"Growing a Sustainable Business"

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The 2011 ARA Conference and expo’s theme was Growing a Sustainable Business: What your customers, consumers and the government want from ag retailers. This year’s conference featured five speakers and two panels over the two days of the conference. The speakers offered their perspective on how the issue of sustainability will impact ag retailers and some offered ways to better handle that shift. Here are some highlights of each speaker’s presentation.

IAN HOPE-JOHNSTONE

The 2011 conference opened with a presentation from Ian Hope-Johnstone, director, agriculture sustainability, PepsiCo. He offered a view of sustainability from PepsiCo’s perspective. He explained PepsiCo’s sustainability lens by saying the company took a two-pronged approach to sustainability. PepsiCo considers sustainability to be about ensuring continued access to key ag raw materials necessary to supply growing consumers’ needs. Secondly, PepsiCo sees sustainability as respecting the environment. Hope-Johnstone said the company recognizes that it’s going to be a challenge making farmers more productive in the future while preserving natural resources. As a result, PepsiCo sets up contracts with growers who apply proven practices.

Hope Johnstone explained that the reason PepsiCo set this approach was due to several factors. An increasing global population will demand more food and impact North American production. As the diets of developing countries change toward more protein, more food will need to be imported into those countries. Hope-Johnstone said he believes North America will help produce that food.

Another factor will be global commodity prices. Although commodity prices have increased, Hope-Johnstone said the volatility in the markets is concerning. He also tied consumers into this point because of the impact of rising food prices. In a market survey of consumers, he said 54 percent considered sustainability to be one of their decision-making factors. Although consumers’ perception of sustainability has increased, Hope-Johnstone said it was not part of PepsiCo’s marketing strategy to adopt sustainable practices only for marketing purposes. Rather, the company is looking to continue adopting sustainable practices to ensure the viability of its global operations and the access to the raw materials it needs to stay in business.

The farmgate is a factor because if PepsiCo is going to meet the increase in food demand, the issues that affect the farmgate are important as well. So, understanding issues such as water availability, soil, agri-chemicals, energy management, farm economics, land management and social and community dynamics are key.

He went on to explain work PepsiCo had done to understand the carbon footprint issue and greenhouse gas’ impact on agriculture. Since agriculture represents such a big percentage of what impacts the world’s carbon footprint, managing how food is grown will be key in managing agriculture’s carbon footprint.

Hope-Johnstone explained that PepsiCo sees its role in managing agriculture and its impact on the climate through a verification system for farms. He stressed that this did not mean certification. He said priorities will be established at the farm level, regional level and county level. This priority list will be a starting point for many farmers, he said.

In PepsiCo’s view, retailers can help farmers increase their efficiencies by adopting new technologies and precision agriculture methods. Ag retailers can be the change agent farmers need to sustainably increase yields for a growing world.

JONATHAN KAPLAN

The second speaker of the conference was Jonathan Kaplan, senior policy specialist, Natural Resources Defense Council, who provided his and NRDC’s perspective on sustainability issues and agriculture. His appearance was the first time a member of the NRDC was invited to the conference to speak. Kaplan shared how his experiences have changed how he thinks of agriculture. He explained a collaboration called the California Roundtable that was created in California between the state’s leaders, the environmental community and the agricultural community. Every two months the group comes together to sit down and identify areas of common interests, concerns and frustrations. The group has been meeting since 2006.

He admitted that his experience in this group has allowed him to see that although there are several issues to which all the stakeholders are not going to agree, they are finding real common, mutual interests where the group can work together.

