[MUSIC PLAYING]
DAVID PERRY: Most farmers get
paid for the bushels of grain
that they produce,
bushels of corn or bushels
of wheat, without regard to
how that produce is produced.
And that, of course, removes
the incentive for farmers
to focus on those things.
They get paid for
volume, so they
invest in methods
and technologies that
will enable them
to produce more,
but not in the things that
allow them to produce better
or in a more sustainable way.
DAVID ABEL: I'm
David Abel and this
is Climate Rising, a podcast
from Harvard Business
School that looks at the
challenges and opportunities
that climate change
presents for businesses.
Today, we're talking about
food, how we grow it,
and its impact on the climate.
Since factory farming took
off after the Industrial
Revolution, the way we use
land and the scale of the work
has changed dramatically.
Now we have a massive industry
that feeds billions of people,
but the success of growing
food to accommodate
an ever-growing population
has had consequences.
Agriculture is now one of the
largest sources of greenhouse
gases, and about a quarter
of all this climate pollution
is produced by growing crops
and related uses of the land.
That includes the clear-cutting
of forests for grazing,
methane from cattle, and the
vast amounts of fossil fuels
and chemicals it often
takes to run a farm.
At the same time, the warming
is changing growing seasons
and giving rise to
viruses and pests.
As these changes
take hold, we're
now seeing a wave of new efforts
to use more sustainable methods
to feed the planet's
7.7 billion people.
With the population, expect
a swell by another 2 billion
by 2050, there is an increasing
urgency for sweeping changes
to how we grow our food.
[MUSIC PLAYING]
Joining us to discuss these
new agricultural practices
are David Perry, the
president and CEO
of Indigo Agriculture,
a Boston-based firm that
calls itself an
agricultural technology
company, and Harvard Business
School Professor, David Bell.
David Perry, as an
entrepreneur who
has built businesses
in other sectors,
such as pharmaceuticals
and life sciences,
take us through how you came
to focus on agriculture?
What are the primary challenges
and what are the opportunities
for your company
and others in trying
to nudge the industry to more
sustainable or climate-friendly
practices?
DAVID PERRY: I really
spent the last 20 years
of my life starting
and running technology
and biotech companies.
When my last company
was purchased,
I had the opportunity
to step back and think
about what I wanted to do next.
And I concluded that focusing
on the problems of food
and agriculture are some of the
biggest problems that face us
as a society and as a planet
and, therefore, a really
worthwhile thing to focus on.
It helps that I
grew up on a farm,
so I was probably biased in that
direction to a certain extent.
But what I concluded
from that time
was that there are four
big problems facing us
from this perspective.
One is that the
population is growing
faster than agricultural
production is growing.
So if we want to feed 10
billion people by 2050,
we need to do
something differently.
Two is that the current
methods of agriculture
are consuming a lot more
of the earth's resources
than we can afford
to devote to that.
Three is that the current
methods of agriculture
are producing less
and less healthy food.
As we focus on volume instead
of quality, as one might expect,
the quality goes down.
And then, finally, farmers
aren't making any money.
And about 40% of the
people on the planet
are somehow involved
in agriculture,
and a surprisingly
large number of them
live below the
poverty line today.
DAVID ABEL: David Bell, you've
studied all aspects of the food
industry, from farming to
distribution to consumer
habits.
What's the proverbial
low hanging fruit
to cut emissions from
the growing of crops
to the plating of
meals at restaurants?
DAVID BELL: I think the
low-hanging fruit for the food
system is one in the farmer.
And I don't think--
when we get to talk further.
I don't think the farmer's
the bad guy in this,
but farming does
contribute a whole bunch,
and the other is the consumer.
I'm laying the blame
elsewhere I suppose.
But the other is the
consumer operating ovens,
driving to restaurants,
driving to stores, waste--
huge potential there.
DAVID ABEL: David Perry, if
there is a growing consensus
in the industry
that far more needs
to be done to make
agriculture more sustainable,
why has it taken so long
for many businesses to act?
And what should regulators
be doing to encourage them?
