Skip to main content

Rapid innovations in agrifood supply chains

David Zilberman, professor, agriculture and resource economics | June 19, 2018

We hosted our third Agrifood Supply Chain Conference on April 18 and 19 together with Solidaridad and other wonderful sponsors. The conference was hosted at the Energy Biosciences Institute (EBI) building in Berkeley, which houses cutting-edge institutions – the EBI and Innovative Genomics Initiative – that create new technologies affecting supply chains around the globe. The key premise of the event was that a high rate of innovation is triggering supply chains to evolve to create new products or new ways of producing existing products, in ways that are economical and meet environmental and social objectives.

The conference emphasized some of the tensions and contrasts within agricultural supply chains, and how policies can resolve or exacerbate these tensions. For example, the contrast between the supply chains for two important crops, cocoa and blueberries, was quite apparent. Cocoa originated in the Americas and production practices were established by Franciscan monks. This system has remained mostly in place to date. The crop is grown mostly in Western Africa where yields are low, trees are tall and require significant harvesting efforts. Modern inputs are rarely used, and there are concerns about labor practices and environmental ramifications. Yet, there are small, specialized producers who are producing high-value, refined varieties. Researchers have discovered new varieties that can improve productivity in the cocoa sector, but adoption of these varieties is limited due to credit constraints faced by farmers, as well as lack of investment in extension services and constraints imposed by government. Some of these constraints may be motivated by the concern that an increase in supply may lead to a drastic reduction in the price of cocoa, which is low already. One possibility that would allow improvement in productivity is to invest in nurseries that introduce higher yield cocoa varieties, and expand outreach to improve production methods, while simultaneously converting some of the land to other crops, such as palm oil. This would allow to maintain cocoa production levels, generate new sources of income, and overcome price stabilization concerns.

While cocoa is an established crop grown by traditional smallholders in developing countries, blueberries have emerged as a commercially significant crop recently. Demand for blueberries increased partly due to studies showing that they contain strong antioxidants. At the same time, supply increased as research efforts allowed for a uniform, high-quality product. Harvesting is labor-intensive, and as minimum wage rises and constraints on immigration grow, the industry is seeking out methods of automated harvesting. Blueberries, for processing, are already harvested mechanically in some cases. But there is hope that with increased precision, harvesting of blueberries for the fresh market will also be automated. In addition, there are continued efforts to increase the efficiency of production and availability to consumers, in part by designing smaller plants that can be grown in vertical farming systems.

Both the emergence of the blueberry sector and the desire to produce high-quality and sustainable cocoa reflect the agrifood sector’s emphasis on addressing consumer demands. The emergence of the organic sector is a prime example of this trend. Whole Foods has been a major promoter of organic, and their success has led other companies, like Costco and Walmart, to invest in building supply chains for organic products. The organic industry emphasizes that organic is “clean” and “natural” even though there is no significant scientific evidence of the superiority of organic products from a health perspective. Regardless, many consumers prefer organic, which leads to a price premium for these products. It also reflects a societal tension between science and ideology that may affect attitudes to agricultural biotechnology as well as climate change. Some of the people most concerned about climate change also oppose the use of biotechnology in agriculture, but modern biotechnology can be an effective tool to help address the potentially negative effects of climate change related to agricultural production. For example, genetic tools can be used to modify crop varieties to withstand changes in climatic conditions, such as droughts, floods, etc. With the introduction of gene editing tools, such as CRISPR, the capabilities of biotechnology are being enhanced even further. The likelihood of their adoption will increase if the regulation of gene editing in agriculture will balance benefits and risk. It’s clear that the major beneficiaries of many of these technologies are developing countries that suffer from food deficiencies, and are more vulnerable to the impacts of climate change. The major challenge is to develop the capacity to create crop varieties and systems that will be appropriate for various locations and be adopted when needed given the impending consequences of climate change.

One of the major features of modern supply chains is product differentiation. It is becoming evident that food markets are bifurcated between foods that target the affluent and foods that target the rest of the population. Very often, people who can afford the price premium tend to purchase and consume organic-certified products. For some, it is because of presumed health benefits, while for others it is due to taste.  Others cite more environmentally friendly practices (restricted pesticide use), or animal welfare considerations. We are now seeing the emergence of restaurant chains, including fast food chains, that emphasize organic products. From the farmer’s perspective, this is desirable as it increases farm income. From a global perspective, it may be problematic because the supply of organic products is limited and may be taxing on the environment. Furthermore, the misleading demonization of non-organic food products may lead consumers to misallocate resources, spend extra money while gaining minimal benefit, and actually harming the environment.

