.5 billion, an increase of meat consumption of 30 kg would result in the need to produce 3 times 30 times 1.5 billion. The need for feed, excluding grass, would be between 100 and 150 million tons of grains.

Human consumption of grains increase rather limited. Considering that in 2011, animal feed uses about a third of all grains produced, more production of animal protein will put much more pressure on the markets of agricultural commodity. Producing enough to meet the desires of a more affluent world population is actually about allowing the luxury of more meat than people really need. There is no doubt that the “meat question” will become more and more vivid in the future.

My next book, We Will Reap What We Sow, will get in depth about this topic and many others, and discuss the pros and cons of different future scenarios. Stay tuned!

Copyright 2011 – The Happy Future Group Consulting Ltd

No shortage of action points for the future

The path to feeding the growing world population and to preserve agriculture’s ability to provide adequate volumes is paved with many challenges. Leaders will have to show how to resolve the many issues food production is facing or will face in the coming decades, and how to create a viable future.

As the population increases, the need for energy increases, too. Oil reserves are finite and new oilfields are becoming more and more difficult and expensive to exploit. It is only logical that oil will become more and more expensive in the future. This will call for more fuel-efficient equipment and vehicles. At the same time, oil that is more expensive also means that the relative price for alternative energy sources will become more competitive. In March 2011, an analyst from the bank HSBC published a report announcing that oil will no longer be available in 2060. In its future projections, the International Energy Agency (IEA) describes our energy sources as more diverse than they are now. They also mention that oil will not be the main source of energy anymore. Natural gas will take over. We should expect some significant changes in the way agriculture uses energy, the type of machinery that farmers will use and how future logistics will be organized.

The change of economics in energy will affect fertilizers, too. Especially, the production of nitrogen fertilizers uses large amounts of fossil fuel, essentially natural gas. On average, half of the nitrogen spread on fields is lost because of leaching. We can expect the focus to be on efficiency and on strategies of applications that are more efficient. This is already happening with precision agriculture techniques. Next to this, the focus of the fertilizer industry should be on developing nitrogen fertilizers that are less sensitive to leaching. Imagine a nitrogen fertilizer that may cost twice the price of the current ones, but for which there is no loss. Farmers would use only half the quantities that they currently do. The money to spend would be the same, but the use of fossil fuel to produce the fertilizer would be much less. There would be an environmental advantage to do so.

In the area of environmental issues, climate change needs to be addressed more effectively than it has been so far. Regardless whether people believe in it, or believe it is caused by human activity or it is only a natural phenomenon, the number of severe climatic events is reason to consider counter measures, just in case. The debate should not be about whether climate change is real or not. It is not about who may be responsible for it. True leaders take care of their people, and in this case, they should at least come with scenarios, contingency plans and emergency preparedness plans. That is the least we must expect from those in position of power and responsibility. In this case, the saying “the failure of the preparation is the preparation of failure” takes all its meaning.

Linked to climate to some extent, and a precious resource in all cases, water needs to be managed properly and carefully. For instance, all major river systems in Asia depend on Himalayan glaciers. If the glaciers were to disappear, which is a possibility, the source of water that sustains 2.5 billion people would be depleted, even if water used for agriculture also comes from other sources, the monsoon especially. The consequences would be catastrophic. Further, as agriculture uses 70% of all fresh water resources, growing food production will require more efficient water usage techniques. The focus must be on efficiency and on reduction of waste of water resources. Such objectives will require substantial financial resources and solid planning.

In the area of waste, food losses must be reduced as much and as diligently as possible. The moral issue of food being thrown away by the wealthy is obvious. The wealthy are not just in developed countries. In emerging countries, similar behavior is appearing. It is interesting to know that the Indian government is considering fines for those who discard edible food. It is even more interesting to notice that in Western countries where the percentage of food thrown away is the highest, governments are not investigating this possibility of fines. The other food waste scandal is the post-harvest losses. The food is produced. It is edible, but because of a lack of proper infrastructure, it is left to rot. What a waste of seeds, land, water, money, labor and all other necessary inputs. I have mentioned this problem in previous articles, as I have shown that the financial return to fix the problem is actually high and quick. There is plenty of work in this area for leaders. The first step to succeed in this is to recognize that no organization can fix this on its own. There is a need for collaborative leadership, because all the stakeholders in the food chains must participate, and they all will reap the financial benefits of fixing post-harvest problems.

Food production is not a hobby. It is of the utmost importance for the stability and the prosperity of societies. Well-fed and happy people do not riot. The need to improve infrastructure and logistics is obvious. Food must be brought to those who need it. A proper transportation infrastructure is necessary. The choice of transportation methods has consequences for the cost of food supply, and for the environmental cost as well. Road transport is relatively expensive and produces the highest amounts of greenhouse gases. Rail transport is already much better, and barge transport even better. The distance between production areas and consumption centers also needs to be looked at, together with the efficiency of logistics. Optimization will be the name of the game. Completing the cycle of food and organic matter will become even more important than today, as the world population is expected to concentrate further into urban centers. As humans are at the end of the food chain, many nutrients and organic matter accumulates where the human settlements are. These nutrients, as well as the organic matter, will have to be brought back to the land. This is essential if we want to maintain soil fertility. As phosphates mines are gradually running out, sewage and manure are going to play a pivotal role in soil fertility management. The concentration of the population in urban centers, together with the change of economics in energy, will require a very different look on economic zoning, and in urban planning in particular.

Special attention will be necessary to inform and educate consumers to eat better. Overconsumption, and the health problems that result from it, is already becoming a time bomb. Overweight is not only a Western problem. The same trend is appearing in many developing countries as well. Overweight is on the rise all over the world. The number of obesity cases in China, and even in some African countries, is increasing. The cost of fixing health is high, and it will be even more so in countries with an aging population, as age-related ailment add up to eating-habits-related problems. Healthy societies are more productive and cost less to maintain.

