Chart(s) of the day: the "polio of agriculture" versus biotech ag

Trio of Economist articles/editorials on ag trends.

Stem rust is resurgent in Africa and heading northeast toward Central Asia and the Eurasian breadbasket states.  Once wheat's deadliest scourge, it hasn't been this strong since before the Green Revolution. Borlaug's original research and breakthroughs involved controlling stem rust.  Now reborn, it's centered in Africa's great lake states and features a footprint stretching from South Africa to Iran. Like a polio resurgent, the current generations of plants have little immune-system capacity to resist it, having gone decades without "infection."

The current version is known as Ug99 for Uganda 1999.

Meanwhile, biotech is beginning to take off in a serious way, having survived the financial crisis nicely, the technologies long pursued are now mature enough for full commercialization.  Moreover, "developing countries are emerging as major markets and sources of innovation for industrial biotech."

Another food giant shifts to bottom-of-the-pyramid selling

WSJ story on how the French food company Danone, of yogurt fame, is now focusing on market expansion in emerging and developing economies.

Danone has ruled the high-end healthy products niche for a while, making it one of the fastest growing food companies in the world.

But momentum is slowing in the company’s traditional, rich-world markets in North America and Western Europe.

And so it’s moving into the Gap big time, meaning “Danone is among a vanguard of Western multinational staking much of their future on the world’s poor.”

A decade ago, Danone got 6% of its revenue from emerging markets.  Today it’s 42%

Digging deeper, the company is now trying to target customers who live on dollar-a-day food budgets.

Danone’s CEO says “the objective is to do business not just with the top of the pyramid.”

“GLOBALIZATION MARCHS ON!” cries the newsreel announcer.

Foot-and-mouth threatens Japan's cattle industry

NYT story on foot-and-mouth (called hoof-and-mouth where I came from) outbreak in Japan threatening to tank it's prized beef industry.

The fear is legitimate.  Similar thing happened with mad cow in the US in the early part of last decade and our beef exports dropped dramatically overnight, and still haven't totally recovered--last time I checked.

You see the rising networks and the incredibly vulnerability and you think, this is where terrorism will go in this century.

As the New Core seeks food security, the Gap suffers less of the same

AP story via Vonne Barnett.

The basic problem persists:

Families from Pakistan to Argentina to Congo are being battered by surging food prices that are dragging more people into poverty, fueling political tensions and forcing some to give up eating meat, fruit and even tomatoes.

Scraping to afford the next meal is still a grim daily reality in the developing world even though the global food crisis that dominated headlines in 2008 quickly faded in the U.S. and other rich countries.

With food costing up to 70 percent of family income in the poorestcountries, rising prices are squeezing household budgets and threatening to worsen malnutrition, while inflation stays moderate in the United States and Europe. Compounding the problem in many countries: prices hardly fell from their peaks in 2008, when global food prices jumped in part due to a smaller U.S. wheat harvest and demand for crops to use in biofuels.

Majeedan Begum, a Pakistani mother of five, said a bag of flour for bread, the staple of her family's diet, costs three times what it did two years ago in her hometown of Multan. She can no longer afford meat or fruit.

"My domestic budget has been ruined," said Begum, 35.

The U.N. Food and Agriculture Organization's food price index — which includes grains, meat, dairy and other items in 90 countries — was up 22 percent in March from a year earlier though still below 2008 levels. In some Asian markets, rice and wheat prices are 20 to 70 percent above 2008 levels, it says.

Many governments blame dry weather and high fuel costs but critics in countries such as India, Argentina and Egypt say misguided policies are making shortages worse and collusion by suppliers might be pushing up prices.

No single factor explains the inflation gap between developing and developed countries but poorer economies are more vulnerable to an array of problems that can push up prices, and many are cropping up this year.

Farmers with less land and irrigation are hit harder by drought and floods. Civil war and other conflicts can disrupt supplies. Prices in import-dependent economies spike up when the local currency weakens, as Pakistan's rupee has this year.

