7 Mega Trends for Food & Farming in 2020 .. & the Next Decade
2020 will see the pace of change, and the range of disruptive influences on the food and agriculture business expand, setting us up for a decade long discussion of food and how we farm to produce it.
Just days into the next decade an industry that has frequently seemed under the radar, the business of food promises to be a major topic of conversation at many tables in 2020. From Davos to Delhi, Beijing to Berlin the world’s leading food companies & agribusinesses find themselves at the center of various maelstroms; climate change, viral epidemics, the use of plastics, water and sustainability.
Within this conversation the facts can get lost.
Food is abundant. The world has never produced so much, and it is doing so with fewer farmers than ever. This increased food production is not just of commodities but increasingly varied, personalized food options that respond to consumer demands. In fact food is so cheap in America hotels such as the Hampton Inn, Fairfield Inn don’t even ask breakfasters for the number of their room!
With fewer farmers. Less than 2 million farms feed America, and only 2% of its population work that produces food and agricultural produce for export. Brazil’s agricultural juggernaut is driven by 4.4 million farms while the UK agriculture has a mere 140,000 farms, employing less than 0.8% of its population. Agriculture may be producing more than ever but as a percentage agriculture contributes less than it ever has to world Gross Domestic Product (GDP). As a result, an increasingly urban population are completely disconnected from the realities of how food is produced.
Food is cheap. You might not believe it from what you read in the papers, or the internet headlines, but for most people in the world, the price of food as a proportion of their income has never been lower. Americans spend less than an average 8% of their income on what they eat and a USDA’s report shows that 2018 was the first year more US personal income was spent on food eaten away from home than on food at home. The same trend is clear in other western countries. European countries citizens have seen the proportion they spend on food halve in the past 20 years. Even developing countries such as Brazil, less than 20% of income, China at 22% and India with 30% are following. This is true even as consumers in developing countries trade up the protein chain, increasing their consumption of more expensive animal proteins (e.g. meat, eggs, milk, etc) and these have been growing at a steady 2% annually. The major exception is the African countries, where food prices remain stubbornly high, at around 60% of consumer income, frequently over a dollar a day when their income is just over $2.
The irony, as Jack Bobo of Futurity noted, is that ‘People have never cared so much or understood so little about how their food is produced’. Food, farm and agriculture stories can be every bit as effective internet click bait as Hollywood scandal or fashions- but it tends to be around issues such as foods that are seen as newly beneficial or harmful to people or the environment (or both: almond milk, for example), contaminants in food or water, etc. Some of the food stories likely to unfold in 2020.
1) (Swine) Apocalypse now?
African Swine Fever (ASF) is a virus that has wiped out more than half of the pigs of China in just a over a calendar year. It is now spreading through Asia, with a quarter of the pigs in Vietnam already killed. By the end of last year, African Swine Fever had resulted in the death of more than a quarter of the world’s pigs. The impact is greater than Avian Flu (aka Bird Flu), Foot and Mouth Disease, or any of the other animal viruses that have previously threatened dire consequences for the world’s food systems.
For those who see reverting to smaller scale, local food systems as the solution, the bad news is that pandemics are actually harder to control on smaller, organic, backyard or subsistence farms, as they typically have weaker biosecurity systems, which larger, professional run farms can afford. African Swine Fever is so contagious that it is known to have been spread by something as simple as the tires on a delivery truck. Chinese government policy is focussed on closing down small farms, increasing biosecurity and in a global food system the pressure to close small farms is only going to increase.
Moreover, the domino effects of the implosion of the pork sector spread to other areas of agriculture: less pork production in China means lower imports of corn and soybeans from Brazil and the US, and increased imports of beef, chicken and pork from the traditional livestock export powers of Brazil and the US, along with dramatically increased demand from Russia, Germany and even the UK. Fewer young pigs in China has meant a huge drop in the demand for milk whey, and other specialized components that go into their feed, with a similar drop in prices for all of those ingredients. Even the drop in John Deere’s share price has been attributed to the knock-on effects of ASF.
How long will it take Asia, and China in particular, to recover? Although there are reports from the Chinese media suggesting that a recovery of sorts is underway, current predictions say it will take at least 3 years. What’s important here, though, is that ‘recovery’ won’t mean going back to the way things were. China had an extraordinary number of very small farms, which it is actively working to combine into larger ones, a trend that is spreading through other Asian countries. The domino effects, such as reducing the need for input purchases (e.g., buying whey from Ireland, plasma proteins from the US etc) will continue to evolve as the market structure changes.
