Food prices hit their highest in a decade by the end of last year. Fertilizer prices, too, saw all-time highs as 2021 turned into 2022, further exacerbating food inflation.
Prices for both sets of commodities have continued to rise this year as supply chain disruption — caused in part by the Covid-19 pandemic — continues.
As pointed out by panelists at the recent Bloomberg New Economy Forum in Singapore, all this is taking place against the backdrop of a longer-term trend towards a larger population demanding more food – with diminishing land and natural resources to produce it.
Panellist Dave MacLennan, CEO of Cargill, argued that the agrifood supply chain has “proven to be surprisingly resilient” amid all the short-term upheaval. But he added that climate change presents a major challenge over the longer term, citing the supply impact of last August’s Hurricane Ida, which took out one of his company’s key grain terminals in Louisiana, US.
“We’ve been able to get food from where it’s produced to where it’s needed, with some exceptions,” he told attendees. “Notwithstanding the inevitable natural disasters coming from climate volatility, the food supply chain has worked relatively well – even amid Covid-19. But that’s not something we can take for granted.”
MacLennan’s co-panelist and counterpart at Bayer, Werner Baumann, offered a cautiously optimistic outlook: while acknowledging the size of the task ahead, he argued that agriculture is going through its most rapid period of technological and scientific advancement in modern times – meaning we already have many of the solutions waiting in the wings.
“Agriculture has become more sustainable. But if you look at the massive impacts that climate change is going to have on all of us […] we have to reduce the footprint that is being used by agriculture while also increasing yields,” he said. “At a minimum, [that means] not increasing acreage, but bringing more intensification on existing acreage – while at the same time freeing up acreage for reforestation and carbon sequestration.”
Baumann also highlighted technologies such as biological nitrogen fixation, which could reduce the environmental costs of fertilizer production and application, as well as selectively-bred crop varieties that can ensure more predictable harvests.
Reappraising GMOs, prioritizing soil health
With regards to the latter, one controversial technology that is returning to the limelight is genetic engineering, including genetically-modified organisms (GMOs).
Baumann said he sensed a “renewed openness” to genetically modified crops in agriculture, particularly from emerging markets such as those in Africa and Asia.
GMOs “absolutely” have to be part of the picture when it comes to building a food system with more resilience and more sustainability, MacLennan said; noting that when he became Cargill’s CEO in 2013, the controversy around the technology was at its height.
“They got branded ‘Frankenfood,’ but ultimately, they have been behind — since the early part of the 20th century — increased yields, increased access to food, increased farmer livelihoods around the world. They’re a tool for sustainability,” he said.
“Mangoes have been GMO since the 1960s, but people became fearful [of the tech more recently].”
Another area pinpointed both by Baumann and MacLennan was soil health, and the techniques that can preserve and improve it.
“The current iteration of sustainability in farming has to include regenerative agriculture — whether it be no-till, whether it be crop rotation — to improve soil health and use soil for carbon sequestration,” MacLennan told delegates. “[These] will become more a part of the solution to improve farmer livelihoods and improve the greenhouse gas footprint of farming.”
Of course, many of these soil-focused practices are nothing new; in one form or another, they’ve been used in farming for millenia. But this fundamental nature of many sustainable farming solutions goes to show how the agricultural industry can actually lead the wider world on climate change adaption and mitigation, according to panelist Sara Menker – whose startup Gro Intelligence aims, in her words, to track “the real-time supply and demand of every agricultural product on Earth.”
Record-breaking female founder Sara Menker warns of food inflation risk amid Covid-19 and climate change – read more here
“There’s a tradeoff between economic growth and ecological preservation,” she said. “If you’re monitoring supply on a real-time basis, you actually have to understand the Earth, our soils, the environment. Sustainability has been part of agriculture since agriculture started in the Neolithic Revolution. [It’s] not that data is the answer, but people who understand agricultural markets, I would argue probably understand our Earth, our environment, our climate, in ways that the average person in this world doesn’t understand – because it is their reality every single day. And so there’s a big role that the agricultural industry can play in sustainability conversations – not just in markets, but in education.”
Information is power, and power is money
On that point, all the panelists were in agreement: that the key to boosting agriculture’s sustainability and resilience lies with the individual at the center of the industry — the farmer — and making sure they have the tools and know-how they need.
But for the majority of the world’s growers, advanced technologies like those outlined by Baumann, MacLennan, and Menker remain far out of reach. While the hope is that access to these can be ‘democratized,’ smallholders across the world’s emerging economies have more immediate technological needs altogether, according to panelist Alloysius Attah, CEO of Ghanaian agtech startup Farmerline.
