Agriculture and the Hungry/Thirsty/Needy Puzzle

Remarks by Hugh Grant, Chairman and Chief Executive Officer, Monsanto Company, At Washington University McDonnell Scholars Program on Energy and the Environment. St. Louis, MO, May 5, 2007

Thank you very much, Mark (Wrighton). So please enjoy your salads, and I will catch up with you in due course.

Let me begin by thanking Mark and the team here at Washington University for the invitation to talk with you today, and I have to tell you, as I look around this room, it reaffirms my belief that I went to university at the right time because the competition now is significantly higher than when it was when I was a student 400 years ago. So let me congratulate each of the McDonnell Scholars on your selection for participation in this, the inaugural Academy class, and I’d ask you to interrupt your salads briefly and stand and be recognized. Congratulations. I promise that’s the last interruption to your lunch.

When Monsanto got involved in this program, we decided to honor two individuals at the same time both the recipient of this award and Norman Borlaug, the pioneer of the Green Revolution. Norman received the Nobel Peace Prize for his work in 1970, and he’s now credited for saving the lives of about a billion people through the introduction of new varieties of wheat that yielded more in India. And I sincerely hope that this year’s inaugural class and future classes will have individuals in them that match the work that Norman Borlaug pioneered in the late 1960s and early 1970s. I particularly wanted to recognize Vickram Govindan, who is the first recipient of the Borlaug Award. So I look forward to years to come to reading great things about Vickram and his colleagues that started here in our wonderful city of St. Louis.

So why is Monsanto here? We’re an agricultural company that’s involved in four crops – corn, cotton, soy, and vegetables. It’s always nice to see a salad at the beginning of a meal. We’re involved in four crops, and we’re a global business. So we’re involved in agriculture globally, and we focus on yield. We focus on making more with less. In the last 10 years we’ve been developing biotechnology products that have information in the seed that helps the plant resist bugs, to allow the plants to look after themselves. And the interesting thing is that if the information is programmed in the seed, then you have a delivery mechanism that no matter where you are in the world. Farmers know seed. Farmers know what to do with seed.

So Monsanto’s an agricultural company, and then I think the next question is, “So what does agriculture have to do with energy and the environment?” – a big piece of your agenda over the next few days. Energy and the environment and the impact of energy production on the environment are two of the most significant challenges that our world faces today. And if you listen to the debate, particularly the debate here in the U.S. at the moment, there’s a real conversation emerging around “food or fuel” – if you produce fuel from crops, does it mean that you lose the ability to feed people? So I want to talk a little bit about energy and the environment but also food versus fuel. I would argue that it isn’t really an either/or. It’s a much broader discussion because it just isn’t food or fuel; it’s hunger, it’s security, it’s safety, and it’s mobility.

So let me start by asking if there are any economists here at lunch? If the economists could raise their hand? So we have five honest economists. Let’s begin this discussion from a classical economist point of view and look at demand.

Demand is escalating and resources are finite. If you look at demand today, and if you look at the resources, soil and the availability of soil is shrinking, water and the availability of water is shrinking, and at the same time, if you look at the baby boomers, and there are a few baby boomers in this room, the boomers in their lifetime have seen a huge change. Fifty years ago, the early years for the boomers, we fed half as many people with 20 percent more soil. So there was half as many people around when the boomers started, and we were feeding them with about 20 percent more soil than today. So resources are shrinking as demand is increasing.

This is the quiz part. The lunchtime quiz is a thousand people in the U.S. equals a thousand cars, more or less. It’s almost one for one. A thousand people, a thousand automobiles. In India a thousand people, how many cars? Eleven. In China, a thousand people, nine cars. So energy demand is up and rising, and if we met here in a few years time, my guess there will be a few more automobiles in China.

If you look at it from a protein point of view, a few years ago there was 20 million acres of soybeans in Brazil. Today, there are 50 million. And the difference between 20 million and 50 million acres of soybeans is China and the consumption of protein.

So by the middle of the century, which isn’t too far away, the forecasts today are that world population will grow by 50 percent, but food demands will double. So population will grow by 50 percent towards the middle of the century, but food demand will double.

If you look at it from a fuel or a bio-fuel point of view, in the last five years, global bio-fuel has grown from 950 million gallons of ethanol five years ago to 13 and a half billion gallons in the last five years. For bio-diesel, 250 million gallons five years ago, now growing to 1.6 billion gallons. And it’s estimated that worldwide energy demand will grow by 50 percent by 2030. But the interesting thing in that timeframe is the expectation that China’s and India’s demand will pass that of the other major developed economies.

