Changing economics to overcome future challenges

October 21, 2016

First, a personal story

A year ago, I moved away from Vancouver to the Okanagan Valley Region some 300 miles east from Vancouver. There, I bought a property with a decent yard where I will have a garden and with a small vineyard. In some way, it is an illustration of what is necessary to foster sustainable practices. The parallel is obvious with some of the global challenges the world is facing and will continue to face in the future. For eight months of the year, the area looks and feels quite similar to the Mediterranean. Precipitations are not abundant with an annual quantity of only 337 mm. Clearly, water is scarce and needs to be preserved, even though an extensive system of lakes fed by mountain snow ensures an adequate supply of water. The region is quite agricultural with many orchards and vineyards, all thanks to irrigation. There are also many lawns in the area and the estimate is that about 25% of the water consumed in the region is just to keep the lawns green.

My plan is to install rain barrels to collect the water from rain and snow and use it for the yard. This is where the economics do not go in parallel with all the talk from politicians about sustainability. Around the house I would need five rain barrels. The lowest and best retail price I can find is of about $80 for a 200 liter barrel. To set up my water collection system, it will cost me $400 to provide me with a 1 cubic meter storage capacity. In comparison, the price for a cubic meter that the municipality charges for water is $0.30 per cubic meter. In the most ideal situation, that is if I were able to collect all the rain and snow through my five barrels, I would at most collect about 30 cubic meters per year. In money, it comes down to a saving of roughly $10 per year. To break even, I’d better hope that the barrels will last 40 years, which they might, but considering my current age, there is a fair chance I may have moved to a much smaller underground dwelling by then. Of course, my example is about quite a small investment and if the return is lousy, it will not change my life. At least, the barrels will help me save water.

The point of my story is that the comparison between cost and benefit would deter most people to consider buying rain barrels. It just does not make financial sense, if money is what matters. I always say that money talks and what it says here is to forget about being sustainable. One of my neighbours also considered installing solar panels on the roof of their house. After comparing the price of the panels plus installation and maintenance with the electricity savings, they discovered that it would last twice the life of the panels to break even. In terms of money, solar panels are a different kettle of fish than my five rain barrels. Recently I saw the price of a propane generator that produces 3650 watts for Canadian $350 while a solar panel that produces 100 watts is sold for Canadian $250. I can understand people decide to not pursue the solar option.

The economics of water and energy savings that I just described can be extrapolated to the much larger picture. All through the food and agriculture value chains, many changes for more sustainable systems face the same kind of dilemma. What makes sense from an environmental point of view often does not make sense financially in the current economic environment. Demanding more sustainable production system is quite legitimate and sensible, but the conditions must also be there to make it happen. The numbers have to add up for farmers and businesses to make the switch. As usual, money is of the essence and it can come from different sides.

First, the purchase price and the cost of operation of alternatives have to come down and be competitive. Either suppliers are able to drop their prices or offer more efficient systems. Governments also can help through subsidies to ease the pain. Subsidies, being public money for the general interest, it is only fair that we all must pay if what we want is a sustainable. Subsidies must of course be set up properly and be effective

Second, the customers, which in a fair value chain would be eventually the consumers, have to pay for extra cost of the better production systems, simply because our consumption societies with their sense of entitlement have to understand that there is no such thing as a free lunch. Such a realization also means that producers also understand that mass production that only deplete resources do not fit in the long-term picture and that value will have to replace volume.

Searching for a new economic model

With the many challenges arising from a growing world population, it becomes more and more obvious that the economic model of the past six decades needs some refreshing. As such providing consumer goods at an affordable price for the masses is not a bad idea. Helping people to have a more comfortable and pleasant life is certainly welcome by most of us. The problem is that the so-called consumption society is not so much aboutpillars-of-economy consumption as it is about people buying and giving their money to someone else. In the current system, consumption is optional. Research has shown that consumers use 75 to 80% of the goods they buy no more than once.  What really matters is the act of purchasing the goods. It is good for growth and the GDP, currently the leading metrics for the state of the economy. The problem is that mass production has gradually shifted from affordability to cheapness and from value to price. It has focused mostly on volume and has not taken into account that consumers would have to get rid of what they bought after usage. Negative externalities have been kept external indeed. Short-term financial results have had the preference and long-term impact has been ignored. The system is hitting a wall and issues of greenhouse gases emissions and waste of resources are now becoming urgent matters to address. All industries will be affected one way or the other. Food and agriculture will be no exception.

The big question is how to change the system without having it implode. That is not an easy one to answer but sooner or later it will have to change. Vision and leadership are crucial to manage the transition. I wish I had seen more of it. So far, I see and hear more about pro this and anti that. It is highly insufficient and produces more noise than results.

In my opinion, the problem is not so much about growth as it is about what growth means. Over the past decades, growth has been mostly about volume numbers. It has been a quantitative growth. I believe that the best transition towards the next model is to focus on what I call qualitative growth. It is not so much about volume as it is about adding value to the buyer. For consumers and countries, qualitative growth would be to quantitative growth what EVA (economic value added) is to turn-over for a business. It is about prosperity.

For food producers, such a shift will lead to a different approach. The most valuable areas of value added for consumers and society lies probably in providing good and enjoyable nutrition, yet affordable, through advice and education. The industry will have to help consumers eat better and help them have healthy diets. It will go beyond just supply food. Consumers will also have to rediscover what proper nutrition is. Initiatives such as the Global Access to Nutrition Index can play a pivotal role in helping food producers make the transition towards quantitative growth. The food sector has also an important role to play in keeping our environment livable. The trend towards transparency is an important part of the evolution on both health and environment fronts.

