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Transcript: Sara Menker in Conversation with Bayer at "Fields of Opportunity: Feeding the World, Protecting the Planet"

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Sara Menker joined a panel discussion at Bayer’s event, “Fields of Opportunity: Feeding the World, Protecting the Planet” alongside Franck Gbaguidi, Jorge Fernandes and Ruramiso Mashumba. The panel was moderated by Thomas Armitage, a member of Bayer’s Executive Leadership Team and Global Head of Communications for the Crop Science Division.

Watch the livestream here

This transcript has been edited for length and clarity. 

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Monitoring Global Supply and Demand Shocks

Thomas Armitage: 

Sara, thank you very much for joining us. Gro Intelligence brings together data insights and insights around the world’s ecology and how that links to our financial markets, the economy, to all aspects of our lives. What are the insights that you’re getting at Gro telling us about the extent of the crisis? And what do they imply about how things are going to develop further? 

Sara Menker: 

Thank you for having me here. 

Let me contextualize where we are as a world today. One of the things I always say about the Russia-Ukraine War is that it has been adding fuel to an already burning fire. It didn't create the food crisis; it just made it worse. 

Let’s look at a basket of food - your major grains, some vegetable oils, and protein - and how prices have changed worldwide since 2020. In the US, [prices have risen] around 75%; in Norway, it's 125%; in Sudan, it's almost 2,000%; in Syria, it's 700%. It's the first time that nobody is immune.

The structural changes that started in early 2020 during COVID lockdowns, combined with climate disruptions, the Russia-Ukraine War, and now the strength of the dollar, have placed us in unprecedented times. Therefore, looking at things in short time frames of year to date is the wrong way to look at the current crisis because its undoing will take time. 

So, what changed? When you look at the supply side, we've had several unprecedented supply-side shocks: 

  • Extreme droughts in major growing regions like the US, Brazil, and Argentina 
  • Disruptions like the flooding in Pakistan 
  • A significant increase in the cost of operations 
  • The fertilizer crisis [fertilizer price has quadrupled, and input costs for farmers have gone up 30 to 40% of production costs]

These extremities are taking over the supply side; also, understanding climate disruptions is crucial. 

On the demand side, following some significant structural changes, China became a net importer of cereal grains in 2020. People tend to focus overly on corn, but China's feed mix is quite complex, so instead, you need to look at the entire basket of grains. 

In 2020, China imported about 80% more grain than it did in 2019. In 2021, despite lockdowns, it imported another 143% [more] from 2020. This year, despite all the lockdowns and price increases, it imported the same amount as it did last year. So the structural change in demand coupled with supply-side shocks encompasses what we’re dealing with here. 

The Current Global Food Crisis

Thomas Armitage

Can you comment on the types of approaches we should be pursuing when dealing with the crisis? 

Sara Menker 

One thing that has shocked me is how much educating we've had to do in the past six months about our global food systems and food security. 

When we talk about solutions and partnerships, part of my role has been just being an educator and providing fact-based education about where we stand. Ultimately, the scale of the challenge can't be tackled by a few; it needs real collective action and a lot of money, which will only come if the people controlling the money pay attention to these problems. 

It also requires collaboration across industries in a way that we haven't done before. For example, I always say that energy security is food security and food security is energy security, and we don’t seem to be faring well on either front. The lack of communication and dialogue between the energy industry and the food industry has been shocking to me. 

I was an energy trader, so serving as a translator in those two worlds has helped me move things effectively. Still, ultimately, to fund these challenges, we also need the capital markets to step up in a way they haven't previously. 

I used to be an oil and gas trader, and when I first started, the idea of selling oil two to three years forward was challenging. When I left, we were buying oil and gas 20 years ahead. What did that do? That funded a new wave of innovation in even the conventional energy markets, which drove down the cost of things like natural gas. The move to renewables has been a long journey and expensive; many players around the capital markets stepped up to do that. We need that level of education and action on the global system to fund innovation. We must start funding it a decade at a time. There's hope, but a fundamental structural change is needed. 

Thomas Armitage 

What should companies be doing to help in the situation of trying to secure food supply? 

Sara Menker

One of the biggest challenges we faced when we started a data company eight years ago was the  mistrust that existed in the industry. I didn’t fully recognize that the trust had been fundamentally broken until I saw the dichotomy between public and private institutions. 

Data information is a bridge to understanding and building trust. We’ve crossed that barrier now - we’re able to develop public goods as a private company and create space for a dialogue that had not happened before. There’s a famous quote that says, “Eating is an agricultural act,” and I rewrote it to say, “Living is an agricultural act.” Everything we interact with, from the moment we wake up, contains some agricultural component, and I don’t think we recognize that enough as humanity. Therefore, reframing the dialogue in this journey and building trust within our institutions is essential. 

Moving Forward and What To Monitor

Thomas Armitage:

We have a question here from the chat. How can we drive more local production, especially in regions affected by climate change? How can we make this more economically viable for farmers? 

Sara Menker

Economic viability goes back to the financing models conversation, whether from a lending or insurability standpoint. It is critical for our food systems to rethink insurance, which applies well beyond agriculture, as insurance affects both the production and logistics sides. 

Along the Mississippi River crops are being grown and we can't get them out because the water levels are too low; this is an example of a climate-related disruption. One hundred twenty-four cities and towns span the Mississippi River, and these places are responsible for 40% of global commodity flows; this tells us that we need to pay more attention to these vast and vulnerable places. 

The few institutions that handle agriculture insurance cannot continue to sustain these risks for much longer at the scale needed for [the agricultural industry] to be funded and financed. Essentially, [the industry has] to think of [climate risk] as a global portfolio [risk] that needs risk management on a very different level. 

Closing

Thomas Armitage:

We’ve talked a lot about the challenges that we’ve had in 2022 across the food production sector. What do you see as the biggest risk and the biggest opportunity in 2023? 

Sara Menker:

The most significant risk on the [food security] side is fertilizer. 

This summer, we partnered with the International Fertilizer Association and took anonymized data on how the war in Ukraine would play out.  When we did that analysis, we open-sourced it and partnered with the Gates Foundation; this is a perfect example of the private industry and the public sector coming together, and developing a tool for the world to understand [the risks we face]. 

We looked at nitrogen production, response, and application rates worldwide and analyzed three different scenarios: a base case, an optimistic case, and a pessimistic case. 

We are in the process of updating these scenarios because our current situation is now worse than the pessimistic scenario, which was essentially going to reduce food supply for about 200 million people.

Going into the winter, we are facing a potash problem, a phosphate problem, and a nitrogen problem, and we've never really dealt with a situation at this scale. 

From a risk standpoint, I am worried about production and productivity going into 2023 and 2024, and which regions will be most affected. Places like the US and Brazil will manage, but places like Sub-Saharan Africa will be affected. When you go from already low to zero, which is where we’re headed, in regions where yields and application rates are already on the decline, it’s worrisome. 

From an opportunity standpoint, food, agriculture, and food systems are now top of mind for every world leader. We need to use this as an opportunity to ensure that we are driving our focus toward long-term changes so that we are not back in this position a decade from now.

As governments, humanitarian organizations, and businesses across the agricultural supply chain try to adapt to these current realities, they need timely and transparent data from trusted sources. The Gro Platform is built to provide this data and help our customers see around the corner - enabling better, faster, and more informed decisions.

Reach out to us at salesteam@gro to speak to a member of our team or get a demonstration of our platform.

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