The Path to Enlightenment

How the Market Achieves a Technological Big Bang

Surf’s Up

This might sound more like some kind of Zen moment where the heavens open and we begin to embrace the new and improved methods of producing, processing and even delivering our food. There are many ag and food supply chain folks out there who will find that this, in fact, does happen and their worlds will be shaken to the core. For those who are at the forefront of this movement you might just get a chance to ride that wave that us old timers have been waiting on for many, many years.

 

There’s a New Deal a Comin’

The leaders in the revolution will be the younger generation of agribusiness professionals who are the trusted advisors of the growers. The agronomists that succeed will be “techno business management agronomists” who understand how all of the pieces of the puzzle come together to deliver solutions – not data or information or suggested courses of action but the best answers to the questions as to “what do I do right now” balancing science and economics to perfection.

Transition to Services

Ag retailers, hawkers of chemicals and fertilizers, will need to change what they do and how they conduct their businesses. The profits that they generate from the volume sales of materials will be surpassed by their services business. They must be prepared to give chemicals and nutrients away at cost in order to convince growers that their own interests are the optimization and profitability of their clients’ businesses. At this point there will no longer be a conflict of interest in the relationship between farmer and crop advisor/salesman.

Money! It’s a Gas

When they are no longer order takers for these products and become the experts in minimizing the use of these inputs while simultaneously maximizing crop outputs the corner will be rounded on the road to success for both parties. And swept up in this revolution will be the technologists who have figured out that the way to a grower’s pocketbook is through his advisor.

Aligning the Stars, Planets, Moon and Earth

There is no one company out there who has EVERYTHING UNDER THE SUN in the way of the “total solution”. No one is even close. Well, maybe Trimble has a start towards the lofty goal of assembling the building blocks on the ag side of the equation. But who is thinking about the other major component of the optimized chain? Food processor and packer. If they are out there then they are keeping a low profile.

 Next: Vertically integrated food and ag companies vs value chains.

Where's the Uber of Ag?

About a year ago my wife and I found ourselves in downtown San Francisco at exactly 5:00 PM on a weekday after a Giants game hoping to hail a cab to meet some friends for dinner on the other side of town. I mean, how hard could that be? There was no shortage of yellow vehicles racing up and down the streets but most of them seemed to be occupied with fares. After more than just a few minutes of waving my arms and failing to find an available driver I called the cab company.

 

A Broken System

I had my smartphone on me and got the number easily and spoke to the dispatcher. She asked for my address and I told her the corner I was on. “No. The address!” was her reply. The buildings around me had some numbers but I couldn’t tell which street address was showing on which street so I gave her what I thought was my location. 15 minute arrival time was the answer. We waited and with nothing better to do we watched the traffic and people around us. A strange phenomenon unfolded whereby I began to notice cars with passengers in the back driving up and dropping people off without any type of exchange of legal tender or even conversations. Mounted on the dashboard of each of these cars was a smartphone.  

When I called my friends and let them know that we were going to be late they asked if I had “Uber”. I had heard of Uber but was not familiar with how it worked. I now know what true “game changers” and “disruptive technologies” are. Uber.

Too Simple to Ignore

For those of you who have not used it then you are not aware of the new taxi experience that takes away much of the hassle of using the traditional Yellow Cabs. It knows where you are and you simply tell it where you want to go. It contacts the nearest available drivers to make sure that your waiting time is minimized. It tells you the estimated price. It tells you the estimated time of arrival. It tells the driver exactly which route to take to get there the fastest way possible. You do not have a dispatcher to deal with who may misinterpret an address or fail to pass along important information about your location. You can communicate directly with your driver via text or phone call and, best of all, you pay with your credit card that is on file and do not have to deal with any part of the transaction at the time of drop off. You simply walk away.

Nothing Out There

What does this have to do with agri-food technology? Well as of this writing there is no Uber of agri food. It doesn’t exist. I have heard countless entrepreneurs talk about their products as if they are sure that they have created the next billion dollar company that will transform the way that farmers grow crops or processors will produce food items. It is not out there today. And we may be a long way away from anyone actually delivering something that truly “disrupts” or “revolutionizes”.