As the economy grows, and wealth increases in more and more countries, diets are changing. Consumers shift from carbohydrate-based meals to a higher consumption of animal products, as well as fruit and vegetables. The “meat question” will not go away. Since it takes more than one kg of feed to produce one kg of animal product, increasing animal production puts even more pressure to produce the adequate volumes of food. The question that will arise is how many animals can we -or should we- keep to produce animal protein, and what species should they be? Levels of production, and of demand, will result in price trends that will regulate production volumes to some extent, but government intervention to set production and consumption quotas cannot be excluded, either.

Similar questions will arise about biofuel production, especially the type of biofuel produced. There will be debates about moral, economic, social and practical aspects of biofuels. The consequences on the price of food and animal feed are not negligible. The function of subsidies in the production of biofuels adds to this debate and there are strongly divergent points of view between the various stakeholders.

One of the most important issues in the discussion about feeding the increasing world population is food affordability. Producing more, and producing enough, is not enough. The food produced must be affordable, too. When this is not the case, people cannot eat, and this is the main reason for malnourishment. To make food affordable, food production must be efficient. The costs of production need to be kept under control to avoid either food inflation and/or farmers bankruptcies.

In agriculture, just like in any other human activity, money always talks. Money is a powerful incentive, and when used properly, it is a powerful driver for improvement. Strategic use of financial incentive is part of policies. To meet the future challenges, leaders will have to develop the right kind of incentives. The focus will have to be on efficiency, on long-term continuity of production potential as well as on short-term performance. The financial incentives can be subsidies. Although the debates tend to make believe subsidies are all bad, there are good and useful subsidies. Another area of incentives to think about is the type of bonuses paid to executives. Just imagine what would happen if, instead of just profit, the carbon footprint per $1000 of sales was factored in the bonus? Gas emissions would be high on the priority of management teams.

If the way executives are paid matters, the type of financial structure of businesses could influence the way they operate, too. Now, it may sound surprising, but in the future, expect the question whether food companies should be listed on the stock exchange to arise. Short-term focus on the share price can be quite distracting from the long-term necessities. If we find that elected officials are short-term-oriented because elections take place every four or five years, how short-term quarterly financial results to the stock markets influence CEOs? The pressure by investors on companies’ Executive Boards to deliver value is high. They expect some results within a relatively short period, while what happens to the companies, their employees and long-term effect on the environment after they took their profits is irrelevant to them. This brings the question of the functioning of financial markets as a whole. What derivatives are acceptable? Who should be allowed to have access to which ones? What quantity could they be allowed to buy and sell? Many questions will arise more and more loudly every time food prices will jump up again the future, and as social unrest may result from it.

To prepare the future, it is important to prepare the generations of the future. Education will play a critical role in the success of societies. Only by helping future generations to have access to knowledge, to develop skills and to train to fill in the jobs of the future, will countries develop a strong middle class. Thanks to education, people can get better paying jobs. This allows them to buy adequate quantities of food for themselves and their families. Education is an investment to fight poverty and hunger. In the agricultural sector, it will be important to attract more young people to work in the food and agricultural sector. In many countries, farmers are getting old and replacement is scarce.

These are just a few of the issues that the current and future leadership will have to solve, if we want the feed and preserve the world. There will be many discussions about which systems are the best suited to ensure prosperity and stability. The respective roles of governments, businesses, non-profits and of the people will certainly be reviewed with scrutiny.

During the writing of Future Harvests, it became obvious to me how crucial the role of leadership is for our chances of success. In the course of a number of assignments with my company, this observation has grown even stronger.

For these reasons, I have decided to start writing another book focused on the role of leadership to develop long-term development of food production and food supply. It will be a reflection about the tough calls that leaders need to make. The final objective is to ensure viable food production systems and proper infrastructure, while ensuring the continuity of food supply in the long-term, through a successful interaction between all stakeholders.

Tentatively, the publication date is fixed for the summer or the fall of 2012.

Copyright 2011 – The Happy Future Group Consulting Ltd.

Why we will change our eating habits, one way or the other

In the discussion about producing enough food for the 9 billion people the world will have by 2050, one of the sensitive issues, especially in the overfed world, is about what to eat and how much of it. There always is resistance to change, and changing eating habits may be even among the most difficult challenges we have. Eating habits are developed unconsciously since early childhood, and switching to conscious choices is not easy to achieve. It requires will power and self-discipline.

Most of the gloomy scenarios about the challenge of feeding the world are based on the assumption that the diet model would have to be the Western diet, and in particular the American diet. This is far from certain. Actually, do not expect this to be the case.

Changing eating habits will happen in two ways. One will be voluntary and the other will be a consequence of food prices.

There is a growing awareness of the health consequences due to overconsumption of food. All the stakeholders seem to blame each over for obesity, diabetes and other heart conditions, and try to convince the public that they are not the cause of the problem. Whose fault is it? Is it meat? Is it corn syrup? Is it fast food? Is it salt? Is it lifestyle? Is it the parents’ fault? Is it the schools with their vending machines offering snacks and soft drinks? We all have read such statements. Here is a scoop: overweight is caused by consuming more calories than are burnt through physical activity. Ailments are the results of rich and unbalanced diets. Eating (and drinking) too much, and too much of the wrong things is bad for you. There is a reason why gluttony is one of the seven deadly sins! Actually, our societies should have a close look at that list, because we might be in trouble.

