It took several reads through their 28-page document, and many notes made in the margins throughout, to realize why the Royal Bank of Canada’s (RBC) “Farmer 4.0” report left me so confused. The core messages, the ultimate purpose, main takeaways, and actionable steps forward to be taken because of this expensive initiative, are all totally incomprehensible to me.
The reason, I finally realized, is because it is written by big bank economists, and I am an independent market economist. Demand drivers are always the starting point for me in analyzing opportunities in the agriculture sector, even if they threaten existing businesses. By contrast, and despite all their consultations and promotions, RBC failed to include consumer demand trends in their assessment of the skills and technology challenges that Canadian agriculture faces.
The report does a good job of illustrating two key features of the Canadian agriculture economy:
Canada is losing global export market share to China, Brazil, Indonesia, and India.
Commodity producers (feedlot beef, grains, and oilseeds) in Canada have automated their systems more so than those involved in direct-to-consumer markets (fruits and vegetables, nurseries, supply management, hogs and pigs, and aquaculture).
But the framework only pays lip service to the bigger challenges drawing public criticism of industrial agriculture, namely: sustainability and cultural diversity. In my analysis of the report, I noted:
There is a brief mention buried on page 7 to “the need for agriculture managers with experience in … integrated systems management, and more exposure to programs focused on … environmental studies.” I left out the other disciplines listed in that sentence to highlight the fact that management consideration of environmental consequences in agricultural production requires systems thinking - an extremely rare and under-appreciated skill set. Production paradigms that neglect environmental consequences of industrial agriculture systems solve problems with simple, linear, and largely automatable outcomes.
Twice the report gives a nod to the role of youth, women, Indigenous people, and new Canadians in agriculture. Yet the authors provide no justification or strategic direction for their call to attract more cultural diversity into the industry. It makes me wonder, does RBC wish to integrate the tangible contributions that demographic diversity could contribute to the white male-dominated agriculture sector, or are these other groups mentioned in passing just to appease societal pressures, without actual intent to make room for them at the table?
North America is losing global market share in commodity crops to lower cost suppliers due to the degradation of our soils. Crop input expenses move higher in tandem with yield potential forcing farmers into a vicious spiral of having to spend and apply more and more pesticides and chemical fertilizers that destroy soil biology and upset nutrient balances. Tillage continues in many regions, causing soil erosion. In parts of the world where new land is coming into production, and/or where machines or manual labor is used in place of degenerative chemical inputs, crops can be produced and exported at a lower cost of production and competitive selling price delivered into world markets.
This problem is significant in the western Canadian conventional grain sector, which also suffers from a freight disadvantage, and it has already collapsed our organic grain markets. Oversupplied by some amount of fraudulently labeled organic grain imports, prices are hardly profitable for domestic producers, whose yields can be quite a bit lower than conventional, GMO commodity export grain.
Canadian governments, industry and trade associations missed a huge economic opportunity to respond with value added investments to organic market demand growth in recent decades. The organic production system has always had enormous potential, momentum, and runway for further growth, and it does not always rely on simple rotations and tillage, as so many in agriculture incorrectly assume. Diversity works to ensure that organic grain farms are sustainable, but they needed the support of the agriculture industry and the markets to better take advantage of the growth opportunity presented.
The lack of investment in local processing, distribution, and marketing systems for food companies to connect with domestic organic producers set the stage for global imports of commodity organic grain to displace demand for local organic grain. As anyone with a background in commodity trading well understands, that loss of market share for Canadian organic grain in the North American food sector can only be won back with a further discount in prices. It is a real shame.
While an interesting study, the economic case for Canadian organic grain market growth is long past. Meanwhile, the pandemic is placing new pressures on conventional commodity supply chains, and heightened awareness on domestic issues around food insecurity. The new way forward for agriculture is in catering to the many new emerging demand segments of the markets for food and moving the concept of “farming” back to the basic moral tenet of using land to grow food to sell to people to eat.
Looking at emerging farm marketing opportunities through that lens reveals enormous potential for business growth in creating safe and nutritious food, and by restoring regenerative land management and customer experience back into agriculture. Public interest in soil carbon sequestration through practices like cover cropping, intercropping, and rotational grazing, is soaring.
If the RBC report were titled, ‘White Settler Farmer 4.0’, it would make a lot more sense. Automation, just like genetic engineering, still only pays back a return on investment to commodity producers in agriculture and offers no added value attributes to the marketplace. For that reason, stories like this about supply chain efficiencies and automation fail to resonate with market economists and conscious consumers alike, because they offer nothing new, and we are sick of the status quo.
Thought leaders like me and the regenerative farmers that I work with, most of whom are young, female, and indigenous by the way, are serving conscious consumers and the public who care about where their food comes from. We accept that some of the efficiencies introduced over the years into modern agriculture have come at too great a cost, and we are working hard on creating better systems for the future.
In conclusion, I am grateful for the sensibility that comes with being an independent market economist because it pulled me out of the deadpan echo chamber that only still resonates within big agribusiness. I am equally grateful for the dedication to customer service that is required of an entrepreneur, and how it allows me to see, hear and act on the best new economic marketing opportunities for Canadian farms.