Q&A: How Colombia and the World Can Improve Food Security and Boost Agribusiness
One of the expected economic dividends of the peace process in Colombia is agribusiness. Once the largest guerrilla group in the nation officially lays down its arms, more rural areas of the nation will open up and more food can be produced. Given the climate, soil conditions, and natural resources that exist in Colombia, this could create vast new opportunities to grow and export more food.
Many challenges exist to turn this concept into reality, however. As with the other emerging markets — and especially the much less developed world — agricultural production and food security has a long way to go in Colombia.
To find out more about the hurdles that both Colombia and the whole world face, Finance Colombia recently sat down with Shay Eliaz, principal at Monitor Deloitte. He was in Medellín earlier this summer at the World Economic Forum on Latin America, and shared his perspectives on the global food situation.
Finance Colombia: What exactly is Monitor Deloitte?
Shay Eliaz: Monitor was one of the original strategy houses, similar to McKinsey and BCG. It was an independent company founded by Michael Porter, so when people talk about “Porter’s Five Forces” and some of the basic strategic frameworks that people use today, that was Monitor. About three, four years ago, Deloitte bought them and combined its strategy practice with that of Monitor to create Monitor Deloitte, which is now Deloitte’s strategy practice.
Finance Colombia: It’s interesting to come to realize that your particular focus, especially with the World Economic Forum, is based on food security and the role of agriculture. What is the work that you’ve done, particularly as it relates the New Vision for Agriculture?
Shay Eliaz: We are the strategic advisor, and this year we delivered two major deliverables. One of them was basically a handbook for countries that are looking to create multi-stakeholder partnerships. These partnerships are really, really important in terms of helping solve problems with complexity and scale that are very hard for any individual government — or an individual company or NGO — to solve by themselves. We believe that multi-stakeholder partnerships will allow you to actually solve those in a much better way.
The other reason we believe in such partnerships is because most people think about the food-value chain in a very, very simple, linear way. People think that the starting point is inputs — fertilizers, seeds, chemicals — and then it moves on to farmers then food producers then retailers and then consumers. But it is a little bit confusing and a misnomer to think about that way.
So what we have done is we’ve helped to map what that ecosystem actually looks like, and it is an ecosystem where all the parties depend on each other. It does include input companies, farmers, food producers, retailers — but there’s actually a big role for finance to play. Nothing happens without access to finance. Nothing happens in that ecosystem without insurance. Nothing happens without telecom. Nothing happens without logistics and transportation. There are so many other critical elements to make food that are not automatically counted because they’re not directly touching the food production itself.
Finance Colombia: The first thing that popped into my head when you started describing that was the important role of the commodities futures market and agriculture futures. It is often demonized as just “speculators,” but the farmers need that futures market. It allows them to plan. It allows them to not just securitize their crops, but to borrow because we have a predictable asset into the future.
Shay Eliaz: Yeah. I think you’re bringing up a great point. Aspects of agriculture have been demonized forever. I mean, part of it is the trading, and obviously that’s part of it. Part of it is around the inputs, and people say, “Well, why do we need, you know, chemicals and fertilizers? Why do we need chemicals to spray on plants?”
Finance Colombia: Well, look at how Monsanto was pretty much treated as the devil by the press.
Shay Eliaz: Absolutely. “Why do we need GMOs?” Well, frankly, the people asking those questions are people that live in the first world. When you think about the fact that there are almost 800 million people who still go to bed hungry each night, they can’t afford to ask the question, “did you spray this to increase the yield or did you not?” Or “shouldn’t we all eat organic?” Well, if you try to eat organic, you can’t feed the planet.
So let’s start with that premise. If you understand that premise, you understand that one of the biggest leaps that we’ve had in productivity and in yield has been due to the introduction of those GMOs. And of the chemicals that we use, of understanding fertilizers and soil health, understanding plant health, understanding all of those aspects. Then you begin to understand that that’s a vital part of what’s needed. Its similar with trading and understanding commodities and understanding pricing and futures. All of those are vital aspects of making a market that works.
So I agree with you. Unfortunately, there are aspects of this market that tend to be demonized without really understanding why they’re important, why they’re actually critical to food security on this planet — which is something that’s becoming even worse because population is growing. There’s an increasing trend toward urbanization, and that means there’s even more pressure on the food system because habits change and you eat more as you move into the middle class in urban centers.
Those needs are not going away. They’re actually increasing, and we need to be able to help farmers, and help the system, work out some of those kinks. It’s a critical part of what the New Vision for Agriculture is working on.
Finance Colombia: What are some of the political challenges?
Shay Eliaz: Part of the problem is that it’s very hard to make long-term decisions when there is incredible uncertainty about what the future holds. In Colombia, for example, as the peace process progresses, the government needs to make clear commitments about its own agricultural priorities. Should you focus on soy, for example? I would say maybe you shouldn’t. Why would you want to compete against the likes of Brazil and Argentina? What would be your odds of actually winning that game?
