Big change is ahead for the red meat sector. While the industry is no stranger to change, you can no longer use the past as a means of predicting the future, delegates at the recent Red Meat Sector Conference heard.
“The red meat sector is no stranger to change,” said one of the sector’s 1980s rebels Craig Hickson of Progressive Meats, opening the session on disruption.
“It’s a biological process with all the inherent delays,” he explained.
“We compete to buy and sell so we face [competition] on two fronts and they don’t work together. We’ve got distance between ourselves and the market with those inherent delays. There are changes in demand and supply.
“We disassemble and make things more complex, we don’t pull things together. So, one whole carcase comes in and goes out in many parts and forms.
“Throw in foreign exchange – with that nobody knows where that’s going, including my banker.
“It’s a perishable product so you’ve got an urgency in terms of dealing with it. We operate in a regulated market and then, the biggest of it all, throw in weather across the top of that – the core of our comparative advantage and also our challenge. So, is it any wonder that our industry is characterised by flux, which of course is another word for change?” he asked.
The challenges it brings are also of course opportunities, said Hickson.
“All of the companies that are currently involved, without exception, have made substantive change, disruptive change in many cases, in the course of their survival to be here today.
Hickson sees very exciting prospects going forward.
“We’re able to move a little further away from just being concerned about production characteristics at home to eating quality offshore. A big part of this, of course, is productivity improvements where we can look to satisfy two conflicting interests: one is to contain or reduce the costs of production and to improve income and earnings for our people as part of our country.
“Productivity is the only way I know to improve that prospect,” he said, segueing neatly into the first speaker.
One of the biggest changes ahead for the sector is what needs to be done in climate change. The Productivity Commission is working on the best route forward for New Zealand’s transition to a low emissions economy, while continuing to grow incomes and well-being of New Zealanders, said chair of the New Zealand Productivity Commission Murray Sherwin.
He covered the ground ahead of the Zero Carbon Bill which will probably see agriculture being brought into a revamped Emissions Trading Scheme, which will involve a lot of work. An Inquiry has already been undertaken, including different scenarios for the transition to a low carbon economy presented in extensive economic modelling by Vivid Consulting, Motu Economic and Public Policy Research. A draft report has been circulated for submissions, which have since been reviewed and the final report is being finalised. This is expected at the end of the month.
He thinks industries are starting to pay attention. A revamped Emissions Trading Scheme will play a part in the transition, with Sherwin predicting an emissions price in the region of $50-60 per tonne of carbon dioxide produced.
“Innovation is your friend,” Sherwin told delegates, without which emissions reduction will be too expensive. Efficiency is coming through in the form of electric vehicles, wind and solar and the promise of the methane vaccine for ruminant livestock, carbon capture and storage options and also hydrogen vehicles, he noted.
“New forests will also play a part, buying us 30-40 years,” he said.
In addition, the Commission has recommended two different treatments for the short-lived gas methane and the longer-lived carbon dioxide and nitrous oxide gases.
“Farmers have to think very hard about how they will use nitrogenous fertilisers in the future,” he predicted.
Sherwin flagged two more NZPC inquiries will begin later this year, the first on technological change, disruption and the future of work and the second on local government funding and financing.
What will be really important for the sector, said Hickson in his closing thoughts, is stable policy to enable farmers and processors to be able to plan the way forward, alongside the right level of pricing for emissions to enable behaviour change, working alongside regenerative agriculture and carbon sequestration.
“There is a role here for B+LNZ to have the tools to measure these emissions on an on-farm basis,” he said. “If we do it right on farm then the sum of the parts will take us forward. The point of obligation needs to be sitting with those who can actually make a difference.”
Riding the wave of change
Delegates also got an insight into the exponential wave of change being enabled by new technologies from Missing Link Consultants chief executive Kaila Colbin.
She compared the traditional linear model of growth along a single line that saw 30 times the growth that “takes you right out of the door” to the exponential doubling steps enabled by modern high-tech technologies – 30 times the growth “takes you right around the world,” she said.
Her insights are that “it’s not about the transistors” or “just about computing”, the technologies are converging, so add biotechnology to 3D printing, for example, and everything accelerates faster. In addition, a new technology, CLIP, has just solved every problem of 3D printing, making it 25-100 times faster.
According to Colbin, the serious downsides to the rate of change are that technology increases unemployment, increases inequality, cyber-risk, algorithmic bias and there is an undermining of trust in civil society.
“However, the technologies are also heralding a future of abundance,” she said pointing to the fact that 2017 saw the smallest share of the global population that was hungry and that it’s now cheaper to build and operate new than maintain the existing.
“You cannot now use the past as a means of predicting the future,” she says.
In agriculture, there are two disruptors: automation, such as the robotic boning technologies employed in the meat processing plants and on-farm drones for checking herds and flocks; and orthogonal disruption. An example she gave of the latter was LED lighting which brought the price of running it down by 90 percent and doubled the lifespan. Because it is now so cheap, it made indoor farming economically feasible.
Niches can now be targeted by bioengineered products, such as meat. She showed a chart from work by Brent Ryan which showed meat prices improving linearly and gradually over time. With bioengineered meats such as Impossible Foods, growth is explosive and costs have been plummeting as scale of production has increased.
“Alternative proteins are ages and ages away from producing a steak,” she said. “We have a choice to embrace the products and produce cultured meats or go hard out in the other direction where you have to live and breathe the premium value story.
‘I think that’s where the future lies and I’m excited to see where it leads.”
Blockchain for real-time traceability
One of the new technologies that might be used by the red meat sector to revolutionise the supply chains is blockchain. Its elusive properties were explained by IBM-certified Blockchain expert, Mahyar Osanlouy, a research engineer with the University of Auckland’s Bioengineering Institute.
He explained blockchain is not a software programme, and does not relate solely to the new cyber currency bitcoin, it’s a whole tamper-proof framework that is updated and validated in real time with each participant.
What it offers the red meat sector is secure storage of information and tracking of products, including proving origin and improving product handling, right through to the supermarket shelf, he explained.
He referred to IBM’s definition which says: “Blockchain … enables equal visibility of activities and reveals where an asset is at any point in time, who owns it and what condition it’s in.”
Osanlouy told delegates blockchain enables transparency and immutability, is cryptologically secure, is decentralised so anyone at any part of the chain, anywhere around the world can upload information to the database at any time, the data has integrity; is efficient and reduces costs. No piece of inventory can exist in several places at the same time.
“Basically, nothing needs to be manual. Once something has been entered, it is verified in the system, then everything is automated and it turns up in their account.”
The platform can also be used in other ways. Retailers can focus on engaging their customers at point-of-sale, for example, by showing them the genuine provenance of the products they are considering to buy via a video that is played to them or display nutritional information about the food, he said.
“It’s changing the consumer and market landscape,” said Osanlouy, adding retailers and other companies in Australia, the US, UK and EU countries are already using the technology.
Looking at the current meat supply chain, he could see that information was fragmented across multiple data sources from farm to consumer.
“Blockchain could help close the gaps in the system and help to improve transparency,” he said, adding it can be implemented over a value chain and over time.
In his session summary, Hickson noted blockchain accounts for traceability but will still require systems for individual items like cuts.
“There won’t be much of a point if you track it all and get to the end and still can’t identify the thing you want to be identified through the system. But, the provision of verification for origin, the sharing of information relatively easily and visibility to a lot of people including consumers, will be useful,” he thought, adding the sector could also benefit from the platform being tamper-proof and secure. “In addition, Decentralised means that it can be resurrected if one part goes down.
“We’ve seen a lot of change, it’s clear to me we’re going to see a whole lot more,” predicted Hickson.