As the country emerges from the COVID-19 pandemic, how will the pork industry be affected? During the National Pork Board’s monthly webinar, Purdue University professor Jayson Lusk discussed three potential disruptors that the industry could encounter in the next three to five years.
1. Ag and Food Tech Innovation
What’s the future for innovation in the pork sector? Lusk says public investments in ag research have been stagnant. Venture capital investment in food and agriculture startups remains strong, despite the pandemic.
“Depending on which commodities we’re talking about, particularly during the biotech boom, there were a lot of private investments in agriculture that remained strong. But I think there’s a bit of a shift in the focus of a lot of the public research that exists in terms of a focus away from food security and more of a focus on sustainability and quality issues,” Lusk said.
From Lusk’s perspective, an increased focus on sustainability is not entirely separate from productivity, which often is the focus of innovation in pork production. He added sustainability and productivity are very close cousins.
“I would go so far as to argue that innovation and productivity are often the cornerstone of sustainability,” Lusk said. “If we can produce the same amount of pork that consumers enjoy, but do it using fewer animals with less feed, that means less greenhouse gases, fewer environmental impacts, and to me, that is the definition of sustainability.”
He encouraged the industry to think about innovation not only in terms of what makes the industry more sustainable and more competitive but also to think about how innovation outside the industry could affect competitiveness. He pointed to the emergence of alternative plant-based protein products.
“Think carefully about how you contribute to conversations around meat consumption and animal agriculture,” Lusk said. “You’ve got to be cognizant of that increasing polarization and think very strategically about ways to move beyond it.”
2. Inflationary Pressures
The current inflation rate is about 4%. The question is, is this a temporary blip in inflation rates, or is it here to stay?
“As we’re hopefully coming out of COVID, maybe it’s just extra demand. People are spending more and can get out of their houses,” Lusk said. “That’s extra demand in the system and that’s what’s pulling up prices. It just means maybe there’s more money to be made out there.”
Another story could be maybe there’s just more money floating around, he added, so all that’s happening is the value of each individual dollar is falling.
“That would be a more problematic issue to keep our eyes on for the future,” he said.
During most recessions, personal savings rates remain low, but consumers have been increasing their savings recent months, Lusk explained.
“Normally in a recession, savings rates remain low, but people don’t normally add a lot of extra savings during a great recession. They normally draw down savings when things are bad,” he said. “But in aggregate, people have a lot of money and savings. Back to the positive demand story, maybe what’s happening is people have money saved up, the economy’s opening up, they can go out and spend, and that’s pulling up prices at the moment.”
3. Food System Realignments
Forward and backward integration in the food industry continues to grow, Lusk said. For example, he shared stories of Perdue Farms launching a direct-to-consumer effort in their poultry business, Walmart trying to get into the beef packing business and Costco getting into the chicken packing business. He also mentioned Tyson’s appointment of a new CEO who came from the tech world.
Increasing pressure to prove sustainability claims will continue driving food system realignments, he explained.
“It’s not necessarily because consumers are willing to pay more for it, but that investors are asking for more documentation and commitments of companies,” Lusk said. “As a company, there’s only so much you could do within your four walls and within your core business. Then you’ve got to reach back into the supply chain to make some of those commitments.”
He also believes what the industry is seeing is an attempt to secure supply to have an efficient quantity, but also to think about quality issues and take advantage of potential information that is coming about through digital ag.
“The ability to track and trace information and carry that information throughout the supply chain is really becoming increasingly important,” Lusk said. “That ability to respond to consumers’ demands about where food is coming from, and whether it has particular quality traits, is also dovetailing in with this ability to track and convey information along the supply chain in ways that we haven’t seen maybe as much of in the past.”
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