Kaplan introduced the term “nitrogen cascade.” He admitted that it was a new term for the NRDC. He explained how the concept was an awareness that reactive nitrogen is now cycling through the environment. Even though that’s always been true, Kaplan pointed out that more reactive nitrogen is a bad thing for the environment because it runs off fields and causes water quality problems, including surface and groundwater. It can also evaporate and goes up into the atmosphere, contributing to global warming. Nitrous oxide is 300 times more potent as a global warming gas than carbon dioxide, he said. So, this nitrogen cycle contributes to eutrophication and hypoxia. The new part of the story, Kaplan said, is that science now understands that one nitrogen molecule can bounce around into all levels of the environment. When a molecule of nitrogen is added to the environment, it can sit in the soil for awhile, be washed into the groundwater, show up in a creek or evaporate into the atmosphere. This process may take years, or decades or centuries to cycle. This one molecule can be causing multiple environmental impacts, he said. So, if more reactive nitrogen is being added to the environment, it is concerning. Indications are that humans have been adding more nitrogen into the environment every year since 1850. He contends in the past few decades, humans have more than doubled the entire amount of nitrogen that’s being put into the environment.

He said more reactive nitrogen is having an impact. We are getting precariously close to reaching a threshold where humans will be adding more reactive nitrogen than nature can absorb or convert, which could spell big problems for the environment, according to Kaplan.

NRDC’s perspective is that better management and more efficient nitrogen use is going to be a crucial way to prevent further addition of reactive nitrogen into the environment. Increasing nitrogen use efficiencies by crops are going to be needed more and more, he said.

Kaplan shared the results of USDA’s Economic Research Service study that found a large number of growers are still not adopting best practices for the maximum amount of nitrogen efficiency. The survey found that about two-thirds of all the surveyed growers were meeting rate criteria, which means one-third were not meeting the criteria and were applying more nitrogen than the crops needed. Some growers also were not applying nitrogen at the period when plants take up nitrogen and absorb it.

He reminded retailers that sustainability is a journey and there is still a lot for everyone involved to learn. He encouraged retailers to view the environment as a closed loop system and that continual improvement is needed. Retailers have an important role to play within that spectrum.

ADAM PUTNAM

Following, Jonathan Kaplan, was Adam Putnam, Florida ag commissioner, who provided his perspective on managing production in a state with more than 300 commodities. Putnam offered a producer and government perspective on agriculture since he comes from five generations of farmers. He explained that there is a renewed interest in where food comes from now, which allows the industry a teachable moment. He stressed that the United States needs to maintain its food independence especially as the demand for food increases globally. He said the United States will maintain its superior position by adopting new chemistries and working with the private sector.

He mentioned regulatory issues that are impacting and will continue to impact the business of growing food in this country. He criticized the way EPA has handled the ammonium nitrate issue. He said EPA had conducted the whole process backwards by first making the rule and then asking for public input. He said stewardship should be a top priority for ag, but that government needs to have the right mindset of assistance. He criticized the federal government on the issue of new child labor laws that seek to prevent teenagers from working and coming into contact with livestock. Putnam’s opinion is that agriculture should be driven by the marketplace, not the government.

Florida continues to struggle with is the numeric nutrient criteria issue. Putnam said, environmental groups want to hold Florida to a higher standard than any other state through enforcement of the Clean Water Act. Because nutrients flow into streams that cross state boundaries, the issue Florida is dealing with quickly becomes an issue for other states. Neighboring states may be required to meet Florida’s standards if the environmental groups have their way, Putnam warned.

He told attendees that if they didn’t think Florida’s issues affected them because they are located in the Midwest, they were wrong. If stream and river flow across boundaries is a concern in the Southeast it is impossible for the issue to not impact all states, eventually.

In order to keep U.S. as a top food-producing nation, increased scientific research is needed so that farmers here can use the best agriculture technology. Keeping agriculture research based in the U.S. is also critical to allow the U.S. to keep the competitive edge. However, he also said research needs to be a collaboration between the public and private sectors.

MAC CARRAWAY

Keeping with the experience of Florida, Mac Carraway, president of SMR Farms, shared his experience as a farmer dealing with sustainable issues. Schroeder-Manatee Ranch has 31,000 acres in southwest Florida and has a diversified operation of citrus, Angus beef cattle, improved value turfgrass, containerized and field grown tree nursery and row crop leasing. Carraway explained with this much diversity, it was an opportunity to work with many sustainable issues.

