Rapid Response: Food security in a pandemic, w/Sara Menker of Gro Intelligence

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Join us at masters of scale dot com slash apply twenty six. That's mastersofscom slash apply. Twenty six. Most people are never really worried about their food supply and all of a sudden it's on every headline. There is no shorta coming. There are certainly parts of the world where that is a reality, but the United States is just not one of them.

Everybody's focused on coronavirus. For some of these emerging economies like East Africa and countries like Ethiopia. The locust devastation could be much greater. than that of coronavirus. But the ability to have people pay attention to that right now is almost non existent.

Answers lie in the data. When you connect the dots between price and demand and supply and climate, you start to learn and pattern recognize, and you can start to ingest and create live predictive models that actually help you forecast these relationships. That's Sarah Menker, CEO of Grow Intelligence, an AI fueled agricultural data firm. By parsing literally trillions of data points around the globe each day.

Sara gets real time insights into our food supply and food security. As the coronavirus rapidly alters our world. This is Bob Safian. Your host for Masters of Scale Rapid Response. From beef and chicken

Sarah explains how the interconnected nature of our agriculture system Impacts what we're seeing on shelves. She talks about the critical importance of finding and sifting the right information.

And how the parameters of that information have moved in the age of Covid nineteen. I'm Bob Safian and I'm here with Sarah Menker, founder and CEO of Grow Intelligence, an agricultural data platform that ingests six hundred and fifty trillion data points updated daily. The firm runs thousands of predictive models off that data, following fifty-five million unique indicators related to global agriculture. This gives Sarah insights into the state of the food supply in the US and around the world. Just a topic of Intense interest as the coronavirus rapidly shifts.

processes and expectations. Many in food related businesses as well as food consumers are unsettled and unsure. Sarah's going to share some facts to help ground us and explain why In many cases we're worrying about the wrong things. Sarah's coming to us today remotely from her home in New York City, in Manhattan, as I ask my questions from my home in nearby Brooklyn.

Sarah, thanks for joining us. Thanks for having me, Bob. So I wanna start by asking about the Food supply here in the US. A lot of people are anxious that the US is on the verge of some kind of a food emergency. And the information that you

Have is that That danger. is wildly overstated. Yes, I think that's a good way to to put it, which is the US is certainly facing some very serious supply chain challenges as producers of anything from milk to vegetables to meat and and packagers of it. are having to repurpose packaging so that stuff that was meant to go to food services ends up in retail shelves, et cetera. So there is all sorts of disruptions happening across the supply chain.

However, this concept that the US is about to run out of meat any time soon is wildly overstated. She mentioned something to me that you got a call or a text from friends at some point saying should I be stocking up? For a long time, most people are never really worried about their food supply. And all of a sudden it's on every headline. So everybody cares about food all of a sudden. And I happen to be one of those people that has thought about it for a long time. And when I get asked that question, my answer is The United States has been a net calorie just overall. So it's in produce, it's in grains, it's in oil seeds. It's it's mi and pretty much every product has always been a net calorie exporter. from the country. So it produces way more than what local demand is.

And that's not about to change overnight. What might change is the mix of products that end up on a shelf could look different. Some products that were typically imported could be way more seasonal in nature now as as shipping changes, but that doesn't mean that As a result, there's gonna be no food in the United States. It's just the mix of food will look different. But there is no shortage coming. There are certainly parts of the world where that is a reality, but the United States is just not one of them. And y you said that there are records amount of Proteins and meat in storage. What does that mean? You mean frozen meat?

Exactly. They're actually reported values. So these are not even numbers that we as a company are estimating, but we're scraping from reports that are being generated by the US government, where there are estimates of how much chicken is in cold storage, how much beef is in cold storage. And how much pork is in cold storage, and when you look at the volumes of what is in cold storage, you're basically at all time high almost in in all three. So that if there's some

facilities that are Not able to process The beat right now. There's plenty of meat frozen to fill that demand. Yes, exactly. And that's why I say what will happen is you'll see shifts and cuts of meat that might be available and the different varieties.

I was born and raised in in Ethiopia. And the concept of seasonality on your supermarket shelf is very normal for us. You would go and say, I want mangoes. You don't get to say I want mangoes every day of the year. America's built on a system where you can want everything every day of the year. What is starting to happen now is that maybe that Concept is gonna start to fade a little bit, but it doesn't mean you don't have food. You just you have something slightly different.

You mentioned this falling Beef supply, but abundance of chicken. Or at least being priced that way. Why is there Plenty of chicken, but not enough beef or

Seeming that way when you look at pricing. It's much more a reflection of how those supply chains work. The way that a chicken getting on your supermarket shelf works is that Most chickens are owned from the time they're laid, but To the time they're handed to the consumer by literally a single vertically integrated company called Integrators.