Costs also have been pushed up by a rebound in global commodity prices, especially for soy destined for Asian consumption. That has prompted a shift in Argentina and elsewhere to produce more for export, which has led to local shortages of beef and other food. The global financial crisis hurt food production in some countries by making it harder for farmers to get credit for seed and supplies.

An old paradigm approach (developed versus developing) hides the underlying reality: the price rises aren't a West-versus-rest dynamic, but a New Core-versus-Gap dynamic.  An emerging middle class in the New Core eats better--and more--and that demand for commodities drives up prices for everybody (to the extent that government subsidies are overwhelmed).

Yes, amidst that compelling dynamic, you can cite all the usual suspects in developing and underdeveloped economies, but you're missing the new forest for the usual trees.

Clearest evidence are New Core pillars and rich Arab petrocracies buying up farmland across the Gap.  The West isn't doing that.

So understand this as a problem of globalization's success, and stop defining it in old-speak.

The Chinese take a page from my Irish ancestors

WAPO story.

The gist:

The Chinese government has begun ramping up research, production and training related to the humble spud, and hopes are high that it could help alleviate poverty and serve as a bulwark against famine.

The challenge of feeding a growing nation on a shrinking supply of arable land while confronting severe water shortages has long been a major concern here. China has to feed one-fifth of the world's population on one-tenth of its arable land, and the nation's expanding cities are consuming farmland at breakneck speed. China estimates that by 2030, when its population is expected to level off at roughly 1.5 billion, it will need to produce an additional 100 million tons of food each year.

That statistical reality could change eating habits here. Potatoes need less water to grow than rice or wheat, and they yield far more calories per acre. 

Makes you wonder why the Irish got so heavy into potatoes, because there's no shortage of water there.  Must be the tough growing season.

But the pattern is clear enough:  cut back on water-intensive crops and move into more hardier fare (rice to potatoes).  Obviously, rice isn't going anywhere, but as one Chinese ag expert put it, "Rice, wheat, corn -- we've gone about as far as we can go with them. But not the potato."

Some perspective on this shift:  China actually ALREADY produces and consumes more potatoes than any other in the world. But when it comes to consumption, because we're talking such a huge population, the Chinese lag in per capita terms, eating only one-third the amount of potatoes that Russians do and two-thirds the amount Americans eat.

If I could get every Chinese to eat a potato a day . . ..

The sweet potato silver-bullet?

WSJ story on how researchers are trying to achieve a more industry-friendly sweet potato.  Unlike its rather uniform cousin, the russet potato, sweet potatoes come in irregular shapes and with irregular sugar content. There's been a push for years to get a single major fast-food chain to pick up sweet potato fries as a healthier alternative--a goal I first ran into at the Clinton presidential library/graduate school years back (a regional ag improvement scheme that struck me as worthy).  The trick is not getting the fries industry to change its machinery so much as getting the sweet potato sector to change the shape and consistency of its product so that the fries industry can process them with the same speed and sustainability as russet potatoes.

Right now there is some sweet potato fries production, using regular potato machinery, and ConAgra is set to open this fall in Louisiana (coincidentally not far from Little Rock) what it claims will be the first dedicated processing plant generating fries, waffles and other products.

Sweet potatoes are not actually potatoes, but the roots of a plant.  The goal of researchers at places like ConAgra is to modify the vegetable to the point where it consistently grows out into a brick-like shape with more uniform color/sugar content.  One line of breeding already seems close to the goal, suggesting a mass production capacity down the road (optimistic is 3-5 years, pessimistic is 7-10).

The invasion of the hypermarkets!

Carrefour plunges into India, putting all manner of corner markets at risk.  It follows Wal-Mart, which opened its first store in the north last year.

For now, supermarkets account for only 5% of grocery sales in India, where middlemen rule.  Laws prevent outsiders from coming in.

But that will inevitably change, not because of the big, bad foreign hypermarkets, but because India's emerging and voluminous middle class will demand more than one brand of rice at one price.  Already, Wal-Mart plans a dozen more stores and reports very positive noises coming from the bureaucracy on this subject.  Why?  A government-sponsored study said that the small shops, when presented with such challenge, lost a lot in the first year but then recovered, presumably by selling differently to maintain their niche rather than their monopoly.

