Since March, the coronavirus (COVID-19) and related control measures have stressed the US agriculture supply chain and shifted markets, but it also has produced opportunities that the industry should grab, said speakers at the virtual Women in Agribusiness Summit.
Consumers are more interested in where their food comes from and how it gets to the grocery store shelves because of shortages during the height of stay-at-home orders. The need for improved infrastructure became even more obvious and includes services such as high-speed internet access in rural areas. The pandemic has accelerated other trends in the industry, including digitization, interest in sustainability and investment from non-traditional sources.
The last few months have been exhausting, confusing and heartbreaking, said Polly Ruhland, chief executive officer, United Soybean Board, during the event in mid-September, but they also have shown the resiliency of the agriculture industry. The conference, originally planned in Nashville, Tennessee, US, was completely virtual because of COVID-19 concerns.
“There are substantial reasons for optimism,” she said. “You have seen dedication throughout the ag chain. I am always inspired by the resiliency, resourcefulness and commitment of farmers. It’s really important we in ag take advantage of the opportunities that are created by this dramatic challenge to the food chain. This is an opportunity to increase and deepen the dialogue between producers and consumers.”
During the pandemic, there has been an explosion of interest in the food system, including how food moves from here to there, Ruhland said, as well as its origins.
Consumers are more engaged and empowered, a trend that has strengthened with the pandemic, said Mary Shelman, Shelman Group. Millennials are leading the way on value-based decisions and are taking into consideration climate change, animal welfare, the environment and the origin of products.
The industry responded with high-priced specialty products with increasing levels of differentiation. For example, it wasn’t enough for eggs to come from cage-free birds, but they also had to be free range, she said. With companies copying and then one-upping each other, what was unique eventually became commonplace.
“Entire categories over time converted to that new attribute,” Shelman said. “What was unique today becomes a commodity of tomorrow.”
COVID-19 has created a fractured demand with calls for both the premium items as well as value products.
“Some describe it as a polarization of demand,” she said. “The growth had been on the premium side. How are we going to respond on that other piece?”
Agriculture needs to get closer with its buyers who are in major cities, close the urban-rural divide and hear from more diverse voices, Ruhland said. It needs to connect with the people who were really anxious and had concerns that they would go hungry when they saw empty grocery store shelves.
Sustainability is another major trend that has accelerated during the pandemic. Over the last years, it has changed from a marketing tool to a fundamental requirement, Shelman said, but how it is defined is a moving target.
“The boundaries continue to shift,” she said. “What is the objective — is it sustainable agriculture or sustainable food? What is clear is that the sustainability of an ag product cannot be improved once it gets past the farm gate.”
COVID-19 spotlighted the strained relationship between people and nature. It served as a wake-up call to the industry and consumers for a more sustainable and resilient food system, Shelman said. The new normal could mean a rise in local and regional food systems.
Resilience will depend on diversity, such as distributed production, redundancy (excess supply) and slack, or extra capacity, she said. The increased costs will be similar to an insurance premium, and the question is who will pay for it? The burden cannot fall on farmers, and there is still the question of whether consumers or retailers would value this change, she said.
While she is not surprised by the surge in sustainability concerns, Shelman said she did not expect the pressure to reduce animal protein consumption overall. Several news articles have championed avoiding meat and dairy as the single biggest way for consumers to impact the earth.
Over the last two years, significant investment has been made into alternative proteins, whether it’s plant-based protein or lab-grown proteins, she said.
“There’s a lot of interest in this space and certainly a lot of investor activity in this space,” she said. “This alternative meat segment could be quite large.”
Investment in the agriculture sector is coming from diverse investors, even more so as a result of the pandemic. The level of investment has grown 10 times over the last 10 years, and the type of investor has changed.
“It used to be specialist groups that understood ag and were willing to take the risk,” Shelman said. “Today we have general venture capitalists, governments and sovereign wealth funds that are concerned about food security. We also have impact investors, like Jeff Bezos and Bill Gates, who think the food system is broken and it’s up to them to fix it.”
In addition to protein alternatives, there has been significant investment in controlled environment, or indoor farming. Food is being grown in shipping containers, greenhouses and on rooftops.
“So far, the capital cost of these projects is very high, product costs are very high, and it applies to a limited number of crops,” Shelman said. “But a lot of people are excited about indoor farming and how you eliminate the weather risk, lower the inputs, potentially reduce labor and move production to new areas.”
While the pandemic highlighted the strength of the supply chain, it also showed that infrastructure needs serious work and may actually be in greater disrepair than the industry thought, Ruhland said.
“It was insightful to consumers that farmers are critical infrastructure,” she said. “I don’t think we’ve ever been thought of that way before. A lot of people took food for granted and didn’t think about what it took to get from the field to the table prior to the pandemic.”
More investment in infrastructure is desperately needed. USB invested $2 million in soy checkoff funds to deepen the Mississippi River from Baton Rouge to the Gulf of Mexico. That money acted as a catalyst to a $245 million investment from the federal government and the state of Louisiana, she said. USB research has shown soybean growers will save 13 per bushel in freight costs and will be able to increase ship loads by 5,000 bushels. That will lead to $461 million in annual realized value just for US soybeans, she said.
“The success and continued investment of society under trying circumstances is a testament to the success of public-private partnerships,” Ruhland said. “Infrastructure is critical to the supply chain. We’ve got to continue to invest in it because it is in disrepair.”
Just as important as the physical infrastructure is the digital value chain for food supply, she said. USB’s long-range strategic plan taskforce has identified access to high-speed internet as part of the infrastructure priority. In a survey last June, it found that 60% of farmers do not have sufficient broadband to run a business.
“We can’t digitally transform a business if we don’t have digital access,” Ruhland said. “Digital tools drive sustainability and many farmers use digital tools to help grow crops more efficiently. This success depends on connectivity.”
Hand-in-hand with broadband access is the digitization of the agriculture industry. Technology is transforming every industry, and while agriculture was a little slow to the digital table, it will be no different, Shelman said. Technology is under development at every level of the supply chain, from gene editing to drones and machine learning.
“There’s a lot of potential and excitement surrounding digitizing agriculture at the farm,” she said. “There is data that allow the development of models and enables farmers to understand and proactively make decisions. All of these things allow the biological system to get closer to its genetic potential.
“We want to transform farming from an art, or something that is just passed on through the years, to a science.”
Developments such as blockchain will help solve transparency problems in the food chain. It will help consumers know where their food comes from and is a great tool for supply chain management. One drawback is that it provides only one-way communication, from producer to consumer; there’s no feedback to the beginning of the chain, Shelman said.
The agriculture industry will need societal support if it is going to succeed in efforts to continue to advance technology, Ruhland said. Producers need to be able to safely grow more food by using fewer resources.
“Prior to the pandemic the general public had been disconnected from agriculture and where their food comes from,” she said. “We need to take advantage of the microscope on agriculture. We have an opportunity to insert our voices in food security conversation, and how important that it is to the US and global society.
“We can start by engaging the public in food security by talking about high protein foods like soy and animal protein, those nutrient dense foods that society needs and maybe we have less support from the public on.”