In Western countries, we eat too much, and that should not be a surprise to anyone. Obesity and diabetes are becoming society problems in the USA, but other countries are following the same path. Europe and China have a rising percentage of obese people, especially young people. Even in Africa, there seems to be an increase of the number of overweight people. A recent study confirmed this (click here for the interactive chart). Awareness about health problems has already generated action. There are government campaigns. Food producers are reviewing their formulas and are working toward healthier products, in particular by lowering the content of salt and sugar of their foods. More and more consumers are also adjusting their eating habits, mostly by changing what they buy and where they buy it. The trend towards healthier and more natural food is growing and it will not stop. Only biotech companies seem to ignore this fact. This food trend is not just in Western countries but in China, too, the demand for natural and organic foods is increasing. After all, nobody really feels happy with being fat or unhealthy. If some people are taking action to improve their diets and its impact on the environment, this voluntary choice is still about a minority of the population, today. One of the reasons for this is that healthy diets seem more expensive than the junk fattening eating habits. I say seem, because those who can cook know that it is quite simple to make delicious balanced meal for less than the supersize combo deep fried so-called menu.

Money matters. That is a fact. This is why money is probably the best incentive for change. And the future will bring us plenty of incentive to change our diets. The current concerns about food prices, and the food riots of 2008, have created awareness about food supply. Although the price hike is more the result of investors, not necessarily speculators, looking for a safe haven for their US dollars through transactions in futures contract, the reality is that the commodity markets, even on paper, becomes the “official” market price. This enters the real economy and affects the price of food for households all over the world. The poorer countries are more sensitive to food price inflation, and this has the potential to cause very serious unrest.

Regardless of the current causes of food price increase, simple economics show that when demand increase, while supply has difficulties to keep up, prices increase. And this is exactly what will happen. In a previous article, I showed that the potential for meeting food demand, or I should say the demand for nutritional needs, of 9 billion was there. Quite easily. However, in this calculation, I indicated the road to success includes reducing food waste and a reduction of the quantity of meat in the diet. This means that we need to change our behaviour towards food.

If there is a sensitive topic about diet, this has to be meat. Opinions vary from one extreme to another. Some advocate a total rejection of meat and meat production, which would be the cause for most of hunger and environmental damage, even climate change. Others shout something that sounds like “don’t touch my meat!”, calling on some right that they might have to do as they please, or so they like to think. The truth, like most things in life, is in the middle. Meat is fine when consumed with moderation. Eating more than 100 kg per year will not make you healthier than if you eat only 30 kg. It might provide more pleasure for some, though. I should know. My father was a butcher and I grew up with lots of meat available. During the growth years as a teenager, I could gulp a pound of ground meat just like that. I eat a lot less nowadays. I choose quality before quantity.

The future evolution of the price of food is going to have several effects. The first one is the most direct. As food becomes more expensive, consumers look for the more affordable alternative first. If their budget is tight, they buy slightly smaller portions. People will slightly reduce their food intake. Those who were over consuming might actually benefit from a positive impact on their health. For those who already were struggling, this will be more difficult to deal with. From all the food sorts, animal protein will be the most affected by an increase of the price of food commodities. Already today, there are clear signs from the meat and poultry companies that the price of feed is seriously squeezing their margins. As usual, passing the price increase to consumers will take time, as retailers will resist. If the price of agricultural commodities is to stay high, consumers will inevitably have to accept price increases for food in general, and for meat and other animal products in particular. The price of meat is going to be affected by other factors than just feed prices. The need for more control on food safety issues, the stricter environmental regulations that will come for animal husbandry, on the land and in the sea, a change in animal husbandry practices, especially a lower use of antibiotics and farms with lower densities of animal will all contribute to an increase in costs. Energy will become more expensive, too. A whole system based on cheap commodities is about to change, simply because there will not be any cheap commodity anymore. These are all adjustments to rebalance our consumption behaviour from the unbridled overconsumption of the past decades, when consumers were not thinking about the consequences of their actions. The industry will figure out how to increase efficiency to contain some of the cost increases, but the change of farming practices will make meat significantly more expensive than it is today. The price of ad-lib cheap meat is ending. The future dynamics of food prices as presented here will be ongoing. A long as we will not have adjusted our diets to a new equilibrium, meat will keep increasing faster than other basic food staples, until meat consumption, and therefore meat production, will reset to different levels. Do not expect this to happen overnight. It will be a gradual process. There will not be any meat or fish riots. If food riots happen, they will be about the basic food staples, simply because the first ones to riot will be the poorer among us, and their diet is composed mostly from rice, wheat, corn, cassava or potatoes. Should the situation become dire, governments will intervene to ensure food for the poorest. Such price systems are already in place in many developing countries, and they are likely to be maintained, and even strengthened.

The same critical factors to keep food prices in check are very much the same as the ones that I presented in the previous article that I mentioned earlier: food waste reduction, moderate meat consumption per capita; and economic development, especially in Africa.

For more on similar topics, please visit my other website The Sensible Gourmet

Copyright 2011 – The Happy Future Group Consulting Ltd.

Food, Inc. or just the description of America?

A couple of days ago, I watched the documentary Food, Inc. Although the underlying theme is that the four large US corporations that dominate food would try to keep the American consumers ignorant of their activities, I saw this documentary much more as a review of the US society over the past 60-70 years.

