Why Agri-Food?

Transforming the Entire Food Ecosystem

Where is the “food” part of this blog? I have been remiss in providing an explanation of the title for my discussions – Agri-Food Technology. Let me take a moment to shed some light on this subject.

Optimizing the Chain

Possibly the best way to clarify this concept is to talk about the food supply chain which is not yet a value chain - but more on this later. If you view food manufacturing in its’ entirety you get a sense of the opportunity for optimization of the collective industries that make up this dynamic continuum of agriculture and food. This ecosystem might not be broken but it is a long way from being efficient.

Beginning with those companies that manufacture equipment or crop inputs, including genetics, all the way to the consumer you get a sense of what many refer to as “farm to fork”. Except in this case it is really “pre farm to fork”.

 

More with Less through GEM Data

How can a food and beverage processor benefit from technology that their suppliers of raw product deploy? The answer is in the data. And how can a grower benefit from sharing that data with their business partners downstream from them? The simple answer is in the optimization of Genetics, Environments and Management practices (GEM) that delivers better quality raw goods resulting in better processing yields to their buyers who are willing to pay for it.

All processors or food manufacturing executives can readily recite the costs of production for each line item on their Income Statement. Containers, ingredients, equipment, energy, labor, transportation, etc. (COGS), and, last but most important and the largest figure of all for first stage processors– raw product – is the one that typically receives the least amount of attention from management.

Upwards of 40% of costs of producing a single can of peaches can be attributed to the purchase of those peaches from the grower. Now if one could somehow buy the same amount of product from farmers and produce just 1 more can of sliced juicy fruit or more than 1% more cases of finished goods that money would go straight to the bottom line. No more effort. No more cost (OK maybe the cans and other variable costs). Free peaches mean increased profits for processors.

Give Me Your Watch to Tell You What Time It Is

Great! So now I have told most of you something that you already knew. But how would you suggest that one go about getting free peaches? Here it is again. The data.

Tomato processors have figured it out to some extent. They know that better quality crops mean better processing yields overall. In the case of paste manufacturing it is less water and more tomato (solids) that drives improved output. There are other quality issues but for the most part it the amount of solids that receives the lion’s share of the focus.

There are only three variables that can create a better tomato. Genetics (seed, seedling), Environment (weather, soil) and Management practices (crop inputs –nutrients, pesticides, water, labor, and equipment) and the right combination of each of these can more consistently deliver not only better quality for processors but better yields for growers.

Aggregation and analysis of the GEM data in and of itself will not solve the problem of delivering a better “packout”. But combining this data with production results can and will result in greater processing efficiencies. There is, however, one operational requirement in order to achieve the desired improvements.

Traceability Not Just for Recall Management

Without traceability, knowing where the product came from (grower, farm, field, block) one cannot gain insights into what caused good or bad processing yields. And without that critical tie between processing performance and a particular products’ GEM there is no hope in determining “best” combinations of GEM.

Value Chains Share

Our old nemesis CHANGE rears its ugly head once more. The supply chain requires a transformation to that of a value chain. What this means is that processors and growers need to establish a very different relationship than the one under which they currently operate.

Chain optimization means that value needs to be shared between partners. Where there are gains there should be compensation provided to those who deliver those gains. The growers’ costs for collecting and managing the data needs not to be simply covered but should result in the payment of some sort of premium. Incentives drive behavior. Just ask my pal Melika. Ball? Cookie? Squirrel?

Picking Up The Pace

Fast Tracking Technology Adoption

What needs to happen to accelerate the short term adoption of technology in the agri-food market? Better apps? Next gen farmers in key management roles? Commercial or government compliance? Assistance from tech savvy crop advisors? How about all of the above with some additional effort on the part of the technology providers?

KISS!

A better application can be a lot of things but clearly simplicity will be a key driver for incorporating systems or hardware into the fabric of the American farm. If the “on boarding” process is difficult and the “widget” or “app” is saddled with complexities it will be hard to find the necessary commitment on the part of growers to navigate a steep learning curve. Interpretations of the data or the act of turning that data into informed decisions needs to be straight forward and obvious. Of course there has to be a clear value to be received in using the new tool. More on that issue later.

Farming as Lifestyle

As noted in a previous discussion the average age of growers is about 56 years old today. What I failed to point out is that farming is less a vocation and more of a way of life. Most farmers don’t retire, they expire. In some cases more senior members of the management team may stand in the way of the incoming CEO who might be advocating a change in the growing methods or practices that have been deployed over the years.  They might be tried and true but are they, in effect, “best practices”?