Long-term project by Wal-Mart and Carrefour.  Only the deep-pocketed should apply.

But serious profits await for the stubborn and persistent.

Great Recession did not equate to Great Diet WRT Western food styles

FT story.

Cargill CEO (see other post today) says the growing appetite for processed food, meat and dairy from Western sources has reversed fears that the Great Recession would trigger a significant drop.  The shift to a more Western diet over the past ten years held solid through the crash, unlike in other crashes where typically the locals turn to cheaper traditional staples.

Gregory Page called  the demand "remarkably resilient."

This time around contrasts greatly with the Asian "flu" of 1998-99, when a decade of dietary change was wiped out in 2 quarters.

Again, so much for deglobalization and the great distinctiveness of Asian tastes.

A glimpse inside one of the world's most important companies: Cargill

From an FT "analysis" full-pager, some sense of Cargill's reach (corresponding to graphic above):

1. The world’s largest cocoa trader, Cargill also processes the beans into cocoa liquor, butter and powder, the raw materials for chocolate

2. The world’s largest sugar trader, Cargill buys from countries such as Brazil and selling to Egypt, India, China, Russia, Ukraine and others

3. Cargill is developing a business focused on replacing petrochemical-based plastic products with soya-based products

4. Cargill produces sterols, plant compounds that help cut cholesterol levels, used in orange juice and other products

5. Cargill merchandises cotton worldwide, buying and sell cotton in North America, Europe and Asia and operates cotton gins in Africa

6. Animal feeds are supplied by Cargill to commercial dairy farmers in 28 countries across North and South America, Europe and Asia

7. The world’s largest corn processor, Cargill handles about 20 per cent of the US crop

8. Cargill Pork is involved in pork production in the US and export

9. Cargill Kitchen Solutions is a leading marketer of high value, processed egg products in the US

10. From seasoning used in processed foods such as baked beans to the kind used on frozen roads, Cargill produces more than 1,000 types of salt

11. Through its subsidiary, The Mosaic Company, Cargill is a leading producer of fertilisers, supplying fruit and vegetable farmers around the world

12. Cargill’s grain and oilseed subsidiary trades grains and employs 15,000 people in 50 countries, operating 324 silos and 31 import-export termin

More basics:

A decade ago, after profits halved, the company set out to offer more than just bids and offers for the farmers and food companies it serves as middleman. Instead of counterparties, Cargill now calls them customers – people with whom, as one executive puts it, “we need to be more open, transparent and vulnerable”.

In many senses, Cargill is one of the hidden companies of the global economy. As the world’s agribusiness leader, it sits at the nexus of one of the world’s biggest and most critical industries – a force of great importance to millions of farmers as well as to large food multinationals from Nestlé to Coca-Cola andKraft, though it is much less well-known as a name. Its significance – as the equivalent of ExxonMobil for the agriculture markets – is set to increase further as food demand rises in China, India and in parts of the developing world, and the use of biofuels grows in the west.

Agriculture and the big food trading houses have been drawing increased attention from policymakers following the price spikes and supply uncertainties of the 2007-08 global food crisis, the first in more than 30 years. Food security, long a topic merely for agriculture ministers, is now hotly debated among leaders of the Group of Eightindustrialised countries.

Amid all this profound change surrounding its business, Cargill has had to do more than just alter its language. It has spent several years expanding down the supply chain from its large-volume, thin-profit business of trading bulk agriculture commodities – instead transforming some of the raw materials into ingredients it could sell at a premium.

In addition, the group is nowadays much more than a grain trader. An industrial side that mines salt, makes plastic from plants and includes a majority stake in Mosaic, the fertiliser company, provides a chunk of the profits. The company holds dozens of patents, including one recently granted for a process to prevent scrambled eggs from turning mushy.

Cargill didn't get here by accident.  After a weak earning year in the late 1990s, it launched its "farm to fork" vision to bring it exactly to this point by 2010--the best earning year in Cargill's 145-year history.