So there is a tremendous role for the government to play. That’s not necessarily in being a dictator and saying, “this is exactly what you guys are going to do.” But it can be very transparent and clear about its priorities. That will help food producers and food security.
Finance Colombia: In Colombia, the government has its 4G highway project — a huge modernization effort. When we talk about agriculture and we talk about food security, I think about Colombia and I think about how important the transportation infrastructure is. One of the main complaints here from the business sector is that its common to say that it costs more to ship a container from Bogotá to the Atlantic coast than from the Atlantic coast to China. These factors, on the surface, look unrelated to food security. But looking deeper down, they seem vital.
Shay Eliaz: On a macro view, we’re talking about the challenge to increase food production and productivity and yield to address, by 2050, a global population of 9.5 billion, right? The estimates — and they’re fairly conservative — are that we will need to increase food production by about 60%. Juxtapose that with the fact that about 40% of the food that we actually make and harvest today gets wasted.
The related hard infrastructure issue is exactly what you mentioned. You have to be making sure that you have proper roads, making sure that you have proper tunnels and bridges that you can access, making sure that the ports allow you to get goods in and out fairly quickly. Storage is a huge piece, especially cold storage, which is needed to ensure that the crops and the harvest doesn’t spoil.
All of that infrastructure is an absolutely critical piece to ensure that, first of all, you’re able to export, and you’re able to export goods that would actually look good a week or two weeks later when they hit the U.S. But as importantly is to ensure that the stuff that we spent an incredible amount of resources on — both “sweat equity” as well as finance — don’t get wasted. We’re talking about hundreds of billions of dollars every year that just get thrown away. Stuff that you spent a tremendous amount of calories trying to put together, now you’re throwing it away.
So, a big part of the solution is not just to increase productivity but to waste less. That would be a huge bump in what we are able to do in order to solve a pretty large problem.
Finance Colombia: But in the emerging world, like in Colombia, productivity gains are also need, correct?
Shay Eliaz: If you were able to apply some of what mature markets do today in places like Colombia, you could increase yield by five to ten times. So it’s a huge bump just to take basic practices, basic technology that exists today, and improve yield and group productivity.
I would just make one final note because I think it’s interesting and it’s beginning to emerge as a topic of conversation. Forever the conversation was about yield, but finally the conversation is also shifting to nutrition. How do we ensure that we not only increase output but also actually produce food that helps people have better and healthier lives? There’s a tremendous amount of science now about what people need and what people actually should consume — sometimes up to an individual’s needs.
Finance Colombia: And how that’s even affecting mental health.
Shay Eliaz: Exactly. All of that science is now coming to the forefront, thinking about how we start to develop seeds, for example. So, if you need more potassium in your banana than I do, how do we customize a banana specifically for you so that it reacts well with what you need and provides you with the nourishment you need?
So it is a very exciting time. It feels a little bit like science fiction at times, but to me it’s a great place to go. We are now talking not just about how we increase yield, but how we actually improve the quality of life by having better food.
Finance Colombia: So that is part of the complexity. How to balance the push for better food with the need for simply more food? And the different challenges that exist in different parts of the world?
Shay Eliaz: I often find myself explaining this to people within my firm, or my family, who live comfortably in New York and have never been hungry. “Guys, you don’t understand how the other half lives and what they’re concerned about — and why this whole discussion of local or organic is a completely distorted conversation when so many other people are dying of hunger.” Even within the U.S., there are what we call “food deserts” where you basically can’t get fresh fruit and vegetables. All you’re resigned to eat is McDonalds for breakfast, lunch, and dinner. That’s not tenable, and frankly it’s not sustainable.
Because the market is somehow distorted, it’s actually easier for you to get a full meal at McDonalds than it is for you to buy fresh fruit and vegetables. If you look at calories per dollar you spend and how you feel at the end of the meal, it’s much easier for you to be satisfied after a McDonalds meal. So, part of the challenge is that the way things are priced also make it very hard to make the right decision.
It has a tremendous amount of impact. So when we have access to better food, when you have access to food at prices you can afford that’s very, very important. We’ve all seen what happens when food prices go up, and what shocks it creates in an economy, both in terms of economic output, in terms of political stability. A lot of people talk about the Arab spring, and obviously it had a lot to do with the types of governments that were there. But it also had a tremendous amount to do with a huge spike in food prices.
Finance Colombia: Wasn’t it a fruit vendor that started it all?
Shay Eliaz: It was. Exactly. For the poor, the percentage of income that can go towards food is really, really high. It could be 60% to 80% of their income goes towards food. And again, it means that you’re starting to make trade-offs and choices around what you spend your money on. When there’s a spike in food prices, well all of a sudden you don’t have a choice. A lot of the other things go away. You can’t do certain things that you want for your family, and you need to start to ask, “am I paying for electricity or am I paying for food now?
Those are horrible choices to make. But that’s why again, the pricing of food and having the available food where it needs to be consumed, at manageable prices, is a very important part of the conversation.
This interview has been condensed and edited from its original version for clarity and space.