Global trends in Animal Agriculture

Transcription

1 Global trends in Animal Agriculture Corny Gallagher Agribusiness Executive September 18, 2008

2 Food Foresight Trends Intelligence Process

3 The Blue Ribbon Panel Walt Armbruster Farm Foundation Willard Bishop retail food expert Richard Breitmeyer California Department of Food and Agriculture Jan DeLyser California Avocado Commission Greg Drescher Culinary Institute of America Cornelius Gallagher Bank of America Martha Roberts University of Florida Larry Kaagan Sociologist/societal trends analyst A.G. Kawamura California Department of Food and Agriculture Carl Keen University of California, Davis John Nichols Texas A&M University Len Richardson Farm Progress Publications Richard Rominger Winters, California Sharon Shoemaker California Institute of Food and Agricultural Research University of California, Davis Dan Sumner Agricultural Issues Center University of California, Davis Tim Wallace University of California

4 2008 FOOD TRENDS The American Dream feels like it s slipping out of reach for growing number of consumers Food emerges as social platform across multiple fronts Sustainability sows seeds of profit, social acceptance Food and health converge on commercial relevance The consumer mass market continues to fragment along emerging new needs while at the same time experiencing an erosion of trust Traditional science becoming less important in the rapid democratization of information New food pipeline requirements raise the bar and create opportunities

5 The American Dream Feels Like it s Slipping Out of Reach for Growing Numbers of Consumers For the first time since the Great Depression, significant numbers of Americans do not expect their children to do as well as their parents. Not about GDP growth or what wealth transfers are projected to take place but: A growing sense of pessimism about economic opportunity and the prospect of upward mobility. Such anxiety has the power to be a social and marketplace force. This may lead to changing consumer behavior patterns.

6 Food Emerges as a Social Platform Across Multiple Fronts Food will be a flashpoint for change on many social platforms. Food is one thing over which a consumer can exert personal control. Care about obesity and diabetes there s a certain way to eat. Concerned about the environment there s a certain way to eat. Driven by opinion leaders - - celebrity chefs and best-selling authors - - but also NGO s and individual citizens at the grassroots level. Twist in these discussions: The chronic disease that now kill us can be traced directly to the industrialization of our food.

7 Sustainability Sows Seeds of Profit and Social Acceptance Companies worldwide seeking sustainable approaches and green consumer products to meet the growing demand. Sustainability strategies are now increasingly driven by global companies, and consumers making lifestyle choices to reflect core values. While trade groups debate the definitions and metrics to measure it, progressive companies sensing opportunity and in some cases avoidance of risk, are moving ahead on a common principle: Balance societal and environmental needs with economic vitality. Not just preserving natural resources for future generations, it s a focus on natural and people resources commitments to safe products, to employees, to communities balanced with the economics to make it possible.

8 Food and Health Converge on Commercial Relevance Relevance of food and health strategies will continue as consumers seek to prevent disease, optimize their health and minimize the impact of higher health-care costs Rapid tests will reveal how diseases progress and how diet influences that progression. Will lead to a harsher categorizing of foods as good or bad for a particular condition or desired health outcome. Food retailers are beginning to seize the opportunity to become a primary destination of information and routine wellness care for the future. The emergence of in-store health clinics offers opportunity to link disease and laboratory tests (and eventually genetic tests) with a call to action for specific foods to optimize health and reduce the risk of disease based on individual health and genetic profile.

9 The consumer mass market continues to fragment along emerging new needs while at the same time experiencing an erosion of trust Consumer demanding transparency, authenticity, healthfulness (of product and process) and experience, beyond price and choice. Consumer anxiety about food safety outbreaks is adding fuel to words like natural and sustainable. Expectations are being met by organizations that may have already adopted healthfulness but are adding carbon-footprint reduction to their approach to the business. Re-inventing consumer information by partnering with specific players in the agri-food chain so consumers feel they know the farm family and conditions from which their food comes. Consumers have endless (24/7) choices in information choices and are establishing true multi level dialog rather than one-way marketing.

