An industry ripe for disruption…
After a solid six months of daily, in depth research into global food systems, agribusiness trends, and the daily trading of primary grains including corn, soybeans, and wheat, what my macro focus discovered was this: agriculture is totally FUCKED.
I’m sorry if my harsh words offend the ears… I just gotta keep it 100 and be absolutely honest. The Fourth Industrial Revolution (#4IR) is here, and so are the disruptions.
I’ve spent the last six months ghost writing for a grains broker; I’ve always loved agriculture and farming, fantasized about having a farm, raising chickens, and harvesting ears of corn. What I learned during this six month exploration is that the dream is far from the reality, that small and medium-sized farms are going out of business, that the agribusiness industry is consolidating on a massive scale just as the financial industry did over the last decade, and that, although a very large global industry, agriculture profits are at near all-time lows. What’s the incentive for farmers to produce when profits are so low? Not only that, but with interest rates rising, and farm debt already at very high levels (on top on very low profits), what direction is there to go but into insolvency?
A sampling of recent disruptions:
Six companies are about to merge into the biggest farm-business oligopoly in history. Regarding: Bayer, Monsanto, DuPont, Dow Chemical, Syngenta, China National Chemical Corp. This is old news, at this point, but I’m still surprised by how many people have NO CLUE as to what’s going on with their food. Forget about sustainability and food diversity, because that’s a reality humans will never see again. Again, gotta keep it 100, ya’ll. Hate the idea of genetically modified crops? Sorry, you don’t matter. While it IS true that the rising Chinese middle-class is wanting more organic soybeans and soy oil, and the Chinese are the key to global grains demand, it is equally true that, without genetically modified crops, many in developing economies around the world would starve. If you don’t think that’s true, then you probably live in the United States, or some other wealthy country isolated from the realities of global food poverty.
Alternative farming methods are coming to prominence, from shipping container farming and advanced hydroponics to vertical farming and green cities. “Smart Farms” are all the rage right now… technologies such as precision agriculture, drones, robotics, automation, and IoT using artificial intelligence and machine learning to improve yields, lower costs, and increase profits. Amazon is buying grocery stores, bringing their automation and disruptive technologies and infrastructure to agribusiness. Think this won’t have long-lasting ramifications on the world’s food? Think again. Amazon’s purchase of Whole Foods is just the beginning. Prepare yourself for consolidation in food distribution and grocery chains, as well as food producers and even food production areas. Amazon has a HUGE appetite, and the devourer of worlds is never satiated.
Enter the beginning of the end for humans in farming. In ten years, the agricultural industry will look completely different.
Need More Food in 50 Years Than All of History?
The Green Revolution of the last half-century had dramatic results on increasing food production: India alone doubled its wheat harvest from 1965 to 1972, and the world overall doubled its food output from 1960 to 2000. However, according to some, most of the things scientists can do to raise grain yields have already been done and the innovations of the Green Revolution have run their course.
Global projections show that, in addition to projected investments in agriculture, further significant investment will be needed to enhance access to food, otherwise some 370 million people could still be hungry in 2050, almost 5% of the developing countries’ population. According to the latest UN projections, world population will rise from 7.5 billion today to 9.1 billion in 2050. Nearly all of the population growth will occur in developing countries, with Sub-Saharan Africa’s population expected to grow the fastest.
Climate Change is impacting and will continue to impact harvests and production areas, from changing weather patterns to demographic shifts. More and more people are moving to cities and as a warming climate makes it more difficult to grow crops, and approximately 70% of the world’s population will live in cities or urban areas by 2050. We’ve already seen the “Great Migration,” but this is only the beginning.
According the the FAO, melting glaciers and rising sea levels will inundate low-lying rice paddies in southern Asia, and leave others — from Australia to America — parched. Guess what… Australia is suffering with drought in important agricultural areas RIGHT NOW. The U.S., as well, is seeing dryness recently in important Eastern crop areas. Volatile weather has become the seasonal norm.
Demand is certain, food prices aren’t!
In the first half of this century, as the world’s population grows to around 9 billion, global demand for food, feed and fiber will nearly double while, increasingly, crops will be used for bioenergy and other industrial purposes. In fact, didn’t China JUST announce a shift to ethanol production in an effort to not only curb climate destruction, but to also reduce their many tons of old, stockpiled corn grains?
Adding to the confusion for future food prices, much of the land not yet in use, but which will be required for farming in the relatively near future, suffers from chemical and physical constraints, not to mention a lack of infrastructure. Significant investments are needed to bring new lands into production, and we can expect this effort to be FOR PROFIT, lol.
Some say worries of food-lack are overblown, and that, because of genetic engineering and other advances, such as CRISPR, that there will NOT be vast increases in the numbers of the world’s hungry. Biotech companies would come forth with new innovations, and greater concern about protecting against hunger once there’s enough money to be made from the effort. Oh, that hurts your sentiments? Sorry, humans are humanity’s problem. Why should food be any different?
Normally, you’d think this uncertainty would be great for food prices, and thus agricultural profitability, but not necessarily so. We don’t even know what form our proteins will take in the next ten years! For all we know, our primary protein sources could be bug-meal. And that’s no joke… bug-processing plants are HUGE right now. “Where’s the beef?” There is none… a major fix for a major climate issue. #CowFarts
Human Nature – That IS a certainty.
“Ultimately, it is the nature of society, as much as science, which will determine whether the world can adequately feed all its inhabitants in the future.”
“At present the economic policies of the rich world, particularly when it comes to subsidizing and protecting its own agricultural industry, discriminate against farmers in many other parts of the world. At the same time many developing world governments keep food prices artificially low and fail to invest in the rural economy. By doing so, they discriminate against small farmers. Political reforms will count for just as much as agricultural innovation in the war on hunger.” -FAO
Final Thoughts:
Above and beyond agribusiness consolidation, the rise of alternative farming methods, growing global populations, Climate Change, and demographic shifts, HUMANS are the reason agriculture is FUCKED. That’s what I leaned as a Agricultural Economist.