So it doesn't change hands multiple times. Whereas when you're looking at cattle Cattle change ownership several times. From when they're born to when they're basically on your plate, or when you're buying them off a supermarket shelf. So what happens is that. Slaughterhouses that buy live cattle, when they start to see demand slowing down.

They can actually cut back on the purchase of live cattle. And that means that they'll just process less beef. Whereas Chicken companies they can't Switch that off because they own the chickens too. So it actually takes several weeks to stop production lines. And so in the meantime, they just have to actually continue to sell even in a low demand, low price market. And so there's slightly different supply chains here. And so what one of the other metrics to look at here is live animal prices.

Це мені лук атлес в лайв катл орс. Those prices are tumbling. Right. So if you Look at beef. prices on the supermarket shelf, that price is increasing drastically. Whereas the price of life cattle

Is Dropping. And that's just that difference in how that supply chain works. I wanna dig in a little bit more, if I can, on the supermarket data. You you mentioned to me earlier that you track about uh five or six hundred produce products, fruits and vegetables and different things. And you you said it's incredibly volatile and you gave me some examples of Golden apples versus Fuji apples or iceberg lettuce versus Romaine lettuce. Why is there that differentiation? I might be perfectly happy with one kind of

Apple or lettuce or the other. Yeah. Alright, so let's pick apples. We look at About sixty-six different Apple products in the product, and some are going into retail, and then some are actually meant to go more into wholesale or kind of in the food.

service category. So there's two things you need to do when you're looking at fresh produce prices. One is take into account that there's a season. Sometimes prices move up and down just based off the fact if something is more in season or less in season. The second part Is You have to strip out what is normal price movement versus what could be price movement just due to COVID nineteen, which is really the thing we're trying to extract here. And when you look at that, you see that Fuji apples on A volatility adjusted basis on the year are up, those prices are up. almost seventy percent

And as you rightfully said, when you look at the polar opposite of this spectrum, golden delicious in the same two pound bags. Are down. Eighty percent. And that, for example, is Just as much about shipping and transportation as it is about

variety and wholesale versus retail or food service versus not. Honey crisp apples is another example. Those that are sold in five pound bags are down over fifty percent. And the reason is who buys five pound bags of apples. As a consumer, unless you're a restaurant or a food service. Exactly. So sometimes it's literally the packaging that makes a difference. So when you look at the per pound or per ounce price of the same product. Package differently. This year you saw very different price moves. It's astounding.

I'm curious. What kinds of new questions, new studies that either Clients have asked you to run or you guys are running. because of the coronavirus. What are the things that you're saying we're doing this We have new questions today.

It's not that the question itself is fundamentally changing because people ultimately care about how much supply You know, is there How much demand will there be? and what's the price implication. I mean those three are gonna be questions that were relevant

A year ago as they are today. However The Desire to understand the dip interactions. that exist between product these nuances of

Oh, I don't need to know just what apple prices are doing. I need to know by variety and I need to know by like you know the details to matter of the why. And so what's happened is that Whereas in the past people were generally kind of just give me an answer, and I just want the answer to be as macro as possible. Now it's much more as detailed as possible is necessary. And so what we've been spending doing is doing what I just did with you in terms of going through things like produce or meat and thinking about everything by cut and by variety and by origin. And coming up with ways to very quickly like literally create visual representations.

That make me go down this list. And I can like rank stuff and just get a sense of okay, what's off, what's on. So we've created a lot more like heat maps. So there's a monitor we had to develop this time around, which is a relevant idea in the past, but now it just moves around a lot, which is What is the move this month versus the last twenty years?

the last twenty year median, and you just have every product down a list and it highlights those that are kind of going down too fast or going up too fast in price. For you. So then you go down that line and you identify anomalies and just quickly act upon them. So it's much more around. Synthesizing to just give people alerts of what to look for because there's so many things that are moving that the concept of alerts has become way more critical. And the opportunities, I guess, if you're a Food business.

You might suddenly see that maybe I should contemplate shifting to a different kind of apple or a different source for a certain kind of thing because the pricing creates opportunities in some areas and new burdens in other areas. Exactly. But what's also been fascinating is, you know, as a company, we've typically worked with Large food and beverage companies or companies that produce seed or fertilizer or large scale retailers of fresh produce, and we typically Have not, for example, worked with restaurants or restaurant owners because the application is much broader in terms of how a company overall operates its revenues.

But I've been spending a lot of time with restaurant owners, walking them through the nuance in some of these price changes because you know, a lot of restaurant owners are trying to figure out how they support the farmers. That used to sell to them. And so understanding some of this nuance is also helping in ways that I didn't see. It's finding applications well beyond what we originally built it for. When you build substantial wealth through your business, it's often tied up in a single equity position.