2) Trading places
The trade deal between China and the US should be capable of unblocking an impasse, where tit for tat tariffs have been a story for more than a year now. 20% of America’s farm produce is exported, the tariff battles tested the loyalty of the US President’s own rural base, even allowing for massive farm subsidies to reduce the pain. China is struggling with African swine fever and the loss of half its pig production would seem to have presented an ideal opportunity to benefit from the crisis, but the US President saw it as an opportunity to bargain and win concessions for other industries from a position of strength. Whatever the long-term results of the tariff battles, it is clear that US farmers won’t make hay (or, more accurately in this case, grow soybeans) from China’s need.
Instead, European reports confirm exports of EU pork up 12% as China absorbs more product and even Russia has become a major supplier. Brazil has been the big winner from the US – China disputes, exporting pork and soybean, and is now the world’s No.1 exporter of soybeans, displacing the US, with 80% purchased by China, and is the second largest global exporter of corn.
This is the less-noticed aspect of the trade disputes: the trading relationships that have been broken during the disputes are re-forming new unilateral partnerships. If Brazil can embed its new trading relationships, the balance of agriculture may have shifted for a generation. By contrast, Argentina, historically a stronger country, that also had the opportunity to benefit from the disruption in the Chinese market, is reverting to past failed policies of taxing agricultural exports in an attempt to control internal food inflation, and thus risks losing the opportunity Brazil is enjoying.
Other factors influencing agricultural trade, including Brexit. Britain’s decision to leave the EU will create massive challenges given the reliance it developed on those markets over its 40-year membership, and bilateral or multilateral agreements are unlikely to shore that up. British agriculture is optimistic in general that much can be achieved through embracing novel technologies, from CRISPR to Digital agriculture. The general tightening of worldwide inventories of many commodities, which suggests price increases of 2 to 5% in a range of commodities including grains, sugar, coffee, and chocolate, will be coming.
3) Climate clashes
The World Economic forum in Davos and the ‘Trillion tree project’ have captured the world’s leader’s attention and the headlines for the start of 2020, if not necessarily convincing climate activists that the world is taking climate change seriously enough. For the farming sector, especially in the livestock sector, are seriously worried about being made the scapegoat for a failure to control greenhouse gases, when issues such as shale gas, passenger travel and the increasing use of energy by an increasingly digital economy. Cows clearly are a significant contributor to gases associated with global warming, although cows don’t contribute as much as some activists would have you believe (the original FAO report citing the contribution of livestock to global emissions at 18% has since been corrected to 5%).
The furore over the burnings in the Amazon rainforest, and the catastrophe of Australia fires, is generating column (screen) inches but is also seeing a backlash from other countries who object to what they see as vilification by rich, Western economies. For example, Brazilian Agri-economists (under the title of ‘food x forest’) point out that the Brazilian agricultural miracle lifted 30 million people from hunger in a decade and created the world’s most important global agricultural exporter. This includes providing the soybeans critical for making soya oil and other soy-based products for animals, but also filling the plates of the vegetarian and vegan worlds with tofu. Brazil’s exports are also critical in providing asparagus, cacao, cashews among others, alongside our morning coffee and juice.
Overall the climate change discussion is emotive, often intergenerational, pitting rural against urban, big business against small holder farmers, vegetarians against meat eaters, but in the end, it does represent a threat to current food systems. As Ed Luce in the Financial Times recently pointed out, it is the kind of complex, long-term problem that is beyond the ability of most democracies to resolve. That said, there is hope that more nuance may enter the conversation in 2020, as hard choices begin to be faced. Does moving away from pasture systems to lower the carbon footprint have to mean worse animal welfare? It there a better use for grass or hay than producing milk and meat? If lower animal productivity and smaller holder subsistence farming in developing countries create a considerably higher burden on the environment will governments embrace a program to accelerate their demise in favour of larger scale farms? Interesting dilemmas for the next decade.
4) The Demise of Retail Food
Younger consumers are changing the face of retailing, including retail food. While reports of the demise of the traditional grocery store and supermarket may be premature, there is no doubt that the sector is going through a massive restructuring. A new wave of value-focused retailers (such as Aldi and Lidl) is moving on from the membership-based structures (e.g. Costco), and hybridized a mix of own-label and / or limited brand offerings into a conventional grocery store format, transforming the expectations of price conscious consumers. Interestingly, something similar is happening at the upper end of the market, even in countries where this traditionally wouldn’t be expected. Whole Foods is the poster child in the US, responding to what have been termed ‘prosumers’ or ‘super-consumers’ demands for transparency, ethical treatment of animals, sustainable farm practices, and food with ‘values’ rather than value foods. Stores copying the Whole Foods model can be found from Brazil to the Netherlands to China, and more are coming. As stores get smaller, and more specialized in the non-packaged goods that prosumers/ consumers are willing to pay more for, and where the convenience factor is critical we can expect to see the ‘starbuckification’ of food retailing, with a small percentage of specific ‘craft’ foods being sold through these convenient corner stores, with a range of produce designed for this distribution network, while 95% of distribution will focus on fast, cheap and convenient for the time-poor consumer who has their pre-packed food delivered by motorbike, autonomous vehicle or drones.
