The Global Food Supply Chain

A number of significant advancements in food production have been made in recent years, from growing and harvesting methods that improve crop yields to ‘new’ food sources like plant-based dairy and meat products, while better cold chain performance and integration are making it possible to move more food longer distances without compromising quality.

Yet for every step forward, the challenges brought about by threats such as climate change, a growing global population, and persistent food insecurity in the developing world remind us how much further we must go to assure an adequate food supply is available for future generations.


Forget the smarter mousetrap, build a smarter tractor

If there’s any doubt just how sophisticated today’s farm equipment is, just ask the CEO of John Deere. In an interview last year with Fortune, the company’s CEO Sam Allen said, “Most people don’t realize that one of our 8000 Series tractors has more computing power on it than the first space shuttle.” The aviation and aerospace comparisons don’t end there…the company’s satellite-guided combines feature more lines of programming than many commercial airliners and are three times more efficient than they were a decade ago, too.

The result is equipment that delivers high performance and precision. “Going up and down a field a mile each way, if the farmer has a 60-foot boom on the back, 30 feet on each side, there’ll be only a two-inch overlap. Prior to this, a farmer would have overlapped by at least six feet,” said Allen.

John Deere’s proprietary GPS-enabled auto-steer technology is an example of the types of innovations the company is contributing to the broader effort of boosting agricultural output.

“We believe the key will be continuing to improve productivity, mostly on existing land,” said Allen during the Fortune interview. “That’s going to come through a combination of seed genetics and smarter agronomic decisions, and those decisions are going to be enabled through the use of data coming off equipment that’s getting more intelligent all the time.”

For example, while farm equipment is in the field plowing, planting and harvesting, wireless connections allow farmers to remotely review such things as planting depths and the application of various sprays and fertilizers. The farm equipment also serves as a data source. Information on everything from the protein level of chopped corn used as livestock feed to the spraying history of each field can be collected and transmitted to a portal and analyzed.

Earlier this month, John Deere and Bayer CropScience announced they would work together on a pilot program to provide data-enabled decision-support tools to farmers.

According to a press release, “Bayer CropScience will initiate R&D-based field pilots designed to use agronomic data to prescribe Bayer CropScience products to maximize yield potential and overall profitability on each acre.”

Shane Hand, the company’s digital farming strategic marketing lead, explained that, “Our intent is to leverage the agronomic strengths of Bayer CropScience and channel partners, combined with the precision-enabled equipment and the MyJohnDeere decision support platform offered by John Deere, to enable farmers to move from precision agriculture to decision agriculture.”

John Deere’s MyJohnDeere is an information platform that allows farmers to manage equipment data, production data and farm operations.

Precision farming is one sector where Netherlands-based TerraSphere is applying its satellite imaging technology. The company produces vegetation index maps of individual parcels based on satellite and UAV (unmanned aerial vehicle) imagery throughout the growing season. The maps allow farmers to monitor the growth of their crops, and make decisions regarding fertilizer application as well as soil sampling.

The application of UAVs/UASs (unmanned aircraft systems) in the area of precision agriculture is huge, and it’s likely that they will be cleared to operate in unrestricted airspace in the U.S. starting in September 2015.

According to the study, The Economic Impact of Unmanned Aircraft Systems Integration in the United States, authored by aviation industry consultant Darryl Jenkins and Embry-Riddle Aeronautical University professor Bijan Vasigh, UASs will generate $13.6 billion in economic impact in the first three years after they are cleared to operate in the U.S. In addition, 90 percent of the potential market would be for precision agriculture, including remote sensing of crops for problems and growth patterns, and precision application of pesticides and nutrients, as well as public safety.


Alternative protein sources

Over the past few years, Food Logistics has covered a number of developments related to alternative protein sources, from Hampton Creek Foods’ plant-based egg to 3D ‘food printing,’ to the rise in entomophagy (the eating of insects) in the Western world to Dutch professor Dr. Mark Post’s ‘lab meat.’

In fact, the Dutch are behind many pioneering developments related to food, including seaweed cultivation.