America's biggest private-owned company founded in 1865 with a single Iowa grain elevator, Cargill is now one of globalization's most crucial players as its vast middle class emerges and desires more caloric intake.  Per my "Great Powers" history of the US, it doesn't get much more emblematic than this.

You want to take about a globally integrated enterprise?  138k employees across 63 nations, the hallmark of their vision is, according to CEO Gregory Page, "end-to-end awareness connectivity"--as in, don't just see a supply chain but understand the everything else to which it is connected.

As in the past, Cargill has started by changing its language.  While previously it talked about internal collaboration, which had a voluntary aspect, today it speaks of connectivity.

Naturally, I admire that kind of thinking when it comes to globalization.

Great piece.  Worth reading.

Taxing soda like alcohol?

Via David Leonhardt column in NYT, say it isn't so!

And yet I would welcome it.  Too much soda comes into my household, the excuse being it's just so damn cheap.

Here's why:

The price has been kept unusually low.  Meat and cheese, fine enough, but soda?  Especially when water is finally getting some realistic pricing?

A good target for cash-strapped states.

Pass me that hamburger, and my cousin's phone number!

NYT story about how globalization is changing diets in the Persian Gulf and how Qataris' tendency toward tradition (marrying cousins) combine to render the population unusually unhealthy--as in, too heavy, too much diabetes, and too many genetic issues.

Like other oil-rich nations, Qatar has leaped across decades of development in a short time, leaving behind the physically demanding life of the desert for air-conditioned comfort, servants and fast food.

While embracing modern conveniences, however, Qataris have also struggled to protect their cultural identity from the forces of globalization. For many here, that has included continuing the practice of marrying within families, even when it predictably produces genetic disorders, like blindness and various mental disabilities.

“It’s really hard to break traditions,” said Dr. Hatem El-Shanti, a pediatrician and clinical geneticist who runs a genetics testing center in Doha, the capital. “It’s a tradition carried from one generation to the next.”

Qataris live in a nation no larger than the state of Connecticut where they are a minority among the more than a million foreign workers lured here for jobs. But their problems are not unique.

Kuwait, Bahrain, the United Arab Emirates and Saudi Arabia all share similar struggles with obesity, diabetes and genetic disorders, each suffering the side effects of an oil-financed lifestyle and a desire to hold on to traditions.

Yet, even in this neighborhood, Qatar stands out.

You know the old Godfather bit about, "Leave the gun, take the canoli"?

When globalization comes to you town, my advice is, "Forget your cousin, take the spinach salad."

But tradition is a hard habit to break:

For all of these challenges, and for all of its wealth, Qatar has primarily focused on the treatment of diseases rather than on prevention.

Everyone here points to lifestyle and tradition to explain the nation’s health crises. While it was once taboo to talk about the problems involved with marrying relatives, they are now talked about openly. There have been some discussions about premarital genetic screening, or genetic testing done at birth. But the tradition is so strong, no one has raised the prospect of curbing it.

“You can’t tackle the issue,” said Moza al-Malki, a family therapist and writer. “There are some big families, clans, they don’t marry outside the family. They won’t allow it.”

The issue of obesity seems to run into the same wall of tradition, health experts here said.

“If you don’t eat, it’s considered a shame, and if you leave someone’s home without eating it’s a shame,” said Abdulla al-Naimi, 25, who refers to himself as “chubby” but is noticeably overweight. “Half of my family has diabetes,” Mr. Naimi said. “My mother has diabetes. Three cousins younger than me have diabetes. For me, I eat too much and I don’t exercise.”

He is also married to his first cousin.

 Everywhere I have traveled in this world, I find the same attitudes:

1. Everyone says their culture is based on food; and
2. Everyone says everybody else's culture is more sex-obsessed than their own.

The inter-marrying thing is tough.  It pretty much has to change from within--as in, grandmas getting too unhappy about their damaged progeny.

On the food front, though, I'd love to America led a positive redefinition.  We need it desperately for ourselves, and we should make money spreading to the world.