Mr. Bryan Dierlam - Policy That Will Meet the Needs of the Growing Food Supply
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Policy That Will Meet the Needs of the Growing Food Supply - Mr. Bryan Dierlam, Director, Government Affairs, Cargill, from the 2013 NIAA Merging Values and Technology conference, April 15-17, 2013, Louisville, KY, USA. More presentations at http://www.trufflemedia.com/agmedia/conference/2013-niaa-merging-values-and-technology
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Mr. Bryan Dierlam - Policy That Will Meet the Needs of the Growing Food Supply
- 1. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. Policies to Meet the Food Needs of a Growing World Bryan Dierlam Cargill, Director, Government Affairs April 17, 2013 Louisville, Kentucky 1 May 2013
- 2. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. Key Trends Volatility Trade Protein Consumption Population Growth Income Growth Biofuels Health & Nutrition Sustainability 2
- 3. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. GLOBAL FOOD PRODUCTION VS. PRICE (production of grain, rice, major oilseeds, PO, FSHM vs. corn/soybean/wheat futures price index) -30 -20 -10 0 10 20 30 40 50 60 70 1975 1980 1985 1990 1995 2000 2005 2010 1 May 2013 Percentage change in production Percentage change in price Source: USDA
- 4. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. world food flows (grains, rice, oilseeds, meals, oils, feed equivalent of meat – net interregional in mmt) -200 -150 -100 -50 0 50 100 150 200 N Amer S Amer Australia E Eur/FSU C Amer W Euro Asia MidEaAfr 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 exporters: more land than people importers: more people than land
- 5. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. 1 May 2013 More people, more income, bigger appetites 0 500 1000 1500 2000 2500 3000 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 0 20 40 60 80 100 120 140 160 000 USD income per capita – 1997$ mil population (grey bars) kg / cap / year (lines) grain meat sugar/sweeteners vegoil
- 6. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. The Effects of Higher Disposable Income Example - Chinese Meat Consumption grew 6-fold in 30 years Meat consumption – 1981 (Pork, Broiler, Beef) China 11% USA 22% Rest of the World 67% Meat consumption – 2011 (Pork, Broiler, beef) China 29% USA 14% Rest of the World 57% 1 May 2013 108 Mln Tons 237 Mln Tons Source: USDA
- 7. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. 1 May 2013 Biofuels Volumes – a Major Shift • Grain to ethanol 0 20 40 60 80 100 120 140 160 180 2001 2006 2011 Million Metric Tons • Vegoil to biodiesel 0 4 8 12 16 20 24 28 2001 2006 2011 Million Metric Tons ~9% of world grain market ~14% of world vegoil market
- 8. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. Populations are expanding where it is most difficult to grow food 8
- 9. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. Sustainability 9
- 10. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. Cargill Supply Chains 10
- 11. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. 11
- 12. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. 12 Cargill Suppy Chains
- 13. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. Cargill Supply Chains 13
- 14. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. Policy Opportunities and Challenges Honor Comparative Advantage Enable Open Markets Invest in Infrastructure Agricultural Productivity Harmonization of Standards Support Smallholder Farm/Property Rights 14
- 15. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. COMPARATIVE ADVANTAGE DAVID RICARDO The world will always raise the most food the most economically if every farmer plants the right crop for the soil and climate, and then trades with others.
