Three Imperatives for Continued Prosperity of the U.S. Ag Economy
March 20, 2018
Joe Stone speaking on a panel at the USDA Agricultural Outlook Forum
I want to thank Secretary Perdue for inviting Cargill here today. And I want to thank him for all he’s doing to promote U.S. agriculture and a food system that works for everyone.
It’s great to share a stage with so many distinguished speakers: Dr. Adesina, Dr. Johansson and Deputy Secretary Censky, as well as everyone else we’ll hear from over the next two days.
Like many of the organizations represented here, Cargill remains family-owned. Started in 1865 by W.W. Cargill in Conover, Iowa, we are now in our seventh generation of family ownership. That longevity is a result of deep pride in what we do and how we do it. Our family shareholders want a company they can be proud of – one that’s built to last so they can hand it off to their children and grandchildren. And one that supports our broader purpose of nourishing the world and our vision of being a trusted partner in agriculture, food and nutrition.
Although we are a global company that operates in 70 countries, our largest market is still the United States. We generate more revenue here, have more capital invested here, and have more employees here than in any other country.
In a fast-growing and more interdependent world, agriculture remains one of our country’s greatest economic advantages. That’s why we’re all here today. In one way or another, our wagons are hitched to agriculture, and we care deeply about its future.
The future of agriculture has never been more worthy of discussion, as the world increasingly relies on trade to feed itself. Nearly one billion people worldwide depend on international trade to meet their basic food needs. And for billions more, trade provides consumers with choice and diversity in their diet.
Put simply: The world is fed by trade.
And I’m especially proud of the role that U.S. farmers and ranchers play in meeting that need – perhaps more than anyone else.
U.S. agriculture is a remarkable story of productivity growth and innovation. Let’s take corn as an example. From about 1940 to today, average corn yields per acre in the U.S. have increased seven-fold, with the number of corn products and uses expanding in tandem. The steady climb in yields across the decades is illustrative of the prosperity that agriculture has experienced, both in the U.S. and around the world.
But no matter the situation or past track record, there is always risk and looming threats. Nobody knows this better than all of you. My wife and I own a farm, and I often say to her that we don’t need to go to the casino to gamble. We can stay home and do that simply by monitoring the weather, crop prices and natural disasters, to name just a few of the risks that we manage every day.
I bring that mindset to my role as Cargill’s chief risk officer, in addition to my job leading the company’s animal nutrition business. Managing risk means understanding the opportunities and strengths of our businesses, as well as the potential disruptions for both today and tomorrow. As a result, our goal is to build strong, competitive markets that work for farmers across generations, not just a single crop season.
Despite risks of all shapes and sizes, the long-term trends are excellent for U.S. agriculture. We have an enormous role to play in nourishing a growing world. We need to do everything in our power to manage these risks and ensure the continuation of the progress we’ve established.
Today, I want to share what we at Cargill view as three imperatives that we can all champion to continue our shared success: standing up for trade, restoring our infrastructure advantage and supporting farmers as chief technology officers.
If we do these things, U.S. farmers will have better access to strong markets and consumer support
for the food they produce – both at home and abroad.
Let’s start with trade. Smart and responsible trade policy will continue to be a tremendous enabler to U.S. agriculture.
The trade agreement that’s on most farmers’ minds right now is NAFTA. As we modernize NAFTA, we shouldn’t lose sight of the significant advantages that the agreement has already delivered to all three countries.
NAFTA has created one of the strongest economic zones in the world. Nowhere are the benefits more evident than in the agricultural sector.
As USDA’s reports show, Mexico and Canada are consistently two of the top three destinations for U.S. agricultural products. Our exports to Mexico and Canada have quadrupled since 1993 – the year NAFTA was signed. Tariffs on soy and corn products have dropped to zero, making U.S. crops more competitive. Mexico is now the largest destination for U.S. meat. All of these exports help support 15 million U.S. jobs.
Of course, nothing is perfect, and anything that is 24 years old should be assessed through the lens of today’s world. Just think, we weren’t even using email widely when NAFTA was signed. A few things have changed since then, right?
