The rise of the rural The Future of Farming entrepreneur ... · Source: World Bank, Rabobank. Arable land (hectares per person) Arable land (hectares per person) includes land defined
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Berry Marttin, member Executive Board Rabobank The Future of Farming 2014 Nuffield Contemporary Scholars Conference
2014: Access to food is lacking842 mln people are chronically hungry <-> 1.4 bln with overweight
3 mln children die of hunger every year
2050: Access & AvailabilityMore mouths with more money living in (mega-)cities
“We need to produce more with less”
Consuming our western way…
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Arable land per capita (in hectares)
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Source: World Bank, RabobankArable land (hectares per person) Arable land (hectares per person) includes land defined by the FAO as land under temporary crops (double-cropped areas are counted once), temporary meadows for mowing or for pasture, land under market or kitchen gardens, and land temporarily fallow. Land abandoned as a result of shifting cultivation is excluded.
0
0.5
1
1.5
2
2.5
3
3.5
1971
2011
Minimum forWest European diet
But the puzzle is complex...(example supply side)
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6
Animal welfare
Consumer perception
Environment
Bio
div
ersi
ty
EconomyIn
novation
Global Master classes - key topics and deep dives on new themes• Succession: Enabling the next generation
• Sustainability: From dedicated supply chains to circular systems
• Science: Unlocking big data, innovations
• Social enabling: From theory to practice
• Social Media: Virtual Farm concept P2P for leading farmers
• Supply Chain: Balance the value chain
• Safety & Health: Nutrition-sensitive growth
• Success: Best farm management practices
• ........
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Succession challenge
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Presenter
Presentation Notes
There are clear differences between developed world and emerging economies. In most of the developed world the farmer population is reducing rapidly. Largest part of production is in “red”countries
Size is important, but big is not always beautiful
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Top performers are not the largest farms in Australia:8 years average EBIT for Australian farmers (> 5mln assets):
Source: Rabobank dataset 2002-2010
1,5%2,7%
16,4%
38,8%
26,2%
8,0%
1,4%
5,0%
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
30,0%
35,0%
40,0%
45,0%
More than 10%
Between +7.5% and
+10%
Between +5% and
+7.5%
Between +2.5% and
+5%
Between 0% and +2.5%
Between 0% and -2.5%
Between -5% and
-2.5%
Less than -5%
EBIT Australian farms > 5 million Assets
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
A. more than 10% B. Between 7.5% and 10%
C. Between +5% and +7.5%
AU
30mln +
20-30mln
15-20mln
10-15mln
Presenter
Presentation Notes
Economies of skills rather than economics of scale Approx 80% of large farms with assets > 5mln have over an 8 year period (2002-2010) an average EBIT of less than 5% and an average EBIT around 2.5%. Although better than the industry average of all farms not the results for a sustainable growth of the business. A similar trend is seen in for example NZ where the weighted avg return was only 1.8% for large arms and most farmers where in the 0-2.5% bucket. It is interesting to notice on the second graph that those with the best returns are mid-size farms, whereby non of the 30mln plus farms had an avg EBIT > 7.5%. A similar result was seen by analysing the NZ data. Excludes land values
Succession
• Key issue: how to enable the next generation of farmers!
• Innovation and investment is crucial
• Education is key
• Increase cash flow at the farm gate
• Cooperation in the chain is needed
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Presenter
Presentation Notes
Summarize succession and highlight the points. There are no easy answers, and the issue is not just the problem of farmers but finding solutions is in everyone's interest.
Best soils in US (Midwest), Ukraine & Argentina
Source: USDA
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Presenter
Presentation Notes
Where can increase of production be realised. Look at the natural resources. Best soils can be found in: US (Midwest), Ukraine and surrounding countries, Argentina Also: Mexico, France Similar soils appear in Africa, which means with the right enabling environment African production might be boosted as well, but not likely to happen short term Similar quality soils can be found in: India, South Africa, Sudan, East Coast of Australia But soil quality is not the only determinant for yield, see next slide.
Tropical& humid
Temperate& humid
Temperate& humid
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Climate determines production potential as well
Presenter
Presentation Notes
Also the climate and water availability that comes with it are important determinants of the production potential of the soil. The most productive climates -- continental and maritime -- can be found in: the US (East coast and the Midwest), North West and Central Europe, North Eastern China, Australia East Coast, South Africa and South America Next to the more humic climates in Brazil, Central Africa and large parts of South East Asia.