- 16. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. 16 Comparative Advantage & Trade Reactions to Volatility Export Bans Stockpiling & Hoarding Conflating Security with Sufficiency Policy Opportunities in GREEN Policy Challenges in RED
- 17. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. 17 Open Markets, Price Discovery, Risk Management Disrupted Market Signals Political, Fiscal & Monetary Risk Factors Regulatory Barriers
- 18. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. 18 Transportation Goods to Market Port and River Dredging Locks and Dams Competitors’ Infrastructure Fiscal Constraints
- 19. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. 1 May 2013 Genetic improvements and fertilizer intensification drive supply expansion thru yield -- acreage has not been a significant supply drive until recently 90 100 110 120 130 140 150 160 170 180 190 200 210 1975 1980 1985 1990 1995 2000 2005 2010 Production Yield Area Key driver of production growth: yield increase Index (1975=100) Source: USDA
- 20. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. 20 Biotechnology & Innovation Asynchronous Approvals Positive Test at Destination for Unapproved Events Field Escapes Commercialization before approval in major export markets creates unacceptable risk
- 21. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. Export Disaster - Don’t Do This! Plants (LT30) (LT30) (Bovine EV) (LT30) (LT30) Open 7/10/08 (Bovine EV) (Bovine EV) (LT30) (LT30) Approved U.A.E. Chile Colombia Dominican El Salvador Hong Kong Japan Korea Lebanon Mexico Panama Peru Russia Singapore St. Lucia Taiwan Thailand Ukraine Vietnam As of 8/18/06 As of 4/30/10 10/1/2008 Dodge City, 86K, Millard Dodge N Y Y Y Y Y Y Y Y Y Y Y Y N Y Y Y Y Y 10/1/2008 Relisted 11/17/08 Friona, 86E N Y Y Y Y N Y Y Y Y Y Y Y Y Y Y N Y Y As of 4/8/08 Relisted 7/12/07 Ft. Morgan, 86R N Y N Y Y N Y Y Y Y N N Y N Y Y N Y Y As of 9/07 Plainview, 86H N Y Y Y Y N Y Y Y Y Y Y N N Y Y N Y Y Relisted 11/25/08 Schuyler, 86M N Y Y Y Y N Y Y Y Y Y Y Y N Y Y Y Y Y Fresno, 354 Wyalusing, 9400 As of 7/12/07 Allow Canadian YES NO-direct slau YES YES YES YES-AV YES YES YES YES NO-direct slau NO-direct slau NO YES YES YES YES YES Cattle? NO-A40 100 Days in U.S. 100 days for bone-in Age Requirement <30 None <30 <30 <30 <21 <30 <30 <30 None None <30 <30 <30 <30 <30 <30 <30 General Product Boneless >30, boneless Beef prods Boneless Boneless Boneless, Boneless Boneless Boneless, >30, boneless >30, boneless Boneless & Boneless Boneless Boneless, Boneless Boneless, Boneless, Requirements Beef Only FTB OK Offals Beef Only Beef Only Bone-in & Bone-in & Bone-in Bone-in & FTB OK FTB OK Bone-in Beef Only Beef Only Bone-in as Beef Only Bone-in Bone-in Tongues (no Offals Offals (no of 11/2/09, Offals <30, boneless Hanging headmeat) No >30s intestines,) <30, boneless <30, boneless No GB must be <30 & bone-in Tender is OK for the QSA No AMR & bone-in & bone-in CDN 100 days U.S. Trim OK per the QSA No Diaphram Special Halal Tallow is not No AMR No Offals, No Mex 7/10/2008 Prod must be Boneless We are not We are not Cannot No Mex No Offals Effecitve No AMR No AMR Considerations Slaughter part of the EV No AMR Cattle for Slau Date rec'd w/in 180 Beef from listed for >30s listed for >30s produce until cattle for 4/1/10 No Offals Only Maintain direct Slau of slaughter Canada is on-site audit direct slau certain offals after 7/15/10 CMS not traceback of Mex cattle Must be on eligible OK to ship kill date listed for >30s cattle to prod Begin w/ do not need vessel w/in 30 (No Cdn No Imported No Trim 7/27/06 Slau 100 days in US days of cert trim) Beef Mex 100 days Allow GB? N Y Y Y N N N Y N Y Y N N Y N N Y Y Require SOV? Y Y N Y Y Y N Y N Y Y Y Y Y Y Y Y Y Specific Offals None Aorta None None None, incl Tongue-all Abomasum None Cheekmeat Aorta Heart None None Tendon None Aorta None (Eligible) Backstrap Diaphram & Abomasum Heart Backstrap Liver Tongue Backstrap as of 9/14/10 Cheekmeat Outside Skirt 86R Only Kidney Cheekmeat Tongue Cheekmeat Heart Livers, Liver Heart Heart Kidney Tendons Omasum Kidney Kidney Liver 86K, M, R Oxlips Liver Liver Omasum Only Tongue Omasum Omasum Oxlips Offals Tripe Oxlips Oxlips Tendon be written in Trimmings Tendon Tendon Tongue the EV and Tongue Tongue Tripe approved by Tripe Tripe AMS