Facilitate Don't Complicate

The reasons for this are many. One fact remains - farming is complex. There are many variables with which to contend and then throw in the weather factor and it gets much more complicated. Sure there are lots of apps out there. Imagery (drones and satellites), mapping, variable rate, crop recordkeeping, ERP systems, irrigation management systems, yield monitors and on and on, but no simple app to tell growers what to do and when to do them, and then order up the resources and make it happen. That is what Uber does. I need a ride. I get a ride. And the experience is much more pleasurable than the old way of doing things.

Next: Describing what a disruptive technology looks like in the agri-food technology market sector.

 

 

 

 

 

 

 

How Will Agri-Food Technology Evolve?

Size Important to Big Players

Technology adoption will gather momentum over time and the necessary changes in the way that we produce, process and deliver food (fiber, feed, fuel) will occur. This is not prophetic. Most of us know that it will happen but note that there is no mention in the above statement as to when that will happen or how it will play out.

Crowded in Here

At last count there were well over 100 information technology companies making some sort of play in the ag and food “space”. The most notable insider players include Deere, Monsanto, Syngenta and Trimble, with what appears to be a number of others sitting on the sidelines putting their digital strategies together while waiting for the market to respond enthusiastically in utilizing technology, therein making some innovators wildly successful selling products and services to growers, processors and supporting agribusinesses. As everyone knows, it has not happened yet.

Gorillas Watching and Waiting

What about those outsider horizontal marketers like Google, Microsoft, Verizon or Oracle? Are they watching this opportunity and trying to determine when they should make their move? It appears that the potential for growth in this emerging business sector is large enough for even the tech giants to strongly consider an agri-food foray. Unfortunately, they cannot simply acquire their way to success. The reason? Buying these miniscule, relatively speaking, startups is tedious, expensive and fraught with risk. Let’s face it, there are no more Climate Corps out there to snatch up for a cool billion dollars.

Where would I put my money? Given the choices I might lean towards the technology companies. Here is why. They understand the business models that have proven to be successful for the horizontal markets, aka – free for users, and they know how to turn data into dollars. They are also doing it in a number of vertical industries and that knowledge can be transferred when they engage the agri-food market.

Domain Expertise Required

The downside of the IT corporations entering ag and food is that they do not understand the market as intimately as those companies that have been selling tractors, seed or crop inputs for many, many years. They will need a partner or partners to help them in building the predictive analytical models needed to revolutionize the way that we manage our food, fiber, feed and fuel supply chain.

Integrate and Integrate More

Before change can occur more and more growers will need to continue to integrate all of their available technologies (ERP, imagery, guidance, apps and more) and, specifically, the Internet of Things (IoT) tools that measure, monitor and control. These devices will continue to have limited value until they are interconnected across the enterprise and then, eventually, across the entire supply chain. At the point that this occurs the data will have the real, not proposed, value that meets and, ultimately, exceeds market and investor expectations. Then, and only then, will we experience the transformation to a true value chain.

Bigger Can Be Better

How does this all come about? There are a number of answers to this question but suffice to say that the short answer is “consortium”. Agri-tech startups will need to integrate, merge, acquire and generally work together to make themselves more valuable and appear larger, not just to the growers or processors, but also to those sideline companies who will enter the market in a big way.

World Agri-Tech Investment Summit

 

San Francisco Summit Report

The recent annual meeting of investors, ag producers, food processors, entrepreneurs and curiosity seekers, like myself, yielded some very interesting insights into an exciting market sector.

Let me just say that I am of the opinion that every challenge that we face in achieving our goal of feeding the projected 9 billion people on the planet in 2050 can be solved with technology. Most of it is available even today. I did not say that it would be accomplished in a sustainable manner, just that it is possible. The meeting confirmed my understanding of this truth .

I Left My Heart….

Perhaps the best way to describe what took place in The City by the Bay last week is that there were two events scheduled simultaneously that were at exact opposite ends of the technology spectrum. The Game Developers Conference was being held at the Moscone Center with thousands of exhibitors and attendees roaming the lobby of the luxurious Marriott Hotel where our meetings were held.  They could be spotted by their casual attire, colored hair, large ear adornments, metal bit piercings, tattoos and youth. It is obvious that this market had infinitely more interest and excitement than the agri-food technology sector.  

Computer gaming, however, is lost on those of us who feel that technology is a tool to be used to assist in achieving something of value. And what is more valuable than food?

Best and the Brightest

I was impressed with the fact that incredibly brilliant people are addressing the problems that ag and food production faces throughout the supply chain. Biotechnology, robotics, information technology, sensors and imagery are just some of the tech solutions that were discussed at the conference.