Soil quality & climate
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Social enabling environment
Soil quality & Climate
Actual yield
Potential Yield
Presenter
Presentation Notes
Enabling farmers to grow production and productivity sustainably is crucial for the success of the F&A value chain The world bank has recently published a study about the potential to increase yields around the world. They found that given local climates, land quality and water availability, yields can grow by over 30% in the US And only about 10% in The Netherlands Concluding, the potential to increase production varies per country.
Actual Yield
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Social enabling environment
Soil quality & Climate
Actual yield
Potential Yield
Social enabling factors key for yield
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Social enabling environment
Soil quality & Climate
Actual yield
Potential Yield
Social enabling environment
• Key issue: from subsistence to commercial farming
• Enable access to financeNo cash no crop
• Government Long-Term Vision and Reforms
• Building a sufficient agricultural infrastructure
• Cooperation within the value chain is key
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Presenter
Presentation Notes
Summarize sustainability and highlight the points.
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Partnership FAO & Rabobank Foundation in
Africa
Rabo DevelopmentFinancial inclusion for
7.5 mln people including 2mln farmers
Rabo Foundation 25 countries
Rabo Development 16 countries
Rabobank Groep47 countries
3215 client branches
Banking4Food
Sustainability
• Key issue: reducing environmental footprint and waste
• Efficiency and High Productivity are KeyMore crop per drop...
• Look for the opportunities in sustainability
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Presenter
Presentation Notes
Summarize sustainability and highlight the points. Examples: More efficient irrigation technologies Climate driven Crop selection Breeding of more water efficient varieties Look for the opportunities in sustainability: Meeting sustainability demands need not be a ‘burden’, there are opportunities to be seized, it can bring considerable competitive differentiation in terms of reputation, customer loyalty, product development, etc.
Social Media & Innovation
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Innovation Productivity gains with Big data…Crucial role for algorithms (machinery intelligence) to provide integrated farm solutions
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Algorithm
Public data (soil maps, GPS,
weather info, public research
data)
Proprietary data
On-farm data collected by
machinery (yield, applications, soil
testing, etc.)
InputsAlgorithm that
runs machinery
Yield
Presenter
Presentation Notes
Better inputs such as seeds, fertilisers and crop protection chemicals Better farmer expertise, best agronomic practises in the local circumstances precision farming, algorithms that steer the machine and adapt settings within a field Example Yara sensor, measures how green plants are and translates that into a spot specific application rate for fertiliser Over time algorithms will do a better job than manual steering by the farmer because It can make variations/adaptations within a field on a continuous basis It can process much more data to come to optimal decisions (soil quality, nutrient levels in the soil, plant growth, weather forecast) We are only at the beginning of developing smart machines These smart machines will increasingly become integrated solutions for a farmer example is the milking robot. The robot collects information on each individual cow, its milk production, its milk quality, its activity level, its eating habits Each morning it produces a list of cows that need action from the farmer The milking robot is no longer a tool for milking but it is a system to run your dairy farm, it is an integrated solution Over time, the robot gets smarter and smarter, as it collects data from more and more farmers and will know what makes a successful farmer.
Supply Chain
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• Cooperate
• Maximise freedom
• Consolidate and Concentrate
• Innovate
• Reconnect with consumers
Presenter
Presentation Notes
Cooperate Players in the chain will have to cooperate. Farmers and for example retailers should leverage the latter’s knowledge about the end consumers to determine and plan assortment, discover niches, explore innovations. Farmers need to embrace collaboration throughout the chain to achieve the highest value add by growing and selling differentiated products to specific buyers in vertically coordinated chains etc. 2. Maximizing freedom Achieve cost efficiency through a focus on increasing scale and producing agricultural bulk goods. This strategy is especially relevant for large corporate farms in e.g. Australia and Brazil. 3. Consolidate and concentrate Consolidation does not necessarily equal concentration but either way, larger farmers or farmers that have joined forces, for example by means of a cooperative, can increase purchasing as well as bargaining power, so strengthening their position in the supply chain. They will have more resources to invest in productivity growth and increase profitability. 4. Innovate Look for continuous improvement. Conduct ongoing reviews of your business and processes, reach out to peers and learn from their best practices, work with other players in the chain, keep tabs with latest agricultural developments to innovate and increase productivity. 5. Reconnect Over the past decades end consumers have lost sight of the beauty of farming, and of the origins of the produce that’s on their tables every day. Look for ways to reconnect with them. Share your authentic story, demonstrate your craftsmanship, show your passion; the end consumer is sure to be receptive and you will help raise the agricultural sector’s profile along the way.