- 22. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. Export vs. Domestic Market $60+ advantage/head on 7 products Product Value in Export Market $ Value/# Lb/Hd $/HD/Export Value in Domestic Market $ Value #/hd $/HD/US Short Ribs Korea $3.00 10 $30.00 US/Canada $ 0.80 10 $ 8.00 Navels Japan $1.60 20 $32.00 US/Canada $ 0.80 20 $ 16.00 Finger Meat Korea $2.50 1 $2.50 US/Canada $ 0.80 1 $ 0.80 Digital Muscle Taiwan $2.25 1 $2.25 US/Canada $ 1.50 1 $ 1.50 Liver Russia/Egypt $0.60 13 $7.80 US/Canada $ 0.12 13 $ 1.56 Oxliips Mexico $1.40 1.5 $2.10 US/Canada $ 0.15 1.5 $ 0.23 Tongue Japan $5.00 3 $15.00 US/Canada $ 0.10 3 $ 0.30 $91.65 $ 28.39
- 23. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. 23 Harmonization Inconsistency Trade Frictions Delays Create Consumer Confusion
- 24. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. Property Rights 24
- 25. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved. The Values Question • Values vs. Technology • Tin vs. Food • Managing the Dichotomy • Anonymity vs. “Story Food” • Knowing Your Farmer and Agricultural Values • Improve our Messaging—Who do we talk to? 25
- 26. National Institute for Animal Agriculture 2013 © Copyright Cargill, Incorporated 2012. All rights reserved.
Editor's Notes
- Thank you for the invitation to visit about the policy challenges and opportunities to ensure abundant, safe, sustainable, and secure food for global consumers.
- What are the trends that inform our thinking?
- Virtually all one needs to know about the last few years can be summed up in this graph and in one word: Volatility. This chart is so critical that it appears on page 3 of our recent annual report. Over the past few years, very small changes in production have led to very large changes in price. The price swings have been dramatic—60% increase in prices in 2008, near 30% decline the next year, 45% increase in 2011. The most striking example of this new era in volatility occurred when the 2010 Russian drought reduced global supply by 1% caused wheat global prices to rise 60 to 80%. The elasticity is clearly significant and far more than we observed with a similar change in production of less than 1 percent 25 or 30 years ago.As a result, in times of good production we get incredible complacency and prices drop extremely rapidly, and in times of relatively modest shrinkage in production, we get dramatic spikes in prices – as you can see on this chart. These are the kinds of environments that are most difficult to deal with for the smallest farmers of the world.
- Over the past 40 to 50 years there has been a relentless expansion in world trade in food from areas of the world that have more land than people to parts of the world that more people than land. Since 1965, exports from North America have tripled. Exports from SA were near 0 in 1965—now 150 mmt. Asia was importing small amounts in 1965, now approaching 150 mmt, and Mid East Africa near z in 1965 to in excess of 150 mmt. Evolution of trade flows has had a dramatic impact on the demand for and therefore the value of grain elevation / processing capacityHuge USSR grain purchases in 72-74 and again in 79-81 resulting in massive construction of center gulf export capacity (Reserve, Zennoh)How are MidEaAfr deficits different from Asia? Asia is more meat driven (feedgrains/oilseeds) likely served ex Americas, MidEaAfr is more food grains, greater opportunity for flows ex Europe/Eeurope.
- The next key trend I like to call “The law of increased protein consumption as income rises.” I believe this should be placed in that body of scientific thought alongside E=MC2. Since 1975, world population has grown 69% and world income by 180%. How does that translate to food consumption?This takes a bit of study because it contains 3 sets of numbers and 4 food groups--but it is important. The left hand side is population, the bottom is income per capita in US $ and the right hand chart is consumption per person per year of each food product in kg. Guess what? The roughly 4.5 billion people with lowest per capital income get most of their calories in the form of grain. Then, as income rises, grain consumption levels out and begins to ever so slowly decline as meat consumption steadily increases. Show of hands: How many people here get a pay raise, a promotion or a new job and celebrate by eating corn/soy blend? Those in the developing world don’t either. Headline: meat is powerful.As people’s incomes rice, they eat less grain and more meat and sugars.Two thirds of the world’s population have incomes below $2,000 a year. (Almost 2.5 billion or world’s 7 billion) and primarily rely on grain for their diets.More countries are moving from the left to the right side of the chart.You make meat from grain and oilseeds. All these food sources are in direct proportion except meat. You need 4 pounds of grain to make one pound of meat.