What does it all mean? The challenges for food ingredient companies are well recognized, as their customers are ‘Big Food’, and traditional food companies are struggling to understand shifting consumer behaviours as they eschew the brands, they traditionally embraced. It does represent a real opportunity for farmers to connect directly with consumers hungry to know more about where their food is produced, and how it is grown, and charge a higher price for it.
5) Replacing animal proteins
Those who express doubts that the future of meat consumption is petri dish proteins, or ‘impossible’ meats, risk being dismissed with ‘ok boomer’, as happened at a recent agriculture conference. 2019 saw record valuations and investments for ‘fake-meat’ or ‘clean-meat’ (depending on your perspective) start-ups and 2020 already shows signs that Impossible meats are hitting the high street. Meat grown in a laboratory has clear challenges, including the need to use stem cells from animals, the cost of the media to grow it, and the use of antibiotics in the lab. The most popular item so far, burgers, has a list of additives that is astonishing.
The focus of the start-ups is to produce alternatives to milk, milk proteins, eggs, fish. Companies such as Perfect Day are producing alternatives to the isolates or derivatives of milk through fermentation. Every trend risks creating a countertrend and already ‘soy-free’ and ‘yeast-free’ foods are promoted as even ‘better for you’. Many of 2019’s disruptors may be disrupted themselves in 2020. Can novel plant proteins grown or fermented efficiently and be texturized or processed to offer alternative to livestock products? What about hybrid products, combining both meats and their alternatives in a meat-light version? While alternatives are still in their infancy it seems better to be a disruptor than to be disrupted.
6) Farming in the great indoors
Indoor farming is featuring in many predictions for 2020. The touted benefits are great: dramatically increased cropping per year, reduced water usage, better energy use. But so far, the economics of indoor farms are tenuous without subsidies. It has been said that indoor farming can only produce food for rich people. The challenges include the upfront costs of building the massive structures required to support these farms and developing the systems needed to control disease and infections. Indoor farms are unlikely to be a success in 2020 without government subsidies to continue to support their development, but the potential is real, as evidenced by the biggest indoor farmed crop, and breakout ag star: Cannabis.
Cannabis, and its derivatives, are a genuine disruptor in the US. With increasing legalization, cannabis infused drinks replacing alcohol is a threat to the US adult beverage business. A new generation of drinkers see it as a healthier alternative to alcohol, beer and wine, and are influenced by claims that various cannabis extracts can improve health, reduce anxieties, etc.
7) The world is becoming Digital
Digital technologies are also a feature of indoor farming and their growing usage will continue to be a story for 2020, but most aren’t ready for ‘Prime Time’ commercialization. Technologies coming to traditional outdoor agriculture in 2020 include robots and sensors, blockchain is closer to ready to fulfil the promise of traceability we haven’t yet seen in food or farming. Rural connectivity can be a limitation to adoption. The silent drivers of change are the increasing use of Artificial intelligence and machine learning, combined with the Internet of things. Many of the innovations we see gaining the most traction in farming are not those that replace human labor and human cognitive function, but those that enhance traditional jobs and allow greater efficiencies to be achieved. 2020 will be a breakout year for AI in agriculture.
An alternative consequence of our digital world is the growing influence of digital food activism is taking root (with the ‘Prosumer’ movement as a subset) and is driving the discussion of ‘regenerative agriculture’, especially with respect to soil microflora and soil health. Regenerative is not just the buzzword of the day but part of a real long-term shift in how farming is viewed, and Digital Food activists see the web as a potent method to effecting change in the food chain. This will be a story for the decade.
2020 is unlikely to be either an ‘annus mirabilis’ or ‘annus horribilis’ for the food industry but the pace of change, and the range of disruptive influences on the food and agriculture business, make it likely to be an interesting year- and setting us up for a decade long discussion of food and how we farm to produce it.
The original version of this article appeared in The Currency. Thanks to Kate Phillips Connolly for editing.