First, he said, the company needed to define sustainability. He defined it as being in harmony with the earth, making money indefinitely so that the farm can continue and market green. He also defined what sustainability is not: magic, silver bullet or unattainable.

He said achieving sustainability is recognizing the cumulative effect of persistent efforts and finding ways to find a balance that meets both economic and environmental goals.

Carraway presented SMR Farms’ approach to adopting sustainable practices. The first focus is on water resources, which includes reducing the use of water for all irrigation and managing negative impacts on water quality. The second focus is on natural systems since the farm has areas near the coast and Everglades. This entails managing impacts on the wetlands and upland habitats as well as restoring impacted areas. Thirdly, the focus is on improving the community. This is done to show that the farm is a good neighbor and that it thinks big and long term.

He said agriculture has been and can be the leaders in nutrient issues and best management practices. Agriculture can set the example for other industries and the public to follow.

Carraway said the issue everyone is watching closely is water quality. He said water quality will become the new battlefront in the future. This will focus on fertilizer’s impact on water and local fertilizer ordinances where there are blackout dates for application, specific allowable fertilizer formulations and training requirements.

He said that he hoped that science-based regulation will prevail. Research will be crucial to minimizing the impact of future regulations. He called for industry solidarity and outreach to proactively face the issues.

He reminded attendees to look at the bigger picture. Agriculture must see better ways of participating in the discussion about food production and sustainability. Fighting emotionalism and unfounded concerns will be challenges agriculture must face. In the end, education and communication will be needed to over come ignorance if agriculture is to succeed, he said.

ANDREW KENNEDY, ANDRES FERREYRA AND KEVIN PATTISON

The first day of speakers ended with a panel that was created to discuss how technology could help retailers better manage the data from farms to help farmers make better informed decisions. This panel consisted of Andrew Kennedy, president, FoodLogiQ; Andres Ferreyra, manager of special projects for Ag Connections; and Kevin Pattison, president, Agri-Data Solutions.

Kennedy started out by saying that all three of the company speakers represented technology to help retailers better communicate between each other and to customers for better value chain sustainability reporting. Together these companies are working together to create data sharing technologies.

As growers are looking to meet processors’ requirements, retailers can help farmers meet those criteria, Kennedy said. The ability to report the data generated from the farm will be needed by the food companies. He explained that prior to this new technology, farmers have been unable to easily compare their farming data to other farms’ data. With technology FoodLogiQ is developing, farmers can use data in a way they haven’t before in order to gain new insight into managing their operations, he said. As processors seek to gain the confidence of consumers, they will increasingly seek the data of farms to be able to justify their practices.

Ferreyra explained how the data collection of sustainable practices occurs at the grower level. As a result, the retailer is in a prime position to help the grower, he said. He explained that the retailer can help the grower work toward standardization of his production practices and develop a common platform. He shared his experience of working with the Keystone Alliance, which is developing the first set of metrics for sustainability measurement. He said farmers often have trouble getting started reporting on the sustainability metrics. It’s considered an upfront burden to enter all the data into a database. This is something the retailer can help with. This can create a partnership that the retailer can foster. Ferreyra then spoke about how the data from the field gets entered using either a desktop computer or Web-based/mobile tools.. He explained that retailers can help growers with Ag Connections’ crop management software solutions so that growers keep better records. Data can be analyzed better and improve meeting a grower’s agronomic needs. The solutions also become a planning tool for farmers and improve the management and logistics of the data capture process. Using this also adds value to the grower/retailer relationship.

Kevin Pattison spoke about Agri-Data Solutions. He explained how data generation improves reports to processors wanting information such as nutrient use on farms. In a carbon offset generation, the data collection offers growers a benchmark against each other once the data is collected and made transparent to all.