A growing aspect of the food system is access to information and transparency about the supply chain. More affluent consumers are generally more interested in and are more willing to pay to be more familiar with food ingredients, and even food production methods and working conditions. The cost of providing this information is declining with information technology and there is a growing reliance on certification systems. However, developing metrics for certification systems that adequately measure positive change, such as poverty reduction and improved market access for farmers, and reduced environmental impact of farming processes is a huge challenge in itself. This is a work in progress – the track record of certification systems to date is mixed. Some indeed may reduce deforestation and eliminate forced labor, but others may be costly to farmers and won’t necessarily lead to meaningful change. Certifiers themselves need to be scrutinized in terms of their impact and their cost. Much of the certification is conducted by NGOs, but these are temporary solutions that need to be upscaled by sound regulatory systems that are enforced by national governments and integrated into a global system.

Some useful insights on certification were shared by keynote speaker Nico Roozen of Solidaridad, our conference partner this year. Solidaridad is a global not-for-profit organization working for over 45 years in the area of sustainable agrifood supply chains. Solidaridad was, in fact, the first creator of fair trade labeling. In the 1980s, Nico witnessed first-hand the social unrest and brutal massacres of the civil wars in Central America. He realized that violence can be reduced through economic empowerment to improve the lives of poor communities striving for justice and equality. He learned from farmers that what they truly wanted was a better price for their coffee, not more aid money.

These experiences inspired him to create the first fair trade label (Max Havelaar) for sustainably produced coffee in 1988, and thereafter for bananas in 1996. Nico encountered resistance from both supermarkets and activists (who were against working with business) in establishing the certification program Max Havelaar. Solaridad continues to partner with businesses and national and regional governments in their work. Despite its long history with certification, Solidaridad agrees that it’s simply not possible to certify farmers out of poverty, or stop deforestation by certifying relatively small market segments. It recognizes the limitations posed by third-party certifications and emphasizes the need for innovation to overcome their shortcomings and eventually replace them by well-functioning regulatory frameworks.

The growing demand for organic food also seems to reflect a sense of dissatisfaction among consumers with the existing agrifood system. However, the food system is evolving. The changes in the food system are outcomes of relentless innovations that tend to originate in new knowledge and development and commercialization efforts resulting in new food products and methods of production and consumption, and provide growing capacity to deal with heterogeneity.

One of the biggest problems in the agrifood system is food waste and spoilage. A significant portion of food produced in the tropics is wasted due to high moisture during harvest and storage. It results in the growth of mycotoxins, including aflatoxin, which is a source of childhood stunting, liver cancer and other medical conditions. A solution to this problem is the concept of the “dry chain” where equipment and procedures are designed to dry produce after harvesting and preserve it in a manner that protects it. While the technical components of such a system are readily available and applied in many parts of US and Europe, the main challenge is to implement similar solutions in developing countries. This entails developing the production of affordable equipment, establishing mechanisms for finance, and providing promotion and education that generate demand and result in appropriate use of the new technologies.

cof

While there is a lot to be done, the world has witnessed immense ‘quiet revolutions’ over the past fifty years, that have improved the quality, convenience, and diversity of food throughout the world, and especially in developing countries, through the introduction of enhanced value chains. We have been witnessing a process through which many technologies introduced in the US and Europe in the 1950s and 60s (e.g. refrigeration, improved storage, processed foods, supermarkets) have been transferred to Latin America and Asia in the 1980s/90s and to many parts of Africa and South Asia in the past 20 years. The diffusion of these technologies is still only partial, but it is moving very quickly, and has had significant impact on farms and agribusiness supply chains. The well-being of many farmers has drastically improved, while many others have lost, at least in relative terms.

Some of the drudgery and waste associated with food preparation is being reduced by processing, in the forms of prepackaged salads and pre-cut meats. Consumers can enjoy the process of cooking and save time with meal kit services, which deliver directly to their doors. Precision agriculture embodied by technologies like drip irrigation and new applications of information technologies and robotics allows for variable application of farm inputs at different locations and over time and improve harvesting.

All these changes are associated with the development of new creative agrifood supply chains. Many of these changes rely on local resources, yet almost all of these changes affect interdependent global supply networks. These systems can be threatened by protectionist policies that erect barriers on the transport of goods or knowledge to protect local interests. Climate change is another threat; failure to mitigate it and adapt production systems and logistical facilities to changing conditions may endanger food security and safety globally. Understanding and improving agrifood supply chains and policies are works in progress, and we will continue to engage through this workshop, that aims to provide education and exchange of knowledge in the coming years.

Leave a Reply

Your email address will not be published. Required fields are marked *