- I like this slide after the previous slide because it shows a very specific example. In 1981, China consumed 11% of the world meat protein. Today, 29%. They are consuming nearly 6 times as much meat in 2011 as they were in 1981. The US only 1.39 times as much. The world economy grows 2.5% to 3% annually on a compound basis. Chinas has been growing at around 9% for 30 years.As China’s disposable income grows its diet turns to meat.
- Ethanol is now consuming 9% of the world’s grain and biodiesel 14% of the world vegoil. This growth will continue to be a demand driver. Understanding the implications of biofuels policy and mandates is critical for addressing the world’s long term food needs.
- Population growth will occur in areas that are already heavily populated. They are also areas that are already difficult to grow food for climatic reasons. More arable land will be difficult to find and as population grows, the arable land that is available will be further occupied by people—making the situation more difficult. The pressure to emigrate will increase which has its own policy dimensions. A particular challenge however, is that most of this expanding and growing population will be in areas where it is most difficult to grow food. According to the UN, populations are expanding in areas where it is the most difficult to grow foodThe greatest growth rates between now and 2050 are projected in sub-Saharan Africa and the Middle EastThis means 88 percent of the global population will reside outside North America and Europe – mostly in food deficit regionsFor people to be food secure they need assured access to safe food that is sufficient to meet their daily caloric and nutritional needs.Experts suggest that the combination of a rising global population and climate change could make this challenge more difficult in the coming decades.
- Sustainability has become a product attribute valued by customers and consumers. Our sustainability efforts range from increasing energy efficiency, greenhouse gas reduction, water conservation, to animal care and food safety so that we responsibly meet customer and consumer preferences and demands as well as the needs of our employees and communities in which we do business. We operate in a transparent world. We work with countless stakeholders to advance responsible, sustainable solutions in our efforts to feed the world.
- Our effort to move product from areas of surplus to areas of deficit relies upon complex and lengthy supply chains where financial, physical and political risk are part of the equation.
- If you understand our supply chains you may have a greater appreciation for the policies we support.
- Our supply chains are as diverse as the products we produce, the countries where we operate, and the customers, suppliers and farmers we serve. Our supply chains include everything you anticipate—elevators, mills, crush plants, refineries, boilers, packing plants, export terminals, trucks, railcars, barges, ocean going vessels, and containers.
- And some things you might not—like bicycles, camels and a cotton scale on a tree limb in a Zambian village. They could be simple like wheat to a flour mill to a bakery; Or it could be as complicated one I recently learned of where we originate a specific product in Spain, process it in Iowa, ship it back to Europe where it begins an overland journey to our troops in Afghanistan. The supply chain to move soybeans from contracting with a soybean farmer to selling the output to a Chinese livestock producer may take 270 days through multiple modes of transportation, processing and handling steps. We confront all types of risks: markets, weather, logistics, regulatory and labeling approvals, compliance, taxes, tariffs, sanitary and phytosanitary issues, inspections, environmental issues, labor, border inspections and a myriad of product specific issues. Each of these has a policy dimension that can speed or hinder the responsible movement of food from Point A to Point B.
- We believe there are several policies to advance that will ensure we can sustainably, affordably, safely, responsibly and securely provide food for the future. They include:Honoring Comparative AdvantageEnable Open MarketsInvestment infrastructureImproving agricultural productivityHarmonization of rules and regulations and,Ensuring success of smallholder farms.