One is, I believe there
is that consensus.
There's broad recognition
in the agricultural industry
that things have to
fundamentally change.
Despite that,
agriculture has been
really slow to adopt new
technologies and methods.
DAVID PERRY: In fact,
in McKinsey, every year,
ranks industries based on
their technology adoption,
and agriculture is dead last
of the large industries there.
The why is something we've spent
a lot of time thinking about.
We can easily say what it's not.
It's not size of industry.
So agriculture is
third or fourth
largest industry in the
world, depending on the year.
It's not important.
We depend on agriculture
multiple times per day
to continue our livelihood.
And it's not the
technology itself.
The same technologies that
are driving other industries,
like computing power,
networking, DNA sequencing,
the development of sensors
all apply equally well
to agriculture.
So the technologies
are available;
they just haven't been applied.
It's our belief that a big
part of the reason for that
is the system itself.
Agriculture is a commodity,
or agriculture system
is set up as a commodity.
So most farmers get paid
for the bushels of grain
that they produce,
bushels of corn or bushels
of wheat, without regard to
how that produce is produced
or what the quality is assuming
it meets certain specs.
And that, of course, removes
the incentive for farmers
to focus on those things.
They get paid for
volume, so they
invest in methods
and technologies that
will enable them
to produce more,
but not in the things that
allow them to produce better
or in a more sustainable way.
And I think that system is
going to have to change for us
to see real progress here.
But as soon as it
does change, there's
a lot of things
stacked up that should
enable really rapid progress.
DAVID ABEL: But are
there any actions
that you think policymakers
and regulators should
be taking here to encourage
them to press them?
DAVID PERRY: Yeah,
there's two ways
we could approach this problem.
We could provide economic
incentives for behaviors
that we want, or
we could provide
regulations to try to restrict
the behaviors we don't want.
Farmers are very
difficult to regulate,
both because of their mindset--
all generalizations
are wrong, but if you
were going to make a
generalization about farmers,
they're very independent, and
they value that independence
greatly.
And they're also a diverse group
that's really hard to monitor
and so forth.
So my strong belief,
and Indigo's mindset,
is the way we solve these
problems is providing
incentives that we want rather
than regulations to prevent.
And we can do that both
from the government side
and from consumers and
consumer-focused brands.
DAVID ABEL: What are some
examples of incentives
that would be effective?
DAVID PERRY: One of the
most interesting things here
from my perspective is that
the power that agriculture
has to fundamentally impact
climate change for the better.
So we talked about the way it's
contributing to the problem.
But the ability of
agricultural soils
to sequester atmospheric
carbon, CO2, is enormous.
To put it in
perspective, if we could
take every acre on
earth that's cultivated
and get it from where it
is today, which is about 1%
carbon, up to around 3%
carbon, which is probably where
it was before we cultivated it.
We could capture
every molecule of CO2
that human beings have
put into the atmosphere
since the beginning of
the Industrial Revolution.
Now, there's a lot of
assumptions in there,
obviously, but it
gives you a sense
of the size of the
potential solution here.
Agricultural soils are an
enormous potential sink
for atmospheric carbon.
If we were, for
example, to pay farmers
to practice agriculture
in such a way
that it sequestered carbon--
and we know how to do it--
something like $20
per ton of CO2 I think
would provide the
right incentives.
And we could see an enormous
shift in farming practices
towards methods that
sequester carbon in the soil.
DAVID ABEL: David
Bell, do you have
any thoughts about how that
might actually be translated
into some kind of policy,
how that would actually work,
and any other
examples of other ways
that you've seen farms
doing this the right way?
DAVID PERRY: Well,
USDA has incentives
to get farmers to lay some
land fallow or to rotate crops,
two things that
they haven't been
doing of late,
installing barriers
to stop erosion of soil.
I'm not sure what the
uptake of that has been,
but it's a step in
the right direction
to give farmers a
financial incentive
to treat the land well.
I do agree that if we're
going to take the carbon out
of the atmosphere, it has
to obviously go somewhere.
At the moment, it's
going into the oceans
or staying in the air.