As usual with this kind of documentaries, there is a mix of commentaries with pictures without presenting anything specific about the relation between the text and the images. The chicken farmer from Pennsylvania is angry, but it is not clear exactly at what. She removes dead chickens, but we do not hear what the cause of death is. To me, with my experience in chicken production, it seems that her chicken house is in very poor shape, and I am not sure about her level of commitment and overall technical performance. The Tyson grower seems quite a bit happier than the lady chicken farmer who ends up being terminated by Perdue. Unfortunately, the crew cannot film inside his chicken house and we never hear to know exactly why, but the commentary tends to imply that Tyson wants to hide something. Unfortunately as well, no representative from the large food companies mentioned wished to be interviewed, and that creates the impression that they want to conceal something. The chapter about the staff policies of meat companies is quite interesting. If this seems a surprise for the journalists, it was not for me. In Europe, we knew 20 years ago how harsh contracts were for farmers and plant staff. This is the product of free job market mechanism with a slight reminder of a certain thinking about labour force in the old south. Certain things simply die hard. John Steibeck’s Grapes of Wrath had shown several decades ago how agricultural labor force could be exploited. The reminder that meat packing plant workers used to have decent wages is an indicator of two things. One is a reflection of the disappearance of the American middle class in the manufacturing sector, and the other is that meat plants would purely and simply suffer tremendous financial losses if they had to reset wages the way they used to be. There might be some concerns about their financial long-term sustainability. They are not ready to cope with production cost increases, and they can hardly reduce personnel costs much anymore.

The family of four that lives on a diet of fast food is also a typical example. They do not have time to cook, and that justifies eating only burgers with fries and pop. The fast food meal for four comes down to almost US$ 3.00 per person. You can make a healthy meal for that money. The luxury meal that I prepared for my spouse on Christmas Eve was hardly more expensive than this. For that family, like for many American households, money is tight and they need to do the best out of a limited budget. The filmed visit to the supermarket tends to focus too much on the broccoli at US$1.29/lb. That price would be too high. That is possible, but there is more than broccoli to choose from. Potatoes, rice, carrots, beans, cabbage or onions are much cheaper than broccoli, and by combining them, it is possible to prepare quickly a healthy nutritious diet, including some meat. The mom works long hours and has no time to prepare diner. I accept that, but the teenage girl could do that to help her mother. My parents also worked long hours, and dinner was not before 9 pm. This is why I learned how to cook. When there is a will, there is a way. Then, we learn that the parents suffer of diabetes. This is not really a surprise considering such a crazy diet, and this problem is spreading to more and more American families. When you add the medication costs to the price of the fast food meals, preparing a healthy meal as I described above is really the best deal in all respects. In the land of individualism, where people are expected to take charge of their destinies, it is a bit strong to reduce the discussion to the agribusiness having “altered” foods, thus presenting this family as victims. I disagree with this. They made a choice, which may be the most convenient, but not the wisest. The alternative certainly requires some effort, and that may be difficult to handle. The blaming game, which is even more popular than baseball in the US is not leading anywhere. Most of all, why do they have to order pop with their burgers? They can cut their calorie count by filling bottles with tap water. Making sandwiches is easy and quick, too. This is a lot cheaper and a lot healthier, and it does not require much work at all. Last year, I had written an article in which I was showing the similarities of human behaviour and how we produce food. Food, Inc. makes this comparison quite vivid.

Then, the documentary shifts to food safety and presents some footage of meat processing plants. That is certainly a very important item in the US, where the number of recalls for bacterial contamination is simply astronomical. I found this part very interesting because in my many years in the meat, poultry and fish businesses, I have spent several years in close contact and even supervised plant operations as well. What this movie from 2009 showed gave me the same impression that I got the first time I came to the US in 1998, and toured what was by then one of the largest chicken processing plants in the country, in Alabama. Americans certainly love everything big, just like the calorie count of their meals. They love huge complicated plants where the molecules (chlorine by then in that particular chicken plant that smelled more like a swimming pool than anything else, and ammonia in the case of the plant featured in the movie) are supposed to do the work. Unfortunately, with such layouts, visual control is rather difficult as it appears in the documentary. When a plant is such a thick forest of pipes, chains and rotating parts, not only is it very difficult to see what is happening, but it is the best amusement park you can imagine for bacteria. They have so many niches where they can settle and grow in peace. The more complex the layout gets, the more difficult it is to sanitize the plant. The hamburger factory has installed cameras and management claims that this helps them to control what is going on in the several plants they own over the country. My view on meat processing plant supervision is that it has to be done in an ongoing manner, online, with the supervisor being on the plant floor, not sitting in his office. I doubt that cameras will eliminate food contamination issues. Moreover, online quality control requires motivated staff, which also requires proper wages and benefits. Food safety is less a technology matter than it is a matter of management and motivation of staff. Another important element that I noticed is that the boss of the hamburger plant describes himself as a mechanic. I had expected him to see himself as a food producer who wants most of all to offer safe food to consumers. I did not hear that statement. I also would have liked to see him eat some of his ammonia-marinated burgers. I am a meat lover, but I really do not need that on my plate. When I think that, in The Netherlands, we were not even allowed to use chlorine in the slaughterhouse water… We had to work on eliminating the causes of the problem instead of applying never-ending layers of technology band-aid. And we did significantly reduce the causes!

Then, the documentary presents the “natural farmer”, Joel Salatin of Polyface Farms. He certainly is very successful, but by his own admission, he has no plans is growing much more than he currently is. If there is more demand than he can supply, that will be the customers’ problem. By looking at his chicken slaughter installation and system, I doubt that he can supply much volume, but we never got to hear how big his business is. He is a niche producer, and his customers appreciate him, since one of them claims it to be worth driving 5 hours to get to his shop. That is 10 hours drive including the way back. One can wonder if the footprint of that food is all that great when it comes into the consumer’s home. How many of such farmers are necessary to meet consumer demand? And what is the price of the food they sell? Could this feed the family of four on a very tight budget that eats from the fast food drive-through? The movie never answers these questions.

