How will Cattlemen Deal with the Future ? Range Beef Cow Symposium XVIII Mitchell (NE), December 9-11, 2003 © Marc Vanacht - December 2003
Jan 22, 2016
How will Cattlemen Deal with the Future ?
How will Cattlemen Deal with the Future ?Range Beef Cow Symposium XVIII
Mitchell (NE), December 9-11, 2003
Range Beef Cow Symposium XVIIIMitchell (NE), December 9-11, 2003
© Marc Vanacht - December 2003
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How will Cattlemen Deal with the Future ?
How will Cattlemen Deal with the Future ?
© Marc Vanacht - December 2003
Mc Donald imposes tighter rules on how its ‘supply chain animals’ are treated
Kraft will ‘reduce the size of its portions’ to help fight the issue of obesity.
Overreaction or ...
Kraft’s parent, Altria, owns Philip Morris & knows about grinding wars with public opinion.
Wal-Mart urges food industry to lower calories & sugar
Frito Lay launches the “Smart Snack” label (WSJ,
8/6/03)
Why do they ‘give in’ ?
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© Marc Vanacht - December 2003
BSESource: The Wall Street Journal, May 27, 2003
MEANWHILE ...
Europe tests 20.000 animals PER DAY
Japan tests EVERY bovine in the food chain
In 2001 the US tested +/- 7.000 bovines In 2002 the US tested +/- 20.000 bovinesGREAT !
© Marc Vanacht - December 2003
Fundamental Challenges to
AgricultureAvailability & Cost of Quality Water
Availability & Cost of Knowledgeable Manpower
Downstream Shift of Economic Power
Demanding consumers make future uncertain
International Politics and Power play
© Marc Vanacht - December 2003
The Western US remains in ‘drought alert’
Many pockets ranging from extreme to exeptional
Water
© Marc Vanacht - December 2003
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The Issue of waterToday:
Shortages in dry areas
Competition with lawns
Competition with recreation
Competition with energy
2010: highly populated areas
2020: Global shortage (except Canada)
Source: Managing Freshwater Shortages and Regional Water Security Conference
October 24 – 25, 2002, Des Moines, Iowa, USA
© Marc Vanacht - December 2003
Reduced Availability:
Urbanization
Graying of operators
Natural & human disasters (like AIDS in Africa)
Cost: Global supply chain drives up rural wages
The Issue of manpowerSource: ‘Creating Digital Dividends’ Conference,
October 16-18, 2000, Seattle, Washington
© Marc Vanacht - December 2003
Concentration in the food chain (agriculture, transformation, processing & marketing)
Power of retailers
In US: value of agriculture = 15 % of value of food
In US: 50 % of food $$ “out of the home”
➥Need for further integration into the food chain
Shifting Economic Power
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© Marc Vanacht - December 2003
The World’s biggest Company is Wal-Mart
Sales: > $244 bn ...
of which Food: > $ 54 bn
Employs > 1.3 million (non-union) ‘associates’ of which 300.000 outside USA
Every week 138 million customers visit a Wal-Mart store
As of 2005 Wal-mart will use RFID for supply chain management (pallet & case)
Power has shifted
Credits: Pink Floyd, A hole in the wall, and Wal-Mart, 2002 Annual Report
© Marc Vanacht - December 2003
Consumers needs and preferences change
Detroit car industry learned the hard way
“Health and Nutrition” is NOT a static target
Food industry is constantly adapting
Fickle Consumers ?
New prods Nutritional claims
‘93 ‘97 ‘01
Low fat 847140
5886
Low cal 609 742 170
No add/pres
543 142 833
Low Sugar 473 78 320
All Natural 449 587156
0
Organic 385 505105
9
Source: World Grain, Sept 2003, p.70
© Marc Vanacht - December 2003
“Origin” affects freedom & cost of product flow
“Cultural” sensitivities vs. process & content
Rural (farm) votes matter... everywhere
Governments want to be seen securing low cost, healthy food for the masses
Recent concerns re. tampering & bio terrorism
Food Politics ... Everywhere
© Marc Vanacht - December 2003
Amazing timing ...