Of course, such a change of economic model means that the economics must change, too. It is also essential that those who do the right thing must be rewarded. A new reward system must be introduced in the set of rules and regulations so that producers get the proper incentive to make the shift because adding the type of value that I mention to consumers also requires a different price tag in the store, or at least a different breakdown of costs and benefits along the entire chain from producers to consumers. How to distribute fairly the cost tag of the change is still open for debate. The reward system has to apply for the business activity by allowing margins to be comparatively competitive in the new situation. Consumers doing the right thing must also be rewarded. The reward system should also apply at the remuneration level. In particular, the share of qualitative improvements in companies’ bonus systems will have to increase at the expense of qualitative growth targets.  The adjustments needed in the food and agriculture sectors will not end in this sector. They will have to include other area of government. In particular the health sector will have to be involved, as the consequences of the quality of nutrition on health are obvious for individuals and society both at the personal as at the financial level.

I also believe that such a shift in economic model will mean that business partners within the value chain will have to challenge each other to carry out the transition and it will become a critical point in choosing with whom to do business in the future.

Copyright 2016 – Christophe Pelletier – The Happy Future Group Consulting Ltd.

 

 

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Nature will reshape food value chains

October 15, 2015

The recent climatic events, in particular droughts, have attracted more attention on future challenges for food production, and rightly so. Unfortunately, the mainstream media cannot help presenting the as all gloom and doom. Certainly, there are very serious reasons for concerns, but solutions can be found. I wish the media would present more examples of positive actions to face and overcome the challenges.

It is not easy to deal with a changing environment, especially when it is impossible to predict accurately what the change will be. Predictions about temperature increases are useful but they are quite insufficient. An increase of 2 degrees on average will be different if the standard deviation is 1 degree or if it is 20 degrees. Other factors such as hours of sunlight and precipitations (including their nature, frequency and intensity) will impact agriculture at least as much as average temperatures. Changing climatic conditions will not only affect plant growth and development, but they will change the ecology of weeds and pests as well and that needs to be factored in future forecasts and models

Nature will reshape food value chainsA special attention on water is necessary. Without water, there is no life. Unfortunately, over the past few decades, wasting natural resources has been a bit of a way of life. The issue of food waste has finally received the attention it deserves, but the waste is not just about food. It is about all the inputs such as water, energy, money, time, and fertilizers. Water is still wasted in large quantities. Just compare how many liters a human being needs to drink compared by the amount of water that is flushed in bathrooms every day. Before the housing crash of 2008 a study in the US had estimated that lawn watering used three times as much water as the entire national corn production. But the issue of water is not just about waste. It is also about preserving water reserves. The late example of the drought in California illustrate what water scarcity may mean for food value chains. California is not only a major agriculture power house, but it exports a large part of the production outside of the state’s borders. The issue of water scarcity and the dwindling level of the Colorado River are not new for Californian agriculture. It has been known for a couple of decades that problems were coming. California produces a lot of water-rich fresh produce by means of irrigation. It actually has been exporting its water in the form of lettuce, spinach, melons, strawberries and citrus far away to places from where the water will never return to California. The water loop has been broken wide open and that is why, among other reasons, the system is not sustainable. If California can no longer supply its current markets, it will have to rethink its target markets. At the same time, other regions, that may not be competitive with California today, because externalities are never included in the cost of production, will eventually take over and replace the Golden State as suppliers for some productions. Unfortunately for the future, California is not the only region with a water problem. Saudi Arabia changed its food security policy a couple of years ago as the country leaders realized that trying to produce all its food would lead to a severe depletion of its available drinking water reserves. Instead of pursuing food self-sufficiency at all costs, the country chose to find other supply sources through international trade and through the purchase of farmland in foreign countries. The examples of California and Saudi Arabia demonstrate how natural –and demographic- conditions shape food value chains. The issue of water is not just about produce. Animal productions require usually more water than vegetal ones. In the future, water availability will surely affect where which kind of animal products are produced. New regions will arise and old traditional ones may review their strategies from volume-driven to higher margin specialty animal products market opportunities because of environmental constraints.

Climate change and water scarcity show how international trade can actually contribute to food security when done responsibly and with long-term vision. The prevailing model of producing where it is cheapest to produce without taking into account negative environmental externalities is facing its own contradiction and demise. The next model will be to produce not only where it is the cheapest to produce but where it is sustainable to do so. When water runs out, it is no longer possible to ignore the externalities of a production. When water becomes scarce, it gets more expensive. The law of supply and demand commands. When inputs get more expensive, several things happen. The economic model shifts. Priorities and externalities change, too. At first, producers try to find ways to increase efficiency and eliminate waste. The benefits outweigh the additional costs. Uncertainty stimulates innovation. New systems, or sometimes old ones that found a second youth, replace the current ones. If that does not work well enough, then producers start considering producing something else to ensure the continuity of their operation and find new business.

It is not the first time that our natural environment changes. Finding successful solutions to deal with it really are about our ability to adapt and to preserve our future, as it has been the case in the past. The challenges may be of a magnitude like never before, but so are our knowledge, our technical abilities and the tools present and future.

