Creating a more food-secure world through adaptation and resilience

MIT Global Change Forum - Boston, Massachusetts
Greg Page, Cargill Chairman and Chief Executive Officer
June 4, 2013

(As prepared remarks)

I am very happy to be here this evening and glad that John Reilly extended the invitation. The theme for this year’s forum is “Water, Food and Energy in a Changing World.” In the past, I know these forums have focused on constrained resources like water and energy, so tonight we will talk more about food – which is the great natural combination of water and energy. 

My remarks this evening hopefully will be a good kickoff for two interesting days talking about the intersection of water, food and energy, which are more closely linked than ever before. 

There could be 9 billion people on this earth in 40 years….and we will feed them. How can we do it given the myriad factors – including climate – that are part of the food security puzzle? It's a challenge that will take our collective wisdom to solve. And it will require adaptive behaviors and resilience.

About Cargill

To give context for my remarks tonight, let me share just a few comments about Cargill.

Cargill is a company that began in the Midwest almost 150 years ago and has grown over time to where two-thirds of our employees are outside the U.S. In short, Cargill has globalized along with the world’s GDP.

Cargill operates in four key segments. The first is the business of taking food and crops from times and places of surplus, to times and places of deficit. That traditional role of Cargill in grains and primary oilseeds represents about 25 percent of the company.

The next segment is providing farmers with a variety of services and access to markets.

Third is our food and meat businesses. Our businesses here include cocoa and chocolate, malt, corn milling, flour, salad dressings, vegetable oil, and a fairly significant meat business.

Finally, Cargill has a risk management business. We trade ocean freight, coal, electricity, natural gas, petroleum, iron ore and basic metals. Clearly the prices of these commodities, particularly freight, petroleum and energy, have a dramatic impact on agriculture.

MIT’s Global Change program is one of several university programs Cargill funds that help to better understand climate science, impact on crop yields, sustainability and implications for food security.

Cargill and MIT

Cargill has been a sponsor of the MIT Joint Program on the Science and Policy of Global Change since 2008. I know this forum has gained an international reputation for serious and frank discussions of global issues.

MIT’s program is one of several University programs Cargill funds that are helping us better understand climate science, impact on crop yields, sustainability and implications for food security. (Others include Stanford’s Center for Food Security and the Environment, and the University of Minnesota’s Global Landscapes Initiative).    Cargill also has engaged with various think tanks to build our understanding of climate change issues, including Resources for the Future.   We also appreciate the work of IFPRI – the International Food Policy Research Institute – who is on the agenda tomorrow…and others in the nonprofit / IGO / academia space who are devoting their time and talent to the challenge of feeding the world.

Some of Cargill's most important philanthropic partnerships are with nonprofits like CARE, Feeding America, The Nature Conservancy, TechnoServe and others who are trying to make the world more food secure by either raising incomes, expanding access to food or ensuring that food production is done in an environmentally responsible way.

The complexity of food security

Of all the challenges facing our world today, none is more immediate than the need to provide sufficient nutrition for all. Food security involves interdependent parts, and having all those parts working together is what is complicated.

The globe’s population is not only increasing, it is becoming more urban and more affluent.  Our ability to meet that challenge is affected by these factors:

• Diets are changing as income levels rise.
• Biofuels have become a significant consumer of traditional crops.
• Public investment in agricultural research has been declining.
• Government policies that inhibit trade or limit productivity are affecting food availability and price.
• And localized supply shocks and production shortfalls continue to occur – although in 2012 we had adequate production – even with the U.S. drought –we just didn’t share well.

Some people question whether we can grow enough food, especially in a world that needs to adapt to changes in climate.

Our optimism is rooted in the ingenuity of the world’s farmers. They are natural innovators - adapting to changes in the environment and technology.

Cargill is optimistic

At Cargill, we are optimistic. We believe that the world can feed itself and that we can harness the power of photosynthesis to produce all the nutrition needed for an increasingly prosperous world.

Our optimism is rooted in the ingenuity of the world’s farmers. They are natural innovators - adapting to changes in the environment and technology – proven by the doubling of the amount of grains, rice and oilseeds that they have produced since 1975—without a significant increase in acreage, much of that coming from double cropping.

