Disrupt or Be Disrupted: Agriculture’s Road to 2035 - by Dr. David Kohl

An agricultural producer who coordinated an event for his team, with invitations extended to selected peers, asked a challenging question during a session I was conducting: What will be the major disruptor that shapes the agricultural industry between now and 2035? Many of those in attendance were members of the next generation who will be taking the reins from existing owners and management teams.

As the days grow longer and summertime sets in, let us take time to renew and reflect on the disruptors and trends that may impact not only the agricultural industry, but also our individual businesses, families, and personal lives.

Urbanization of Global Population

A major disruptor over the next decade will be the global trend toward urbanization. For example, in the 1980s, less than 20 percent of China's population lived in urban areas; today, that figure is approximately two-thirds. In the U.S., the urban population has increased from 73 percent to 84 percent over the same period.

Urbanization will likely result in lower population growth, particularly in developed countries. The rise of the urban, technology-oriented introvert, coupled with a widening disconnect from agriculture and rural America, could influence political priorities and government support programs that shape the industry.

However, this trend could abate or possibly reverse if a major black swan event were to threaten security and social harmony, resulting in a repopulation of rural areas.

Proactive Health 

The next decade will see precision and innovative agriculture intersect with precision and customized health, accelerated by AI (artificial intelligence). Healthcare costs are among the largest line items in federal and state budgets, as well as in household budgets. As a result, economic incentives will increasingly be offered to individuals who take ownership of their health.

Very soon, individuals may be able to customize exercise, lifestyle, and nutrition programs using AI, monitored by health specialists. The consumer of the future will seek agricultural products that provide a balance of protein, fiber, hydration, and emotional well-being. Expect the next decade to be an era of peak protein as well as peak calories, with increased use of supplements and functional foods over ultra-processed products.

The next health tsunami, a wave of both physical and mental health challenges, is being driven by excessive screen time, processed foods, lack of exercise, and limited personal connectivity. The traditional consumer's demands of great taste and affordability will evolve into a focus on great taste, affordability, and health. The agricultural industry must align with both domestic and global market trends. Businesses that combine taste, nutrition, affordability, environmental sustainability, and customized solutions delivered through a relationship-based customer experience  will be better positioned to generate profitable margins  than those relying on a commodity-based transaction model.

Just around the corner will be a greater emphasis on food intensity, nutrition, and consumers' relationships with the food of the future. Recent discussions with scientists involved in the development of GLP-1 medications provided a glimpse into this rapidly changing marketplace. GLP-1 medications are now used by an estimated 10 percent to 15 percent of American adults, and the recent introduction of oral pill versions is expected to expand usage significantly, possibly up to 50 percent of American adults. Of course, as with any innovation, there will be unintended consequences, including concerns about muscle loss and other potential negative side effects.

To address this challenge, supplements designed to enhance protein absorption based on an individual's genetic makeup may help direct protein utilization toward muscle development and maintenance. This is particularly important for individuals over 60 who desire an active lifestyle in their later years. The bottom line is that these developments could increase demand for agricultural commodities such as beef, dairy, pork, and other livestock products that provide dense sources of protein. These same forward-thinking scientists also suggest that consumers who prefer plant-based diets will be able to meet their protein requirements through customized nutrition programs utilizing plant-based foods.

The trends and disruptors outlined above bode well for businesses that are close to the customer and provide transparency in their products and services. Ultimately, transparency fosters trust, and trust will remain a key competitive advantage in the marketplace of the future.

Regenerative Agriculture 

Holistic agricultural practices with a focus on soil and water health will only accelerate in the future. Healthy soil and water lead to healthy plants, animals, people, and environments.

Some argue that the term regenerative is overused and has become a buzzword. However, producers who are deliberately planning, executing, and monitoring regenerative practices are experiencing both financial benefits and greater personal fulfillment.

A notable trend among young and beginning farmers and ranchers is a greater acceptance of innovation and technology that enhances both business performance and quality of life while helping them achieve a broader sense of purpose.

 New World Order

The next 10 years will not resemble your parents' or grandparents' global landscape. Historically, the U.S. was the dominant global player and provided security for many nations. Moving forward, a new global order is emerging, characterized by much greater competition from the Global South.

This shift is being driven in part by China's strategic investment initiative, which has directed approximately $1.3 trillion into more than 70 countries to diversify food, fiber, and fuel sources, not only for China but also for the Asian Rim, which represents roughly 40 percent of the world's population and continues to experience rising standards of living.

As many as 40 additional countries have expressed interest in joining this alliance, with an increasing number of trade agreements being reached outside the influence of the U.S. More intense competition can be expected, which is particularly important for the agricultural industry, where approximately 20 percent of net farm income is generated through export markets.

Natural Resource and Energy

Just-in-time management, popularized during the era described by Thomas Friedman in The World Is Flat, is now being replaced by a just-in-case mindset in a fragmented global economy. The coming water wars, compounded by the growing demands of AI for water and energy, will have significant impacts on both business and household finances.

The current oil and energy landscape is much different from that of the 1970s. Today's conflicts have destroyed critical infrastructure and united various faction groups in Iran, creating significant tail risk. Oil, which influences approximately 80 percent of farm expenses and 60 percent of the general economy, creates substantial inflationary pressure when supply is disrupted and distribution channels are challenged.

Add to this disruptions in fertilizer production and distribution, which could reduce global food production by 3 percent to 5 percent. The water wars, globally, nationally, regionally, and locally, may be just around the corner and can emerge without warning. Agriculture, as a major user of water, will increasingly compete with AI-related industries and the general public for a limited supply.

A period of stagflation, a stagnant economy combined with high inflation and potentially above-average unemployment, similar to the 1970s, could be in store. Also, expect higher long-term interest rates as concerns about the security and stability of bond and Treasury markets emerge in both the United States and around the world.

The agricultural industry and individual businesses must strategically plan for these disruptors with a focus on the following:

• Alignment with future trends in food, fiber, and fuel needs for both domestic and global consumers. Agriculture is the answer to security, health, and lifestyle solutions, and being close to the customer will be a winning business model. 
   
• Special emphasis on natural resource stewardship and production practices that align with consumer and societal expectations. 
   
• Scenario planning for business and industry operations that extends beyond a focus on just-in-time efficiency toward a just-in-case effectiveness mindset. 

Successful businesses of the future will be:

• Efficient in logistics, inputs, outputs, and operating expenses. 
   
• Marketing-oriented and close to the customer. 
   
• Capital-efficient with a productive and engaged human culture. 

However, even the most well-positioned business can be undone from the inside out.  At all costs, avoid the bad ABCs of business culture:

• Arrogance
• Bureaucracy
• Complacency

These three attributes have derailed more businesses than any economic cycle, technological disruption, or market challenge.