(Swine) Apocalypse now?
Yes. Although Covid-19-related closures of US swine processing facilities have put a spotlight on the fragility of the food supply chain, the global pork production system was already under huge pressure from the loss of pigs due to African Swine Fever (ASF). ASF (also a virus) has wiped out more than half of the pigs of China in just over a calendar year and is now spreading throughout Asia, with a quarter of the pigs in Vietnam already killed. The severity of ASF is astonishing. By the end of 2019, ASF had resulted in the loss of more than a quarter of the world’s pigs. The impact of ASF is greater than Avian Flu (aka Bird Flu), Foot and Mouth Disease, or any of the other animal viruses that have previously threatened the world’s food systems.

For those who see reverting to smaller-scale, local food systems as the pathway to greater resilience, the bad news is that pandemics such as ASF are actually harder to control on smaller, organic, backyard, or subsistence farms. These financially fragile enterprises typically have weaker biosecurity systems that larger, professionally 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 focused on closing down small farms and improving biosecurity. 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 has spread to other areas of agriculture. Less pork production in China means lower Chinese imports of corn and soybeans from Brazil and the US. To fill its protein gap, China has increased imports of beef, chicken, and pork from the traditional livestock export powers of Brazil and the US. As China has taken a greater share of global production, countries such as Russia, Germany, and even the UK has seen export demand dramatically increase. In addition, fewer young pigs in China have resulted in a huge drop in the demand for milk whey and other specialized components that go into their feed, leading to a sharp drop in prices for all of those ingredients. Even the drop in John Deere’s stock price has been attributed to the knock-on effects of ASF.

How long will it take Asia, and China in particular, to recover from ASF? Although Chinese media reports suggest a recovery of sorts is underway, current predictions say it will take at least three years for China’s pork industry to rebuild. What is important here, though, is that ‘recovery’ will not 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. This trend is spreading through other Asian countries for similar reasons. 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. A broader question is whether China’s government may use this opportunity to encourage households to eat more chicken, which is more efficient for feed conversion, and less pork.

Of the seven mega trends expected to influence our food production system for the next decade in January 2020, three trends are confirmed, one is on hold, and three are reversed. Our conclusions could be that the world has been changed so utterly by this novel coronavirus that six months later it is necessary to rewrite our thoughts
Trading places?
Yes. Trade deals and harmony, especially between the US and China, have become more critical but are also under more pressure from the Covid-19 pandemic. The late 2019 agricultural trade deal between China and the US could have unblocked an impasse, where tit-for-tat tariffs have been the story for more than a year. US producers were well positioned to benefit from China’s struggles with African Swine Fever and the loss of half its pig production; however, the US president used the opportunity to bargain and win concessions for other industries – potentially sacrificing agriculture for the “greater good.” Whatever the long-term results of the tariff battles, it is clear that US farmers are not currently making hay (or, more accurately in this case, growing soybeans and producing pork) from China’s need.

Instead, European reports confirm exports of EU pork are up 12% as China absorbs more product. Even Russia has become a major supplier. However, the big winner from the US – China trade war is Brazil through strong exports of soybeans, pork, and poultry. Chinese imports of Brazilian-produced pork and poultry create more value for Brazil’s ag sector compared to shipping commodity grains.

This is the less-noticed aspect of the trade wars. Long-standing trading relationships have been broken during the disputes and are reforming as new bilateral partnerships. If Brazil can cement its new trading relationships, the balance of agriculture may have shifted for a generation. By contrast, Argentina, historically an agricultural powerhouse 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.

Several other factors are influencing agricultural trade. Britain’s decision to leave the EU will create massive challenges given the reliance it has developed on those markets over its 40-year membership, and bilateral or multilateral agreements are unlikely to shore that up. The Covid-19 pandemic itself is creating concerns about food security, leading some countries to restrict agricultural exports (Vietnam rice, for example) while others dependent on oil revenues now have less money to pay for food imports. The general tightening of worldwide inventories of many commodities suggest price increases of 2% to 5% in a range of commodities including grains, sugar, coffee, and chocolate will be coming.