10 Traditional Science Becoming Less Important Given the Rapid Democratization of Information Science is not the foundation for decision-making it once was. Consumers, government officials and health professionals are not turning to the traditional institutions as a resource. New paradigm counts on the collective wisdom of the crowd to trump the professionals who once served as guardians of accuracy. Reclaiming relevancy for science will have a say, but it won t be the only voice. The benefits of engaging and embracing these new consumer-driven information venues and fueling a voice for science within the wisdom of the crowd far outweighs the risks of standing on the sidelines and allowing inaccurate information to continue to go unchecked.

11 New food pipeline requirements raise the bar and create opportunities The role and relationship among suppliers in the food pipeline are becoming more important. Opportunity to drive greater value through strategies designed for greater efficiencies, demand satisfaction, differentiation and innovation. Sharing of information up and down the supply pipe can be a key enabler to increasing sales and customer satisfaction (e.g., reducing out-of-stocks). Suppliers can be in a position to offer a clearer view of specific areas where chains can improve their operations to the advantage of both parties. Retail-supplier collaboration can help support chain innovation, brand differentiation and bringing the consumer s in-store experience to life with consistent quality, new products, new varieties and at price points that haven t been seen before.

12 2006 study examined challenges and opportunities in 7 areas : Economics of production, processing and marketing Global competitiveness and trade Environmental issues Consumer demand Food safety and animal health Community and labor issues Animal welfare

13 Forces Driving Animal Agriculture Commodity prices Land use and prices Compounding Regulations Labor cost and availability Water cost, quality and availability Industry mergers and consolidation Global Demand and Competitiveness Animal Welfare concerns

14 U.S. FARM ASSETS / DEBT/INCOME (USDA $billions) Real Estate 1,756 1,912 2,052 Total Assets 2,047 2,210 2,359 RE Debt Total Debt EQUITY $1,851 $1,998 $2,147 Net Income $59 $87 $101 ROA 2.9% 3.9% 4.3%

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17 Corn price history CBOT

18 2007 CASH RECEIPTS $ billions U.S. CALIFORNIA ALL COMMODITIES % ALL LIVESTOCK % DAIRY % MEAT ANIMALS % Poultry/eggs %

19 Animal Ag Issues Ag production and processing are in the spotlight of animal welfare and environmental challenges. November 2008 Prop 2. See UC AIC study. Animal sector is the focus of California land use, air and water quality regulations. Food Safety and Insecurity are redefining routine practices. Impact of high and volatile commodity prices and feed costs. How to sustain family operations and succession at non-economic land values. Overall sustainability is becoming mainstream.

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21 2005 Prop 39 Passes: All Animal Production Facilities Required to Change to Free Range Operations by 2010 Driving Forces Restraining Forces Animal Rights Activists gain political clout Public believes animals have poor living conditions Increasing market share for free range animal products High cost of converting to large scale free range operations Research shows no health/nutritional differences between free range and confined animal products Public appetite for cheap, fast food continues 2005 Force field analysis of the forces for and against change

22 Food Opportunities Innovations in Sustainability. Health benefits of Food products and parts. Changing demographics = New products. Food Service Chefs driving menu-wine ideas. Drive for local and fresh products. Environmental solutions and improvements. Coordinate and collaborate research for solutions to challenges and opportunities.

23 National Grape and Wine Initiative COLLABORATION MODEL Bring together key individuals from the entire national sector to: Identify research and extension priorities. Develop a strategic, focused approach to tackling the most important projects, strengthening accountability and ensuring communication. Stimulate increased investment from industry. Seek substantial federal funds in recognition of the importance to the national economy of a thriving grape and grape products industry.

24 GLOBAL FOOD ISSUES Global commodity price volatility at historic highs input costs up Food costs increase. Global food riots a growing story Food vs. Feed vs. Fuel a critical debate Historic low value of U.S. $ driving U.S. ag exports up but monetary policy can change Global food system consolidation continues Global food supply is so fragile that any one crisis could change the food issue landscape overnight

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