The land is an obvious place.
If we could put
some of the trees
back that have been clear-cut
over the last 40 years
or whatever, that is obviously
another great, a possible sink.
But the land is
definitely an opportunity.
DAVID ABEL: David
Perry, you have
mentioned how we need to make
the agricultural industry based
less on commodities so
that farmers aren't just
compensated, as you said, for
producing a bushel of corn,
but that they're making
more money by producing
that bushel with less
impact on the environment.
Can you tell us
what you mean when
you talk about
de-commoditizing the industry
and how that might happen?
DAVID PERRY: Let's start by
talking about how we got here.
Agriculture is about
10,000 years old.
For the vast majority
of that time,
farmers knew exactly who
they were producing food for.
It was only about 100 years ago
that we changed that system.
So during that time, the
turn of the last century,
people were moving off of farms
and into urban environments.
So we had to set
up a system that
allowed us to grow food far
from where it was needed,
store it, transport
it by rail or ship,
and then get it on the
table of the consumers.
And so to do that, we
created a commodity system
so that every bushel, assuming
it met a certain number of--
certain specs, was
worth the same.
So it was really effective.
That system has worked and
fed billions of people.
But we've come a long way
in the last 100 years.
And technologies now allow us
to do things like track the way
that grain is produced
on a field-by-field basis
and provide traceability
all the way from the farm
to its ultimate destination.
And if we implement
those practices, now
the buyers of grain,
for example wheat,
can specify certain things.
Perhaps it's the
quality of the wheat.
I want a minimum protein spec.
Or I want wheat that's grown
from a certain type of seed
because I believe that
will produce better flour.
Or I want it grown in a way
that sequesters more carbon
in the soil than gets
emitted, so that it's actually
carbon positive.
Technology now allows
that to happen,
the direct connection
of buyers to farmers
and the traceability
of the goods
from the farm to the buyer.
Once we put that in place, we've
now de-commoditized agriculture
and created a footing for
a really dramatic change.
DAVID ABEL: David
Bell, agriculture
may be the most
subsidized industry
with all kinds of
government support for crops
and investments.
Why shouldn't we effectively
be paying farmers
to be reducing their emissions?
DAVID BELL: Well, again, I
challenge the premise a bit
that agriculture is
heavily subsidized.
The subsidy is relative
to the amount of money
we're talking about.
Farmers, by and large,
are not wealthy people.
And the subsidies come in
the form of-- historically,
came in the form
of crop insurance.
So if you had a terrible
year, and farmers
can't afford a terrible year.
And so you have subsidies
from the government.
But the WTO 20 years
ago, whenever it was,
said that governments cannot
subsidize particular crops.
You can't give subsidies
away that make farmers want
to grow one crop or another.
So you have to be agnostic.
One way of being agnostic
is to give farmers
subsidies to help their
farm be more sustainable.
Much of the land in the United
States and across the world
is being operated by farmers.
These are the people that are
in charge of our environment,
by and large.
And so I think that depends
on government priorities.
But I think that the
government giving incentives
to farmers to make their land
sustainable is a good thing.
The other incentive
is from manufacturers,
as David was saying.
Manufacturers who want to
deliver to their customers
certain types of wheat
or certain products
with certain characteristics
can contract with farmers
or give incentives to farmers
to produce what it is they want.
And that's probably a
more powerful incentive.
DAVID ABEL: David Perry, your
company, Indigo Agriculture,
has plans to use microbes
to replace pesticides
and other natural
means to reduce
the need for
artificial fertilizers.
Can you tell us about those
efforts, what's new about them,
and how viable they
are in the near future
and on a large scale?
DAVID BELL: So it's
important to recognize
that what we think of today
as modern or conventional
agriculture is also
relatively recent.
It was only post-world War II--
the last time we were worried
about a growing population
exceeding our ability to
produce food resulted in what's
called now known as
the Green Revolution,
perhaps somewhat ironically.
