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.