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New Possibilities in Agriculture

I admit it. Agriculture fascinates me. As someone with an engineering education I see so many potential upsides, complex merging of systems, and breakthroughs ahead.

I’m not a spiritual person but the miracle of growth is inspiring. As Cargill Executive Director Greg Page once said to me, “Trust in photosynthesis.”
Hand Water Plant Small

I envy the nifty toys agriculture pro’s get to play with. Robots and drones. Tiny nano-sensors that eventually feed big honking computational power to make everything work even better. Curls my toes.

If I could restart an education and career I could easily choose agriculture. It appeals to the boy still in me.

A fascinating niche of the field is the never-ending possibility of new crops and new uses. I spend a lot of time with the monoculture – the empire of corn and soy that dominates the best soil in America. But there are very interesting upsides for discovered or rethought plants and the potential within them.

Perhaps none of them will make a huge difference in agriculture – at least not in my lifetime. But every time I hear of a new potential crop, an experimental program, an adaptation, the possibility to grow a cure for a disease, a new source of energy, or a breakthrough that could help us in climate change, I’m inspired.

Carinata, moringa, and Rhodiola rosea are examples. Each has promise in a particular niche of agriculture.

Brassica carinata is the most interesting of new biofuel crops. It’s essentially a weed – Ethiopian mustard – that grows on marginal land in heat and drought conditions. New breeding by Canada produced a plant that rivals canola for yields, is resistant to disease, produces long hydrocarbon chains, and has a number of uses. Jet fuel, lubricants, and bio-plastics are all on the list.

Moringa trees are native to the foothills of the Himalayas and are cultivated in the tropics. One nickname is the miracle tree. It produces small leaves and pods that have an impressive nutrient profile. With a protein content nearly that of eggs, more potassium than bananas, more iron than spinach, and massive amounts of calcium you can see why it’s a new buzz in natural foods.

This is no recent discovery. Moringa were used 4,000 years ago but the application to a modern society for anti-oxidants, anti-diabetes, anti-inflammatory, anti-arsenic, and anti-cholesterol are just coming into wide recognition. Look for development of species even easier to harvest as the world seeks food for the next two billion planet occupants over the next 25 years.

Rhodiola rosea is an adaptogen. It’s made into a supplement that has an ability to improve the response to physical and mental stress and trauma. There are claims it lifts mood, increases energy, and sharpens focus. It can optimize insulin production and extend the effects of caffeine. The root is powdered or chipped for tea.

Cultivation is ramping up because demand far outstrips the wild sources from Siberia. Canada, Scandinavia, Poland, and even Alaska are doing startup cultivation. But there is a growing emphasis in agriculture on indoor cultivation of many specialty crops.

Energy Prices: Why Have They Moderated?

It’s seldom that I work with a client not affected in some way by energy prices. Whether it’s the shipping costs of manufacturing, input costs of agriculture, or even the impact of higher transportation expenses on business to consumer organizations this question about the future often plays into strategy and preparation for the future.

Everyone wants to know the future price of a barrel of oil or of a kilowatt of electricity. Like most forecasts the calculation is complex and the range is wide depending on the timeline. OPEC policy, supply, demand, new discoveries, emerging technology, consumption behaviors, geopolitical events can all have a bearing or effect on energy price.

For several years I’ve been tying the price forecasts to global economic performance. This has been especially true as the globe goes through the most dramatic economic cycles since early in the last century. In fact, I’ve been forecasting a semi-permanent rise above a $100/barrel price floor sometime between 2011 and 2015. I still hold to it.

Many will ask what’s driving down short term spot prices in oil. Good question. Typically these short term fluctuations are driven by buildup in supply and the hidden effect of economic downturn and consumer behavior. That’s what’s been going on lately. I believe it also has to do with the discoveries of fairly large but very expensive sources of oil in the Western Hemisphere. Bakken oil (or “tight oil”), Alberta tarsands, and offshore Brazilian potential are all examples.

These “tight” and “dirty” sources have put off the depletion of other sources in the recent past. Eventually, however, the inexpensive oil sources are going to wane further and the price is going up. I believe to a fluctuating, often volatile range from $100 to $150/barrel.

Whether I’m right or wrong about the forecast is less important than preparation. I’m fond of the statement denial is not a strategy. That’s why I’m bemused, surprised, or sometimes frustrated by organizations that find reasons to deny any possibility of what would be painful developments. Those that believe the relatively inexpensive energy we enjoy today is going to be with us for the foreseeable future are in that denial.

2012 - The first half in the practice

2012 began as our busiest year in a decade. For the first six months of the year I’ve been on an almost non-stop schedule of strategy sessions, conference presentations, retreats, decision-making meetings, and consulting projects. Financial services, telecommunications, agriculture, executive education, information technology, and healthcare have been the most prominent sectors.