An estimated 84% of the world’s farms are smallholdings of two hectares or less; research indicates that around one-third of the world’s food is produced by these operations.
What’s more is that most of these smallholder farms are located in regions such as Sub-Saharan Africa, which are also likely to see the biggest increases in food demand over the coming decades.
“They’re often not in the middle of most conservations, and they struggle to access high-quality fertilizers and seeds,” Attah said of his continent’s smallholders. “We need to find new ways to make capital more affordable for farmers so they can afford all the tools they need, in order to grow more food to feed the future.”
It’s part of a bigger problem with capital in the agtech space, Menker suggested.
“All of this is going to cost money. And that money comes with risk, and you have to price [that risk],” she said.
In the early 2000s, Menker was an energy commodities trader. She noted that, at the time, many producers wanted to hedge oil two years forward – but that it was difficult to sell time horizons that long to the markets.
But by the time she left to start Gro, she was able to sell oil futures contracts with 10- to 20-year timeframes.
“That funded all sorts of innovations in the energy market that made things like shale oil [and] shale gas possible. Gas prices went down, coal got priced out of the market, renewables became a possibility. Really long-term changes happened because capital flowed well; and capital flows well when there is good information,” she said.
“So data becomes necessary infrastructure for driving transition and change. [This] change is going to require lots and lots of long-term capital, and ag capital today is too short term.”
At the farmer level, too, Attah said that information — or the lack of it — is holding back the cause of food sustainability and resilience.
“The biggest challenge is that information today is in English, it’s online; it’s not in a form that’s easy for most farmers to understand,” he said, pointing out that Nigeria alone has over 200 languages in everyday use, aside from English; while many farmers in poorer or more remote regions lack internet access.
While these language, capital, and technology barriers remain in place, there’s little hope that the latest, sustainability-directed farm products and knowledge are going to be adopted in such communities – let alone cutting-edge agtech.
“So there’s massive room to figure out how to use data tools to give info to farmers,” Attah said. “If you want to be able to communicate how to use seeds well, reduce impacts on soil, and so on, then local language [products and services] is one of the ways to go.”
MacLennan noted that he’d visited farms in Zambia where growers were applying fertilizer using a soda bottle cap. “Are we spending enough time and capital? I think the answer is no […] You can double, triple [those farmers’] yields just with modern techniques,” he said.
Spending Elon’s $6 billion
Not long before the Singapore event, multi-billionaire and Tesla CEO Elon Musk had tweeted that he’d sell $6 billion worth of his electric car company’s stock and commit the money to solving world hunger – but only if the UN World Food Program could tell him exactly how it would be spent.
Musk was responding to comments made by the World Food Program’s director David Beasley, who’d told CNN the ultra-wealthy — including, specifically, Musk and Amazon CEO Jeff Bezos — should “step up now, on a one-time basis [and donate $6 billion] to help 42 million people that are literally going to die [of hunger] if we don’t reach them.”
Asked by the moderator how they’d spend the cash, Attah and MacLennan both opted for infrastructure investment.
“You and I can go on Amazon and buy what we want. But small-scale farmers are often ‘takers’ of services,” Attah said. “There’s one guy in their village that does fertilizer, and that’s it […] They need more options and choices where people compete on quality and price. Infrastructure will give people more services on the farm.”
Taking a more macro perspective, MacLennan said that investment in infrastructure such as ports and waterways could help get much more food from where it is grown to where it is needed – exampling South America.
“You’ve got this massive crop-growing region of the world that doesn’t yet have the appropriate infrastructure to get it out of the fields and to the consumers. It doesn’t do any good if you increase yields and increase farmer training and education, if you can’t get [food] to where it’s needed,” he said.
Baumann reeled off a number of areas that should get Musk’s money — from carbon farming to analytics and traceability tech — but he underlined that “whatever we do should be farmer-centric. The solution is the farmer.”
For Menker, the $6 billion donation would be more than welcome — but would still be a drop in the ocean if the aim is to make food systems more resilient and sustainable in the long run, rather than just solving the world’s immediate hunger problem.
“It’s going to take a lot more than $6 billion,” she said. “When you look at small-scale farming, scale doesn’t exist, so the cost of infrastructure is artificially too high. So how do you create aggregation methodologies for communities in parts of the world where that scale doesn’t exist?”
Her answer would be to use Musk’s $6 billion to establish a new financial institution focused on agrifood sustainability.
“That [could] help create the mechanisms to start financing all the changes that need to be made,” she said.
