The Changing Landscape of American Agriculture

Remarks by Cheryl Morley, Senior Vice President, Corporate Strategy, at the American Farm Bureau Federation Annual Meeting, Salt Lake City, Utah, Jan. 8, 2007

I am delighted to be here. So I thought that I would start by telling you who I am because you know what, business is all about people, right? Well, I wasn’t born on a farm. I’ve only been in agriculture 15 years and started my career in pharmaceuticals and consumer products. And 15 years ago when I told my friends I was going to work in agriculture, they said, “Are you nuts? What are you going to do?” And I said, “Well, maybe I am nuts, but I’m going to work in agriculture.” And what I can tell you is that was the smartest unknown decision I’ve ever made.

But I will also tell you that I represent probably 95 percent of the people out there 15 years ago who have no clue how their food is produced. And for us in U.S. agriculture, that’s a big problem. I will also tell you I’m a convert, and I’m out there every day telling people how their food is produced and encouraging our educational system from day one to teach our children the most basic part of their lives, which is food production and good health, and hopefully that will change the way people feel about agriculture and technology in the future. It is the most dynamic, interesting, challenging, frustrating and enormously rewarding industry in the world. I’m excited and proud to work in it.

I also get to work in a company that is 100 percent committed to agriculture. That’s Monsanto. Ten years ago we did a lot things. We made synthetic chemicals with pharmaceuticals, artificial sweeteners, but today, we do agriculture. That’s all we do. It’s the only industry that we operate in. We serve our consumers and our customers in our home state of Missouri, in our home country of the United States, and in many agricultural countries around the world. We provide seed, biotechnology traits, agricultural chemistry for the production of corn, soy, cotton, and canola, and we produce products for swine, dairy, and vegetables. That’s what we do. And I suggest that today in a very, very enormously challenging and changing world, it helps to be 100 percent focused on agriculture.

So, what do I do there besides tell people about agriculture? I have a great and exciting and challenging job at Monsanto. I spend a lot of my time looking at what’s happening whether it be commodity markets, competition, agriculture R&D, energy, environmental issues, global trade, and then I have to try to make some sense of it all and tell Monsanto and work with my other executives to decide what we should do for the future. So, I travel to almost every single agricultural market in the world. I’ve been around the globe. I’ve seen it. I’ve talked to farmers, consumers, and to the government policy makers.

And so today, I’d like to share a little bit about what I’m learning and what we see in this industry of ours and how it may impact you in the future. So if you’ll bear with me for a little while, we’ll take a little trip around the world and see what’s happening.

So, let’s look at global agricultural markets.

Population growth: 750 million more people in the next decade and mostly in developing world. I’ve been in Mumbai, India. There are 18 million people in Mumbai, India, in a space smaller than Manhattan. There are places all over the world just like that, and one of the things that’s a fact is that people need to eat and they like to eat, and somebody’s got to make sure that happens for them.

New economic growth in developing countries: A growing middle class. This is the group that’s driving commodity consumption and trade. Unprecedented demand for energy and primarily driving by increasing demand in countries like India and China. And, of course, the volatility of oil in the Middle East and other oil-producing countries. They say that the national bird in both China and India is the crane, the construction crane. I’ve seen it. I’ve seen it everywhere. It’s unbelievable. The amount of construction, housing and new businesses, is phenomenal. This energy demand will only increase.

Increasing supply demand issues associated with fresh water: This may be the most significant agricultural dilemma in the world. It not only affects us; it has affected every single country I traveled to.

Unpredictable and volatile weather patterns: Drought is an issue around the world. This is going to continue. In the developed world, it’s the aging population and their increasing emphasis on health.

So, these are just a few of the trends. They’re real. They’re here to stay, and some will impact us even greater in the future. So, what are some of the implications for all of us today?

The emerging markets have plentiful, cheap labor. The U.S. cannot compete with this labor pool. This is an ongoing economic disadvantage. I, like many who have traveled south to Brazil, have been amazed at Brazil’s arable land mass. There is tremendous land yet to be farmed; but unlike Brazil, agricultural land here is somewhat limited and environmental pressure, including water rights, is increasing. We have to be better productive stewards of the land.

A wealthy and aging population will continue to put demands on retailers for healthy foods. I tell you it’s a wealthy and aging population, but it has no clue about how their food in produced today, which means the timing pressures for innovation will be very, very difficult.

