Is every animal in the food chain unique and important?

Cattle Herd and Ranching on the Great PlainsMatthew Stommes, Wells Fargo Sector Manager, Protein (Beef, Pork, Poultry)

I grew up on a farm in a very large family, and feeding 11 children was no small task for my parents. Every four months or so, my parents needed to replenish the meat freezer, and so my siblings and I would each sit on five-gallon buckets and watch as the local butcher slaughtered an old Holstein cow or a fattened steer in our farmyard. It was a normal way of life for us, and we recognized that’s where our beef, and our favorite burgers, came from.

In my current role as a protein sector manager within the Wells Fargo Food and Agribusiness Industry Advisors group, I’m re-living my childhood walking through meat processing facilities and touring animal farms. However, as a millennial, I’m also keenly aware that most millennials coming from non-farming backgrounds cannot relate to seeing animals slaughtered.

Today, for all generations, animal welfare is increasing in importance. In addition, across generations, our value for our pets is also increasing. According to a VIP Petcare study, an average $2,260 is spent annually by a cat or dog owner. The study also revealed that 68% of millennials have raised a pet in preparation for raising a child.

Number of U.S. Farm Operations

At the same time, there has been a 7.1% decrease in the number of farm operations in the U.S. over the last 10 years, and that trend will likely continue as consolidation continues in the Food and Agribusiness industry. And, competition across the industry is greater than ever, boosted by the Amazon/Whole Foods merger in 2017.

Food Spending Chart

So, you might ask why I raise seemingly unrelated trends in farming and pet ownership. Well, it’s because I believe that humans will continue to be drawn closer to animals and pets, and that this will carry over into the food chain. And, consumers will be willing to pay higher prices in order for farm animals to be treated a specific way.

As with anything, consumer demand drives the market, and always will, and consumers are demanding more humane animal treatment within the food chain. Antibiotic use in chicken production has decreased at a rapid rate. Egg-laying chickens are increasingly being raised in cage-free barns instead of cages. Sows are moving from gestation crates to open pens, and cattle are moving from feedlots to grass pastures.

Year-over-year, consumers are paying higher prices for animals to be treated in a specific way, bringing animal treatment more in line with the way humans are cared for. However, there is one big question being asked by consumers, “How do I know whether this animal was cared for and slaughtered in a humane manner before it was cooked for me to eat?”

How does a meat processing company actually prove where the meat came from given that there is no antibiotic, non-organic, or caged-animal residue in meat from legally slaughtered animals? While many believe that the honor system in conjunction with USDA regulations is enough proof for today’s consumers, many consumers want to know where each specific animal came from, thus bringing a new challenge to meat processors and animal farmers. Not only is there increasing demand for a specific meat production method, but also now for a specific life story for each animal.

China, meanwhile, has opened their borders for U.S. beef imports, and they require traceability for all beef revealing each step of the supply chain path. In my estimation, less than 10% of today’s cattle herd is traceable, thereby leaving 90% of our beef market unqualified for export to China. So, this presents a huge opportunity for our cattle industry, and incorporation of technology that can support traceability.

Going forward, not only will groups of cattle, chickens, and hogs require unique identification, but each individual animal will need to be tracked, and this will surely increase meat production costs. The Food and Agribusiness industry is beginning to see blockchain technology incorporated to solve the traceability challenges, and it could be the answer to tracking agriculture from production to consumer, or, from “farm to fork”. Recently, Walmart partnered with IBM to test blockchain technology in China1.

Blockchain technology should have a positive impact on food safety. It accommodates more rapid action on food safety issues, increases communication quality, and targets a smaller lot size than today’s standards. The technology could save lives lost to food contamination every year.

Already, some animal technology companies are beginning to see this revolution, and to take advantage of the current trends, recognizing it is a matter of “when”, not “if”, domestic and export consumers will demand meat traceability. Precision livestock farming is beginning to gain more traction through companies such as Advanced Animal Diagnostics. The technology provides real-time information on animal health, welfare, and productivity. So, the race has already begun, but it’s anyone’s guess as to the speed of the race, and who will be the winners and losers.

It was commonplace and easy for me to grow up knowing exactly where the hamburger on my plate came from. My family grew the grain, fed the animals, ordered the butcher, and picked up the meat from the processor after a specialized run was completed for our family’s steer. However, the vast majority of our U.S.-produced meat flows through complex supply chains and large facilities to provide meat safely and efficiently. But, for a generation that has information at their fingertips, standards of transparency are much higher, and most want to know where the animal that they are eating came from. They want to know specifically how it was raised and processed. At present, I believe there is a gap to be filled in giving consumers more of what they want, and agriculture technology companies are ramping up to provide it for them.

 

1. “The world’s biggest retailer wants to bring blockchains to the food business” — Joon Ian Wong;

 
Matthew StommesMatthew (Matt) Stommes is a vice president and sector manager within Wells Fargo’s Food and Agribusiness Industry Advisors group focusing on the protein sector specific to beef, pork, and poultry.

Matt joined Wells Fargo and the Industry Advisor group in 2016. Prior, he worked in Cargill’s U.S. Grain business as a production supervisor, managing an 8-million bushel capacity grain terminal from 2011 to 2016. Before that, he held the role of business analyst from 2010 to 2011. Matt worked for Park State Bank during his senior year in college and also interned in Wells Fargo’s Wealth Management business during the summer of 2008.

Matt grew up on a dairy farm in Eden Valley, Minnesota, as the oldest of 11 children, and today, his parents still milk approximately 60 cows on a 350-acre farm. Matt holds a bachelor of science in Business from the University of Minnesota’s Carlson School of Management in Minneapolis with majors in finance, risk management and insurance, and supply chain management. He also completed a minor in construction management.