The story of Stonyfield Farm yogurt was cause for more optimism. They offer the organic alternative. According to the CEO of the company, they are the third yogurt brand in the US and the most profitable one. This is a success story. They sell to Wal-Mart and fit in the retailer strategy towards more sustainable food. It also shows that organic has long passed the stage of hippie small-scale and that is a rational modern business, which the industrial agribusiness tends to refuse to see. The one thing that was missing about this story, though, was how the farmers who supply the milk perform financially.

Probably, the scariest part of Food, Inc. was the one about the lobbying and the politics. In the material country, this is no surprise. This does not make it any less scary, though. Since winning elections is about how much money candidates have in their “war chests”, the actual vote ballot is a banknote. The ones with the most bank notes have the most power. Reality is less idealistic than the idea of a “government of the people, by the people and for the people”. The system seems to have evolved to somehow reminiscent of an aristocracy structure. The US is a republic, but maybe a little less of a democracy after all. The money power is not only political, but in society where suing is a lifestyle, justice tends to favour the richer ones, simply because the poor cannot offer the fight very long. This power of money through lobby and lawmaking might not be as strong as one think, though, Last year, an oil lobby backed-Republican Senator of Arizona wanted to pass a bill to kill solar energy in the state. A Chinese company, Suntech Power, had plans to open a solar panel factory in Arizona (a Chinese company opening a manufacturing facility in the US. That is interesting is it not?) If this bill had passed, they would have lost the business. What did they do? They threatened to stop the project and kill the jobs. Do you know what happened? The Republican Senator did not proceed with his plans. Maybe China will help eliminate the negative effects of lobbies. Nonetheless, for now, lobbies are still active and powerful.

Then the conclusion of the documentary comes in a rush. Buy local, from the farmer’s markets. This is nice, but millions of households cannot afford that food. Moreover, production is not even remotely close to meeting the national food demand. You can vote three times a day to choose the food system. Americans voted a long time ago to have instant gratification, and they chose for the consumption society. Never things would have evolved to what they are if consumers had rejected it from the start. Nobody forced Americans to drive to a fast food restaurant and stay seated inside their cars to eat. Nobody forces them to drink pop, eat potato chips or candy bars, to think that the right size for a steak is 9 oz., to pour ketchup on everything, just as they did not have to spend more then they earned and dig themselves in huge debt.  I do not consume any of those items, yet my self-esteem is good, though.Freedom requires a bit of will power. Freedom of choice does not imply that one should not resist temptation. The American consumer’s behaviour has been a boon for the industry. Nothing is better than consumers who just consume without asking questions. Fortunately, this is now changing gradually. Americans realize that consumer goods producers have looked at them in a similar way as the livestock in feedlots, passive and submissive. Unlike what the makers of Food Inc. may say, all Americans are responsible of the society they have. The industry is, of course. But consumers are just as much. In order to change, consumers are going to realize what role they have played in the consumption society. They can vote, but the US is one of the countries with the lowest turnout at elections. The ones who choose not to express themselves just miss an opportunity to change things. Most Americans have lost faith in their politicians. Yet, there is a democratic force that can, and in my opinion, will restore true democracy. This force is the food retail, with Wal-Mart as the leader. They do not wait for politicians to make laws when it comes about food should be produced. They do not care much about the games played in Washington, DC. They just listen to the people and they offer the workable solutions to meet these wishes. Unlike politicians, they do not set their objectives for the next four years. Wal-Mart has already done more about sustainability of food supply than lawmakers have. Earlier, they had decided not to sell milk from cows injected with growth hormone. Yesterday, they announced their decision to make healthier food affordable to their customers. They represent such a purchasing power that they can force their suppliers to change their practices and their purchasing strategies, enforcing the change all the way back in the supply chain to the seed producers. Be assured that the food industry will do what the retail tells it to do, because without the retail, they are out of business. Their purchasing power is so much larger than the one of the people buying on farmers markets. People should cast their vote and give power of attorney to the retailers. Really, the food retail is just one step away of enforcing change on antibiotics, hormones, animal welfare and GMOs; even if the politicians have not made up their minds. Just compare the size, financially and in jobs, of Wal-Mart and Monsanto. Who is the true giant?

Altogether, I found that the movie was raising good questions, but it was not giving much hope for a quick change, either. This is a weakness, just as the lack of specifics of the pictures. They need to make a sequel in which they will show how things can change for the best, make food affordable and farming sustainable, and how they see the US making the transition. I missed that. The documentary is not as specific to the food industry as it seems. A similar movie with a similar commentary could be made on about every industrial sector of the US, from energy to electronics, telecommunications, the car industry, the banks or the pharmaceutical industry.

Copyright 2011 – The Happy Future Group Consulting Ltd.

Follow the water!

Without water, there is no agriculture, there is no food, and there is no life. It is obvious, and yet the water question is too often neglected. The quantity and the quality of water available are absolutely crucial for the future production of food. It will influence where and what type of food we can produce. It will define food security and world politics. Since 70% of fresh water use is for agricultural purposes, it is clear that water will soon be power.

The need to preserve water and use it efficiently is going to be one of the main challenges to overcome for the decades to come. This will stimulate innovation and the development of new technologies and new techniques.

Field sensors that measure the level of humidity in the air and in the soil connected with “crop per drop” irrigation systems can allow the distribution of the right amount of water at the right time, thus saving waste through evaporation and drainage. The selection of plant varieties will focus more and more on water efficiency. Drought-resistant plants that can thrive in arid conditions are in the works. For instance, a trial on wheat in Australia has delivered promising results, as the yield was 25% higher than non drought-resistant varieties. Researchers, through hybridization and genetic engineering, are working to develop varieties that can use less water and produce similar yields as per today. Although high tech may bring solutions, other methods deliver good results, too. Agro forestry, the production of crops under a cover of trees seems to help farmers achieve satisfying results in the Sahel region. The foliage of the trees helps reduce evaporation from the soil. Combined with proper techniques to apply organic matter and fertilizing elements, farmers can create better conditions for plants to grow.