Climate clashes?
Maybe. The advent of the novel Coronavirus appears to have put the climate debate on the backburner. Although the World Economic Forum in Davos and the ‘Trillion tree project’ captured world leader’s attention and global headlines in early 2020, Covid-19 abruptly shifted the world’s focus to personal health concerns, worries about jobs, and the potential collapse of entire industries. At the same time, Covid-related shutdowns of non-essential activities have reduced the release of carbon gases, making it clear (at least to some) that rising emissions are driven more by human travel, construction, shale gas production, and the tremendous use of energy by an increasingly digital economy. Modern agriculture may not be the climate villain it has been made out to be.

Climate activists claim that the world is not taking climate change seriously enough and the farming sector, especially livestock, is worried about being made the scapegoat for a failure to control greenhouse gases. Cows clearly are a significant contributor to gases associated with global warming, although they don’t contribute as much as some activists would have you believe (the original FAO report measuring the contribution of livestock to global emissions at 18% has since been corrected to 5%). In addition, the fact that methane from cows can be recycled by nature in a way other forms of greenhouse gas emissions cannot is usually overlooked.

The furore over the burnings in the Amazon rainforest and the catastrophic Australia fires are generating column (screen) inches but are also seeing a backlash from other countries who object to what they see as vilification by rich, Western economies. For example, an esteemed group of Brazilian agri-economists (under the title of ‘food x forest’) point out that the Brazilian agricultural miracle has lifted 30 million people from hunger in a decade and created the world’s most important global agricultural exporter. This includes providing the soybeans for making soya oil and other soy-based feed for animals produced in Asia and Europe, and also filling the plates of vegetarians and vegans around the world with tofu. Brazil’s exports are also critical in providing asparagus, cacao, cashews among others, alongside our morning coffee and juice.

Overall, climate change discussions are emotive, often intergenerational, pitting rural against urban, big business against smallholder farmers, vegetarians against meat eaters. In the end, the changing climate does represent a threat to current food systems. As Ed Luce in the Financial Times recently pointed out, climate change related to human activities 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 low-intensity pasture systems to lower the carbon footprint have to mean worse animal welfare? Is 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.

The Demise of Retail Food?
No. The fourth mega trend of 2020 has been reversed in a most spectacular manner by Covid-19. While the trend for younger consumers to change the face of food retailing still holds true, the predicted demise of the traditional grocery store may be premature. Supermarkets have roared back during lockdowns as housebound consumers were forced to cook at home, often from scratch, and facing boredom reembraced the arts of baking and breadmaking, among others.

Prior to the novel coronavirus, the grocery sector was going through a massive restructuring. Building on the success of membership-based “clubs” such as Costco and Sam’s Club, a wave of value-focused retailers (e.g., Aldi and Lidl) brought their hybridized 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 would not be expected. In the U.S., Whole Foods has been the poster child, responding to ‘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. This dual-sided attack left traditional supermarket retailers struggling in the undifferentiated middle, with too much space and a lacklustre e-commerce offering.

The supermarket industry is now at a crossroads, assuming the world begins to open up again. Will we return to the trend for stores to get smaller and more specialized in the fresh goods and “craft” offerings that prosumers are willing to pay more for? Will the tough economic conditions for the foreseeable future further bolster the gains of hard discounters? Or will consumers who have now sampled online shopping due to Covid-related safety concerns stick with food delivery from full-line retailers who have quickly expanded e-Commerce activities and can provide one-stop/one-click shopping?

Covid-19 has also reversed the decline of ‘Big Food.’ For the past decade, leading global food companies have been struggling to understand shifting consumer behaviours, including a rejection of historic brands. However, during lockdown, consumers have returned to safe, recognized brands and packaged foods. What’s next? Whether consumers continue to embrace at-home meals over the coming months or escape lockdown with a desire to never cook at home again, in either case technology provides 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.

