Note: The following article was originally published in the January/February 2015 issue of PorkNetwork.
Almost everyone is familiar with the global food demand projections to 2050, which were first promulgated by the Food and Agricultural Organization (FAO) of the United Nations in a report from a high level gathering in Rome in 2009. The challenge is daunting for a number of reasons and depending on the day, people I speak to have the idea that we are either uniquely up to the challenge or they see some very big problems ahead. Regardless of how you feel on this issue, take a moment to consider the future of agriculture and see if you agree with a couple of key changes that I believe will be required to be competitive as we gear up to meet future global demand.
When we think about the future, there are some undisputed realities which form the baseline of any forecast or prediction of what is to come. They are grounded in economic understanding, but they are nothing more than commonsense. As you will see, the world of agriculture is going to become far more precise in the years ahead. Precision is the name of the game going forward.
Resources are Limited
First, we live in a finite world, which makes resources for food production scarce. Scarcity imposes costs that allocate these resources to their best uses. Therefore, as demand for food increases, the resulting pressure on input cost will drive both increased technology development and the retirement of not only high cost production systems but whole areas of the world currently in production of some products. While food security considerations may trump economics on the retirement of some geographical areas many of the retired production companies will have been model, low cost facilities when evaluated by 2015 standards.
By scarce, we mean resources are limited in time, space (geographically) and form (quantity available and in useful form for biological/agricultural production). Even though we live in a global marketplace that is increasingly capable of lowering cost by removing trade and resource access barriers and increasing effective communication so that efficient systems can align with abundant and available resources, political processes control the gateways and they do not always follow best economic choices. This almost always raises costs. And with increases in global government regulation and reporting, future producers also will need to find ways to overcome this source of rising costs as they deploy cleverer technologies for acquiring and using scarce resources in their production processes.
As you can see, the problem is not simply gearing up to feed the world. It is all that in addition to negotiating the host of other impediments to efficient production as well as random shocks originating in weather, disease and natural processes. This means ever increasing efficiency will be required, particularly in new technology investments and knowledge workers.
Unfortunately, “efficiency” has become a dirty word in our time. It has come to be defined by opponents of modern agriculture as the cost-lowering strategies of large corporations who care only about profits. They are perceived as using increasingly artificial and unnatural means to make food cheap but increasingly unhealthy, all the while pushing costs off on others to improve their bottom lines. These voices have gained traction with governments around the world, especially in developed countries.
Restrictions and Interventions
As a result, first-world nations are making policy decisions that will increase the cost of food production per unit, without necessarily increasing its value. Restrictions on resource use, ever higher levels of regulation and reporting requirements, criminalizing of simple human errors, and the demand that production systems meet arbitrary standards of care are only a few of the cost-increasing prescriptions being promulgated by governments.
These government interventions no longer confine themselves to the production portion of the chain but run the entire chain length, and now even include consumers, who are increasingly penalized with higher costs and restriction in choice. The only way to have a chance at overcoming this discrepancy is by reinventing once again the food production processes with a focus on increased precision.
Identify the Profit-Maximizing Level
I have said many times that the pathway to precision is through the variance. This is not a new concept but it is new to most animal production unit owners and their employees. Most would not be able to quote a single measure of variance across the production metrics and cost structures they employ. Knowing, measuring and managing (especially) the unnecessary or “self-inflicted” variation in a system is key to a movement toward more precision, but there is much more involved. Variation is present in biological systems by design, as it is the principal pathway to biological improvement. So, our goal is never about minimizing variation, but rather choosing the profit-maximizing level of variation given current technology, input costs and pricing of output.
The first big change that is coming to support increased precision is the (near) elimination over time of human observation, evaluation and judgment in biological systems. Technological investments will all but eliminate many farm production decisions that are based on observation and judgment. Instead, decisions will become higher level and more operational, focused on technical processes.
Human Intervention Issues
Just about any time a human makes an observation, a resulting judgment, and then performs an action based on a conclusion, there is a source of unnecessary variation. The reasons are many. Sometimes there is simply too much to observe, or it may not be cost effective to observe what is really necessary to improve efficiency. In other cases, what really needs to be observed happens outside of work hours when few people are present. It could be that workers are not trained well in biological processes so they often really don’t know what to observe or what they are seeing nor how to prioritize all that they do observe into the critical choices. There are lots of distractions, and surprisingly little agreement on key aspects of what the same two people observe at the same time. There is tiredness, there is shirking, there is undermining and often there is little “real time” feedback to reward the right decisions versus a wrong judgment. As a result, little effective learning takes place and the same mistakes are repeated (see sidebar).
The Coming Revolution
As that happens, there will be a revolution in the information technology for precision systems of animal production. Gone will be the sole reliance on metric means that presently dominate all of animal agriculture. Measures of variation from standard or projection will come to dominate, but in a very different way than typically deployed principles of “statistical process control” which are sometimes tried and often discarded.
Most attempts at measuring variance today are actually measuring the variance of means of group outcomes over time rather than the variance of individual animals. For instance, we know that every animal in a building has its own unique FCR and ADG but we can only measure building level consumption and weight gain today and that only when the production phase is over to create these averages of performance.
Many people have deployed systems of monitoring variation around changes in these mean values over time. Watching changes in mean values of ADG and FCR is far different and less valuable than monitoring the variance in daily feed consumption and daily weight gain of individual pigs, or even the daily barn average for these parameters. Both of these protocols, though impossible to do cost effectively with most present-day systems, are likely to be cost effective technological choices in the not-too-distant future.
Daily water intake and current animal temperature are also likely to join the list of real-time monitoring variables relatively soon. By using this information, pork producers will have the potential for nearly real-time intervention when production variances begin to increase, versus viewing historical outcomes after animals are sold and when no intervention is possible.
Keeping in Real
The focus on records will then shift from historical comparisons to near real-time observation and intervention. Most of this activity will be guided by sophisticated bio-economic modeling and will require most firms to either open a true operational research division or outsource that function to consulting companies or technical specialists. Value systems and pricing will become more transparent, as the means to respond to price changes quickly are increased by precision systems.
Gearing up to meet the challenge of 2050 food demand will require a generational change and reinvention of modern livestock production systems. Simply increasing production to meet the growing demand will not be possible since the environmental impact of producing meat for projected 2050 population and income growth with 2015 technologies will be disqualifying. In addition, cost increases imposed by government regulation, current global resource utilization rates per unit of output produced and random shocks such as disease and political upheaval will force animals systems down the path traveled by crop producers over the last twenty years.
Measuring system variances, which means measuring individual animal variances on a daily basis, and developing highly responsive strategies to correct variance in near real-time will be the key to producing cost savings capable of feeding the world and making an attractive return.