I will try to show how the stakeholders in world food production are exhibiting the adaptive behaviors that underpin resilience and provide us a more food-secure world.

Can the food systems we rely on adapt?

If we are in a period of accelerated climate change, the question is whether the food systems upon which we rely can adapt.

Sometimes when we hear the word resilience applied to agriculture, we think of a hard-working and stoic farmer valiantly saving his crop from pests, drought and frost.  What I’m trying to convey is a much broader notion of “systemic resilience,” where all major stakeholders in the global food system are poised, able and willing to build solutions to broad challenges in an effective and most important, a complementary way. A global system that is sufficiently flexible to produce enough food despite localized disruptions.

The resilience of farmers

Let’s start where it all begins. On the farm.

While many people are working on climate change mitigation strategies….the farmer will be busy doing that and doing what he or she has always been doing: adapting! Clearly we need both adaptation and mitigation….it is not an either/or choice.

Farmers are the consummate optimizers. Every year, they look in their field, and look at what has been dealt to them. And -- in the best-run countries -- at the last minute, they make a decision about how to optimize their profitability – to grow what the market is signaling to the best of their ability. They look at input costs, forecasts, relative output prices, soil moisture. And then they plant.

There aren’t many of us that can come to work and turn on a dime as skillfully and naturally as farmers.  And while many of my examples today relate to modern Western agriculture, we also see resiliency in smallholder farmers. 

The power of price

To farmers, rising commodity prices are a potent fertilizer, motivating them to produce more when the market calls for it. In late March, the USDA predicted U.S. farmers would plant the most corn since 1936 – about 97 million acres. And 77 million acres will be planted with soybeans.  That acreage is predicted to deliver huge harvests. The predictions come with a caveat of course; they are predicated on a return to reasonable weather during the growing season.

If we take good prices to farmers, incredible progress can be made on food security. In developing countries it is an issue of the economic capacity of non-farmers to put enough price into their agricultural systems to create sustainable agriculture.

Growth in non-farm income is a precondition for agricultural development in emerging economies.  Climate, water, seed, technology and agronomy are all important. But the fundamental ingredient of sustainable agriculture is an adequate price to reward the farmer for her efforts.  Without the signaling power of price, there will be no change in farmer behavior.

Better technology at an accelerated rate

Because of recent high prices, farmers have had a run of prosperity and are gobbling up technology like never before. Better technology is coming into agriculture at an accelerated rate. And farmers are willing to invest. Cargill has a role in this, facilitating the transmission of price signals and bringing farmers technology and risk management options so they can make decisions that maximize their profitability.

Here is an example. Some of you may know that at least in the middle of the country, we had a very late-arriving spring, and planting was delayed. But in another example of resilience, in just one week, 52% of Minnesota’s corn crop was planted. That is the fastest one-week corn planting on record.

A farmer plants his crops at night. View from the tractor seat. You can see the monitor, the light bar on the hood and almost no visibility in the dark, yet it is still operating – because the GPS is steering.

Adaptation at work 

Here you can see a photo from one of our farmer customers who is planting at night.  From the tractor seat you can see the monitor, the light bar on the hood and almost no visibility in the dark, yet still operating – because the GPS is steering.  About 75% of our customers can now plant 100% of their corn and soybeans in seven days or less.

And one of our customers in Ohio planted 6,000 acres of corn and soybeans in four and a half days. That is what adaptation, profitability and reinvestment has done on the farm.  

Key driver of production: yield increase 

Over a long period of history, the main contributor to increased food production has been yield gain through genetic improvement and fertilizer use. Acreage has been relatively stable from 1975 to the early 2000s. Only recently have we seen harvested acreage increase.

Farmers have met the challenge of increasing demand for food. But the environmental price of our practices in some cases was too high, and the debt to Mother Earth is now being repaid through a host of remediation efforts such as ag setbacks, and buffer strips to prevent run off; better tillage and reduced tillage practices; restoration of wetlands; and bio-digesters that recover energy from dairy waste – to name just a few.

A satellite image for precision agriculture. Cargill's Next-Field system uses satellite images and soil sampling to determine yield potential and crop inputs.