From an agricultural point of view, adapting to a new environment is about finding the type of production that thrives under new conditions. It may mean different areas of production for some species. In North America, there is already a shift for corn. Iowa has traditionally the main grower, but the corn production area is now expanding north. Minnesota is now producing more corn than in the past and so are the Canadian Prairies. Similarly, the production area for soybean is shifting north. Minnesota is growing an increasing volume of soybean and even in the province of Manitoba in Canada, soybean production attempts have been carried out since a few years.  It is the result of better production conditions and the development of new varieties that can adapt to new less favorable climatic conditions. Because of the local supply for soybean, the development of aquaculture with local soybean products for fish feed is now considered a long-term possibility in Minnesota among others. In Europe, corn production regions also saw a shift to the north for corn during the 1970-80s thanks to the development of new varieties, which largely contributed to the growth of dairy production in these new areas through the widespread use of corn silage. For the future, there is no doubt that genetics will contribute again to ensure food security. There is currently a lot of work done to develop varieties that can withstand droughts, floods or soil salinity. The ability to know the complete genome of species, to spot genes through gene markers, to be able to create new varieties that are less sensitive to diseases help speed up the development of crops that can thrive under future conditions. The recent developments in synthetic biology are quite interesting. Research conducted at the IRRI (International Rice Research Institute) on the development of rice varieties that can have a higher photosynthesis efficiency and thus higher yields could open new perspective for a more productive and more sustainable production.

Next to the development of better and more adapted seeds and genetic material, the development of new technologies that I described in a previous article will bring a number of effective solutions as well. In particular the rise of precision agriculture is certainly quite promising. The ability to deliver to the crops exactly what they need when they need it at the right time and at the right place in the right quantity will help reduce the environmental impact of agriculture while offering the possibility of delivering higher yields. Similarly, in animal production, there still is room to improve feed efficiency. It can happen through further genetic improvement, the use of more efficient feed ingredients and feed composition and through better farm management. The latter is definitely an essential facet of a better future for food production. Better and updated skills for food producers will help being more efficient, more productive and more sustainable at the same time.

An area that is often forgotten when it comes to the future of food is the functioning of markets. If demand for certain products, and in particular animal products, increases faster than supply, price will go up and there will differential increases between the different types of products. As most consumers, unlike what marketers sometimes tend to make believe, still choose what they eat depending on the price of foods, there will be shifts. Some productions will thrive while others will struggle.

As prices still will be an essential driver of the location of the various vegetal and animal productions, markets and environmental constraints will increasingly have a joint effect. In the future, the dominant economic model of producing where it is the cheapest to produce will evolve. As the pressure on water supplies, soil conditions and pollution issues will keep increasing, the model will include an increasing share of negative externalities. They are the long-term costs that are never factored in the production costs but that will affect future production economics. Externalities are the hidden side of sustainability and they will determine the future map of agriculture, as it will no longer be possible to ignore them. Choices will have to be made between short-term financial performance and the long-term ability of various regions to be able to produce, and to keep producing, the volumes and the quality specifications that are needed by the different food markets of the future.

A friend of mine told me a couple of years ago after a trip to Asia how she could see from the plane the large plantations of palm oil trees, and how they had replaced the jungle. She described her impression as the view resembled the strategic game of Risk to her. Yes, climate change and water availability in particular, will reshape food value chains because agriculture, regardless of it scale, is a strategic activity. It is about life and death. It is about peace and war. Future strategies for both global commodities as well as for local food value chains will integrate Nature’s new deal of precious resources and conditions of productions. Together with the geography of future consumption markets, world agriculture will readjust, relocate and the Earth will look different once again.

Copyright 2015 – Christophe Pelletier – The Happy Future Group Consulting Ltd.


Precision is the future of agriculture and our future

August 22, 2014

By the end of last July, the InfoAg conference took place in St Louis, Missouri. Matt Waits, CEO of SST Software, a conference sponsor, introduced me before my presentation titled “Beyond the Farm of the Future”. In his brief introduction he told the audience that he strongly believes that precision agriculture is the future of agriculture. His statement resonated quite positively with me. I see only advantages in making agriculture more precise. Just for starters, per definition the opposite of precision agriculture would be an imprecise agriculture. That is already reason enough to become a supporter of precision agriculture.

