As a person who likes to consider a glass as half full and not half empty, it takes some effort to read the latest book by Nouriel Roubini, also known as Dr. Doom. Titled ‘MegaThreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them,’ it has been described as a wakeup call for humanity. As an economic analyst and forecaster, Roubini is most famously credited with predicting the 2008 housing crisis. His latest book lists 10 dangerous challenges for the world. The consequences of these trends for swine production are worth considering.
Inflation and Stagflation
The multiple injections of cash into Western economies, most notably post-COVID, have left most of the western world in debt and vulnerable to a prolonged period of inflation over 5% and high interest rates. In a world accustomed to bank rates hovering close to zero, and historically low inflation, this will mean a different type of financial reckoning for pork producers. Can integrators continue to invest, or pork production expand, if the cost of capital is above 10%? What effect does this have on land prices? The purchase of equipment? Inevitably economic instability will favor those with access to better financial terms, advice. I would expect consolidation to continue apace.
Russia-Ukraine Conflict
The ways in which the war has already impacted the price of feed proteins has been well established. As feed typically contributes around two-thirds of the cost of a finishing pig this means that increased feed costs are significantly impacting the price of pork on the supermarket store shelf. Other consequences of the war are the doubling down of government policies to generate energy biofuels, notably soy and corn, and these are also impacting feed costs. Of course, the war has also impacted fuel and fertilizer prices. A recent presentation by Smithfield suggests farm machinery prices up 24%, feed up 43%, diesel up 115%, natural gas up 202% and fertilizer prices up 220%. While some easing of prices has already occurred, 2023 shows no sign of an end to the war or to its impacts.
The New Cold War
The Chinese-U.S. trade conflict has the potential to spill over into trading sanctions if China invades Taiwan. The importance of China on U.S. pork prices is frequently underestimated. Even when China doesn’t purchase pork directly (or with extra tariffs through Hong-Kong!), it still impacts price here by removing meat from Brazil and other competitors to the U.S. on the global market. Pork continues to be China’s favorite meat and is culturally associated with health and wealth. African swine fever (ASF) has accelerated in the closing of small Chinese farms, moving national production towards larger modern operations. While Chinese sow numbers are at record-low levels, the productivity per farm is making up of that in increased output. The importance on world trade is clear. As has been said before when the Chinese economy sneezes, the pork markets are prone to catch a cold!
Climate Change
The narrative that livestock are responsible for climate change continues to dominate the media. The question becomes how quickly government policies will be put in place on farms to address greenhouse gases like methane production. Political realities suggest this will be slow, with confined housing probably proving a more ‘sustainable’ model to capture these gases than organic production. Robani’s book describes how climate will change what we grow, where we grow, and potentially leave more parts of the planet uninhabitable. Swine producers particularly in the U.S. are increasingly finding ways to profit from energy capture on the farm, through methane digestors, solar energy, hydrothermal and wind power.
Artificial Intelligence and Robotics
Robani is very pessimistic about the role of artificial intelligence, and robots, and their possible role in replacing humans in the workplace. While these are already on the farm, the complexity of farm work ensures this will never be the first place for robots to be used. Factories, however, particularly the processing of food, will be transformed by use of robotics and artificial intelligence. Robani’s contention is that if we don’t consider carefully how robots and artificial intelligence are implemented, we will end up with huge numbers of unemployed. The dire consequences of that for society is relevant for food producers. Overall, the importance of artificial intelligence is how jobs will change, and the skills both farm workers and managers need to evolve to the new agri-technology realities.
Robani’s other pessimistic predictions include the fact of a world seeing our overall population aging, currency meltdowns and the end of globalization. While all of these threaten the era of economic stability and prosperity growth has brought, Robani does include the Yogi Berra quip that it is ‘hard to make predictions, especially about the future,’ Humans have shown the ability to overcome diversity through innovation, ingenuity and leadership. Hopefully, even in the face of these 10 very real threats, this will allow pork producers to be more optimistic about the coming years.
Aidan J. Connolly is a contributor to Forbes, who describe him as a futurologist, he teaches at three Agri-Food MBA programs and is President of AgriTech Capital, where he advises on innovations and technology investments. His most recent book ‘The Future of Agriculture’ is a free download.
More from Farm Journal’s PORK:
Tell Your Story: If We All Do A Little, No One Will Have To Do A Lot
Here’s Why Pork Producers Are Reluctant to Expand