It was encouraging listening to the investment community’s view of the market growth and opportunity during the course of the sessions. It was evident that they have resigned themselves to a number of facts that those of us who have been watching the “evolution” and not the “revolution” have been all-too-aware for many years. Adoption is slow.

Butcher, Baker and Candlestick Maker

Speakers included growers, farm managers, venture capitalists, fund managers, ag product manufacturers, seed companies, bankers, ag retailers, food processors and, of course, the technologists. We heard about RNAi, CRSPRS, IoT and IT, to name just few of the acronyms.

Innovative Innovators

I spoke to interesting people at every turn. One gentleman had developed an insecticide made from the poisonous venom of rare spiders in Australia. Another was using a patented UV light process to grow bigger and better lettuce. The removal of heavy metals from soils was of interest to a woman from China who talked about the results of unsustainable practices in that country that had left thousands of acres of land sterile. And a scientist from Madison WI who said he had developed just such a product. There was even a young man who worked for a vertically integrated enterprise (from crop inputs to food) that understood the value in creating a “value chain” with free flowing data up and down that chain. Oh, and my British cousin (same surname) talked to me about the development of rapid animal genetics mapping that can predict "best" results for dairy and beef farmers.

Investors included representatives from Google, Bill and Melinda Gates Foundation, Rabobank, Kleiner Perkins and Accenture. From the ag manufacturing world there were people from Deere, AGCO, Bayer, Syngenta, Monsanto, Dow, DuPont and BASF. The list of attendees and the companies that they represented was impressive, to say the least. And it truly was a global gathering with folks from Brazil, Mexico, India, all over Europe, Baltic States, China and, obviously, the USA in the audience.

Virtual vs Reality

I would say that while gaming might seem to be a great investment now, in the near future it will be the challenges associated with eating that will change our perception of agri-food technology and the crucial role that it will play in producing and delivering food to the masses. Portfolio managers understand this fact and are investing in our future.

 

Big Data and Missed Opportunities

What are the issues and controversies surrounding big data and the agri-food industry? They’re many and contentious. That’s the short answer but there is more to this discussion than a one-liner. But you knew that, right?

 

Data, Data Everywhere….

When we look at all of the data that is generated on the farm it is, as most growers will tell you, overwhelming, to say the least. Data from sensors, controllers, devices, software applications, satellites, drones, tractors and implements are being collected in the cloud or on computers somewhere in the producers’ world.

Weather, soil moisture measurements, GPS tracking, seeding rates, nutrient applications, accounting, pesticide records and on and on are all part of the ag big data equation.

So What’s the Big (Data) Deal?

Companies like Google, IBM (Watson), Dun & Bradstreet, WalMart, VISA and others have made decent profits analyzing what some might consider to be relatively innocuous electronic activities and/or transactions. This data “mining” has resulted in the identification of very valuable trends, facts and insights that can only be possible when there is a lot of it (data) – and they have the right to access it.

This is why Monsanto, Deere, Syngenta, Trimble, SST and just about everyone in the agri-food technology “space” so covets a growers’ data. Answers to all of the questions regarding yield, and more importantly, profit maximization on the farm can be found in all those bits and bytes.

The Cure for Cancer and 300 Bushel Corn

About 7 or 8 years ago the health care industry was charged with overhauling their information systems from paper files to electronic records. Some hospitals and doctors office had been undergoing the change prior to this mandate but for the most part one could walk into many offices and gaze at row after row of old manila folders containing all of your, and everyone else’s, medical history. Needless to say analytics of this data was nonexistent.

The opportunity for improved patient care is huge today because of this medical digitization. We have an opportunity to determine the effectiveness of procedures, practices, and pharmaceuticals that had never been possible before.

GEM (GeneticsXEnvironmentXManagement) analytics of our medical records can tell us so much about those causes of our ailments and success of the prescribed practices. Researchers say that in the future every individual with any given diagnosis will have a unique treatment plan based on historical successes or failures of millions of patients and their prescribed solutions before us.

Distrust Fuels Fear

What does this mean for growers who have a lot to gain and possibly something to lose from the extensive analytics of BIG DATA?  Suffice to say the upside for growers, processors, packers, retailers, food service providers and the consumer is unlimited. What is keeping us from realizing these gains in efficiencies may be as simple as what is between our ears and a gripping distrust of those who might control the data and therefor the outcomes.

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.