The first reason why a precise agriculture is the way to go is the necessity to manage finite resources more efficiently. Precision agriculture means sustainability. The philosophy behind precision agriculture is to use only what is needed where it is needed when it is needed in the mount that is needed by crops. In practical terms, this means that every molecule of input in agricultural production has to be transformed into food and not end up in the environment. Precision agriculture reduces waste. When I was writing my first book on the future of agriculture in 2009, the estimated worldwide amount of nitrogen loss due to leaching was of about 50%. The example of nitrogen shows what reducing waste can mean. In an ideal world where nitrogen would be used much more efficiently, it could be possible theoretically to use only half of the nitrogen we have been using, or in other terms, the current amount of nitrogen used should help produce twice as much food. Considering that the FAO claims that between 2010 and 2050, agricultural output should increase by 70%, it means that in an ideally precise agriculture, the world could meet the demand for agricultural products by using 15% less nitrogen than it did in 2010, theoretically. Also considering that the production of chemical nitrogen fertilizers represents about half the use of fossil fuels in agriculture, the positive impact on the carbon footprint of agriculture would be substantial. Similar calculations can be done on other inputs, such as water and crop protection products. By bringing just the right quantities at the right time at the right place, the consumption of water and chemicals will be reduced substantially, too. As recent droughts have reminded us how precious water is, precision watering is also becoming more important than ever. Water is precious, but in many cases, its price has not emphasized this enough. The main reason for wasting is always the result of economics. If inputs appear cheap, the low price is always implicitly perceived as a sign of abundance and of negligible value. Such a perception goes against the reflex of sustainability. Our elders did not waste anything (candle bits, soap bits, socks, you name it). They were frugal simply because the cost of replacement was too high, and at least was higher than the cost of repairing and saving. When a government subsidies inputs to make them cheaper, the users end up wasting much more. It is sad because such subsidies always have a well-meant starting point. The idea is to make it affordable to poor farmers so that they can increase their production. The result is when the less poor ones get the subsidies, they do not see the new price as affordable anymore but they see it as cheap instead. Managing for sustainability really is about managing the fine line between affordable and cheap. That is not easy, because the difference is not just about the price of inputs; it is also about the financial situation of the subsidy’s recipient. Subsidies should not be aimed at just price, but at more at efficient use of inputs and should be based on achievable yields. If governments wish to spend money, it should not result in farmers overusing and wasting water and production inputs. That is counterproductive. These governments, which often are in developing countries where resources are scarce and access to inputs difficult, had better spend money on helping farmers being more precise. The math is simple: efficiency is the ratio output/input, and the difference between what comes out and what got in the field in the first place is what is wasted – or lost. A precise agriculture reduces the waste, and therefore increases the ratio. This means that precision is the way toward increased efficiency.

As I mention developing countries, here is another important point to bring up: precision agriculture is not just for large farms but can be implemented everywhere. The development of precision agriculture goes parallel with the development of new technologies. At first, it would seem that such technologies are too expensive for small and/or poor farmers. If the point of view were to be that every farmer should own all the precision equipment, the answer is: yes, it is only for the large and wealthy, but looking at precision agriculture from that angle would be rather dull. Satellite imagery, drones, sensors, robots and other big data software can also be shared. In the era of the cloud and social media which are all about sharing, so can new technologies. Just like ownership of agricultural machine has also been shared through equipment coops for instance, so can these new devices. After all, it does not matter so much who owns them, as long as those who need it to do a good job can have access to them. Mobile communications have changed how farmers everywhere can get the latest information on markets. Smart phones have become affordable to the point that there are about as many mobile phones as people on the planet. Similarly to mobile communications, precision agriculture will also become more affordable in the future. If precision agriculture tools can monitor, map and help make fast decisions on farms of tens – and even hundreds – of thousand acres, they just as well can look after an area of the same size even if it is divided between many farms. It is just a matter of management and coordination between farmers. In poorer regions, it could very well be that the authorities be the owner of the equipment and proactively communicate with farmers through extension services to help the groups of farms manage the region efficiently for higher output. Such tools will help developing agriculture, in a sustainable manner. The benefits will be many. It will help increase farmers revenues, create economic activity, enhance social stability and help reduce the waste of water, energy and all other inputs. It will pay off in the long run and actually probably in the not-so-long run at all. Agricultural development requires financing and investments. Precision agriculture is in my opinion a very good place to put money at work.

In the future, the key for these technologies will be to also help see the bigger picture, not just the field and not just production data. The potential for applications and interfaces seems almost endless. By connecting all the devices and allowing sharing information of all events taking place on farms, these technologies are going to help reconcile the interests of all stakeholders much more effectively than it has been the case in the past. By monitoring production parameters as well as environmental parameters, proactive action will help anticipate instead of reacting. Actions will be targeted timely. One of the difficulties to manage sustainability is one of timelines. It is possible to monitor financial performance on a second to second basis, even faster actually, in the case of financial markets where algorithms can execute millions of transactions in less than a second. Environmental impact does not manifest immediately. It takes decades to notice the impact of a particular type of activity. With this time discrepancy between financial performance and environmental performance, it is only logical that money has trumped environment, even though there is a price to pay some day. That is the dilemma of externalities: how to factor such externalities when the exact cost is unknown. The future generations of technologies to monitor and map agriculture and environment will bring solutions. Once the focus widens from the field to the level of regions, countries and the entire planet, then it is possible to envision monitoring systems for all resources, environmental impact of agriculture and production output. It is only logical to expect dynamic information systems that could look like Google Earth, but with many editions, such as, the aquifer status edition, the nutrient edition, the crop yield edition, the soil erosion/restoration edition, the pest edition, the contaminants edition, and so on and so on. With such dynamic systems, it will be possible to not only monitor but to also produce simulations and test different scenarios. It would become possible to have an idea of how long resources can last, depending on different production techniques. It could be possible to make estimates and develop policies to adapt agriculture timely and ensure that future practices will maintain sustainable production systems. With such tools, precision agriculture, it will possible to develop worldwide policies and strategies to coordinate agricultural production. It also will help make markets much more transparent, as such dynamic systems would take into account consumption demand, worldwide stocks and production updates. Such transparency will reduce risks of speculation as the system would present a continuous update on the most likely scenario. Let’s face it! The computers will eventually replace the market places or agricultural commodities.