And the result of the Green
Revolution was a focus on seed,
plant breeding, and the
resulting improved seeds,
fertilizer production,
especially nitrogen fertilizer
production, which was a
relatively new technology
created in World War II, and
the use of chemical pesticides--
insecticides, fungicides,
and herbicides.
And so these methods really took
hold in the middle of mid-1900s
and are practiced widely today.
Again, they were effective.
So the adoption of the methods
advocated for in the Green
Revolution probably allowed
us to feed a billion people
we couldn't have fed otherwise.
But technology's come
a long way since then.
Specifically, we now understand
that a lot of those techniques
and tools aren't very good
for either us as consumers
or the environment.
Nitrogen produces runoff that's
causing algae blooms in lakes
and streams and dead
zones in oceans.
We've got CO2 that
we just talked about.
We've got pesticide
residue in our food.
And we've got new alternatives.
So microbiology is one of those.
Really, just in the
last 10 or 15 years,
largely through focus
on human health,
we've realized that every single
organism has microbes inside
of it, and those microbes
are necessary for the larger
organism to both
reproduce and thrive.
And that's true in humans,
and it's true in plants.
In fact, over the last
200 million years,
plants and organisms
have evolved
so that there are microorganisms
that protect plants
against pretty much every stress
that plant might encounter,
whether it's drought or
environmental stresses,
or whether it's
disease or insects.
And so what Indigo and other
scientists like us are doing
is identifying those microbes
in nature that have already
evolved the capability
to protect plants
against these things.
And using these natural
solutions that are already
in the environment, they're
already in our food supply,
all we have to do is
concentrate them and apply them
where the stresses are
to be able to improve
the yields of
plants, protect them
against stress in a healthier
and more sustainable way.
DAVID ABEL: And can
you give us some sense
of how this actually
works in practice
and how far along you are?
DAVID PERRY: Well,
we now have microbes
commercialized and coding
seeds on over a million acres
in the world.
So we've made a lot
of progress, and we
expect that number to
be close to 4 million
by the end of 2019.
DAVID BELL: It is quite
a revolution, really,
that the old technology
technologies to spray
fertilizer over the
fields willy-nilly,
but you're putting it actually
on the seed so that you're not
wasting--
it's like drip irrigation
where you're bringing the water
to exactly where it's needed.
You're bringing the
fertilizer and other vehicles
precisely to the seed.
DAVID ABEL: Are there
any adverse reactions
that you're finding to the
introduction of microbes?
DAVID PERRY: Well, no
is the short answer.
And a big part of that is we're
not really introducing them.
Again, everything we're using,
we're finding in nature.
So these are things that are
already found in these crops
and already found
in our food supply.
Really, all we're
doing is concentrating
on where they're necessary
and where they're needed.
So we do a lot of
safety testing.
But the presumption of
safety is pretty strong
because we're not creating
anything, modifying anything,
or introducing anything into the
environment that's not already
there.
DAVID BELL: And to
go back to something
David was talking about earlier,
which is commoditizing food,
in the same period that
production has taken off
over the last 100 years, yield
has taken off over the last 100
years, the price of food--
or put it another
way, the percent
of household expenditures
going on to food
has gone down from 40% to 10%.
And nobody wants pay
more for anything.
Nobody wants to
pay more for food.
But if people did
pay more for food,
this could allow farmers to
have the luxury of spending more
on the farms.
Again, I'm not really talking
about subsidies of farms.
But there is a trend
these days for people
to be more educated about food.
And I think, as people become
more educated about food,
they'll be more
discerning, and be
more willing like other things,
like willing to pay more
for foods they like, for
foods they think are healthy.
That money will get
passed down the chain.
DAVID ABEL: David
Perry, your company
has been building a digital
marketplace to connect farmers
directly to buyers
allowing farmers
to get paid more for catering to
the buyers' specific requests.
Can you tell us how
that works and why
you see this as a means of
promoting sustainability
and reducing emissions?
And you had mentioned that
the makers of Budweiser
were involved in this as well.
Tell us a little bit about that.
DAVID PERRY: Well,
we talked earlier
about the promise of
de-commoditizing agriculture
and what that would
mean if farmers
could get paid for producing
things of higher quality
and more sustainably.
