Sara Menker participated in a panel discussion at Bayer’s event, “Fields of Opportunity: Feeding the World, Protecting the Planet” alongside Franck Gbaguidi, Jorge Fernandes and Ruramiso Mashumba. The panel was moderated by Thomas Armitage, member of Bayer’s executive team and global head of communications for the Crop Science division.
Watch Live Stream here.
This transcript has been edited for length and clarity.
Monitoring global supply and demand shocks
Sara, thank you very much for joining us. Gro Intelligence brings together data insights and insights into the global ecology and how this relates to our financial markets, economy and all aspects of our lives. What information do you get from Gro about the extent of the crisis? And what do they imply about how things will develop further?
Thank you for inviting me.
Let me contextualize where we are as a world today. One of the things I always say about the Russian-Ukrainian war is that it only added fuel to an already burning fire. It didn’t create the food crisis; it only made things worse.
Let’s look at a basket of food – your main grains, some vegetable oils and proteins – and how prices have changed around the world since 2020. In the United States, [prices have risen] about 75%; in Norway, it is 125%; in Sudan it is almost 2,000%; in Syria, it is 700%. This is the first time that no one is safe.
The structural changes that began in early 2020 during the COVID shutdowns, combined with weather disruptions, the Russian-Ukrainian war, and now the strong dollar, have placed us in unprecedented times. Therefore, looking at things over short periods of the year to date is the wrong way to look at the current crisis, as it will take time to resolve.
So what has changed? On the supply side, we experienced several unprecedented supply shocks:
- Extreme droughts in major growing regions like the United States, Brazil and Argentina
- Disruptions like the floods in Pakistan
- A significant increase in the cost of operations
- The fertilizer crisis [fertilizer price has quadrupled, and input costs for farmers have gone up 30 to 40% of production costs]
These ends take over from the supply side; also, understanding climate change is crucial.
On the demand side, following significant structural changes, China has become a net importer of grains in 2020. People tend to focus too much on corn, but China’s feed mix is quite complex, so you have to look at the whole basket of cereals instead. cereals.
In 2020, China imported about 80% more grain than in 2019. In 2021, despite the blockages, it imported 143% more. [more] from 2020. This year, despite all the blockages and price increases, he imported the same amount as last year. Thus, structural change in demand coupled with supply-side shocks encompasses what we are discussing here.
The current global food crisis
Can you comment on the kinds of approaches we should take in the face of the crisis?
One thing that has shocked me is how much education we have had to do over the past six months about our global food systems and food security.
When we talk about solutions and partnerships, part of my role is just to be an educator and provide fact-based education on where we stand. Ultimately, the magnitude of the challenge cannot be met by a few; it takes real collective action and lots of money, which will only come if those who control the money pay attention to these issues.
It also requires collaboration across industries in a way that we have never done before. For example, I always say energy security is food security and food security is energy security, and we don’t seem to be doing well. The lack of communication and dialogue between the energy industry and the food industry shocked me.
I was an energy trader, so serving as a translator in both worlds helped me get things done efficiently. Yet ultimately, to fund these challenges, we also need capital markets to step up in ways they haven’t before.
I was an oil and gas trader, and when I started, the idea of selling oil two to three years ahead was difficult. When I left, we were buying oil and gas 20 years in advance. What did it do? This has funded a new wave of innovation even in conventional energy markets, driving down the cost of things like natural gas. Switching to renewables has been a long and expensive journey; many capital market players have mobilized to do so. We need this level of education and action on the global system to fund innovation. We need to start funding it a decade at a time. There is hope, but fundamental structural change is needed.
What should companies do to help in the situation where they are trying to secure the food supply?
One of the biggest challenges we faced when we started a data business eight years ago was the mistrust in the industry. I did not fully recognize that trust had been fundamentally broken until I saw the dichotomy between public and private institutions.
Data insights are a bridge to understanding and building trust. We’ve broken through that barrier now – we’re able to develop public goods as a private enterprise and create space for dialogue that hasn’t happened before. There’s a famous quote that says, “Eating is an agricultural act,” and I rewrote it to say, “Living is an agricultural act.” Everything we interact with, from the moment we wake up, has an agricultural component to it, and I don’t think we recognize that enough as humanity. Therefore, reframing the dialogue in this journey and building trust within our institutions is essential.
Moving forward and what to watch out for
We have a question here from the cat. How to further stimulate local production, especially in regions affected by climate change? How can we make this more economically viable for farmers?
Economic viability comes down to the conversation about funding models, whether from a lending or insurability perspective. It is essential for our food systems to rethink insurance, which applies well beyond agriculture, because insurance affects both production and logistics.
Along the Mississippi River, crops are grown and we can’t get them out because the water levels are too low; this is an example of a climate-related disturbance. One hundred and twenty-four cities and towns span the Mississippi River, and these places are responsible for 40% of the world’s flow of goods; it tells us that we need to pay more attention to these large and vulnerable places.
The few institutions that manage agricultural insurance cannot continue to bear these risks any longer on the scale necessary to [the agricultural industry] be financed and financed. Basically, [the industry has] Think about [climate risk] as a global portfolio [risk] which requires risk management at a very different level.
We talked a lot about the challenges we faced in 2022 in the food production sector. What do you see as the biggest risk and biggest opportunity in 2023?
The greatest risk on the [food security] side is fertilizer.
This summer, we partnered with the International Fertilizer Association and collected anonymized data on the course of the war in Ukraine. When we did this analysis, we made it open source and partnered with the Gates Foundation; it’s a perfect example of private industry and the public sector coming together and developing a tool for the world to understand [the risks we face].
We looked at nitrogen production, response and application rates around the world and analyzed three different scenarios: a base case, an optimistic case and a pessimistic case.
We are in the process of updating these scenarios because our current situation is now worse than the pessimistic scenario, which would essentially reduce the food supply of around 200 million people.
As winter approaches, we have a potash problem, a phosphate problem, and a nitrogen problem, and we’ve never really faced a situation of this magnitude.
From a risk perspective, I’m concerned about production and productivity out to 2023 and 2024, and which regions will be most affected. Places like the United States and Brazil will be fine, but places like sub-Saharan Africa will be affected. When you go from already low to zero, which is where you’re headed, in areas where yields and application rates are already down, it’s worrisome.
From an opportunity perspective, food, agriculture and food systems are now at the heart of the concerns of all world leaders. We need to take advantage of this to make sure we focus on long-term change so that we’re not back in that position a decade from now.
As governments, aid organizations and companies in the agricultural supply chain try to adapt to these current realities, they need timely and transparent data from trusted sources. The Gro platform is designed to deliver this data and help our customers see around the corner – enabling better, faster and more informed decisions.
Contact us at firstname.lastname@example.org to speak to a member of our team or get a demo of our platform.
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