I agree with Matt Waits, precision agriculture will be the agriculture of the future. I also believe that the technologies that agriculture will use will play a role at a much larger scale and beyond just agriculture to shape the way we deal with our planet and our societies. Precision agriculture will play a crucial role in ensuring food security and prosperity.

Copyright 2014 – The Happy Future Group Consulting Ltd.


Dealing with complexity

February 1, 2013

Looking at the future of food and farming goes far beyond agriculture. It comes down to looking at the future of humankind. Balancing future supply and demand of food is an exercise that includes many disciplines and dimensions, probably more so than any other human economic activity. Anything that affects life and its level of prosperity must be taken into account. Feeding the world is not just a matter of production. Of course, the ability to produce and to keep producing enough food is paramount, but there is more to it than that. The consumption side is just as important. Demand will depend on the diet, which also depends on how much money people have available to pay for food.

Total future food demand is a combination of which foods and food groups people in the various regions of the world will buy and eat. This is a function of demographic, economic, cultural, religious and ethical factors. If future demand is about consuming according to the nutritional needs of a human being, clearly the situation will be different than if people demand twice as many calories and protein as the actual nutritional needs. The relative share of animal products in the total diet will also change the situation in terms of production and of production systems. Food production must adjust to the demand and do its best to meet it, but not at all costs. Therefore, it is essential to optimize food production at the global level so that the largest quantity of food can be produced at the lowest environmental cost. At the local level, production depends of course on natural conditions, but also on economic, political and cultural conditions as well. This may be the most profound change that we must deal with: feeding the world of the future is a global exercise. As more and more people worldwide have more and more money to spend on food, demand is now global, and therefore production plans must also be global. The times of producing food simply for the own people and exporting surpluses is over. Markets will now react to any event that will affect production or consumption somewhere else. Borders do not make this shift in thinking easy. It is always tempting to think that having one’s house in order is enough, but it is not. What happens in other countries on the other side of the world will affect us just as well. Why is that? Just one word to explain it: markets. There used to be a time, not so distant when if there was a drought in Russia, China or Brazil, markets would not react as strongly, and anyway not so much in the media, as we have seen over the past few years. This was the case because only a minority of the world was consuming large quantities and that minority did not have competition. Now the competition is wide open. Markets will keep reacting on this and the relative price levels of various foods will influence how much of what is consumed and where. We will see eating habits change because of this economical aspect of food supply.

At the same time, food production is also adapting to a changing environment, and to face its future challenges. The amount of new developments in technology, access to information and knowledge and in decision-making tools is amazing. Innovation is flourishing everywhere to solve environmental issues, to cope with new energy and water situations. The dominant themes are the reduction waste of all sorts, as well food as agricultural inputs and by-products, and the prevention of the release of harmful contaminants. Innovation is developing towards better and more efficient systems that must ensure the future continuity of food production and, at the same time, keeping food affordable for consumers. Interestingly enough, many innovations that will be useful for agriculture do not originate from the food sector. Food producers will need to be curious and look beyond the field to prepare for the farming of the future.

Clearly, the number of factors affecting both consumption and supply are many. To add to the complexity, many of these factors are not of an agricultural nature. Many of them originate from the population, its activities and its needs for all sorts of goods. I mentioned earlier that what happens in one region affects others, but the natural resources markets, such as energy, metals and minerals, that must meet demand for non-food consumer goods also affects agriculture and its production costs. Although many see rising costs first as a threat, I tend to welcome them, as they always stimulate innovative solutions to increase efficiency and reduce waste. Two examples show that it works. One is the car market in the USA that shifted from gas-guzzlers to high gas mileage vehicles since gas at the pump became much more expensive than it was only 5 years ago. The second one is food markets. Had you heard as much about food prices, food security or food waste before the food price hikes of 2008 and 2012?

In my work, I always try to make my clients and audiences aware of how everything that has to do with food is interconnected with many other sectors, and how economic, demographic and political events are linked to food security or how they might affect it in the future. That is an underlying them in my books.

Even, within the food and farming sectors, organizations do not realize enough how their future will be influenced by other food productions and vice-versa. I always get reactions of surprise at the magnitude of the interconnection and the interdependence with these factors, and how they affect their activities indirectly. It is a normal reaction, as most people tend to focus on what has a direct connection with their activities. After all, that is why I do what I do: to help them see and decipher this complexity, and understand what actions to take to adapt and prosper. I never shy away from show the complexity. My audience needs to get a flavor of the any dimensions and many layers involved. However, I always take a practical approach and show them that complexity is not the same as complicated. Deconstructing the complexity actually works well to show the many levels of actions there are. It helps my clients connect the dots between their activities and what will affect them and how. It gives them a level of confidence in how to deal with the future and take action. I also like to warn against oversimplifying, which is another tendency that I observe from time to time. The mainstream media is rather good at that. But I also get questions that sound like those who ask hope that I have a magic wand and will be able to give them a foolproof recipe for success. That simply does not exist.  If preparing the future were easy, nobody would even talk about it. It would be done. It it was easy, I guess many of the organizations that have been involved in agricultural development and food aid for decades would have already succeeded, and they would not exist anymore. Yet, they still have to keep up with their work.

Feeding the world is work in progress. Developing the right actions is complex, but not as complicated as it sounds. However, the true difficulty is in the execution, and in particular bringing other stakeholders with different agendas and different views on board to contribute to the success.

Copyright 2013 – The Happy Future Group Consulting Ltd.