So our hypothesis was
that, if you directly
connect the buyers who already
want these things with farmers
who are capable of
producing it for a price,
then you effectively are
de-commoditizing agriculture.
You're allowing every
farmer to produce
what the consumer wants, which
means, instead of a commodity,
it's a specialty product
with a greater margin.
And so we set up an
e-commerce platform
that we call Indigo Marketplace.
We launched this in
September of last year,
so just about six months ago.
We now have about
8,000 farmers who've
put up for sale almost
12 billion worth of crop.
We have thousands of buyers
representing about $16 billion
worth of current
demand in Marketplace,
and we're doing tens of millions
of transactions each week.
It's literally the
fastest growing thing
I've ever been associated with.
DAVID ABEL: How unique
is this, David Bell?
Is there any example
of this kind of thing?
DAVID BELL: So one
example we wrote
about this year is on Zespri.
It's the New Zealand
kiwi growers association.
Like all farmers-- not all
farmers, but most farmers.
Most farmers are very small.
They're in the middle
of the United States
or the middle of New
Zealand or wherever it is.
And the history of the kiwi
fruit industry has been bad--
low prices, farmers competing.
Anyway, they set up a
for-profit co-op run by people
with marketing experience.
And the front-end
marketing organization
is now passing back to farmers
what it is that consumers want.
And they pay farmers
according to whether they're
producing that.
The farmers are right on this.
And now they're producing
fruits earlier or sweeter
or this, that, and the other.
The commodity cycle that
David was talking about
cuts off the farmer
from the consumer,
so they have no incentive.
They have no knowledge
to grow anything
but what they're growing.
And I think, as retailers,
as food companies start
to realize that the consumer
is more educated, they will be
passing on to the farmer,
more precise requirements,
will start to eat away at
the commodity business.
DAVID PERRY: And we're seeing
this with Anheuser-Busch
today to continue
in the beer theme.
So about two or
three weeks ago, we
announced that
Anheuser-Busch will
be buying 2.2 million
bushels of rice
from us through Marketplace.
Specifically, they're
looking for rice
that's produced with
less nitrogen fertilizer,
using less water, and having
fewer greenhouse gas emissions.
And they're paying about
a 15% premium for that.
So it's a perfect example
of a consumer-focused brand,
a blue-collar, consumer-focused
brand recognizing a need
and being willing to pay
farmers for producing that.
DAVID ABEL: Why is
Anheuser-Busch and other
companies--
why are they willing to
spend more money on something
that maybe their customers
don't care about or know about?
DAVID BELL: Well, I think
it goes back to Heineken.
One possibility is that
they really do care about--
they probably do care
about the ingredients--
but they really do care
from an environmental point
about their greens, but I bet
it's really consumer interest,
as I certainly know
as a beer drinker.
But the craft beer business
is taking off like crazy.
And people are always
looking for an edge
in appealing to consumers that
beer is different because of--
Budweiser has produced a
mainstream beer for as far
as I know, as long as I know.
But now the game is different.
And the game is moving towards
custom foods, custom beers.
And you need to find an edge.
And you can often find
the edge with a farmer.
DAVID ABEL: For your
company, Indigo Agriculture,
what is your ultimate goal?
What are what are
you trying to do,
and where do you hope
to be in a few years?
DAVID PERRY: Well, we
describe our mission
as harnessing nature to
help farmers sustainably
feed the planet.
And there's three
key pillars to that--
improving farmer
profitability, improving
environmental sustainability,
and improving consumer health.
If we're successful-- and by we,
I mean the bigger we, I think,
in five or six years, we
could reduce fertilizer usage
by half on Indigo farms.
We can reduce insecticide and
fungicide use by over 90%.
And we can improve
farm profitability
by billions of dollars.
DAVID BELL: If you look at the--
I'm going back to
these yield graphs.
If you look at the yield of corn
per acre in the United States,
it was flat from when records
started in 1866 through 1920.
And then it has taken off
like a rocket since then.