Comply or Else

Nothing forces change more rapidly than compliance. When the choice is to continue farming or run the risk of being assessed fines, threatened with business closure or, worse, having a key buyer discontinue their relationship with that business, then change will occur. Sure records are kept in order to better measure and manage but it doesn’t hurt that government regulators are requiring the official reporting of activities that might include pesticide and nutrient usage on the farm. Using technology to help automate that reporting is a no brainer and minimizes the impact on the business in terms of risk, time, effort, hassle and cost. Not many want to admit it but that same information can be used for making better decisions regarding the effectiveness of various crop inputs and cultural activities.

Every Day Low Prices

Government is not the only compliance enforcer. Buyers, whether processors or packers, are “asking” for more information about the products that they sell. This may be coming from consumers or investors by way of grocery retailers or food service providers. Companies like Walmart, the gorilla in every ag and food manufacturers’ conference room, are demanding more information from their suppliers to substantiate their own claims on sustainability. It doesn’t do any good to say that they are environmentally sustainable in their own business practices if the products that they sell are not in compliance with the real or perceived laws of Mother Nature. These companies are simply responding to the pressures from NGO’s, consumers and their investors and, in turn, turning up the heat on the left hand side of the agri-food supply chain.

A Little Help from Your Friends

Growers will require an enormous amount of assistance to incorporate new technologies into their day-to-day farming operations from those people they consider to be their trusted advisors. These agronomists, soil scientists, entomologists and a host of other “ists” are the key to migrating farming towards science and technology-based decisions. The key is that while the systems, devices, sensors, controllers, models, analytics and apps improve over time and deliver increasing value to the grower, it is the people who embrace these new tools as a requirement for improving their own services that will increase the velocity of change in production agriculture. Conversely, these people will be fairly compensated in order to attract the best and the brightest minds to an industry that will need top performers for future success. That is, growers will need to pay for these services.

I’m From Missouri – Show Me!

Something that needs to happen in order for agriculture and food processing to experience a true technological revolution is that same critical step that has been ignored for the last 30 plus years. PROOF OF VALUE. Every high tech company in the agri-food market sector has a whole host of, what they consider to be unique, “Value Propositions”. And these are just that, proposed value for their products and or services. And they are not unique. Here is a list of such VP’s that each and every ag tech company promotes to their buyers:

·        Increase yields

·        Optimize inputs

·        Enhance quality

·        Increase profits

Now there may some variation on these propositions but they are pretty much the same even if one includes saving time or reducing costs (optimize inputs and increase profits).

Many of these new products and services probably deliver on all of these key points. Anecdotes and intuitive thinking may lead us to believe in how a “widget” or “app” returns real dollars on the original investment. Case study videos may put us face-to-face with growers who fall into the excited early adopter category in our beloved “curve”. Those ag producers in the bigger part of the bell-shaped graph may need more proof, however. Who could blame them?

When technologists come to the realization that they can move their products faster and with an increased volume simply by proving the value of their offerings they will have a problem that every company wishes that they could have – demand will exceed their ability to deliver it.

 

Technology Revolution or Evolution?

“Understanding the Market Chasm”

What Makes Farmers Tick?
So why haven’t we experienced the revolution in agricultural technology that many are expecting to occur in the next few years? There are a lot of factors that should be considered in the analysis of the situation, some of which might include the following insights and observations:

·        Growers are, by nature, cost managers as most, not all, do not control the price of their finished products and can only manage expenses as a means to achieve profitability. Many view something new as simply an added cost of production. Farmers buy retail and sell wholesale.

·        Growers who are doing well financially will rarely change their practices in the hopes of achieving even greater gains. It is difficult to argue success.

·        Growers who are struggling financially will not invest in some new technology unless absolutely forced into that decision. Most farmers are “cash conscious” (taxes are filed as cash basis)  and view the balance in their bank account as a good indication of success or failure. You don’t buy what you can’t afford.

·        Change assumes risk and most growers are conservative by nature and risk averse. Farming is already inherently risky when dealing with the weather.

·        The average age of farm owners and managers is 56 and trending up slowly. The point being that many do not think in terms of “technology as solution” in their decision processes. “Just Google it” is not in the farmers’ vocabulary.

·        The majority of crops are harvested annually. A producer has one chance every year to do everything right and turn a profit. Changing the formula for success is not something that is taken lightly. You get one shot every year and you can’t afford to mess it up.

This peek into the psyche of the American farmer should not be a surprise to many who have experienced first-hand these behaviors. It may be that this is an observation of human nature in general and not restricted to those people engaged in the business of farming.

Not Just Growers Need to Change
The technologists should also assume some of the responsibility for the slow adoption rate. Many of these companies have entered the market with the latest wiz bang disruptive technology tool that only complicates the decision processes further. Generating more and more data may not be a solution to any problem. When so many new products only address a single or maybe just a few aspects of the total number of decisions that growers are making daily concerning pests, nutrients, genetics, water, equipment, labor, weather, marketing and many more, spending too much time on one challenge may not be the best use of a producers’ time. If the new “thing” does not simplify a growers’ life it will not be used for very long.