Thinking of a better agriculture in a better world

August 11, 2012

Recently, I joined a group on LinkedIn called “Future of Agriculture”. One of the discussion topics, which caught my attention, was “What’s your dream for the world with agriculture as a theme?” Of course, this is quite a broad topic. I decided I would write here my thoughts about the discussion as concisely as possible. Therefore, here is what I believe is important for the agriculture of the future.

Agriculture must provide food today and tomorrow. Keeping the potential to feed the world for future generations is not an option; it is a necessity. Agriculture must produce in a sustainable manner. It must meet both the demand for food, but also be able to continue meeting future demand. It must take all necessary actions to ensure there will be enough water, enough soil, enough organic matter and enough nutrients to keep producing. It must also make sure that it does not contaminate the water and the soil. Agriculture must be sustainable from an environmental point of view, but it also must prove sustainable financially and socially. Without agriculture, there cannot be prosperous societies. To have agriculture, the world needs farmers. Farming must be an attractive occupation that allows those who practice it to make a decent living. This is more important today and in the future than it has ever been before.

Future food production must be innovative. Innovation is essential to solve current and future problems. It is the main trait of the human genius. Finding new ways of doing a better job and meeting all the future needs is a must if humanity wants to succeed in feeding its growing population. However, innovation is not the same as high-tech. Innovations do not need to be complicated and expensive. Innovation must integrate science, experience, common sense and practicality. Innovation does not oppose the past and the present or the future. It comes for the search of the best of all worlds. Innovation is useful only when it solves actual problems. It is not a doctrine of its own. The purpose of innovation is not about R&D for the sake of new products that help boost sales of those who market them. Its primary purpose is really about helping others succeed. Innovation must start from the market. What does the customer need to do a better job? The answer will be much more successful and better accepted if it starts from the market end, instead of being pushed onto the customers. This leads me to the next point: the necessity of being market-oriented.

Market orientation is the best approach for any type of business activity. It is true for R&D, but it is true for farming, too. Developing and producing by investing large amounts of money are much more effective and cost-efficient when the markets and the infrastructure are there. Offering what customers need has a much higher level of success than trying to convince buyers who are not very interested. The prices and the margins are always higher in a pull strategy. Market orientation also means that the infrastructure to bring the goods to the final users exists and that it actually works. One of the main scandals in today’s agriculture supply chain is the postharvest losses. It is outrageous that food that has been produced at the high cost of money, labor, water, energy, inputs and the farmers’ time rots in the fields or in deficient storage while it is good for consumption. It is the responsibility of all partners in production, supply chain and government to co-operate by organizing operations, so that food reaches those who need it.

The agriculture of the future needs to be developed in a pragmatic manner. There is no fix-it-all agricultural system. Food production depends on climate, landscape, soil types, water availability, need for sustainability, land rights, as well as the cultural, social, economic and political environment. The types of crops and animal production will depend on these factors. If systems cannot always be transferred from one place to another, knowledge and skills can be. Human intelligence and sharing is what spread progress. If farmers and all players in food production must be pragmatic and choose among the arsenal of tools and techniques what fits best in a particular situation, there are no boundaries in helping others to succeed. The energy must be spent to level up performance, not on defending a system for ideological or mercantile reasons. If the agriculture of the future succeeds, all of humanity will succeed. If it fails, humanity will have to deal with unrest, riots, hunger and possibly wars. Pragmatism is what will help the farmers of the future optimize food production around the world by making decisions that are in the best interest of all the partners from farm to table. Pragmatism is also what will deliver the highest financial return for them. However, for pragmatism to beat partisanship, bias and short-term interests, outstanding leadership will be paramount.

The leaders of the future will identify the right actions and execute them. They will cut the rhetoric and focus on delivering result on all fronts: financial, social and environmental. They will crystallize the energies around the objectives that serve all on the short term and on the long term. This will not be an easy task as the reasons to choose the path of least resistance are many. It will take courage, vision and the ability to convince the opposition. In history, great leaders have always sacrificed their personal interests, their personal safety and comfort for the good of the group. Such leaders are rare, but they exist, at all levels of society. They need to rise and improve the way we currently do things. They will succeed only if the average person is willing to make the right changes, too. This is not an easy task, either, but the alternative is even worse. The great leaders of the future will show the rest of us how things can be. They will give others the courage to implement the change and make them believe in the future. They will have to lead by example. They will have to reconcile instead of dividing and polarizing. When it comes to food production, they will not only help develop an efficient and sustainable agriculture, but they also will make sure that consumers change their eating habits where it is needed. They will help educate consumers about proper nutrition and moderation, while keeping food a positive experience, as well for the senses as for it social purpose. They will ensure that proper nutrition protects the health of their people. They also will give agriculture its rightful place in society and ensure that producing food is a respected and attractive occupation. They will take all actions to help food producers to succeed. They will reconcile urban and rural areas. They will make sure that people understand where food comes from and what it takes to feed for prosperity. They will work against waste.

Every waste is a loss of efficiency. With a population of 9 billion coming in the next few decades, waste will not be an option anymore. As the number of people increases and their needs have to be filled, the margin for error will shrink. The consequences of 9 billion behaving badly will be much worse that when there were only 3 billion people on Earth doing that. Every waste of resources will be quite costly, financially, socially and environmentally. The only way to reduce waste will be by being more efficient.  This will be true for food, as well as for water, for energy, for agricultural inputs, for soil, for organic matter and for biodiversity. Preserving and replenishing will protect humanity from a situation of depleting resources, which is where it is currently heading. The consumption and depletion society has no future. Future food production and consumption must be aimed at maintaining and preserving the potential of agriculture.