© Marc Vanacht - December 2003
Emerging Food Regulations
Satellite TeleconferenceWednesday, June 18, 200318 Downlink sites in Arizona, California, Idaho, Oregon,North Dakota, Washington, Wisconsin & Canada!
BIOTERRORISM PREPAREDNESS RULES
PRIOR NOTICE RULES FOR IMPORTS
COUNTRY OF ORIGIN LABELING (C.O.O.L.)
FDA FIELD SECURITY ACTIVITIES / USDA INCIDENT PROTOCOL
TRACEABILITY STRATEGIES FOR LARGE & SMALL PROCESSORS
© Marc Vanacht - December 2003
To protect their franchises, food companies & retailers exercise influence upstream
They will achieve new requirements of
- Origin - Management - Process - Product Specs
And Food Companies...
They will get it done ... directly, or through intermediaries / agents
© Marc Vanacht - December 2003
Food: Cargill Inc.
Biggest privately held company ($55 bn)
Integrated chains: Orange juice, Baby food
Converted elevators to Identity Preserved
Cargill owns Excel Beef...
Value Chain Integration
© Marc Vanacht - December 2003
US Business Culture favors
entrepreneurial freedom over regulation
detailed bi-lateral contracts
competition over cooperation
Financial markets do not see food as a investment & growth opportunity, so $$$ will have to come from cash flow
However ...
© Marc Vanacht - December 2003
‘Adversarial’ (zero sum) thinking in the value chain
Inefficiencies accepted as ‘cost of doing business’
It is difficult to change behavior of participants
Obstacles to change
© Marc Vanacht - December 2003
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Changes in one part of the value chain will impact (many) other parts of the system
Will Initially try to avoid change, and then try to limit the scope / speed of change
Ultimately change will happen
incrementally
with new infrastructure
with speciality markets
enabled by cash flow created by value
So... System Inertia
© Marc Vanacht - December 2003
Grow food with a lot less resources and people
Sell food to fewer & more global oligopsonistic customers
Make food fit increasingly demanding & diverse consumers needs and tastes
Operate with less clout, leverage & protection
Summarizing: Agriculture (& Beef) will...
© Marc Vanacht - December 2003
How possibly can we do all that without using our brains,
& develop the right strategies ?
How possibly can we do all that without using our brains,
& develop the right strategies ?
Now ...Tell me ...
Now ...Tell me ...
© Marc Vanacht - December 2003
Recent successes ...
DownstreamBar code scanners at the point of saleCleaned, cut & bagged lettuce, mixes &
saladsSupply Chain Management
UpstreamIntegrated water, pest & fertility
mgtImproved genetics & biotechnologyAutomation of field tasksPrecision Agriculture
© Marc Vanacht - December 2003
Large acre arable crops: improve productivity
50 m ac yield monitored, > 15 m ac VRT
~ 30% of acres in corn & soybeans
~ 10% of acres in wheat
Adoption in cotton with new yield monitor
Forestry: GIS & images for early warning
Precision Ag. in the US
© Marc Vanacht - December 2003
Credits: Trimble Navigation
Farms confronting sustainability issues:
large animal confinement: manage ”byproducts”
range land: to avoid overgrazing
Managing ‘land’ aspects of livestock operations
irrigated crops: water shortages
high manpower cost: automation, productivity
social pressure at the rural - suburban edge
P.A. Expansion
© Marc Vanacht - December 2003
Wireless &Wi-Fi (802.11) TODAY:
Wine Estates, for real time data transfer from equipment & monitors
Trucks & elevators
‘Les Culturales’ Ag Show
InfoAg 2003 (Indy, July)
Imagine ... in ? years: field equipment & animals wirelessly connected to dealers, farm computer(s), service providers, customers ...
