Category Archives: Strategy Consulting

Issues in Animal Ag: A Strategic Approach

People: the planet has more of them every day. More of them are eating better. Global consumption of protein is increasing. In 15 years projections show there will be a 35 percent increase in demand for vegetable oils, meat and milk. Forecasts for future food demand offer many opportunities for higher farm incomes and post-harvest additions.

Context’s Animal Ag Practice is taking an in-depth look at food, feed, and the general ag climate contributing to this fast-paced industry segment. Trends we are considering are very inter-related and will lead to a targeted view of industry direction.

Under those categories, Context has further examined and defined key drivers influencing the production of food in livestock and poultry sectors. Key drivers in food production will include:

  • Shifting Consumer Preferences – including natural, organic, locally sourced or grown, etc., many of which eventually lead to higher food costs.
  • The Sustainability Initiative – downstream value chain and end consumer demand more sustainability, which will have a profound effect on producers.
  • GMO Global Acceptance – GM acceptance varies globally while the market for biotech seed continues to grow. At the same time, consumers increasingly demand non-GMO foods.

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Complex, intertwined issues in animal agriculture pose many daunting challenges. Disparities exist in producing safe, consistent, trusted animal food products that meet consumer demand tiers. In the products consumed, those range from the quality of the nutrients (high in Omega 3, low fat, high protein, etc.), to the breed of livestock (Angus beef, Berkshire pork, etc.), to the type of care the animal received during the course of its growth and development (cage free, pasture-raised, grass-fed, happy cows) and so on. Marketing capabilities within, among, between and even against varying segments add to both idealistic and opportunistic venue pursuit. Customized marketing promoting an individual market niche may effectively improve sale of a product but open up negative or prohibitive restrictions on other production methods.

With a goal of supporting and sustaining a viable, productive animal agriculture food production sector, Context’s Animal Ag Practice is supporting companies across the globe. Each initiative is individually approached, and a team of specific expertise is assembled to provide vision and actionable solutions to advance animal agriculture.

For more information on Context’s Animal Agriculture Practice, contact Mike.borel@contextnet.com.

Provided by Context Senior Associate, Kathleen Erickson.

Achieving Scale and Sustainability of Market-based Development: Two Perspectives

In July of 2014 the government of the Democratic Republic of Congo (DRC) announced a plan to create 20 agro-industrial parks. These parks will represent a key pillar of their $6 billion Agricultural Investment National Plan running through 2020. Included in these agro-industrial parks will be the formation of commercial anchor farms, training and financial support for small holder farmer groups, distribution of agricultural inputs, equipment, and irrigation technologies, building of grain storage facilities, and development of processing centers.  

The DRC has always been considered a potential African bread basket, rich in natural resources. With 80 million hectares of arable land, enough pasture land for 40 million head of cattle, rivers and lakes representing a potential of 700,000 tons of fish, and abundant rainfall, the DRC has the potential to serve as a key exporter in a region rapidly growing in food and feed demand. However this has not materialized as while the DRC was once a net exporter at independence, the government forecasts in 2014 agricultural imports of $1.5 billion with exports only $200 million.

While there are many reasons behind this massive agricultural gap, including political instability, lack of infrastructure and financing to name a few, this recent investment raises a greater question of what is the optimal strategy to transform an underperforming sector. After all, there are many agricultural technologies being deployed throughout parts of Africa today that are improving productivity but not reaching the DRC farmers.

At Context, we have a long history of working on the commercialization of technologies in agriculture, making it more productive, more efficient and more sustainable. In such complex development challenges as the DRC, both top-down and bottom-up perspectives are required to formulate a strategy that leverages the inherent interdependencies of two theories of change, technology-driven and cluster (network effect) approaches.

The technology-driven approach is commonly referenced within agricultural through examples of hybrid corn adoption in the US during the 1930s-1950s (and later GM corn) and more recently the rapid adoption of hermetically sealed bags (PICS) for grain in Africa.

The key component and foundation of this model is an attractive (or game changing in the above examples) technology, that is then enabled with the development of a market-like environment, a robust technology supply chain, and strong partners that drive commercialization through fostering an information ecosystem – the system supporting farmers in making informed decisions.

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The cluster approach, on the other hand, seeks to accelerate development and overcome constraints that no one single technology developer can effectively surmount through ensuring macro-level market enablers (e.g. infrastructure, regulatory framework, market-clearing mechanisms, etc.) are in place, co-locating complementary stakeholders and developing market literacy, as appropriate. The most referenced example of a cluster approach is Silicon Valley and the many innovation successes that have come out of that geographical technology cluster. While less widely known, there are agricultural successes as well, such as the development of the soybean sector in Mato Grosso, Brazil (1980s-1990s) and the Amul Dairy Cooperative in India (1940s, 1970s, 1980s). If the DRC can effectively organize cluster stakeholders and foster their relational dynamics, then the DRC will join these agro cluster success stories.

