By Charlie Arnot, Look East CEO
The future of U.S. agriculture fundamentally changed on Dec. 7, 1941.
Prior to the attack on Pearl Harbor, the United States was content to serve as the “armory for the allies” with broad public sentiment against entering World War II. Ag policy was geared toward protecting the nation’s farmers. Farm Bills in the 1930s worked to curtail over-production to keep commodity prices at profitable levels for producers.
That all changed in the 90 minutes that it took Japanese bombers to destroy Pearl Harbor. The United States was thrust into the global conflict and suddenly, food security became national security. Ag policy focused on maximizing productivity and efficiency, overshadowing nearly all other attributes of production. Farmers were exhorted to grow as much as they could, as quickly and efficiently as possible.
And boy, did they answer the call.
Agriculture productivity nearly doubled from 1950 to 2010. Today, corn yield per acre is six times what it was in 1940. The average dairy cow produces nearly twice as much milk as in 1944. In 1950, one acre of wheat produced enough to make 670 loaves of bread; today that same acres produces nearly 1,800 loaves.
Once unleashed, increasing productivity and throughput became a nearly unstoppable force in U.S. agriculture. We became the envy of the world for our ability to produce large quantities of ag commodities efficiently.
The ripple effects of the laser-like focus on increasing productivity have been wide-reaching. They include amazing advancements in food processing as food companies developed new ways to use cheap inputs to create new products. Despite the current concern over food price inflation, the U.S. still spends less of our disposable income on food than any other country.
The drive for ever-increasing productivity also resulted in a frequent imbalance between supply and demand resulting in low margins and market volatility that contributed to the consolidation and integration of agriculture. The impact has spread beyond agriculture into many aspects of daily life, both positive and negative.
Now, 80 years later, I believe we are at another inflection point for the food system. This year will prove to be every bit as definitive as 1941.
Impacts of the pandemic and the rapid expansion of Environment, Social and Governance (ESG) concerns are fundamentally reshaping the food system. Environmental pressures focus on reducing carbon emissions, decreasing demands for natural resources and the emergence of regenerative agriculture. Social changes include fundamental shifts in shopping patterns, generational changes in consumer power, amazing new technology on the farm and in food production, fierce competition for labor and talent and increased focus on Diversity, Equity and Inclusion (DEI). Demands for greater transparency, meaningful stakeholder engagement and organizational leadership that reflects the diversity of today’s society are just some of the forces shaping governance.
This paradigm shift will trigger significant changes in every sector of the food chain. The challenge for agriculture is that most of today’s market signals are still tied to efficiency and productivity. Until we develop mechanisms that equitably distribute both the costs and value of ESG across the supply chain, many in agriculture will continue to respond to the existing commodity market signals focused on maximizing productivity and throughput.
Early adopters and innovators are already making the shift to capture the opportunities created by these fundamental changes, but until we adjust market signals, we should anticipate significant headwinds driving change through the supply chain to reach those who produce commodities.
The food system is transitioning to a market based on values that extend well beyond productivity and efficiency, with impacts that will be as significant as those that resulted from the attack on Pearl Harbor. There is much work to be done to adjust market signals to align the output across the food system with the rapidly changing demands that are reshaping everything from farm to table.