Monday, February 24, 2014

Financial Disruption Opportunities In Meatonomics

The Commonwealth Club presented one of its awesome Climate One shows today on meat.  The author of Meatonomics and the head of the California Cattlemen's Association discussed the meat industry's effects on our climate.  The science behind the contribution of livestock to global warming has been contentious ever since the UN FAO's 2006 report "Livestock's Long Shadow."  The existence of a baseline of methane production from livestock is more important to the public than the amount of production.  This invites regulation, which in turn opens the possibility of entrepreneurial disruption.

The livestock industry has tried to criminalize whistleblowing exposures of its dirtier practices by lobbying for ag-gag laws.  When these laws succeed, our democracy is poorer for the lack of informed consent in what we consume.  The Pew Commission on Industrial Farm Animal Production notes that the concentration of food processing in the hands of a few large companies creates unique food supply stresses that are a departure from much of American history.  This evolution of the livestock industry invites entrepreneurial disruption from food producers who transparently display their livestock processing.

Organically raised meat is fashionable in places like the San Francisco Bay Area.  This says little about its advantages in profitability or even sustainability.  Like anything else dependent on cold chain logistics, the financial viability of organically raised meat may vary by geography and the cost of energy.  The American Grassfed Association won't want to hear the Meatonomics evidence that grassfed cattle contribute measurably more methane to the atmosphere than cattle that are corn-fed in commercial breeding programs.  This implies that innovations to capture methane and other greenhouse gases from cattle production, and convert them into energy that brings ranches close to net-zero energy use, will find a ready market in the organic sector.  The rural land experts at the American Society of Farm Managers and Rural Appraisers (ASFMRA) have a large body of knowledge for types of land suited for agricultural production.  Food entrepreneurs don't have to reinvent the wheel.  The USDA-funded Agricultural Marketing Resource Center describes grants and data available to agribusiness entrepreneurs.  Anyone going whole hog (pun intended) into organic production should do their market research first.

Sometimes Uncle Sam helps out agricultural innovation in small ways.  The USDA's NRCS maintains an Environmental Quality Incentives Program (EQIP) that provides grants for producers' conservation projects.  A truly free market approach would eliminate federal crop insurance, price support programs, and insurance for floodplain habitation.  Those reforms would be much more appropriate targets for the livestock industry's lobbying than more ag-gag laws.  One area that probably will not see reform is the existence of commodity checkoff programs that fund sector-wide promotions.  Entrepreneurial producers of sustainable foods may as well use checkoffs to their advantage while they exist.

Meatonomics may not succeed in convincing Americans to reduce meat consumption, but cattle ranchers are amenable to arguments for more sustainable production.  This allows room for ag-tech entrepreneurs.  Understanding where to begin means knowing USDA's AWIC farm animal standards.  Launching disruption means mastering USDA's AFSIC organic production practices.  It takes more than a fortnight to connect the market data from the Economic Research Service and the National Agricultural Statistics Service but farmers and the American Farm Bureau Federation do it all the time.  Food technology startups are the new darlings in the VC sector's eyes.  They can attract funding if they disrupt the unsustainable practices of industrial farm animal production.