2 min
Digitalization creates value in the whole food chain. While China is way ahead of Western countries in middle and front end e-commerce, the worldwide agri industry needs to start adopting technology to enhance yields, decrease waste and increase customer value. But don't set the wrong standards. It will make the system more fragile than it already is. Turn it the other way around.
For the first panel on digitalization Dick Veerman had an exchange of views with Tiffany Tsui (Springtide Consultancy), Mary Shelman (Mary Shelman Group, former head of Harvard Business School's agribusiness program) and Aidan Connolly (AgriTech Capital, former board member of Alltech).
“The last three to four years, I have not used any money in China,” says Tsui while she explains the biggest difference she sees between China and for instance the Netherlands. “Even a beggar in the metro, I pay with WeChat by scanning his code. WeChat is widespread in China, making it very convenient for all shops to be on this platform.”
“Delivery in China is huge.” The last mile – closing the cost gap between the store, hub or distribution center and the customer – is not a problem in China, while in the Western world it makes e-tailers loose money. The large scale has cost benefits, as does the large army of cheap labor from the rural areas.” SARS in 2003 was a turning point for delivery in China. Tsui: “SARS was mostly impacting China. Since that moment e-commerce really started to take off due to public safety concerns. SARS gave a major boost to e-commerce by changing consumer behavior. They are now used to paying and buying online. The whole system is so easy to use.” Covid-19 could do the same thing for the Western world 17 years later.
Precision will turn agri into a real industry
Connolly believes that technology provides huge opportunities for food production. More productivity and less waste. “No other industry runs as inprecisely as agriculture does. The gap between what we know and what we should be doing is massive. Precision in being able to measure – for instance in crop fields, in animals, and even in ourselves – is going to create massive changes. Definitely in the next ten years we will see a food production that we have never seen before.”
However, he is disappointed in the pace it is being adopted. “In the West we are embracing new technologies, particularly digital. However the speed of embracing has been slow.” China, Connolly believes, is moving forward much faster. “The speed of technology adaptation in the agri business will take place more rapidly as well.”
Shelman sees two challenges in doing more with less, as Connolly proposed. “It’s one take to create value, it’s a second piece to capture value. Typically, farmers who are more productive, increase their scale.” Which does not comply with consumer’s needs, believes Shelman. Moreover, “as we see from the Covid impact, an efficient system and supply chain aren’t very resilient.”
“The real world isn’t perfect,” Shelman says. “We have developed all of these efficient systems, but they cannot cope with outside shocks, like Covid or extreme weather conditions. Typically, the farmer bears that cost.”
Connolly responds: “The promise of technology is not simply to make farming more monocrop, cheaper and efficient. It can also be to design new systems that are more sustainable, more robust and antifragile.” Shelman couldn’t agree more. However, she is skeptical: “Naturally technology leads into a push. We need to reinvent the fabric of farming. And maybe this shock [of Covid-19] is it, maybe it isn’t. We need to proactively think about that and support that transition.”
SARS (2003) gave a major boost to e-commerce by changing consumer behaviorSARS boosting e-commerce in China
“Delivery in China is huge.” The last mile – closing the cost gap between the store, hub or distribution center and the customer – is not a problem in China, while in the Western world it makes e-tailers loose money. The large scale has cost benefits, as does the large army of cheap labor from the rural areas.” SARS in 2003 was a turning point for delivery in China. Tsui: “SARS was mostly impacting China. Since that moment e-commerce really started to take off due to public safety concerns. SARS gave a major boost to e-commerce by changing consumer behavior. They are now used to paying and buying online. The whole system is so easy to use.” Covid-19 could do the same thing for the Western world 17 years later.
Precision will turn agri into a real industry
Connolly believes that technology provides huge opportunities for food production. More productivity and less waste. “No other industry runs as inprecisely as agriculture does. The gap between what we know and what we should be doing is massive. Precision in being able to measure – for instance in crop fields, in animals, and even in ourselves – is going to create massive changes. Definitely in the next ten years we will see a food production that we have never seen before.”
However, he is disappointed in the pace it is being adopted. “In the West we are embracing new technologies, particularly digital. However the speed of embracing has been slow.” China, Connolly believes, is moving forward much faster. “The speed of technology adaptation in the agri business will take place more rapidly as well.”
No other industry runs as inprecisely as agriculture does. The gap between what we know and what we should be doing is massiveThe cost of efficiency
Shelman sees two challenges in doing more with less, as Connolly proposed. “It’s one take to create value, it’s a second piece to capture value. Typically, farmers who are more productive, increase their scale.” Which does not comply with consumer’s needs, believes Shelman. Moreover, “as we see from the Covid impact, an efficient system and supply chain aren’t very resilient.”
“The real world isn’t perfect,” Shelman says. “We have developed all of these efficient systems, but they cannot cope with outside shocks, like Covid or extreme weather conditions. Typically, the farmer bears that cost.”
Connolly responds: “The promise of technology is not simply to make farming more monocrop, cheaper and efficient. It can also be to design new systems that are more sustainable, more robust and antifragile.” Shelman couldn’t agree more. However, she is skeptical: “Naturally technology leads into a push. We need to reinvent the fabric of farming. And maybe this shock [of Covid-19] is it, maybe it isn’t. We need to proactively think about that and support that transition.”
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Kathryn White (IFAMA's director), see Krijn's #7. Perhaps you can help Krijn out on that one.
Is anybody in the IFAMA network studying Corporate Social Responsibility and immigrant labour? It strikes me that interviewees are not willing to give their names when they talk to journalists on pay, housing and Corvid-19 - even if they are positive. The picture created is one of exploitation.
But that on the other hand the remittances of these workers to their home country are often really important, not only for their own family but for the economy as a whole. Family clans and villages save to get somebody into Europe or the US, which signals how dependent they are on this cash flow.
So there is a positive side of the immigrant work, but also an image of exploitation. Do companies work on this image, and how?
Thx for bringing that one to mind Krijn!
Dick Veerman #3 No, I had a more recent paper in mind.
On #4 The pineapples and oranges are perhaps not the problem, when they are picked by locals (although perhaps badly paid and housed) in e.g. Brasil or Ghana. The vegetables in Florida or California depending on Mexican immigrants or the fruit and meat from the Netherlands depending on workers from Eastern Europe are a better example.
Interesting to see that farmers in different countries (UK, Netherlands) call on their government to have more working permits for immigrants.
marylshelman@gmail.com en Aidan Connolly, please feel free to join the discussion on the scenario I just put forward: the migrant workers discussion that has come up, could lead to organising primary food production of freshly consumed goods from a less Ricardian logic and would limit world trade. At the same time it would unleash a technology and value push (trusted food with a guaranteed origin/life cycle).
But then again: where would Amsterdam, Moscow, Reykjavik, Montreal or Boston source affordable pineapples or oranges for their middle classes?