During the COVID pandemic, fear around the world led to “blank check” stimulus authority. Politicians all over the world were allowed to spend with impunity on nearly everything they have ever wanted. Within three years roughly US$17 trillion was poured through the global economy. In the U.S. that amount was US$6 trillion.
Why does this matter? Because that is A LOT of money creation. Enough to increase the U.S. money supply by 40% in two years. Waves of inflation spurred real estate, commodities, and equity markets. And inflation never reverts.
Today we find ourselves in a new world. In America versus pre-pandemic: home prices 55%, electricity 38%, and food prices 33% (beef 53%, pork 27%, poultry 35%). For meat and livestock producers that inflation has raised the cost of labor 31%, steel (equipment) 52%, and diesel +72% (also war-driven).
This massive inflation is now spurring a surge in agriculture technology adoption, not because the ag-tech is cheaper, but because the alternatives have inflated so quickly. Here’s an example. Cattle virtual-fence collars have been available for years. Like a dog collar these can be controlled by an app, moving cattle with electric impulses and negating the need for fencing. The costs have previously been prohibitive with start up costs including tower construction ($5,000-12,000), subscription fees ($40-80 per cow), and collar costs ($250-300 per cow). That cost structure limited adoption. However, in today’s “new” world, fencing costs have surged higher due to labor ($2-3 per foot, or $10,000-15,000 per mile), wire ($2,000 per mile), and higher steel post costs. The new math makes new virtual fencing tech much more interesting.
Other new ag tech examples for livestock, poultry, and meat producers include animal health sensors (collars on dairy cows that detect mastitis through temperature, as well as other health monitoring), biosensors that are swallowed by cattle to report health, AI camera analysis of animal movement to assess health, AI “ear” listening devices that hear, compare healthy poultry chirping (or pig coughing) versus distress, autonomous farming, vision-guided robotic meat trimming, AI meat plant optimization models, robotics in processing plants that help box, palletize, move, and even load trucks, and precision farming with new AI algorithms to optimize expensive fertilizer applications. It is estimated that more than 90% of the U.S. corn and soybean crops are now planted using some type of “autosteer” technology. I’m sure Elon is envious…
Ag tech productivity is now an economic imperative. Expensive land, equipment, and infrastructure costs have leveled the playing field for technology. The math favors investment into conception rates, pigs/sow/year, yield, waste reduction, and optimization far more than big land and infrastructure investments. And this isn’t just a wealthy country trend. Ag tech adoption may be occurring more rapidly in Matto Grosso Brazil where 30-year-olds are often managing 10,000 acre “fazendas” (farms) compared to Iowa where the average farmer age is 59.
Charles Darwin, the father of animal evolution theory gave a poignant lesson that can be applied to businesses: “It is not the strongest of the species that survives, nor the most intelligent, but the one most adaptable to change.” You don’t need to be the biggest or smartest, but you better learn quickly how to ADAPT. Ask a cockroach…
Bottom line: BUCKLE UP. We are heading into a new phase of global food and farming where ag tech, AI algorithms, robotics, sensors, and optimization are now advancing productivity VERY QUICKLY. Hire youth that can help advise, adapt, and adjust.
~Brett Stuart