He said online data management will move to a cloud-based system. It will be Web-based with no software needed and no backups. It will be password protected with 256 bit encryption and stored in a world-class data center. It will also be accessible from multiple browsers and platforms. GIS mapping functions will be enabled so that crops can be tracked and the data can be integrated with lab data. He explained that field scouting will then be done with geo-tagged photos through mobile technology. Custom Apps will be used. With irrigation and weather information, he said expenses will be tracked by individual field. Today, he said lots of data is already being generated with the use of precision agriculture, but it’s not in an easily usable format. Mobile phones and tablets will make that easier in the future. He said barcoding use will increase as he expects QR codes, RFID, wireless monitoring and real-time communication becoming more commonplace.

BOB WILLARD, ORVIN BONTRAGER AND DAVE COPPESS

On Thursday, Dec. 1, the conference featured a retailer panel that was designed to offer a retailer’s perspective on dealing with sustainable issues from their region and business. Each shared their individual challenges. The retailer panel included Dave Coppess with Heartland Co-op, Bob Willard with Willard Agri-Service and Orvin Bontrager, Servi-Tech. Willard spoke about the issues Willard Agri-Service has faced surrounding the Chesapeak Bay area. He shared that between 1608 and 1950 the population around the bay had increased to 8 million people. Between 1950 and 2000, the area added another 8 million people. In the next 50 years, the area is expected to add another 8 million people so that by 2050, there will be approximately 18 million people living around the bay.

He spoke to the challenge of having rural areas up against urban areas. He expressed a need for science-based regulations and echoed many of the points that Mac Carraway had mentioned the previous day about nutrient management regulations. He stressed that mandatory nutrient management would be necessary in the future and ag retailers will need to be involved to help their farmer customers.

Bontrager offered his perspective from a crop consultant's point of view and as the past president of the National Alliance of Independent Crop Consultants. He said dealing with sustainability issues in the western Corn Belt were most likely to involve water issues. He mentioned irrigation issues surrounding the Ogalala Aquifer, which has been decreasing over the years as irrigation has increased. However, to increase yields in parts of the Midwest, he said, irrigation was one way to do it, efficient nutrient use another. He also suggested that retailers should utilize social media to better connect with farmers and the industry. Like previous speakers at the conference, he stressed better communication and transparency among industry participants.  

Coppess shared his experience with other Iowa retailers who have gathered together to share data about nutrients in the soil and fertilizer's impact on water supplies. He explained how he got involved with water and nitrogen issues in Iowa 12 years ago. High nitrate spikes were found in local water supplies, so Coppess and other retailers got together to help protect themselves from unfounded claims so that they could operate without regulations that weren’t science based. The group began to gather data and helped develop a nutrient reduction strategy for Iowa farmers. As a result, they’ve been able to show a reduced nitrogen load water supplies.

All three panelists agreed that proactive involvement is necessary going forward and that retailers are in a key position to help farmers navigate future sustainability issues.

THOM WINNINGER

Wrapping up the conference was speaker Thom Winninger, a marketing strategist. He explained that retailers are not just in the business of selling crop protection and seed. They are selling an experience. He explained that customers buy from retailers based on the experience they perceive they are going to get, not just to buy the product being sold. An example he offered was Disney. They sell an experience, not just an amusement park. In another example, he explained the difference between a Hershey’s candy bar and Godiva chocolates. Hershey’s will sell a candy bar for 99 cents whereas Godiva can sell a box of chocolate that contains about as much chocolate as the Hershey’s bar for $12.95. How can they charge more? The perception is that Godiva is an experience. The chocolate is the same. The perception is the difference. Winninger said retailers can take that knowledge and apply it to their businesses. He challenged retailers to see themselves as “sustainable growth providers.” He explained how customers break into four categories: the buy-what-they-need group, the primary profitability customer, the moving-up customer and the drive-me-out-of-business customer.

In serving customers, Winninger asked retailers if they had a customer relationship model? He said a CRM application is needed to turn sustainability into a culture. He recommended that retailers really listen to what their customers want. He said retailers need to build a collective authority, educate the customer and create priceable value in sustainability in order to make it worth customers’ time and effort.


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