As urgency to accelerate agricultural sectors in the developing world intensifies, it will be critical to not only learn from past failures and successes, but to develop the best strategy for technology adoption best suited for local market and enabling environments. Context has the know-how and expertise to break down large complex challenges into actionable strategies.

Provided by Context Partner, Mark Nelson; Context Senior Associate, Robert Lowenthal; Context Consultant, Will Rogers.

References

Misser, Francois. DRC – Agro-industrial parks to address the food security challenge.  Southworld, July 1, 2014, François Misser

Ulimwengu, J. DRC Agricultural Business Parks Initiative. An Integrated Strategy to Unleash Economic Development and Address Food Insecurity in DRC and Beyond.

Matopoulos, A. et al. Exploring Clusters and their Value as Types of business networks in the agricultural sector. Operations Research.  An International Journal. Vol.5, No. 1 (2005), pp.9-19.

Galvez-Nogales, E. FAO. Agro-based Clusters in Developing Countries: Staying Competitive in a Globalizing Economy. Agricultural Management, Marketing and Finance Occasional Paper. 2010.

Sonka, S. et al. Case Study – PICS Project: Triple layer bags in Africa. Rockefeller Foundation. Forthcoming 2015.

Fast Forward Faster

“This apparent disconnect between projected population increases, and the resulting increased demand for agricultural products and diminishing investment in agriculture provide members of the broader agriculture, food and energy communities with the opportunity to build on past successes and create entirely new paths forward.”
-Thomas B. Klevorn, PhD, The Context Network Senior Associate

The accompanying charts showing increases in milk production and maize yields in the United States are excellent examples of the progress made over the past century in increasing agricultural productivity.

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Although different for every county or region, technical advances involving an array of areas including engineering, genetics, chemistry and information systems, to name but a few, have played a leading role in the ability of agriculture to deliver these increases. Combined with influential economic, trade and social policies and a variety of partnerships involving numerous private and public sector participants, they have facilitated and enabled development of a system of agricultural production unprecedented in human history. This system, for all of its strengths and weaknesses, currently supports production of food, feed, fuel and fiber for a world population of nearly seven billion people.

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Looking ahead, the world’s population is expected to reach an estimated eight billion people by 2030, and approximately nine billion by 2050. With the possibility of a nearly 30 percent increase in world population by 2050, the ability of the world’s current system of agricultural production to meet basic food, feed, fiber and fuel needs is being scrutinized as never before, especially since this larger population will, on the whole, be more affluent and more demanding. In addition to established needs for increased production and productivity, agricultural enhancements are being evaluated for their ability to deliver desired results equitably and sustainably and more than ever, meeting the challenges of climate change and environmental protection.

To a large extent, past enhancements to the agricultural segment have been based on technical improvements. Many of these technical improvements have enjoyed the combined benefits of time, availability of relatively easily accessed resources (land, energy, genetics) and sustained public and private sector investment and partnership.

With less than twenty years until 2030 and just shy of forty years until 2050, time is clearly at a premium. Many past technical enhancements have required ten to twenty years to reach the stage of market introduction and added years for broad grower adoption. Likewise, the value of resources that have been critical to agricultural production and productivity in the past (e.g., land, genetics, energy) seems poised to increase rather dramatically through 2050. Finally, the rate of growth in traditional agricultural technology research and development, especially from public sources, has been characterized as being in a state of “underinvestment” in terms of forgone benefits and ability to meet future food, feed, fuel and fiber demands (Beintema and Elliot, 2009 – includes figure.)

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With the challenges agriculture faces as a result of forecast increases in global population, it would be easy to conclude that the prospect of flat investment in the discovery and development of new technologies for agriculture means that the possibility of providing food, feed, fuel and fiber for a 2050 population of nine billion people might simply be out of reach.

Considering past achievements and results, this conclusion makes perfect sense and indeed makes a strong case for an immediate increase in this type of investment. However, for reasons including lack of perceived return on investment, high barriers to business entry due to industry consolidation and limited public funding resources, it seems unlikely that such traditional forms of investment will materialize.

Evaluation and advancement of new technologies, development of novel business and public/private partnerships, entry of new sector participants and implementation of enhanced go to market strategies are a few elements that merit consideration by today’s agricultural, food and energy leaders. In meeting global demands and creating attractive investment and business opportunities, it is essential that these leaders identify critical elements of a rapidly changing and more closely integrated agricultural, food and energy system and act on them in a focused, timely fashion.