Those who are familiar with my work know that sustainability, innovation, market orientation, pragmatism, leadership and efficiency are the 6 principles that I had gathered under the acronym of SIMPLE in my first book, Future Harvests. In my second book, We Will Reap What We Sow, I developed and discussed the characteristics of proper leadership and the vision required to rethink food and farming to succeed in the future.

Even if future solutions need to be adapted to their specific local situations, these 6 principles apply everywhere and need to be implemented in a concerted manner by all regions.

Copyright 2012 – The Happy Future Group Consulting Ltd.


When externalities cannot be externalized anymore

March 29, 2012

Externalities are costs, or benefits, that are not included in the price charged for a product. If a cost is not included in the price, it represents a negative externality. If a benefit is not included, the externality is positive. The concept of externality is particularly important to determine whether an activity is sustainable. For instance, if an industrial activity pollutes and causes harm, there will be consequences, and costs. As it takes many years for environmental problems to become obvious, the cost of repairing the damage caused by pollution is not included in the cost of the goods produced by the industrial activity in question. However, there will be a day when it there will be no alternative but to clean the damage. That cost is the externality.

Every activity that pollutes without cleaning the contaminants is a negative externality. Everything that damages physically the environment and undermines the sustainability of food production is a negative externality. Every activity that depletes essential resources for the production of food is a negative externality. In this highly industrialized world, the consequences of economic and human activities, slowly add up. Nature’s resilience makes it possible for damage to remain unnoticed for quite some time. However, the ability of Nature to repair the damage shrinks, as the damage is continuous and exceeds Nature’s ability to cope with the problem. As the population increases, the level of human and economic activities intensifies further. There will come a time when Nature simply cannot handle the damage and repair it in a timely manner anymore. The buffer will be full. When this happens, the effect of negative externalities will manifest immediately, and it will include the cumulated damage over decades as well. It will feel like not paying the bills for a long time and then having all belongings repossessed. Humanity will feel stripped and highly vulnerable. The advisory services company KPMG published a report in 2012 stating that if companies had to pay for the environmental cost of their production, it would cost them an average 41% of their corporate earnings. These costs are currently not included in the pricing. That is how high negative externalities can be. Looking at it from the other way, companies would still deliver 59% of their current earnings. Repairing the damage and still generate profits shows that sustainability is financially achievable. On average, the profits would only be lower, but the impact would vary substantially between companies. Businesses that create high negative externalities will show much bigger drops in profits, than business that do the right thing. The only ones who would have to get over some disappointment would be Wall Street investors and all those who chase capital gains on company shares. The world could live with that. Investors should put their money only in companies that actually have a future.

All the fossil fuels that humans burn are gone forever. It is not renewable. All the water that farmers use for food production and exported away from the production region is gone forever. Exporters in arid regions will have no choice than disappear, produce only for the local markets, or if that is economically sensible, import water from surplus regions. All the minerals that are used as fertilizers and that are exported from the fields in the form of leaching or in the form of agricultural commodities are gone forever. New supplies produced either with non-renewable energy sources or from mines that are slowly depleting must replace the loss. Organic matter that is lost from soils must be replaced, or it will be gone forever. Soil that is lost through erosion and climate is gone forever, unless new soil is brought back on the land or very long-lasting repair techniques are applied. Every gene that is lost is lost forever and might be missing dearly. Every species that goes extinct is gone forever, as well as its role in the ecosystem. Every molecule of greenhouse gas that goes into the atmosphere is gone out of human control forever. It might bring a heavy cost in the future.

Since everything that becomes rarer also becomes more expensive, the externalities are going to weigh on the economics of food and agriculture, as well as in any other activity. There will be an oil price for which the current machines will be too expensive to operate, and for perishables to be too costly to truck with fossil fuels over long distances. The economics of water will change the purpose of farming in arid regions. It will alter the agricultural policies and force farmers to innovate new irrigation techniques. The economics of minerals and organic matter will change the location of animal farms and manure containment systems. No minerals will be lost. Manure will become a competitive fertilizer, as chemical fertilizers will become much more expensive to produce. The logistics of manure will change and the location of animal farms will change to allow an optimal cost efficiency of raw material for feed and access to fertilizing elements and organic matter. Farms will not have to be mixed, but the agricultural landscape will restore an integration of crop farms with animal farms.  Agriculture will be sustainable only if completes all the cycles. In the past decades, the cycles of minerals, of organic matter and of water have been open. Food has been produced in one place, and then moved over long distances and the waste and surpluses have accumulated somewhere else, while the original production areas were slowly depleting. New systems and new organization will work on closing the cycles again to bring back what agriculture needs to function. The economics of energy will change the chemical industry and its products. Everything will aim at using as little primary resources as possible and maximize the efficiency of inputs by both bringing entirely new products and application techniques. It will be true for energy, water, fertilizers, chemicals, medicines. The new focus will be about using just what is needed when it is needed and only in the dose that is needed, and no more than that. It will be all about precision agriculture, precision animal husbandry, precision packing, precision manufacturing, precision processing and precision logistics.