The US government had
a policy of trying
to increase food production,
get people to eat more.
If you look at photographs
from the 1910, 1920s,
people look very thin.
And that's changed.
And to a certain extent,
in the United States,
anyway, there's over
food production.
And now the emphasis
from the government
is healthy eating rather
than caloric eating.
And I think in the
same way that science
solved the yield problem--
the statistics are unbelievable.
I think science is now turning
to the other question, which
is how to be most sustainable
with how we grow crops,
how do we grow healthier
foods in healthier ways?
I think science will
take up this challenge
and be ever-more productive.
DAVID ABEL: And
what would you say,
David Perry, to folks who
would be skeptical that you
can do what you're promising?
DAVID PERRY: Jeff
Bezos has a quote
that he uses a lot, which is
something along the lines of,
if you want to be
understood, you probably
shouldn't do
anything innovative.
We're seeking to do
things differently
because we think there
is an opportunity
to make a significant
positive change in the world.
And to skeptics, we don't
really pay much attention,
and we just ask them to watch.
[MUSIC PLAYING]
DAVID ABEL: And now, a story
from Harvard Business School
professor, Mike Toffel.
MIKE TOFFEL: The
agriculture sector
has adopted lots of technology
in terms of seeds, fertilizers,
and pesticides over
the past decades
to become much more productive.
But as David Perry
indicated, a McKinsey report
reveals that the
agriculture sector
has been a laggard in adopting
information technology,
and that represents
a huge opportunity
to make the sector
even more efficient
throughout the supply chain.
Agriculture supply
chains are complicated,
but let's simplify
it into four stages
where IT and biotech
innovations can dramatically
reduce its climate impact--
what we eat, the seeds that
get planted, how they're grown,
and how crops are shipped.
Along each step of
this chain, there
are really exciting
innovations going
on that can reduce the climate
impact of the agriculture
industry.
First, we're seeing
some shifts in the foods
we're seeking to eat.
Plant-based meat alternatives,
like those sold by Beyond Meat
and Impossible Foods are
scaling at rapid rates
with the backing
of venture capital
and a widely publicized IPO.
Think of the Impossible
Whopper served at Burger King.
And the number of
people engaging
in meatless days or who are
vegan are also on the rise.
What about seeds?
As David Perry
mentioned, some seeds
are being developed
to thrive with less
carbon-based fertilizer.
Also, seeds are being developed
to be more resilient to drought
or seawater incursion, as
Syngenta is working on.
On the growing side,
regenerative agriculture
practices, like no-till
farming have the potential
to increase carbon
content in soils,
which would enable agriculture
to become a massive engine
of carbon sequestration.
Finally, in the supply chain,
we lose nearly 30% of our food
as waste, which is
a massive problem.
Food waste is a
third largest source
of greenhouse gas emissions.
We need lots of innovation here.
One example is the organization
called daily table, which
provides a B2C solution
that brings nutritious
food that would
otherwise be wasted
to markets in low-income areas.
Another company, Full Harvest
provides a B2B solution
that delivers
imperfect and surplus
produce that would
otherwise be wasted directly
from farms to businesses
like markets and restaurants.
So agriculture lagging in the
use of information technology
means there are tons
of opportunities
to improve efficiency and
to create new businesses
and business models that
can be profitable while also
dramatically reducing the
climate impacts of food
and agriculture.
[MUSIC PLAYING]
DAVID ABEL: That's it for
Climate Rising this week.
In our next episode, we'll look
at where and how we buy food.
SPEAKER: My customers are
generally agnostic about what
they put on their menus.
If the consumer
wants pickled beets,
they will sell pickled beets.
They may be, today,
tied up with their brand
with certain products
that they sell,
but they know that those brands
can evolve and have evolved
over the histories
of these companies,
and they're able to adapt.
DAVID ABEL: Thanks
for joining us.
I'm your host, David Abel.
This is Climate Rising, podcast
produced by Harvard Business
School.
You can subscribe
on Apple Podcasts
or wherever you listen.
And please leave us a review.
We appreciate the feedback.
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