Among the highlights:
  • An interesting decision-making project for a financial services client. The eventual outcome will establish a path for the organization for at least the next two decades. Like all of my best clients this group is taking time and a major due-diligence discipline in order to choose correctly.

  • Executive education sessions in strategic leadership and “anticipatory habits.” I’m usually in front of a few hundred mid to top level managers from corporate environments and a similar number of governance participants from the association and cooperative space. This is some of my most rewarding work.

  • National-level strategic planning for resource-based industries in North America. The global focus of my work and scope of my forecasting background helps provide a baseline for advising and facilitating planning in this environment. Two very engrossing projects stand out in the first half of 2012. Both involve organizations with huge upside opportunities in a world with growing populations and burgeoning middle classes.

  • A deep dive into government agencies as advisor and strategic advisor. While I’ve done advising work with government clients in the past (look here) I worked on a project that broke new ground in the past six months. It was a government agency that had never gone through a formal strategy process before. It was a combination of education, facilitation, and development. Very interesting to see the group take to the processes under a highly respected leader.

  • I moderated professional society meetings recently that gave me a global perspective and insight to the intersection between business considerations and those of specialized expertise within organizations. Every organization needs professionals that generate the intellectual property, streamline the workflows, manage risk, and protect the most precious assets. As an attendee/reporter/moderator/presenter I was able to see connections, take away lessons, and pass along advice from a high-level observer’s perspective.

The Oil Forecast

For the last three years, ever since it became obvious that the world was slipping into a recession and commodity prices would come down, I’ve forecasted an inevitable return to rising oil prices.

My logic: the recession reduces demand but only temporarily. Recovery from recessions is uneven globally. Some regions recover months, perhaps even years before others. A robust economy in Asia and to a lesser extent in Latin America will create demand that will drive prices up despite a slight fall in use in the U.S. and the EU.

Speculation or unexpected geopolitical events – “triggers” – will create volatility. Speculators will enter the market on supply shortages. No regulating body can keep them away from the opportunity to make money.

My forecast from mid-2008 forward: 75 to 85% confidence that an oil price spike and permanent plateau above $100/barrel will come sometime in the 2011-2014 time frame.

It’s been of interest to clients in, well, almost every field. Because as one CEO said to me on being asked what energy prices affect, “Everything!”

As the economic recovery has forged ahead strongly almost everywhere except the North Atlantic the price of a barrel of oil has risen back through the $50, $70, then $90 levels. Now the unprecedented events in the Middle East have taken Brent futures over $111. West Texas will follow.

Will it stay there? Of course it depends on a complex array of factors. Economic effects, how high the price spikes, volatility, whether the Saudi’s can really make up most of the shortfalls, refining bottlenecks, and more. In the weeks ahead I’ll place more information here on the implications of this important trend.

In the meantime I’m getting a lot of queries from clients who quickly remember my forecasts and are running through their Plan B strategies to react to the development or are confident because they planned for the high probability of this years ago.

Patent Harbinger: Where is Distributed Energy Headed?

I advise clients to watch certain metrics for emerging direction. A good example popped up recently in all the hype over the Bloom fuel cell announcements.
Bloom is a startup that has built fuel cell “servers” supplying electricity to a number of Silicon Valley firms. If you’ve missed the hype there’s a healthy helping
here. The servers at those big SV firms run a cool $750,000. Not pocket change to us consumers.
The Bloom technology is interesting because of a several factors. 1) It
might scale down. The company’s statement that they could be producing home-sized units for a $3000 price point in a few years causes ripples in the energy sector. 2) It shows off a technology that’s taken a back seat in the media, fuel cells. 3) It demonstrates early hype for a technology. I encourage skepticism when something gets too much media attention.
But what caught my eye as my scanning system picked this up is the longer term pattern of patents in “clean energy.”
My favorite weekly scanning source, The Economist, showed this chart at left.
When you think “alternative energy” or hear it in a politician’s speech you probably think solar, wind, electric vehicle, or maybe biofuel. You don’t think of fuel cells. But a patent rate three times the other technologies causes me to point to it as a trend to watch carefully.
The Economist hypothesizes it’s due to corporate R&D stimulated by government subsidies. Probably the major driver. When you start delving into the practicalities of the Bloom style of cell you see problems. Very, very high operating temperatures. 24 hour a day operation which gets to be a problem if you can’t sell your electricity back to the grid especially at night when demand is low. A reliable source (read that as natural gas).
My forecast: true renewables like solar and wind look like the best bets. But keep an eye on fuel cells for the long term.