The foundation of global commerce is the supply chain, consisting primarily of agriculture (food & fiber), material and energy. Feeding and providing energy to 7+billion people will continue to be one of society’s most significant challenges, and developing a new risk management framework around potential disruptions to the supply chain is becoming increasingly important with each passing year. This is particularly true when we view risks against the backdrop of a growing and more affluent population, changing demographics and buying preferences, and physical disruptions with natural and man-made causes. In a recent Atlas Research Innovations technical paper, I demonstrated how the utilization of global physical teleconnection analysis can aid in identifying and managing risk across the global agricultural supply chain. Early identification of potential threats may not prevent the disruption from occurring, but it certainly may allow us to better prepare for the effects across sectors and geographies. Teleconnection analysis is just one tool of many scenario-specific measures which highlight a new way to view risk; there are many more. It follows that new types of non-traditional analytical methodologies and techniques will hopefully allow us to (a) identify risks earlier than if we relied on conventional techniques, and also to (b) better prepare for the effects, both physical and economic. Here we look a little closer at the complexities associated with agricultural disruption.
In many ways, agriculture is not like any other industrial sector. Supply and distribution issues are different for every cultivar. Similar crops respond in very different ways based on geography. Further, agriculture touches nearly everything. One out of every two Indians is employed in a field related to agriculture. California, which became the world’s 5th largest economy in 2018 attributes nearly $43 billion of GDP to agriculture (2015 statistics), and this does not even account for related industries. Beyond, food, agriculture extends into the chemical, water, energy, material and infrastructure sectors, among others. As a consequence of this complexity and interconnectedness, the causes of disruptions to components of the global food supply chain are also complex, and no two (disruption) events are the same. There are instances when a supply chain ‘event’ can have numerous causes, with roots spread across factors including tariffs, labor shortages and disease outbreaks. Other times there may be only one trigger, such as a natural disaster. However, the one factor that has become generally consistent regardless of the catalyst, is that each disruption event can carry contagion risk. (Literally) every country in the world engages in trade, globally, and the notion of geographically isolated risks has become nothing short of a farce, although many macro analysts might want to tell you otherwise. Take a look at the ingredients on just about any food product you consume. Chances are the ingredients come from three or four continents and at least a dozen countries. The sales risk might be isolated to a single country, but the material risks cast a much wider net. The distinction here is not trivial.
When agricultural economists refer to a crop’s ‘origin’, they typically refer to the country from which the material was cultivated. But the notion of origins is starting to take a new meaning. When we scroll through the pages of a USDA report from the Foreign Agricultural Service, the tables and charts are filled with estimates associated with every commercial crop, and how much of each was grown domestically, how much was exported to and imported from other origins, in an effort to construct a country by country supply-demand balance. But let’s look at the concept of agricultural ‘origins’ more broadly. Climatic conditions which enable favorable growth patterns, or those that potentially limit yields, do not stop at country boundaries. Similarly, non-localized crop diseases do not stop at county/state/country lines. Accounting interests will always necessitate the need to count and project crop output at the country level, but from a risk management and sustainability perspective, a more useful way to measure agriculture potential is to take a regional approach. Again, we look to the themes presented in Parag Khanna’s Connectography for guidance.
Food security, and insecurity, are likely to rank among the top technical and economic issues affecting global populations through the 21st century. Water will certainly be a central theme at the epicenter of global agriculture potential, but technology development, access and distribution will also shape the discussion. And as we are examining what an agricultural origin truly means, we will need to expand our definition when we start to account for commercially viable quantities of food products that are generated in non-traditional ways. This includes contributions from synthetic biology, lab-grown (motherless) meat, and indoor agriculture to name a few. We will continue to explore the evolving dynamic around the global agriculture complex, addressing issues such as how food is grown and distributed, sustainability and risk, and supply chain interactions and participants, from both a technological and market perspective.
(this article also appeared on Medium)
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At Atlas Research Innovations, we look to the network sciences, geospatial analysis and the evolution of technologies for guidance and risk management in the new economy. Along with our network partners we will be publishing articles related to the global commodity trade, applied science and technology, and the manufacturing complex, while embedding principles and developments which promote Industrial Ecology integration across the agriculture, energy and materials complex.