When externalities manifest immediately, there will not be the time discrepancy between financial results and environmental results. There will be no excuse anymore to say that there is no evidence of consequences. There will be no possibility of creating the confusion, either. When pushed to the limits of its resilience, Nature will bring the financial and the environmental at the same timeline. It will be stressful. Doing the right thing environmentally, or in other words, producing sustainably, will be the best, and only, short-term strategy for financial sustainability.

Copyright 2012 – The Happy Future Group Consulting Ltd

Just for fun, a bit of science fiction

October 15, 2011

One of the issues that I regularly raise during my presentations is the one of the farmers of the future. As about everywhere in the world, the average age of farmers is increasing, this brings the question of who will take over and what effect it will have on the future of agriculture and future production systems.

One topic that generates interest from audiences is the possibility of having farming robots. Surprisingly, the same intrigued enthusiasm comes from audiences that have a bias against industrial large-scale agriculture. Yet, the prospect of robots roaming the fields does not seem to be a cause for concern.

Because of the lack of interest by the youth to take over farms, the Japanese are actively working on setting up farms that could be run by robots, instead of humans. In many other countries the aging farming population with the limited interest from younger people to become farmers, also linked to the rising price of agricultural land, raises the question of how big farms might become, and how to manage them.

Currently, the many developments in the field of robotics, of satellite applications, of field sensors and of computer programs make a futuristic picture of farming become more realistic.

With the expected rise of the cost of energy and of the price of all compounds made with massive use of fossil fuels, precision agriculture is the future. The name of the game will be zero-waste. Future economics will not allow for wasting energy, water or fertilizers or any other input. It will be imperative to get the most out of the least, not just simply producing more with less.

The use of satellites to map fields and indicate the variation of the content of fertilizing elements in the soil is already a reality. The use of GPS for harvest is now common with modern equipment. We are really only one step away from having computers processing all this data and operating fertilizer spreaders by automatically regulating the distribution of fertilizer on the field, based on the soil scan assessment. This will avoid overuse of fertilizer in zones that already contain enough nutrients. With the expected exhaustion of phosphate mines, and the large variation of phosphate contents in soil, it will pay off.

We are also only one step away from having tractors, harvesters and other agricultural equipment doing the fieldwork without drivers. A company in Iowa is already developing such a technology by linking the position of a tractor to the harvester via GPS. Such an approach makes the use of human operators less of a need than it used to be. This would allow farmers to manage much larger areas from one remote location. Their role would become more one of process controller, monitoring and steering the fieldwork by ways of cameras and remote control. This also would require less physical work, thus allowing aging farmers to manage at least as much production as they would have at a younger age. This would become even more of a possibility, as farming robots would be developed to replace humans for the physically more demanding activities.

Developments in the area of sensors also offer many possibilities in terms of farm and risk management. The ability of monitoring variations of temperature, humidity, plant growth, the presence of diseases, fungi and other pests in real-time would help make use of resources much more efficiently. Current developments of biosensors used in food packaging are amazing. Some of such sensors have the ability to turn fluorescent in presence of food pathogens. They can help prevent risks of food poising. Sensors help to detect undesirable “visitors”. Sensors also would help farmers detect potential threats at an earlier stage, even before they actually become visible by the human eye. This would allow starting treatment before problems could take proportions that would threaten production. This has the potential to help farmers produce more optimally, and to produce higher yields than they would otherwise. Linking such sensors to devices that can release the necessary amounts of water, nutrients, pesticides and possibly herbicides would help produce quite efficiently, and would reduce the use of inputs. This would help reduce waste, work towards more sustainable farming methods and reduce the use of chemicals, as they would be used only at the right time, at the right place and in the right quantities, instead of being applied systematically to the whole fields, including areas where they are not needed. The use of airplanes to spread chemicals could be eliminated, which would also reduce the use of fossil fuels. Instead of airplanes, it is possible to envision the use of drones that would have a “patrolling” function to detect anomalies or the extension of pests in the fields. By bringing the huge amount of data that these robots, sensors and drones would produce, fields would be monitored on a 24/7 basis and decision-making would be faster than today. Corrective action could be implemented automatically just as well.

By adding more monitoring functions and developing ecological modeling, this futuristic approach would be a way of managing the interaction between the crop itself, which is the purpose of food production, and the need to manage the ecosystem surrounding the fields, to ensure that production is carried out in an environmentally sustainable manner. Monitoring living organisms in and outside the fields would help optimizing production. The farmer would know the status of soil organisms, mostly worms, insects and microorganisms. He would be able to deal with pests in a targeted manner, almost in a similar way as the images of surgical strikes that we can see in the news. Mapping the extent of weeds through such devices would also allow their control in a targeted manner and with minimal use of potentially harmful compounds. The emphasis would be about control and management, not on killing out everything that seems a threat.

Further, monitoring fields as described above would support the environmental steward’s role of farmers, while making it easier to execute as well. Farmers would be informed timely about production effects on groundwater quality and possible residues in the soil and the crops.

Of course, all of the above sounds like a bit of science fiction, but considering the amazing innovations taking place in the all the areas mentioned, together with the constant miniaturization of devices and the increased processing abilities of computers, it might not be as far-fetched as it may sound today. Although many of these developments are not taking place in the agriculture sector as such, they are real and happening faster than one could imagine. Farming in 50 years from now will probably look different from it does today.

Copyright 2011 – The Happy Future Group Consulting Ltd.