So, at Cargill, we are optimistic that an updated NAFTA will build on these gains and make it even better by expanding overall market access for agricultural goods; reducing barriers by harmonizing food safety standards; simplifying customs procedures; and strengthening dispute resolution mechanisms, so we can clear up issues quickly when they do arise.
While there’s still a lot of work to be done, negotiators report that talks have already resulted in some notable improvements. But we need to press ahead to lock in and expand the benefits of this important agreement.
We are grateful to Secretary Perdue, Deputy Secretary Censky, and many others at USDA who have been relentless champions of this process and all that it can deliver for our industry. Like everyone in this room, they understand what is at stake, and the vital role that agriculture plays in the strength and continued growth of the U.S. economy.
There are other significant opportunities to expand foreign markets for U.S. agriculture. Today, a billion or more consumers worldwide are poised right at the income threshold of $2,000 to $10,000 of GDP per capita. When they cross that threshold, demand for a more diversified diet starts to kick in.
Many of these consumers live in the high-growth markets of East and Southeast Asia. For example, in South Korea, beef consumption has surged 25 percent since 2010. Koreans eat more U.S. beef per person today than consumers in any other market. Much of this is due to a lower price on U.S. beef thanks to the trade agreement between the two countries.
High-growth economies like Vietnam, Indonesia, Malaysia and the Philippines are also seeing incomes rise, along with a growing demand for diversified diets. These markets are a natural fit to consume what U.S. farmers grow.
These are phenomenal opportunities for farmers, and we need to ensure that we can access markets like these on a level playing field.
The U.S. has led every step forward in trade liberalization since World War II, and we must not cede that role to other countries. For example, 11 nations recently signed the Trans-Pacific Partnership, creating one of the largest trade zones in the world. This includes our neighbors Canada and Mexico.
At Cargill, we are hopeful that the U.S. will join this agreement. One analysis indicated that those 11 countries represent a $62 billion market for U.S. farmers, and that joining the deal could add $4.4 billion to U.S. farm income – that’s about seven percent of farm income today. What an opportunity!
No nation wants to be taken advantage of in trade deals, which is why we must demand agreements that are fair, rules based and include critical enforcement tools. But with 96 percent of the world’s consumers – and the majority of the growth – outside the U.S., we need to be part of the global trade story if we want to flourish and grow.
Canada, Japan, the EU, Mercosur and China are all showing increased initiative in this arena. They understand the value of open, responsible trade to grow their economies in a sustainable way.
This administration has identified economic growth and prosperity as a priority, and set impressive targets for increasing U.S. GDP. Global trade will be a key contributor to meeting these goals.
So let’s rally together as an industry around a productive U.S. trade agenda, one that will ensure our country continues to lead toward prosperity.
It’s not enough to make sure we have the right trade agreements in place to access foreign markets. We also need to ensure we can efficiently move our agricultural goods to get them there. This means investing in infrastructure – the second imperative that I want to talk about today.
The U.S. infrastructure system has been the envy of the world and provided an important competitive advantage for our country. It has allowed our economy to become the powerhouse that it is today. As an example, in the years after the Civil War, Cargill grew up alongside the railroad as it connected farmers in the expanding Corn Belt to consumers back East. Agriculture remains one of the largest users of our national infrastructure. As a sector, it accounts for 31 percent of all ton-miles shipped, according to USDA.
We at Cargill are often the ones who carry farmers’ crops forward from the farm gate. We haul those crops over rail and road, down rivers to ports, and out onto the ocean. We see first-hand how agriculture depends on infrastructure.
Today, our infrastructure system is under very real stress, and it requires major investment to keep it strong for tomorrow. We cannot delay. We must act now.
If we’re going to maintain our advantage, these fundamentals must be addressed. Our inland waterways are struggling under the strain of aging locks and growing demand. Our sea ports aren’t deep enough to accommodate newer, larger ships. Our railroads are experiencing capacity constraints. Our bridges and roads are crumbling, receiving D ratings from the American Society of Civil Engineers.
These are bottlenecks to American prosperity. What’s the value in producing goods competitively and responsibly, and securing access for them in foreign markets, only to have them slowed or stuck along the way? Especially in agriculture, which has such slim margins – if infrastructure fails, those of us in this room all feel it.