Talking 'Bout a Revolution
What will it take for the changes to occur in farming that will truly revolutionize farming the way that hybrid corn did in the 40s and 50s or GMO soybeans more recently?  Significant increases in yields, improvements in quality, optimization of crop inputs and greater profits for the farmer are within the grasp of the industry. Tech tools are currently available to enable huge efficiency gains in agriculture. Unfortunately, pulling all of the data from so many disconnected and disparate sources has not been easy to do. More importantly we are at the beginning stages in developing true decision making tools. Measure and monitor needs to migrate towards apps that control systems and hardware as they do in VRT. Morphing applications to those that optimize using predictive models will yield greater returns-on-investment as will the introduction of the final phase of automation where user interaction in the decision process is minimized substantially.

Across the Great Divide
Geoffrey Moore, in his book “Crossing the Chasm”, took another cut at the adoption curve that Everett Rogers had hypothesized and inserted a gap between a preliminary and secondary group of Early Adopters. This gap, or chasm, demonstrates what many of us already know about the technology revolution that will certainly be in our future. Getting the market to leap across a great divide may require some actions that have yet to be taken by both the technologists and the growers. More on that later.

Managing Expectations
In the meantime, technology entrepreneurs will need to temper their expectations as to the adoption rate for their products and services as we evolve agricultural practices and processes over time. And there may be steps that can be taken to shorten those market growth timelines given an understanding of the grower persona and behaviors. The potential for success is clear. The path to getting there will be challenging.

 

Agri-Food Technology Adoption

Industry Change Required

Revolution or Evolution
Recently a lot of attention has been given to the enormous opportunity for new technological advancements to transform the way we grow crops. The spotlight is on production agriculture now more than at any time before as investors and entrepreneurs seek to revolutionize the way that we go about the business of farming. Is it possible that this may be more of an evolution than a revolution and will require several more years than most high tech executives currently have outlined in their business plan timelines?

Technology Adoption Curve and Mr. Rogers
In order to fully understand the rate-of-adoption for agricultural producers one needs to look back at a study that was conducted on this subject by Everett Rogers, a professor at Iowa State University in 1962. Mr. Rogers grew up on a family farm where the primary crop grown was corn. He experienced first-hand, in the years of The Great Depression, the effects that disease and drought were having on their own crops. In 1925 an agronomist by the name of Henry Wallace developed a double cross inbred hybrid corn that possessed certain qualities that included a resilience to the adverse effects of weather and pests. Rogers noted that in a 1933 study conducted by the USDA only 0.1% of growers were planting the new variety even though it was proven that it was superior in many ways, including yielding on average 25% more than other available varieties. By 1946 the adoption of hybrid corn was at 70% for all corn acreage. It took over 21 years to achieve these levels of incorporating the new technology into the farming operations of most US farms. Through these observations Mr. Rogers developed a technology adoption curve (published in his findings in the book “Diffusion of Innovations”) that others, including Geoffrey Moore, author of “Crossing the Chasm”, used to explain how people and markets embrace new innovative tools for use in their businesses.

Quickened Pace But Fast Enough
To be fair, a lot has changed over the years and we are living in a faster paced world where it can take considerably less time to integrate new technologies into todays’ agribusinesses. If one looks at the adoption of GMO soybeans we see that this, in fact, is true. Within 8 years almost 80% of all fields were planted with the new seed over other available varieties. Another example of this change in rate of acceptance is the incorporation of precision agriculture tools like geo-referenced mapping, GPS guidance, yield monitors, variable rate technology and aerial imagery in US agriculture. Introduced in 1992 the yield monitor was being utilized on almost 45% of all soybean and corn acreage by 2006 (14 years). Variable rate technology did not experience the same rapid growth as yield monitoring with 8% of soybean and 12% of corn acreage deploying systems 10 years after its’ introduction.

Ch-ch-ch-changes
Growers are using smart phones and tablet computers to access market, weather and agronomic information to help them make better decisions. But to truly transform their decision processes requires something that may not be an integral part of their DNA. Change. Changing the way that they go about the business of farming from one that uses intuition, tribal knowledge, past experiences and an increasing reliance on the recommendations of their trusted advisors to a methodology that is data driven by economics and science is not an easy transition.

A better understanding of the farmer persona may provide answers to some of the questions regarding how the technology rate-of-adoption can be accelerated. Or it might just provide an explanation as why we are where we are along the curve that Mr. Rogers hypothesized so many years ago.