Generating Big Ideas

Generating “Big Ideas” is key to strategic thinking. Big ideas are those that enable your company to grow considerably faster than others in the industry. They can be simple and straightforward, or big, bold and appear intimidating.

The understanding of ideation thinking has advanced significantly. Different from brainstorming, ideation requires critical thinking and a more structured approach to an end result. The ideation process is divided into four stages:

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An idea not implemented adds zero to your balance sheet or income statement. This final step involves a lot of hard work, so remember why you started on this journey: you want your company to be a winner. Context has ideators and the ability to facilitate this process for you. Call us to discuss.

“Coming up with big ideas is an ultimate value activity to keep your company thriving in today’s intensely competitive marketplace.  Industry research shows that 80 percent of companies know big ideas are necessary for success, but only four percent know how to generate them!  Context’s leadership in strategic business consulting allows us a unique perspective to help companies working toward discovering, evaluating and implementing “Big Ideas” effectively.” – Context Principal, Mike Borel, mike.borel@contextnet.com

Fertile Ground for Shifting Value

Much has been written and discussed describing shifts in economic value from crop protection products to new biotechnology products. Two widely cited examples have involved shifts in value from herbicides to herbicide tolerant soybean seeds (i.e., glyphosate tolerant soybeans) and from corn rootworm insecticides to insect resistant corn (i.e., corn with a Bt gene conferring CRW resistance).

These biotechnology products, along with several others, have significantly influenced the structures of the crop protection and seed industries. Prior to the introduction and widespread use of these traits, both industries were considered to be relatively separate. More recently, they have been seen as evolving fairly rapidly into one common industry. In an ongoing process that has involved a number of acquisitions, rapid technological advances, an increase in the number of partnerships and collaborations and new go-to-market strategies, the industries are clearly transitioning into a new industry, dubbed by some as the “Plant Science” industry.

New biotechnology products and technologies have been instrumental in motivating and facilitating this transition and it appears likely that they will continue, and the trend is likely to expand its scope of influence and reach. One area in particular where this may occur is soil fertility where the science of biotechnology is starting to be used to enhance soil nutrient utilization efficiency. Currently, fertilizer of some type is applied to nearly every crop.

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Source: Assessment of Fertilizer Use by Crop at the Global Level 2006/07 – 2007/08. Heffer, P., International Fertilizer Industry Association (IFA). 2009.

There are two primary motivators for the expansion of biotechnology into the realm of soil nutrient utilization efficiency. One is financial. As an example, in the United States, a 2009 report from a study commissioned by the Fertilizer Institute of America indicated that the industry produced fertilizers with a direct value of $15.1 billion per year. The other is environmental. Particularly for SCStory5Image2nitrogen and phosphorus, concerns ranging from greenhouse gas contributions and their effect on global warming (nitrogen) to scarce/limited resource concerns (phosphorus) to water pollution and quality (nitrogen, phosphorous) are challenging the industry to identify and develop new and better ways of delivering soil fertility products.

From a biotechnology point of view, most new technology efforts have focused on nitrogen, the world’s highest volume and value soil applied fertilizer. More generally, biotechnology is also behind research under way to develop seed and/or soil applied microorganisms designed to enhance nitrogen utilization as in a number of crops including corn and soybeans.

SCStory5Image3Although not as prominently reported and apparently somewhat less technically advanced, plant biotechnology work is also under way to identify methods of enhancing the efficiency of phosphorus use by plants (e.g., rice, wheat, forage grasses). Seed applied products promising enhanced phosphorus utilization, have recently been introduced commercially and continue to be the target of ongoing research efforts.

Thus far, the business of providing soil fertility has generally been considered the domain of firms existing outside the world of biotechnology. Building on past experience, if biotechnology R&D efforts currently under way are reasonably successful, this may change in a significant way in the coming years. The previously described financial opportunity represented by fertilizer sales and the potential environmental and other benefits (e.g., enhanced ease of use, reduced storage requirements) available through biotechnology combine to offer what appears to be an extremely attractive commercial target.

Furthermore, combining potential technology advances under way within the fertilizer industry (e.g., enhanced efficient fertilizers or EEFs, pairing of crop genetics with new fertilizer delivery systems) with advances in biotechnology and precision application technology offers the prospect of valuable opportunities to quite dramatically improve soil nutrient use efficiency across a number of crops and geographies.

Given this scenario, business success will certainly depend on technology development and access. As importantly, it will also depend a great deal on how effectively and quickly current fertilizer and biotechnology industry participants are able to anticipate, accept and adapt to the soil fertility enhancements that biotechnology and other technologies may be on the verge of delivering for the benefit of global agricultural community.

Thomas B. Klevorn, Ph.D., The Context Network Sr. Associate, thomas.klevorn@contextnet.com