U'S' Agriculture in a Competitive Global Market

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U.S. Agriculture in a Competitive Global Market

• Michael Boehlje
• Center for Food and Agribusiness
• Purdue University

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Fundamental Forces Shaping Agriculture

• Expanded Global Production
• Growing and Diversified Global Demand
• Consumer Expectations
• New Science
• Changes in Ag Business Model
• Government Policy

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Expanded Global Production

• Global access to money and technology
• Increased world wide production capacity
• Geographic diversity
• Reduced logistics/distribution costs
• Global sourcing and selling

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Growing and Diversified Demand

• Domestic food market mature
• Industrial uses for ag products energy,
  synthetics
• Demand for value added exports

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Caloric Intake of Animal Proteins
Personal Disposable Income
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Consumer and Food Industry Expectations

• Beyond price
• Convenience
• Taste
• Variety
• Nutritious
• High quality
• Low calorie
• Retailer power
• 4 retailers 40 market share
• Wal-Marting of Agriculture

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New Science and Innovation

• The convergence of innovations
• Biotechnology
• Information technology (measuring and monitoring)
• Mechanical implementation/process control
  technology
• Enhancing product value

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Change in Ag Business Model

• Industry has typically been low cost commodity
  focused
• Metrics are changing
• Differentiated products market makes competition
  multi-dimensional
• Compete on cost, quality attributes, speed and
  response time to consumer demands
• Advantages accrue to the first-movers

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Government Policy

• WTO and the 2002/2007 Farm Bill
• Poor negotiating position
• A fundamental train wreck
• Bigger impact in 2007?
• Current economic incentives
• Not sustainable long-term
• Inflated land values

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Tomorrows Farming

• Different types/sizes
• New products/services/markets
• New technology
• New business arrangements
• New performance assessment
• Information intensive
• Better managers

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Different Types/Sizes

• Rural resident/lifestyle
• Dual career farmer/part-time
• Commercial/full time
• Large scale

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Change in Market Share by Pork Producer Size for
1991 and 2000
Source 2000 Pork Industry Structure Study
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Disappearing Dairymen
Source 2003 Cornell Study
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New Products/Services/Markets

• Bio-energy/industrial
• Organic/natural
• Identity preserved/traceability
• Storage/JIT delivery
• Custom work
• Value added

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Gross Farm Sales from Value-Enhanced Crops for
Commercial Producers
Significantly different between Commercial and
Mid-Size in 2003 at plt.05
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New Technology

• Simplify/automate processes
• Roundup Ready
• Robotic or GPS guided machinery
• Electronic measuring/servo adjustment systems in
  machinery and buildings
• Implications
• Labor productivity
• Production skills
• Managerial skills/span of control
• Biological Manufacturing

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New Business Arrangements/Models

• Contract production
• Qualified supplier
• Franchise grower
• Food supply chains

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New Performance Assessment/Metrics

• Better, faster, cheaper
• Environmental, animal treatment, wild lands,
  community commitment

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Information Intensive

• Precision farming
• PDAs and real-time monitoring
• Farmers as information workers

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Better Managers

• Hire skilled employees
• Develop business plans
• Use consultants/work-flow planners
• Develop standard operating procedures
• Manage risk
• Think like a CEO

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The New Agriculture

• What we will do biological manufacturing of
  specific attribute raw materials for nutritional,
  pharmaceutical and industrial products end-uses
• How we will do it integrated value chains that
  enable genetics to plate traceability
• How we will compete
• Quality (better)
• Speed to market (faster)
• Cost (cheaper)