Another field of research is the development of alternatives to traditional desalination, which is very demanding in energy. Transforming seawater into fresh water for the production of food is not simple, and it is expensive. The technology is here.  Israel has used it for decades. Currently in the United Arab Emirates, a project of floating islands covered with solar panels to provide the energy to desalinate seawater is being developed. This system has the advantage to produce both fresh water, which is precious in desert countries and clean energy at the same time. A project, called The Sahara Forest Project aiming at producing food in the desert is currently in the works. It combines solar energy, modern biomass production and a type of greenhouse, built by the Seawater Greenhouse company, that helps the humidity produce by the plants to condensate.

In many countries, the problem is not so much physical scarcity of water as it is a lack of proper infrastructure to collect, pump and irrigate efficiently. The population density contributes to the problem, because the more people, the less for each of them. In many countries, for instance in India, the equipment is old, inadequate and poorly maintained, because of a lack of finance of governments and farmers. The result is a waste of water resources, and a suboptimal production. Another area that has potential for improvement is the collection and the storage of rainwater. A large quantity of water runs off and is not available for food production because there are not enough containers, if any. Developing and improving storage infrastructure will definitely help farmers to produce more food.

If the availability of water is important, so is its quality. In China, the situation is a lack of both, because of the heavy pollution of many streams and rivers. In many areas, the water is there, but it cannot be used, as it is fit neither for human consumption nor for agricultural production.

The respective situation of countries about water availability will determine their ability to feed their own people or not. In Arab countries, irrigation has led to a high level of salinity and it has depleted drinking water reserves. Saudi Arabia, for instance, has now abandoned its policy of increasing food production to become be self-sufficient. Saudis are actively purchasing land in African and Asian countries to meet their food needs. China and India, that represent about 40% of the world population, are following a similar approach and invest heavily to help develop land in Africa. In countries where drinking water is scarce, there are discussions about the need of not exporting, as export of food is actually water export as well.

If a number of countries face a water shortage, others have a different situation. This is the case for large areas of North America and South America. Especially Brazil disposes of large water reserves. Together with a favourable climate, Brazil has many advantages to produce food, especially animal protein. According to Osler Desouzart of OD Consulting, the production of 1 kg of beef requires 16,000 litres of water, while it takes 6,000 litres for 1 kg of pork and only 2,800 litres for a kg of chicken. This shows why Brazil has been gaining market share in beef and poultry. It indicates that intensive animal production will be more challenging in countries where water is not as abundant. This also tends to show that poultry will be the most successful type of land animal production. The US and Canada have large water reserves, although there are also clear regional differences. The South West of the US becoming increasingly arid, and one can wonder if California, that currently produces most of the fruit and vegetables for the North American continent, will be able to keep its production levels. It is likely that fresh produce will be gradually produced closer, even inside, the large urban centers in the northeast as well. Considering the emphasis on water preservation, it is also interesting to note that before the housing crisis in the US, the most irrigated type of plant production were lawns, using three times as much water as US corn. Food recalls are another source of water waste, especially meat and eggs recalls. From the numbers presented above, it is easy to see how much water is lost when dozens of tons of animal products must be destroyed, not to mention the huge food waste that this represents.

When it comes to food and water, aquaculture offers interesting possibilities for the efficient production of protein. Fish produced in the ocean do not consume freshwater. This saves large amounts that can be used for other purposes. However, one of the challenges for the fast-growing aquaculture industry will be to be able to source feed ingredients that do not directly compete with other farm animals and direct human consumption. Land-based aquaculture is developing the very interesting concept of aquaponics, which is a combination of fish production in tanks combined with the production of vegetables indoors. The system recycles the water used for the fish tank, and helps fertilize the plants with fish waste. This is a very water–efficient system that can help produce large amounts of food on a small area, making it fit for urban farming units.

Copyright 2010 – The Happy Future Group Consulting Ltd.

The quiet revolution of food retailers

While many debates continue in the political and “parapolitical” world about many aspects of food production systems and the impact of human activity on the environment, retailers lead a quiet revolution. Without making the headlines, they gradually change the way their suppliers will do business in the years to come.

Such an evolution is certainly welcome, especially in a time where important decisions need to be made. Political leaders seem unable to reach any agreement on environmental issues, as the world could see at the late Climate Summit of Copenhagen. In the food sector, there are many discussions going on about sustainability and genetic engineering, to name the two hottest items, but the political class does not seem to generate clear and concrete action plans.

Just like what happened in the 1990s about food safety in Europe, retailers are taking the initiative to create momentum on the current issues. The problems that plagued the food industry in Europe, such as salmonella in poultry, the mad cow disease, or the dioxin in Belgian fat for chicken feed showed a number of weaknesses that needed to be addressed. In the case of BSE, UK retailers did not wait for British or European legislation to demand meat and bone meal-free feed for farm animals. As I was working for a company supplying the UK market with chicken meat, I can testify that these were dramatic times. Tough decisions had to be made on a very short notice that had serious financial consequences. By then, a couple of reasons made the retailers took the lead. First, the inability of the government to prevent and tackle the issues was creating a bit of a vacuum on leadership. Consumer confidence in their institutions was fading, and retailers were the only ones, true or not, perceived to take the proper actions to protect the public. The second reason was the fact that many retailers had their own private labels. In this case, the problem was not the supplier’s problem anymore because the supermarket chain could have risked serious PR damage if a food safety issues would have been associated with their brand.