Precision agriculture

One of the ways farmers are meeting the challenge is through optimization of inputs. Precision Agriculture is the integration of all sorts of optimization tools.

Basic precision agriculture uses satellite images and soil sampling to come up with an average yield potential for a field, and crop inputs like fertilizer are applied based on average yield goals. Cargill’s Next-Field system goes several steps further and develops 2.5-acre yield zones within a field to more precisely apply inputs where they make the most difference, based on that area’s individual yield environment – and in the process reduces waste and environmental impact. We should be impressed that the free market, without any intervention, has incented the conservation of valuable resources and improved sustainability.

Another example of resilient behavior in farmers was featured in a May 20 New York Times story about the Ogallala Aquifer. The aquifer is under depletion stress in High Plains states as a result of intensive farming and drought. The story was loaded with examples of how farmers are adapting to this changing environment: switching to raising dairy heifers, or switching to less water-thirsty crops such as sorghum. Or deciding to rely on rain alone and the lower resulting corn yields.

Farmers also take steps to protect moisture and soil conditions in their fields through conservation tillage and tractors with wide tracks that have a light foot print. They “tip toe” across fields so they don’t cause soil compaction.  Our industrial innovators captured this market opportunity, proving their resilience. 

In addition to farmers, livestock producers are optimizers, too. For example, there has been a huge surge in the addition of enzymes to animal feed, born largely out of rising ingredient prices partially connected to the ethanol boom, which signaled a need to improve feed conversion into meat and milk.

The resilience of governments and policymakers

Let’s move off the farm and into the halls of government. How are governments and policymakers showing resilience?

Fortunately, when it comes to behaviors that distort markets and disincentivize farmers, today governments for the most part are showing more restraint. Unlike the embargoes we saw in the 2008-2009 time period, there have been fewer market- and price-distorting behaviors of late, such as artificially suppressing prices, hoarding supplies or banning imports or exports.

But there are exceptions. We have seen this clearly in the Indonesian beef market, where steps were taken to block live cattle and boxed beef imports in an effort to spur local production. This has resulted in dramatically higher prices for Indonesian consumers and lower supplies on grocery store shelves.

For those of us who believe the economist David Ricardo, we know that self-sufficiency is not the answer. The world will always raise the most food the most economically and in the most environmentally responsible way when farmers plant the right crops for their local climate and soils using the right technology, then trade with others.  If every government set a goal of food self-sufficiency, the world would have much less food.

Resilience in the world’s largest agricultural economy

Another example of resilience is what has been happening in China. Policymakers in the world’s largest agricultural economy have shown their ability to adapt and change behaviors.

China has helped the world in aggregate produce more food through its decision to honor comparative advantage and import soybeans.  When it focuses on those areas where it has an advantage – using its scarce land to produce corn, wheat, rice, which yields relatively better in China, then imports soybeans and vegetable oils, which yield relatively more poorly in China  – the world in total raises more food.

The challenge for China now is that it built its model for agriculture on the assumption of inexpensive and widely available labor, and a multi-cropping environment. As wages rise, urbanization continues, and agricultural land reform evolves, China again will be tested in terms of its resiliency.

Africa’s critical role in feeding the world

Africa is another example where government action and policymaking is so critical to our ability to feed the world.

In short, Africa has the soil and the rainfall -- but not the policy, infrastructure and rule of law -- that are necessary, along with higher non-farm income, for increasing food production. But we see positive changes in the works.

Some of the lowest productivity gains over the last 40 years have existed in much of Africa.  But there are countries on the continent that have shown resilience and their commitment to change the face of agriculture.

As just one example, Nigeria is working hard to transform its agricultural sector, by their own words, “treating agriculture as a business and not a development program.” And treating farmers as business people and not aid recipients. They are interested in attracting private sector investment, and creating the right conditions for both smallholder and large-scale farmers to succeed and collaborate.

Ensuring production through science and innovation

How are policymakers helping ensure the availability of food through their support of science and innovation? I believe the acceptance of science is the foundation to being resilient.

Clearly the world has benefited from the application of food technology and particularly, the appropriate and well-regulated use of genetic engineering to create foodstuffs that are cheaper to produce and require less water, chemicals and tillage.