- But challenges usually manifest themselves during volatile times. Poor trade policy based upon snap political reactions to volatility is a recipe for food insecurity. The past couple of years provides countless examples of this. Recently, drought conditions in key food producing countries like Russia, Ukraine, and Australia saw food production fall. Russia implemented an export ban which severely raised prices around the world and caused insecurity in the countries counting on them. This had several spillover effects: It put more pressure on countries like the U.S. and others to make up for what Russia held off the market. It also reduced domestic prices in Russia—which certainly satisfied urban consumers—but undermined their incentives to plant—perpetuating the crisis. Additional food dependent countries, fearing shortages, began considering other ill-conceived policies such as stockpiling and hoarding—which only forced prices up even further. Building stockpiles and hoarding during times of shortage and high prices worsens the high price problem just like reducing unneeded stockpiles during years of surplus further lowers already low prices—further suppressing farmers’ incentives to plant. Poor policy driven reactions to volatility send precisely the wrong signals to the market place. It is also important not to conflate food security with self-sufficiency. Unsustainable decisions could be made, scarce resources consumed and irreparable ecological damage done in the name of self-sufficiency when the right answer is to trade. Perhaps the best example of this is Saudi Arabia’s wheat experience. In the 1970s, the kingdom embarked upon a project to use underground water from aquifers to irrigate the desert and become self-sufficient in wheat. At one point, they were the 9th largest wheat exporter--but at tremendous cost--5 times the world market price, according to a recent study. They have come to appreciate the principles of comparative advantage and trade. They have a comparative advantage at producing hyrdrocarbons while others have a comparative advantage at producing carbohydrates. By 2016 they will be out of the wheat business. But the water may never return. For the system of trade to work, trade partners must rely on something more meaningful than simple principles like comparative advantage and more valuable than signed trade agreements between their leaders—they must have trust. Cargill believes in a trust based system of trade where countries and companies deliver on their commitments. No export bans or trade restrictions after contracts are agreed to. If there is no trust, countries may pursue policies which they believe in their self-interest but may prove counterproductive to global food security.
- Prices stimulate production and best allocate resources. Anytime there is volatility or high prices in the food markets commodity speculation is usually viewed by someone as a culprit. Prices are driven by supply and demand fundamentals. Last year the world lost close to 80 million tonnes of overall crop production, solely the result of bad weather. As discussed, many countries restricted trade flows which forced prices up even higher than had those restrictions not been in place. On top of this crop volatility there was turmoil in fiscal and monetary policy as both the U.S. and EU worked through debt inspired policy debate. This volatility in global commodity, debt, interest rate and currency markets had to be managed. All this risk is managed by firms in the futures, options and derivatives market-- A market that is little understood by the casual observer. I have in my hand a pair of dice. Some equate the futures and derivatives market to nothing more than a dice game where participants wager or gamble on an outcome. Commercial participants have risk because they are active in a physical market. They do not pick up dice to take on risk; they enter these markets to offset the risk they are already bearing. Firms might actually have more risk when they set the dice down and choose not participate in these risk management markets. Market volatility and the recent financial crisis led to policies, laws and regulations in the US which are now under consideration in the EU and elsewhere that address markets for risk management and price discovery. Rules that go too far by impeding price discovery and management of commercial risk do not change the weather and make risk go away—they make risk more difficult and more expensive to manage.
- If we want to continue moving the bounty of the American farmer from the corn fields of Iowa, the bean fields of Illinois and the wheat fields of Kansas, we need to continue focusing on infrastructure or our competitors will get the advantage and serve global consumers faster and more efficiently. Already, in Changdong province, China is building interstate quality truck-only lanes that have weight limits of 200,000 pounds. Panama has rebuilt and resized the Panama Canal on time and on budget. But convincing you today and many in Congress tomorrow does not build the needed infrastructure. The US is in a difficult fiscal period. As long as the mandatory side of the federal budget grows unabated without meaningful, significant, and politically painful reform, significant increases in funding for infrastructure and virtually everything else will be difficult.
- New technology, new production techniques and new ideas can increases efficiency and the sustainable, responsible use of resources. This can take the form of biotechnology, energy efficiency, labor saving devices, water reduction strategies, GHG reduction and technology like Cogeneration. No technology has advanced food production like biotechnology.ProductivitySlide: Key driver of production growth: yield increaseThis slide is perhaps news to no one here today. Production increase has been a result of yield not acreage expansion, until somewhat recently.