So 15 years ago when I started with Monsanto, I had the oils business and I talked about trans fats and the food industry told me, “You’re nuts. That’s not a problem here in the United States. That’s a problem in Europe.” But it takes a long time to develop a solution to a problem, and we are going to have to get faster and smarter about how we do it.

Alternative energy is a fact. It is not a big flirty trend. It’s here to stay. It’s global, and it will continue to put pressure on corn prices. So what are we going to do? What does that mean for all of you? So, I tell you think about technology, sustainability, productivity, relationships, and lots of change.

So first, we have to continue to lead in technology. This is not just true for agriculture. This is true for the U.S. as an economy. It is our ability that has kept us on the leading edge economically for many years, and it must continue to do that today. We are all creating an agriculture that is increasingly characterized by technology, and we will compete on this for many years to come. So, this has serious and challenging issues for intellectual property around the world. Not just for agriculture, but for many industries. The U.S. government, along with companies like Monsanto and the farming community, must continue to fight for harmonization of the way intellectual property is handled around the world.

Now, if we don’t do that, what happens? It means there is little motivation for investment and innovation, and we cannot compete with cheap labor around the world. However, with new innovations, technologies for farmers will mean that you will have simplicity in production, diversity of choice, time savings, cost savings, better profitability. It will also increase the complexity of your operations.

Second, U.S. agriculture must continue to be a more productive agriculture, increasing land productivity. I am sure that all of you would have never thought you’d see the kinds of yields you see in certain crops today 10 years ago, but when you look at the phenomenal gains, we’re not done yet.

The ability for you to deal with unpredictable weather patterns. As I’ve said, they’re not going away. So new genes are on the horizon to improve water use efficiency, cold tolerance and other stress-related environmental difficulties.

With the right policy decisions and support for new technology, advancements in biotech doubling corn yields again by 2030 and increasing production to 90 million acres, we will be able to meet the needs of both animal feed and energy. We will be able to increase production to 25 billion bushels of corn and produce 50 billion gallons of ethanol. That’s a reality.

Third, the agricultural future is a more sustainable agriculture. Conservation tillage. Soil is limited. I read that it takes 100 years to build an inch of topsoil and one bad weekend to wash it away. Massive reductions in pesticides. The ability to better use nitrogen. We will have to reduce the environmental footprint.

Fourth, U.S. agriculture must become more flexible. The ability to meet the needs of a diverse range of markets such as ethanol, biodiesel, healthy oils, better foods, will insulate U.S. growers from reliance on the increasingly lower cost of global commodity markets.

Knowing where and when your crops will be consumed at the time of planting versus the time they’re consumed. You will be able to get around a vast sea of commodities. From commodities to many higher value mini-commodities to unique, small acre, higher value products will insulate you and drive profitability.

And finally, I think the changing landscape of U.S. agriculture requires a profound shift in agricultural relationships among all participants in the value chain from growers to retailers. We’ll have to evolve and figure out the way that these commodities are grown, handled, and used … Vistive oils, corn with high extractable starch for ethanol … all of this will require a unique relationship with the end users. Redefining our working relationships … how we work together to develop new markets and food platforms to meet the new and renewable sources of energy and consumer food demands. This requires change. Not only biotechnology, molecular breeding, but it will require new infrastructure data-gathering technology partnerships. At this stage I will tell you the magnitude seems pretty overwhelming, almost impossible, but it’s already happening today at various stages. Change brings discomfort, but it also brings great opportunity.

So, there’s only one way to create this agricultural future, to make this great land we call the United States more technological, more sustainable, more productive, and to do that is going to require change in the way we work together. We have to embrace change. We have to anticipate change. When I tell you today that India is the largest cotton producing country in the world, did you know that? When I tell you that Brazil will be the largest producer of commodity soybeans in the world with incredibly cheap labor, does that make you uncomfortable? It should. But when I tell you how we’ve got the brains and the smarts and we always have had the innovation and the capabilities as a country for all these years to beat the system, to be more productive, that’s the possibility for all of us in this room.

So I, along with my Monsanto colleagues, am proud to work in agriculture, a little nervous, but proud nonetheless. I look forward to working together to make a mutually successful agricultural world and profitable one, and to meet the changes and challenges of a global world.