This time, retailers are again in the position where they can present themselves as the consumers’ champions. Legislation is slow to move and make significant decisions. The involvement of interest groups adds to the infighting and delays decision-making.

To prepare for the future, they already have come out with plans and communication on how and where they want the food they sell to be produced, and they try to offer a choice to consumers. By doing so, the most active among them are setting new standards, and forcing the whole production and supply chain to think about the things to come.

In previous blog posts, I have mentioned some of such initiatives, and in Future Harvests, I described the increasing leadership role of food retail in agricultural practices.

In particular, I mentioned the carbon footprint labelling on dairy products by Tesco, Wal-Mart’s Sustainability Index questionnaire to suppliers, and the seafood sustainability programs of many retailers. Marks & Spencer started their Plan A in 2007 with the objective of making their business more sustainable. To achieve this, they are involving their suppliers and the farmers producing for them to carry out the changes that M&S finds necessary for a better future.

More recently, new initiatives indicate that retailers are pursuing further on such initiatives. Wal-Mart came last week with their plan for sustainable agriculture. In the UK, Sainsbury let know last week that they were committing GBP40 million to invest in farming. Earlier this week, Carrefour unveiled their “Reared without GMO” program. In their stores in France, they will sell 300 food items labelled as being GMO-free, to offer consumer a choice based on transparent information. If Carrefour ventures into this, one can be sure that they do so because they already know that this will be good for their business. By gaining market share, it is very likely that their competitors will soon react by issuing similar programs. The EU Commission may be struggling to figure out how to deal with GMOs, but Carrefour says “Let the consumers tell us!” Vox populi, vox dei!

Of course, such initiatives do not please everyone. Today, I could read in a blog for a US magazine backed by the meat industry some interesting reactions about Carrefour’s new plan. Some readers were bringing up the typical arguments. Meat would be so expensive in Europe. Well, meat is quite affordable in France, even without GMOs, so think again! The other argument was about freedom of choice: people should be able to eat what they want. By labelling its food item, Carrefour does just that. French consumers are free to buy at Carrefour or somewhere else, and they have the right to choose what label they prefer. The freedom of choice is ironic coming from the US meat lobby, since American consumers do not have that freedom. Reared with GMOs is pretty much the only choice in the US. For now, that is. However, it is interesting to see on Carrefour’s press release that the pictures of fish, chicken and pork chops are exactly the same, regardless of whether they would be grown with or without GMOs.

In the 1990s, British and European consumers, and retailers, were challenging food industry practices because they were worried about their health and about the lack of transparency about food. Nowadays, in the USA, consumers are increasingly suspicious of their agribusiness, because they are worried about their health and the lack of transparency of the industry. Beef recalls because of E. coli, egg recalls because  of salmonella, spinach contaminated with manure are in the news on a (too) regular basis. They are also increasingly aware, and suspicious, of the relations between interest groups and their government agencies, and how this influences decisions on what they eat.

Retailers are now saying that they are not waiting for politicians to make decisions. They have defined their vision, they know what they want, and they are passing the message on to the suppliers. What would happen in agribusiness USA if Wal-Mart took a similar approach as Carrefour?

Copyright 2010 – The Happy Future Group Consulting Ltd.

Regaining the consumer’s trust

I read many blogs, articles and opinions about food on a regular basis. Yesterday, I came across an interesting blog post on Meatingplace.com. Yvonne Vizzier Thaxton, an authority in the US poultry industry, wrote the article, titled “Consumer trust” after she found out about a survey carried out by the Center for Food Integrity. Basically, the survey concluded that as farms were growing in size, consumers started to wonder if they still had the same values, and although small farms still have the public opinion’s trust, large-scale farms are looked at with suspicion.

That article brought me to think about trust, how it works, and what to do to win it back once it has been lost.

Instead of trying to figure out which group of the population to influence, as the author suggests, I prefer to go back to the basics. If I stop trusting someone, what would he/she have to do to convince me that he/she is trustworthy again? The empathic exercise is a much better way to find out what might work or not. In my opinion, that is exactly what the food sector should do first, instead of pushing the same message without much success.

First, people stops trusting when they are disappointed, when they feel betrayed or when they feel unsafe. By finding out which one of the above caused the loss of trust, and what more specific reasons made the public change their minds, the food sector will already make huge progress.

The second thing to keep in mind is regaining trust is even much more difficult than winning it in the first place. The baggage will stay in the way for a long time. Therefore, a lot of patience is required. There will be no quick fix. A cute video clip, well-thought press releases will not be enough. Far from it. Trust is not something that can be forced, it must be earned. Trust is the result of consistent and positive behavior that benefits the other party.

Once people have lost trust, per definition, they do not believe anything they hear from the distrusted party. In fact, they will hardly listen. Therefore, words will have little impact, unless they go along with actions that confirm that the message is true. If the food industry does not want to change and hopes that communication will be enough to change the public’s mind, nothing will change. When you want someone to prove to you that he/she is reliable, you want to see tangible proof that something is changing in your favor. The most powerful communication tool that really works for regaining trust is the non-verbal communication. The distrusted one must sweat to win trust back. This does not take away that verbal communication must continue. It will keep the relationship alive, but it will not be the critical part for turning around the situation.

Here is just an example to illustrate this. The US meat and poultry sector has undergone many recall procedures about bacterial contamination over the years, and at this day, this problem seems to continue. The industry takes measures to solve the problem, because such recalls are very costly, but as long as there will not be an obvious change in food safety, and recalls keep on happening, consumers will keep doubting how their meat is produced.