- Cargill supports biotechnology as one of the solutions to growing safe, affordable, nutritious and accessible food for the world. Biotechnology makes it possible to maximize crop yields and grow crops and income in areas of the world that were never before possible. A farmer in the Indian state of Gujarat recently told Cargill that his income is up 50% over the past few years due to Bt cotton. He credits Bt cotton with his son’s ability to get an MBA at a US B-school. We are committed however to serving the needs of our food and feed manufacturing customers with the full range of grains and oilseeds on the market today and believe customers and suppliers should have a choice whether to use agricultural biotechnology products or conventionally bred crops and specialty grains. Despite biotech’s ability to increase yields and grow production and food supply, not all countries agree or move with the same sense of purpose or timing. Often product approved in one country may not be approved in another. When the unapproving country is small, this may be a minor issue. When it is a large importing country however, it can create unacceptable risk for commercial companies—especially if it does not stay segregated from the approved product as it travel through the supply chain. That is why we oppose the commercialization of new genetically enhanced products prior to regulatory approvals in major export markets. Destination testing creates unmanageable commercial risks for importers and exportersNegative at origin DOES NOT guarantee negative test at destinationSupply chains cannot manage this risk effectively “Limit of detection” thresholds do little to improve destination risks Thinking back to our ship, the Aghia Marina, rejected loads cause major commercial disruptions—where do you go with a rejected cargo that is an ocean away from its origin? How do you get a rejected cargo offloaded? Where is the nearest country that has approved the product? How soon could another ship with approved product arrive to replace the load that’s been rejected? How many calls must one make to how many offices to get all this sorted out? Who picks up the cargo that was supposed to be loaded into a boat now laden with rejected product? All the while the demurrage calculator is adding up. How many people or animals go hungry while this plays out? We will continue to accept and market most genetically enhanced crops. The key to delivering on commitments is through communication and dialog between us, our supplier producers and our end customers.
- We want to avoid what you see on this slide, which is a disaster unto itself. It shows the BSE regulations by country that our beef company has to evaluate in order to comply with a myriad of import rules. When trade rules begin to look like this, you have a disaster. Across the top are 19 key export markets with 7 of our facilities along the left hand side, each different rules about which plants can export to where by product and processing method. Imagine the logistics, plant operations and cattle purchasing requirements that go into simply filling an order. This is to be avoided at all cost.
- A preferred approach is this one—where each individual product is sold to its highest valued market. When is the last time you had oxlips, tripe or liver? These are but a few cuts from the carcass of a beef animal. By exporting them to a few key export markets adds $60 per head. This goes to the price we are able to pay for the animal, and ultimately, to the corn and protein that went into that animal. To get from the first slide to the second slide, we need harmonized rules and standards.
- Harmonization of transparent, science-based standards should be a priority so that food can be moved efficiently and predictably. Recently I learned of a boat we were loading bound for Africa with wheat. The rules say you are to sniff it from two inches to determine if its sour. The inspector insisted on putting his whole nose in the sample. Imagine what was found—it was sour. The boat backed up and was on demurrage. The customer called asking if his shipped had sailed. The train could not unload because the elevator was filled with now rejected grain. The grain was not sour from two inches--but it was once you buried your nose it in. Imagine the problems that could be prevented and the people that could be fed on a more timely basis if everyone followed the same rules. With countless food products in commerce, our collective efforts to get food and feed from those that produce it to those that consume it would be advanced through harmonization.
- Let me expand upon the property rights issues. Property Rights and the Developing World—Not one of us here today woke up this morning worried about the validity our car title or the deed of trust for your house, or feared that a squatter might show up and claim your home as their own while I am speaking to you? Yet many in the developing world farm live with that degree of anxiety. We don’t say possession is 9/10th of law for nothing. Many in the developing world, own property, just not in a way that it can be converted to capital for investment in their business. Hernando de Soto explains this wonderfully well in his book “The Mystery of Capital.” If you doubt that residents of the developing world own land, look at the behavior of their dogs he says. The dogs know the property lines of their master as well as any surveyor. Their formal laws do not recognize the informal property systems that have evolve over time. Our own property laws evolved this way in the 17 and 1800s and today we take them for granted. Clarifying property rights would enable farmers in the developing world to improve their land, their efficiency and benefit from many of the same legal rights, business arrangements, financing, and property customs that we have; improving their property, livelihood and the environment in the process. But also important for city dwellers to give them to capacity to buy the food they need and grower their economies so they have the capacity to purchase food.