People Gotta Eat

The video above is eye opening if you don’t understand modern farmers.  When I traded, we had a fair amount of traders on the floor that grew up on a farm.  They’d be the first to tell you farmers are quick to adopt new technology when it makes them more productive.  When I traded lean hogs and we were bullish we used to say, “People gotta eat”.

People like to think farmers are backward hayseeds.  Nothing is further from the truth.  I was at a pitch competition once in a rural area of Illinois and someone actually wondered if farmers had cell technology or not.

I know about the farm to table movement. I am totally familiar with it. My first angel investment back in 2006 was in Tallgrass Beef. My wife loves organic farms and has voluntarily worked on some of them.  I am a big fan of the raw milk movement.  I think that small food production and small farms can be incredibly creative and do things that large farms can’t.

There is an immovable object though.  People have to eat.  Ideally, the cheaper access to food the better. American food costs used to consume a considerable portion of the American budget. With technological advances, that has changed.  There is no one starving in America anymore.

We have seen technology invade all occupations but in the next ten years it will invade farming like never before.  Sensors, drones, chips implanted in livestock, autonomous tractors and autonomous delivery systems and artificial intelligence will allow operations to be smoother and better decisions to be made.   That should drive the cost of food down further.

Farmers also access markets and manage risk using technology. As algorithms become commoditized, farmers can use them to help them trade options, futures and lock in profits.  We are starting to see some unbundling of centralized marketplaces as farmers get bigger.  It’s early in the game, but blockchain might have a lot to say about the unbundling of centralized marketplaces.

This is a reason why it’s important to get cutting edge technology pipes out to rural areas. Not only are the kids in rural areas getting left behind because it makes learning in school tougher, but the business of farming is slower.

Personally, I would like to see the subsidy swamp drained in Washington DC.  All the subsidies and rules around growing food screw up the marketplace.  What gets planted and how much of what gets planted is out of whack with real demand.  Our diets get messed up because government standards have nothing to do with a lot of the science and everything to do wth the lobbying.  Innovation would happen faster without subsidies.  Realistically, that will never happen though.  It’s unfortunate.

  • You are right and that is unfortunate.

    Any discussion of the future of food that doesn’t address the human consumer as an object of health is like running your business by the spreadsheet only.

    Shortsighted.

    Technology as it relates to both production and health is the answer. Discussions that don’t include density along side calories per acre is harking back a century and ignoring nutrition as the goal.

    This is a doomsday scenario in my opinion.

    • Get rid of the subsidies, you might see row crops diminish-or different crops planted with more innovation.

      • We disagree on this.

        Not on subsidies but on action/reaction.

        You as an investor–and a smart one–are lionizing the use of tech as a production and monitoring tool (which it is of course) without rounding out the puzzle with the end result, the quality of the product.

        That is an issue as well.

        • Quality should go up and the cost to produce it should go down.

          • History has never proven this to be true.

            Honestly astounded that you think this.

            The opposite is the reality especially in the food biz as quality is compromised step by step to create margin.

            Tech in your view pushes production efficiency. Tech to me creates way to keep quality possible with margin.

            If you are right in this case the world looses big time.

          • I grew up on a farm. The quality is relative to your perspective. Quality if grain is way up in production and health standards. Better storage and transportation methods and better science behind cross pollination has made better seed. Better tech has led to modern grain harvesting and storage improvements also have led to higher yields and better quality.
            Now, if you want to focus on consumer products, then often times you are likely (at least historically) correct, quality is often weighed against profit margins. I think there is a larger perception that the large mass production of food means a reduction in quality. However, I believe consumer demand is trending towards expectations of quality which is pushing food quality up in many cases. Still a lot of legacy decision making but I believe we are turning a corner to a healthier tomorrow.

          • I an an investor in a functional beverage company that sells through distribution.

            In that segment, and in all perishable goods that go through distribution to the customer I’m pretty certain I am correct.

            There are exceptions.

            But the historical precedence of the food market is that it tends to lower prices, increased production and drop quality.

            Using tech to only increase efficiency in no way impacts the need for rethinking about the healthiness of what we produce and sell.

            Thanks for your thoughts on this.

  • This is a great post and thanks for sharing the story. Growing up on a small family farm and witnessing the emergence and growth of “megafarms” around us was astonishing as a youth but highly predictable in hind sight as I became more educated on the world. Seven siblings and I all walked away from farming as a career choice. Now if you don’t have the capital for land and equipment for a long term investment, you are better off as an employee of a megafarm than trying it on you own.

    One thing bugged me:
    “innovations would happen faster without subsidies. Realistically, that will never happen though. It’s unfortunate.”

    You’re correct. Although some subsidies have to remain to “protect the little guy” as a bad year could often have meant my family made nothing or lost money in a bad year. Some subsidies promote better crop rotation and land management, to avoid a repeat of the “dust bowl” era (that is plaguing China recently)

    And why can’t we change these? Don’t we live in a democracy any more? You have way more experience than I in government and lobbyist power but it seems we need to do something about this as a nation. And I’m talking about way bigger issues than farm subsidies.