Food suppliers have no other choice than to listen to the consumers. The customer is always king. The customer is always right, even when he/she is wrong. A lot of this is about perception. Here is an example of the above. Last June, Greenpeace came with a ranking of Canadian retailers about their seafood procurement, and in particular about their sustainability score on seafood. Costco scored poorly, and their first reaction was to dismiss Greenpeace’s assessment, by basically saying that they are professionals who know what they do, and that they do not really need advice from Greenpeace. Yet, a few weeks later, Costco reorganized its seafood assortment from 15 species back to seven sustainably produced seafood species. That is successful non-verbal communication.

Regaining the consumers’ trust will require transparency, integrity, honesty, a lot of patience and communication, and most of all action towards change that meet the market’s demand. This does not mean that all consumers wishes can be met. After all, life is a continuous negotiation. Food producers and the public need to meet somewhere halfway. Market-driven always trumps production-driven.

Copyright 2010 – The Happy Future Group Consulting Ltd.

Lady Gaga, PETA and lack of knowledge about meat

At the last Video Music Award, Lady Gaga showed up with a garment (including hat) made out of meat. I read about the event in an article from Time. In this same article, Ingrid Newkirk, the founder of PETA (People for the Ethical Treatment of Animals) made some statements that I found just as outrageous as the singer’s outfit.

According to Ingrid Newkirk, “Meat is the decomposing flesh of an abused animal who didn’t want to die, and after being under the TV lights it would smell like the rotting flesh that it is and likely be crawling with maggots”.

Ingrid, here is some more info for you.

  • Meat is not decomposing flesh. If it were decomposing, it would not be edible. Meat is flesh. Period.
  • To get maggots, a fly is necessary, and it has to lay eggs and the eggs must hatch. That would not happen during the duration of the show.
  • What the heat from the lights would do though is to stimulate the growth of bacteria. Bacteria are what cause decomposition.

I have spent quite some time with farm animals in my life and I really could not make any statement about  them having any sense of wanting or not wanting anything. They mostly follow their instinct and do not walk around with a plan. They may not “want to die”, and we may not want it either, but this is life. In the end, we all die. In Nature, it is about eating or being eaten, and herbivores are at the bottom of the food chain. Eating meat is not unnatural. The purpose of farm animals is to feed humans. They are not pets. Adding the word “abused” in her statement is only rhetoric. Like in every profession, there are slobs, but they represent a tiny majority. The overwhelming majority of farmers treat their animals with respect. Similarly, in slaughterhouses, animals are handled with care, because stress causes poor meat quality, which in turn causes economic losses for the processing companies. It is a well-established fact in the industry that proper handling of animals is the economically right thing to do as well.

Quite a bit of misstated facts from the activist who knows it all. But I will leave PETA and its extremist activism here, and get back a bit on Gaga’s “clothes”.

The singer is an adept of excessive and outrageous behavior. We all know this by now. Yet, using meat as garment is beyond bad taste. To produce meat, an animal must be killed. This is not a mundane act. This used to be referred to as sacrifice, which indicates its true value. Our urbanized consumption society (two concepts that defined the New Yorker artist) has made many of us forget about this, though. That meat spoiled because of the stage lights, and was surely discarded and thrown away. In a world where one billion people do not have enough to eat, and where already 40% of all food is wasted, the meat dress is an obscenity. I do not mind provocation, but I do mind vulgarity. Meat is for eating, not for wearing. The justification that Gaga gave for using meat was that she was making a case for gay rights is lame at best.

For me, the final score is a tie. Gaga: zero – PETA: zero.

Copyright 2010 – The Happy Future Group Consulting Ltd.

What a game changer my book is!

Future Harvests has been published less than two weeks ago, and it is going to change my company rather profoundly.

What started as a blog on the side of The Happy Future Group Consulting Ltd. is now about to become the very core of my business.

Not only the book sales are already higher than I would have thought, the book is creating much interest for my other activities. The book has already been shipped not only to Canada or the USA, but also as far as South America, Asia and Europe. This is truly amazing.

The reactions to the announcement of the book’s publication have been amazingly enthusiastic and they made me feel like I had just produced something that many were waiting for. This is both very rewarding and very humbling, because working on solutions for future food supply to an increasing world population is a huge task. Since the publication, people with whom I never had contact before, from all around the world, have approached me, thanking me for having engaged in this venture.

New contacts are asking me to participate in conferences and to organize workshops and seminars for them. The CBC (Canadian Broadcasting Corporation) is interested in having me on one of their programs. Of course, the concrete discussions are still to come, but I have to admit that my Food Futurist is now showing incredible potential.

The part on policy making and strategy is getting more attention, too. This activity has the potential to become a solid business that will need to involve more people in my organization. I have already started to develop a plan for this. I can see interest coming from companies, professional associations and governments, not only in Western countries, but in many emerging countries, such as in South America, Southeast Asia, India, or Russia to name a few.

The first step that results from all of the above is for me to formalize the Food Futurist further into a more structured activity than it has been so far. This has started with my defining and posting the mission on all the business pages of the website. The mission is “To help our clients challenge today’s certainties, shape the future, and manage the transition with a targeted and practical action plan for the coming 10 years and beyond”.

The following step is going to be to develop business around this mission and the principle expressed in Future Harvests.

If you are interested in this, please do not hesitate to contact me. Talking is cheap. If you know people who would be interested, please pass it on to them.

As Humphrey Bogart’s character said in the movie Casablanca, “I think this is the beginning of a beautiful friendship”.

Future Harvests – A preview of the book

My book, Future Harvests, is expected to be published before the end of August.

Here is a preview to give you a flavor of the content.

For a full view, please click on the thumbnails.

 

 

 

 

 

 

 

 

 

 

Here is a sample containing the table of contents and the preface of the book:

 

For the video trailers, please visit my YouTube channel.