Replacing protein from animals
No. Consumer data on Covid-19’s effect on the growth of alternative proteins, including plant-based or ‘animal-free’ meats and dairy, is not conclusive. During the early days of lockdown, consumers flocked to trusted options, frozen and processed alike, with long shelf lives. Some analysts see data suggesting that the pendulum is swinging back, bolstered by new retail offerings from leading players such as Beyond Meat and Impossible Foods that are gaining traction with both vegetarians and meat-eaters.

Those who express doubts that the future of meat consumption is plant-based and/or petri-dish proteins risk being dismissed by millennials with ‘okay boomer,’ as the authors of this paper heard at an Asian Agtech investment conference in November 2019. Last year saw record valuations and investments for ‘clean-meat’ or ‘fake-meat’ (depending on your perspective) start-ups and funding in 2020 has remained strong, even with Covid. Consumers seem willing to lower their standards for natural or non-GMO. The most popular plant-based items so far, burgers, has a long list of additives and Impossible Foods’ key ingredient, heme, is unapologetically made with genetically-engineered yeast. Meat grown in a laboratory has additional challenges, including the need to use stem cells from animals, the use of antibiotics in the lab, and the cost of the media to grow it. However, given the reaction to plant-based meats, the first two are unlikely to be major consumer concerns and production costs will decrease with experience and scale.

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 be grown or fermented efficiently and be texturized or processed to offer alternative to livestock products? What about hybrid products that combine meats and their plant or lab-based alternatives in a meat-light version? While alternatives are still in their infancy, it seems better to be a disruptor than to be disrupted. Watch this space.

Farming in the great indoors
No. Covid-19 has not been good for investors in the indoor farming sector. Featured in many predictions for 2020, the touted benefits of indoor farming (formally known as controlled-environment agriculture) are great: dramatically increased cropping cycles per year, reduced water usage, better energy use, higher food safety. 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. 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 including THC and CBD, 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 these products as healthier, lower calorie alternatives to hard spirits, beer, and wine. Consumers are influenced by claims that various cannabis extracts can reduce inflammation, relieve pain, reduce anxieties, promote better sleep, etc. Anecdotally, Covid-19 has resulted in an increase in cannabinoid consumption, likely for the same reasons that alcohol sales have increased as people try to alleviate boredom and lower fears. That said, post-crisis there are no signs that investors will be rushing back to indoor farming investments.

The world is becoming Digital
Yes. The biggest winner of Covid-19 in agriculture undoubtedly are technologies that removed people from the process of producing food. Digital technologies provide that promise. Innovations gaining the most traction in farming prior to Covid-19 were those that replaced human cognitive function (e.g., artificial intelligence and machine learning, combined with the Internet of Things), but now sensors, robots, and other forms of automation that replace labor on the farm and in the processing plant are growing faster. Even 3D printers to avoid the need to ship replacements parts to the farm and the use of augmented reality and virtual reality to train employees are being accelerated by real and immediate needs during social isolation. Blockchain can provide the traceability consumers crave in food and farming, when you are unsure what food is safe. There is no doubt that 2020 will be a breakout year for digital in agriculture.

An alternative consequence of our digital world is the growing influence of digital food activism that is taking root (with the ‘Prosumer’ movement as a subset). These loud voices are 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 genuine 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. Although this is not a top news story now (during the recovery from Covid-19 period), it will be a story for the decade as the virus recedes.

Of the seven mega trends expected to influence our food production system for the next decade in January 2020, three trends are confirmed, one is on hold, and three are reversed. Our conclusions could be that the world has been changed so utterly by this novel coronavirus that six months later it is necessary to rewrite our thoughts. Perhaps, but in one of the most fluid moments in the history of mankind, food has reasserted its central position in peoples’ lives. The techniques and technologies to do that have also never been so important.