But the use of that technology is under debate in the United States. In American agriculture, resistance to genetically modified (GM) products was pretty much seen as a European issue, but now it is an American issue. While a ballot initiative in California that called for front-of-package labeling of any GM product was proposed and then defeated, it became clear that there was not sufficient understanding of GM by the public. We need to reach out to both governments and consumers to better explain the benefits of this technology. We need to gain society’s permission to use sound, proven and well-regulated science in the production of food.

The resilience of consumers

While producers and policymakers are changing their behaviors, so are consumers.

I would argue we have seen the resilience of the world’s population as they faced higher food prices in the past six years.  As food prices spiked, the conventional wisdom was that it would be a big challenge for developing countries…and that they would have no defense against the rising cost of food.

But rather, GDP rates in developing economies have continued to climb over that period.  Part of the reason is that as much as 70% to 80% of the population is involved in farming….and higher prices have created an income opportunity for farmers. In fact they have been thriving….because they are producing and selling into this better price environment.

Let me share an astonishing fact with you... Based on our tracking of global incomes, we have seen real, inflation-adjusted GDP of the least affluent 70% of the world's population more than double in the last 10 years.  To me that's incredible resilience during a period so widely lamented.

You may be surprised to hear that we collectively return less than 2% of global GDP to farmers for the calories they bring us in basic foodstuffs.  We can afford to be thoughtful in how we compensate them.

Food is emotional

We also need to acknowledge that food is personal.

In developed countries, people increasingly want to know the "story" behind their food. Just look at the bookstore shelves to see how much we as consumers contemplate our diets. Food is emotional, but we need to address it with hard science in a resource-constrained world. We shouldn’t return to medieval agriculture.  We need a science-driven agenda, not an emotion driven one.

Global production and consumption

So what kind of results does this resiliency produce?

This chart shows that the world’s variability from year-to-year in its annual total crop production versus trend line is no greater than it was 35 years ago.  So despite the headlines that the world has become a far more desperate place and a far more volatile place, actual data on deviations to trend line in global agricultural production is not different from the 1970s. We don’t deny the possibility, or even the likelihood, of looming challenges ahead related to agriculture, but we haven’t seen the impact of climate change in our data so far. Climate change is a risk we cannot throw off frivolously. We need the scientific community -- and many of you in this room -- to better define the risk -- based on science. 

The changing Canadian Prairie provinces

In North America, we are seeing changes not just in how food is produced, but where it is produced.

I grew up in North Dakota, where the big question up for debate in the spring was: would you plant your wheat on May 20 or May 28? Now the question is much more complicated. Your options are not just wheat, but now corn, soy, canola, sunflower and lentils enter the equation. Clearly, the variety of crops being grown in Bottineau County North Dakota is quite different from when I graduated from high school. So what does this example show?

Is the planting of corn a response to an increased number of frost-free days in the Northern latitudes? The answer is yes. At least in this microclimate it seems like something structural is happening. But I would argue that genetics, price and crop insurance are at least as contributory factors as frost-free days. Farmers’ decisions are based on a host of elements.

It is also true that these same factors are driving investments in Canada’s Prairie Provinces of Manitoba, Saskatchewan and Alberta….by Cargill and others, and that Canada’s grain mix is being transformed.

While changes in temperature and moisture may play out differently on different continents, I was encouraged to see the preliminary research that MIT presented at the last Forum on the world’s breadbaskets. I recognize that this work is preliminary but I congratulate MIT for tackling such a highly charged issue. In the absence of climate mitigation policies, the ability to adapt is critical. That is why this research is so important.

The importance of working together 

Agricultural production has always been affected by variability in weather...and farmers have adapted strategies appropriate to their local situation.

Who knows when and how much we will tip the scales from weather volatility to climate change? We all need to look carefully for this future.  We are looking for scientists to help us with these questions, to help define the borders and the scenarios so we can help create a more sustainable food system.

I believe that we have the power to adapt, and that the resilience we have shown in the face of change will continue.

So if there is one point to leave you with, it is the importance of working together on this issue of feeding the world. That is why we are so pleased to see MIT involved in this work.

Cargill is optimistic that we can, in fact, feed our world – even in a changing environment.

NOTE: These are the speaker’s “as-prepared” remarks.