Wireless in Agriculture
© Marc Vanacht - December 2003
Small devices that receive, store & send data
‘Read-write’ capability of RFID could turn it into “embedded traceability”
Ruggedness seems no issue
Costs are coming down fast (5ct now)
RFID (Radio Frequency IDentification)
© Marc Vanacht - December 2003
GPS: First military tactical use in Gulf War I,
First agricultural use within 5 years
RFID: First military tactical use in Gulf War II,
Navy (dogtags)
All supplies by 2005!
When will we see agricultural use ...?
GPS & RFID... From military to civilian
use
© Marc Vanacht - December 2003
In 2003 Gillette buys 500 million RFID tags @ 10 cents/piece for inventory management
P & G will implement in 2004
Air Canada asset tracking
Luggage handling @ Las Vegas, Brussels and Stockholm airports (End 2003)
Ford’s engine plant in Windsor Ontario (A.)
Michelin Tires (Sensors & tracking)
Commercial use of RFID...
© Marc Vanacht - December 2003
June 10, 2003, Wal-Mart announces it expects main suppliers to switch to RFID by Jan. 2005, for pallet & case inventory management
Library of Rockefeller University in NY (A.)
Sainsbury’s (UK grocer) (Experimental)
RFID in Retail & Services
© Marc Vanacht - December 2003
Animal ID Systems (Greeley, CO)
VeriPrime Inc. (Wichita, KS)
EC Research Center Test
1998-2001
440,000 beef - 490,000 sheep - 30,000 goats
France - Germany - Italy - Holland - Spain - Portugal
Injectable - Digestive tract - Ear tag
Technology works and is ready for commercial implementation - inclusion in management systems
RFID in Agriculture
© Marc Vanacht - December 2003
Technology CyclesClassic Model: Paced Succession
Example:Wind to Steam to Diesel
© Marc Vanacht - December 2003
Technology CyclesHi-Tech Model:Time Compression
Example:Intel Pentium 1 - 2 - 3 - 4
© Marc Vanacht - December 2003
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When your next truck ... phone ... computer ?
Who will buy your calves in 2004?
A few questions ...
© Marc Vanacht - December 2003
How many cycles before 2010? Two? Three? Four?
Which ones will we participate in?
New Zealand Lamb, and Tyson Foods (our biggest customer) put RFID tags on their shipments to Wal-Mart
Argentina Beef effectively complies with Bio-Terrorism Act traceability requirements
Chronic Wasting Disease becomes a household word, just like .....
How prepared will we be when ....
© Marc Vanacht - December 2003
Quality
© Marc Vanacht - December 2003
Consumers pay for Quality
Customers pay for Quality
Quality means profit
Quality usually entails:
Something tangible / measurable
A repeatable process & predictable results
Up/downstream traceability (documentation)
Genetics
Grid
Boxed
Weight
Consistency
Tangible & Measurable
© Marc Vanacht - December 2003
Formal planning
Record ‘as done’
Track results
Analyze deviations
Feedback loops
Integrated: compliance by the entire chain
Process & Result
Been there - Done that: Salmon ... 5 years Hogs ... 15 years Poultry ... 25 years Kosher ... 2500 years
Been there - Done that: Salmon ... 5 years Hogs ... 15 years Poultry ... 25 years Kosher ... 2500 years
Notebook --> handful of units
Ledger & tags --> few dozen units
PC & Worksheets --> low hundreds
Database & barcodes --> mid/high hundreds
RFID beyond thousand
RFID if special value or high integration, whatever the size of herd !
Documents - Traceability
© Marc Vanacht - December 2003
Now is the time to ...Now is the time to ...Enjoy the prices ... before they self-destroy
Invest in Cost reduction, for the next downturn
Invest in Quality, to get more value
Integrate into the Value Chain
Enjoy the prices ... before they self-destroy
Invest in Cost reduction, for the next downturn
Invest in Quality, to get more value
Integrate into the Value Chain
THINK QUALITY & PROOF of QUALITY
SO ... THINK FOOD LOTS OF FOOD
THINK SECURITY & PROOF OF SECURITY
© Marc Vanacht - December 2003
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Thank You !