The Van Trump Report

“Creative Destruction”, by Carter William

Each week our good friend and business partner Carter Williams will be sharing some of his thoughts on agriculture below are a few recent highlights from his weekly report called “Creative Destruction”, written by Carter Williams, CEO at iSelect Fund (@jcarterwil on x/twitter)

What I learned this week…

  1. Crop yield and nutrition developments have been negatively correlated for 50+ years. Who has the crop modeling technology to create a positive correlation? It does require a training dataset similar to road data from 5M Teslas.
  2. While nutrition comes from soil health, the bulk of experts believe there are too many exogenous variables to control the variance needed to achieve better nutrition in food. 
  3. Carbon programs in grasslands are more turn-key than row crops, with less outcome variability. Six Sigma and Poka-yoke will turn soil microbes/health from a fad to innovation.
  4. I can’t determine whether nutrition density at scale comes best from crop genetics, soil, or fortification.
  5. Microsoft has to offset more carbon than Exxon. Microsoft and the other AI firms share a common purpose with farmers: improving soil health.
  6. The bulk of US ag production is from 85k farms, which will go to 60K over the next 20 years, each getting bigger. And reducing the need for many service providers in agriculture. 
  7. The rest of the world eats less beef but seeks quality and pays a premium when it does. Should innovative emerging grassland/sustainable beef companies target those markets with quality and differentiated products to get a premium price? A market where plant-based and premium meat coexist but CAFO declines?
  8. The fresh produce industry in the US has steered Americans to prefer fresh and devalue frozen or otherwise processed. Individual quick freezing at the farm, though, may deliver more stable nutrients into the supply chain.
  9. Our food system is a gateway drug to healthcare. Farmers are giving up value to doctors. Farmers need to repackage their offerings in new business models focused on nutrition density. Take market share from healthcare.
  10. If regenerative agriculture = nutrient density and nutrient density = health, then regenerative agriculture = health (h/t Raviv Turner)
  11. No human cares more about soil health than farmers and ranchers. None.

Interesting Thoughtby Carter Williams

“Mini Mills”

In the early 1980s, Japanese steel manufacturers put large US steel mills out of business, driving down costs despite long supply chains. In the late 1980s, Mini-Mills emerged in the US in part because they could more tightly time production line demand. The mini-mills were more local than Japan shipping routes, with less inventory and better quality feedback loops.

Will something similar happen in Agriculture?

Scale matters in commodity agriculture. Transportation and milling are significant costs for ingredients. The location of mills, rail/truck routes, and the location of demand matter. GMO/Non-GMO, protein density, and other attributes further confuse the supply chain flow. Grain can be stored, processed, and unprocessed. Supply comes in one big load in the fall. Offtake occurs throughout the year. Rather than Just in Time, it is more like Anything but in Time.

If CPGs start innovating nutrient-dense food, they also have to deal with demand forecasts. Will people like this new thing? How much? If the input is a custom SKU, it’s hard to “Mix” from commodity. The supply chain then becomes a critical part of the cost/product decision. No one in CPG land has really had to worry about this because they mainly source commodity inputs.

90% of new products introduced by CPGs fail within one year of introduction. If Ozempic and other Anti-Obesity Medications are used more, experience suggests a 25% reduction in calorie demand and a 45% reduction in processed food demand. 90% of CPG product development talent is focused on value engineering, not nutrition optimization. Consumer pressure on climate has CPGs focused on farm carbon, not nutrition. If CPGs see a 45% reduction in demand in the future, worry that 90% of new products will fail, and have to optimize for climate, they have a lot to worry about all at once.

“How did you go bankrupt?” Bill asked.
“Two ways,” Mike said. “Gradually and then suddenly.”
                        – by Ernest Hemingway, The Sun Also Rises

It is a longer story, but the answer will be that CPGs need to concentrate on optimizing nutrient density. Nutrient density improves taste and cost. Its positive externality is carbon reduction. This means they need to source more novel soy, wheat, and/or corn. With more protein and/or micronutrients. In volumes of different sizes, in supply chains of different sorts. It means farmers need incentives to improve soil health because nutrient density is part plant genetics and part soil health. It means that CPGs need processors with the flexibility to mill to different demands that are a bit fickle. If you are a student of Lean and Six Sigma, continuous production flow, and cellular manufacturing, you have seen this episode before. And the answer is mini-mills. Big Steel never saw this coming, but firms like White River Soy do. And Edacious, a nutrient density assay company, provides the other critical technology needed to shift the supply chain to prioritize nutrient density.

I won’t complete the story today, but the “Tech Stack” to nutrient density and Food is Health includes:

  • Holganix – Soil Microbiome
  • Kula Bio – Nitrogen Fixation
  • Benson Hill – Genetics
  • White River Soy – Mini Mill
  • Edacious – Nutrient density optimization

But will it happen? You never know. So many ideas fall on the cutting room floor.

This reminds me that I still can’t get a good answer to whatever happened to that firm SpaceX from a 2004 article in Aviation Week. I recall us at Boeing talking about it, but we were focused elsewhere.

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