Since 2012, Wageningen UR (University & Research Center) has been conducting pilot trials involving seaweed cultivation at several sites around the Netherlands. Dr. M.C.Th. (Martin) Scholten explains that, “As the world population and consumption levels grow, efficient use of natural resources becomes more important. Feeding the world within the carrying capacity of Planet Earth requires an open eye for the sustainable food production at sea, as seas cover more than 70 percent of the planet.”

Competition for land-use, depletion of terrestrial nutrients and loss of pristine forests are among the top challenges that warrant pilot programs such as these, adds Dr. Scholten. “Seaweeds provide big opportunities for production at sea: a commodity that can be used as food for human consumption, livestock feed and a source of green chemicals.”


Supporting a growing cold chain

Whether it’s alternative or conventional protein or growing imports/exports of fruits and vegetables, more perishable foods are relying on an integrated cold chain to satisfy increasing demand in both the developed and developing world.

The USDA’s Economic Research Service forecasts that:

• U.S. fresh vegetable imports will grow from $6.5 billion in 2013 to $11.3 billion by 2023; fresh vegetable exports will climb from $2.3 billion in 2013 to $3.1 billion by 2023.

• U.S. fresh fruit imports will rise from $8.3 billion in 2013 to $13.4 billion by 2023: fresh fruit exports will rise from $5.01 billion in 2013 to $7.44 billion in ten years.

• While imports are expanding faster than exports, the USDA predicts exports will continue to grow significantly for U.S. producers. By 2023, 27 percent of U.S. fruits and nuts will be exported, up from 23 percent in 2013. Likewise, about 20 percent of U.S. vegetable output will be sold in foreign markets by 2023, up from 16.7 percent in 2013.

Container lines have invested heavily in refrigerated equipment in order to gain a larger market share of food imports/exports. During the JOC’s recent TPM conference in Long Beach, Calif., shipping executives said they’re preparing to transport more reefer cargo going forward.

Peter Frederiksen, a member of the executive board for Hamburg Sud, said that improving standards of living and growing populations were driving demand for perishable foods. He expects the global reefer market will continue to achieve 4 to 5 percent growth in the coming years.

To keep up, Hamburg Sud will add 6,500 new reefer containers to its equipment fleet this year. At the same time, its new ‘Cap San’ series of vessels, launched in 2013, offer more reefer plugs (2,100) than any other vessels available today.

Just last month, Hamburg Sud held a naming ceremony for the Cap San Lorenzo in Buenos Aires—this is the fourth of six ‘Cap San’ new builds that will be deployed by the carrier. The Cap San Lorenzo has been put into service between the east coast of South America and Europe--a major reefer cargo trade lane.

Maersk Line, the biggest player in the containerized reefer market by far, is currently evaluating whether or not it will make investments in reefer containers this year, said Bill Duggan, vice president of North American refrigerated services, during a roundtable discussion at the JOC’sTPM conference. Maersk decided to cancel an order for approximately 35,000 new reefer boxes in 2012-13--a half a billion dollar order that not only hurt a lot of people in the reefer trade back then, acknowleged Duggan, but Maersk’s sister company MCI too, the company’s container manufacturing unit.

Given that new reefer containers cost between $17,000 and $18,000, investments are a major consideration for carriers, explained Duggan. Furthermore, when you only end up getting four turns per year on that reefer box, and you have all the ancillary costs with the box, like maintenance and repair, repositioning etc., this forced the company to wait on the reefer order and “get our house in order first,” Duggan said. As for 2014, Duggan says the company is currently evaluating the market, including rates, and will make a decision on reefer container investments “as we get to mid-year.”

The reefer business is “a beautiful part of our business,” said Duggan. “You’re dealing with people who fish something, grow something...many times from family-owned companies. We really like working with them.”

However, he sympathized with the volatility in reefer rates that those shippers face in the current market. And it’s unlikely the volatility will subside anytime soon with more carriers “running for marketshare and not really looking at the overall costs required to invest in this industry,” noted Duggan.