So two things are happening simultaneously in the next 30 to 50 years. Food demand doubles, energy demand soars, and the demand for that energy increases in China and in India. So that’s the frame of the argument.

Agriculture has a significant part to play in that puzzle. Agriculture has a significant contribution to make on how you look at food and how you look at bio-fuel production. The three-word summary for lunch, the three-word summary in this conundrum is hungry/thirsty/needy. Within that triangle is the question hungry, because agriculture has every to do with food security; thirsty, because agriculture consumes 70 percent of the water on the planet – 70 percent goes to agriculture; and needy, because of this energy drive and the reality that agriculture can play some part in satisfying the energy demand. Agriculture is core to these issues.

So let me just look at “hungry/thirsty/needy” and then bring this together. Food security is the political driver because when people have enough to eat, everything else changes. Of the six and a half billion people on the planet today, there’s 900 million who go to bed hungry. By the time that you in this inaugural class of McDonnell Scholars are in your 40s, there’ll be another two billion people on the planet, two billion more people to feed. Land is finite and water is finite and we need to look at a better way of doing that.

What Norman Borlaug pioneered was yielding more with the same inputs, yielding more with the same – and that was the heart of the Green Revolution. I was in Malawi earlier this year, and you can see there the beginnings of a revolution in Africa, a revolution of yielding more with the same. But by the time that the McDonnell students are in your 40s, we will be well into the gene revolution and the gene revolution will yield more with less because the inputs will decrease and we’ll unlock the genetic capacity of the plant. So from the food security point of view a big piece is how do we make more go further or how do we yield more with less.

The big issue in environmental security is going to be water. The geopolitical arguments on food will be dwarfed by the geopolitical arguments on water. And at Monsanto we’re working on plants that sip instead of gulp. So the first opportunity in developing drought tolerance, and there are other companies working on this, but yielding more with less water is a key to environmental security.

A second part of environmental security is pesticide reduction. In the last 10 years we’ve seen 172,000 tons of pesticides eliminated from the environment. If we think to the future, we need to continue to decrease the amounts of inputs in agriculture production.

So let me finish on energy security. We’ve talked about food security, a quick touch on environmental security, and now on energy security. At $3 dollars a gallon in the U.S., people believe that there’s an energy crisis. We haven’t touched the energy crisis yet. It isn’t about the $3 dollar gasoline. It’s about enough energy, period.

Agriculture has a part to play in the production of bio-fuels in the next 10 to 15 years, and bio-ethanol is competitive when crude oil rises above $30 dollars a barrel. So I can only see improvement in the efficiency in the production of bio-ethanol. It isn’t the whole answer, it’s a contributory factor in the future.

And there are varying studies in this, but with bio-fuels there’s also a way of simultaneously sequestering carbon dioxide. Depending on whose studies you read, there’s a 15 to 25 percent reduction in greenhouse gas emission in the production of bio-ethanol versus the same calorific value of gasoline. It strikes me that somewhere in the middle there’s an opportunity to yield more by consuming less.

So the answer isn’t more acres. We’re aren’t going to be plowing down strip malls and pulling down skyscrapers to plant corn. The answer isn’t more acres; the answer is intensification and yielding more on the acres that we have worldwide, and doing all that inside a single seed. So I’m an optimist, and as a Scot, optimism is a rare commodity. I believe that these technologies have breathtaking opportunities. There is a way of doing a lot more with a lot less, and there’s a way of doing that inside a single seed.

If you look back 50 years, long before the ceiling here was renovated, the yields of corn in the U.S. were about 75 bushels an acre. Today we average about 150 bushels an acre for corn. And the belief is that, in the next 20 or 30 years, we’ll achieve 300 bushels an acre, and that’s extremely doable. So we’ll see double the improvement in half the time. But technology, the “gee whiz” essence of science, isn’t going to be enough.

I’d like to conclude with the notion of partnership. It’s why I’m so enthusiastic about this first McDonnell’s Scholars Class being from across companies, governments, and NGOs. Regardless of whether you lead a company, lead a government or lead an NGO, the skills for that future development and the navigational capability of working across those three platforms will become more important than it’s ever been.

And that’s because companies, governments or NGOs alone will not solve this problem. It’s the collaboration and the partnership that will unlock that opportunity. Already there are skeptics that talk about bio-fuels as a promise that will never yield, and I can tell you from my perspective you have to step over the skepticism and seize this unique opportunity in this unique point in time.

I look forward in the future to reading about some of the scholars here and their developing skills in navigating through this new landscape in the future. So I wish you very well in your conversations on environment and energy and how you look at a hungry/thirsty/needy planet in the future.