Here is one example. Crumbling bridges near our beef plant in Wyalusing, Pennsylvania were recently bypassed for replacement. Reduced weight limits made the bridges impassable for our trucks. In this rural town where we employ 1,700 people, trucks taking beef to our customers were forced to find alternate routes. This has added $500,000 a year in costs, which makes the products less competitive.
We need Congress to act now to make sure that our system is ready to go as global demand continues to rise. The dollars we invest today will pay off ten-fold. But big projects take time, so we can’t delay in getting started. Other countries are investing now to build 21st-century systems. Maybe some of you saw the video online last month that showed 1,500 workers in China building a railway station in just nine hours.
We appreciate the U.S. Administration continuing to highlight the urgency of updating our nation’s infrastructure. As an industry, we must advocate to Congress and educate the public on the need for an expedited and equitable approach to revitalizing our national infrastructure.
We’ve talked about trade and infrastructure, now let’s talk about my third imperative – supporting our farmers as chief technology officers. The nearly continuous growth of U.S. agriculture over the past few generations has been remarkable. Yet we see opportunities to help farmers do even more to improve food production in ways that help nourish the world sustainably. Technology can be both an enabler and a disruptor. As the CTOs of their operations, farmers have an unparalleled ability to adopt and adapt to the best new ideas.
In particular, there are substantial opportunities to use technologies like data analytics, machine learning and blockchain. Among other things, these will help farmers optimize their operations, manage price risk and tell consumers the story of their food. Cargill is investing to do all three. Cargill has built cutting-edge analytics platforms that help farmers gather their data and use it to optimize their business. Our platforms help dairy farmers produce more milk. They help shrimp farmers listen to the sound of shrimp crunching their feed, to determine when they’re full. And we are using facial recognition technology to optimize an individual animal’s nutrition, health and performance.
We have partnered with machine learning start-ups to combine our analytical models for estimating supply and demand. This is helping us foresee market moves with greater accuracy. We can use these insights to help farmers manage risk and market their crops. Technology is also benefitting agriculture by enhancing connectivity throughout the value chain. The simple act of sharing information can be transformative – increasing transparency, accountability, and trust among all who touch our food system. It enables farmers to be more responsive to consumers’ changing preferences and gives consumers a more complete story behind the products they use.
Transparency is quickly becoming a “non-negotiable,” and demand for more information will only grow over time. While not always easy or comfortable, we must lean into this reality. We must use technology to tell consumers how food is produced, who was involved, and where it traveled from farm to fork.
Here’s one example of how Cargill is using technology to improve consumer trust, understanding and acceptance of our products and practices. Last fall we piloted a traceability program in our turkey business using blockchain. This allowed consumers to see which farm raised the turkey they were serving on their family’s Thanksgiving dinner table. They could read the farm family’s story, see photos of the farm, and even view a video message from the farmer.
As an industry, we must not forget that consumer acceptance of what we make and how we make it is earned and should never be taken for granted. This is no small task, since consumers are often reluctant to adopt new technologies in food production. Part of our job is to make a better case for responsible technologies we believe in by connecting these innovations to the social values that most farmers and consumers share – like stewardship of natural resources, the welfare of animals, and human health.
We have work to do... that is clear. But few sectors of our society are as well equipped to take this on as we are – all of us in this room. Farmers are the epitome of resilience and grit – two words that we use a lot today when describing the essential characteristics of success. I see it on a regular basis as I’m out visiting with farmers. I witness firsthand the ingenuity, innovation and drive that keeps them moving forward, despite all the challenges.
We are in awe of this invincible spirit, but it also needs to be valued and supported. For a long time, our farmer customers and others in the industry have asked Cargill to be more vocal on issues like these. And as you’ve seen in the past few years, we are doing so. Everywhere from ag outlook forums in Kansas City to the World Economic Forum in Davos, we are standing up for U.S. agriculture and farmers.
Today my message is this: everyone in this room represents U.S. agriculture in one form or another. Let’s continue to work together to nourish the world, and to stand up for trade, infrastructure and technology. With the partnership of all the different organizations in this room, I know we can do this.
Together, we can ensure that the roots of prosperity for U.S. agriculture remain vibrant and strong. We can ensure that – thanks to U.S. farmers – the world continues to be fed by trade.