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You told me that that prosperity in the US is Somewhat a result of prosperity elsewhere. that the global markets are linked that way. So I I wanna move to some global questions. And I saw in one of your notes that you send out that in early March you urged your mother in Ethiopia. To stock up on food. Two years worth of food.

But even though it was early March was not necessarily just because of coronavirus. But because of locusts. I know you made your data and models freely available around locusts because you wanted to sort of speed dispersal of pesticides to blunt the locust crisis. Nobody is talking about locusts except you, or not a lot of people. I'm just curious, are there risks that are being overlooked because we're worrying about coronavirus? Is it that those risks are exacerbated because of

The distractions of coronavirus. Yeah, I wonder if The world is this much more complicated and just Going through so much more trouble, or we can see better because we have all the data now and we it's all organized and we have all of these models that tell us stuff, so I can't unsee it. I mentioned earlier I was born and raised in Ethiopia, but I was raised during the nineteen eighties famine. I lived a life Basically where everything was rationed. You had curfews. Toilet paper used to be rationed when I was growing up. So when I saw toilet paper selling out here when everybody was stocking up, it was kind of a running joke. I was like, I would never run out of toilet paper because I always store it. But uh there's this natural instinct you have of understanding what Food shortages.

are. Like I I do. It's kind of this natural instinct. You know, when you look at what's happening with locusts, locusts can literally have an impact on two hundred million lives going into dire poverty this year. this year into next year because they were impacting the growing season, and this extends from eastern Africa into Iran, Yemen, India, Pakistan. And it can keep growing. In some ways, it's like the coronavirus because the pace at which locusts multiply is similar. So they're going in swarms and the populations are growing in twenty to four hundred X multiples in months. Wow. It's literally exponential growth in the population. And yeah, there's a lot of distraction because Everybody's focused on coronavirus.

for some of these emerging countries and emerging economies like East Africa and countries like Ethiopia. The locust devastation could be much greater. Then That of coronavirus.

But the ability to have people pay attention to that right now is almost non existent. So you know, we kind of taken it upon ourselves to be yelling and screaming about it until people listen. We've been getting some traction, but it's a lot of work. I know you've been concerned about, you know, a coming Food. Shortage globally.

You mentioned to me sort of Other risks that exist that have been exacerbated by coronavirus, other crop disease, climate change. And you said to me at one point that some markets maybe Taken back. Ten or fifteen years.

I wonder if you can explain how Coronavirus might push us back ten or fifteen years in these places. America's prosperity is tied to the prosperity of the rest of the world because the US sells tons of product and services to many other parts of the world. The expansion of multinationals that are American companies has been tied to them setting up operations and expanding operations globally. What has happened with coronavirus is that

Markets have kind of gravitated towards the US dollar being the the safety net currency of choice. And so that has meant that foreign exchange rates around the world have have have declined and they've been drastically depreciated. That means the cost of importing goes up by that percentage point. So all else being equal, if you're South Africa or you're Brazil, and you're the Brazilian real is down almost 28% year to date, South African Rand is down twenty-five percent year to date. If the price of what you're importing didn't change. The cost of your import just went up.

By twenty five to thirty percent. That means the cost of doing business goes up. And so you can basically end up in these hyperinflationary modes in these countries. So all the growth that had been experienced. gets wiped out. They have debt that's outstanding through these countries, and the debt is denominated in US dollars, and you have debt payments coming up. So there's just this cascading set of events and you know, there's very big conversations that are beginning now around you know, are debt relief programs by the IMF and World Bank gonna be

warranted and necessary to stave off some of this economic decline that other parts of the world will face. This is just the beginning. You talk about how there are all these interlinked factors that affect global agriculture and the food supply. One one you talked about was oil prices and food prices. Oil prices are down. Obviously there are all kinds of economic implications for that. You explained to me what some of the implications are that lower oil prices means

Lower sugar prices and lower corn prices, lower cooking oil prices. Can you explain how those things connect across? Yeah, I call it the Ag Energy Conundrum, which is the day we decided to drive our agricultural products instead of eat them. If you look at The United States forty percent of the corn produced in the US actually goes to producing ethanol.

Which we drive ethanol competes with gasoline at the fuel stations. And so what happened was when crude oil prices Basically plummeted. The gasoline prices started to obviously come off as well, because gasoline is just a byproduct of crude oil. Ethanol was no longer competitive. the cost of producing ethanol was way more expensive than the cost of just buying gasoline.

And so all these ethanol plants essentially shut down. So forty percent of US corn production basically is driven. In Brazil That similar relationship exists between sugar cane. and ethanol,'cause they use sugarcane for their ethanol. And then in South East Asia It's palm oil.

That goes into biodiesel. That's basically again found in the fuel pump. When oil prices go down, these core products start to move hand in hand in prices. So the palm oil used in a chocolate bar is uh is competing with palm oil that's put in a car, so There you go. Does this mean that the excess corn that the US now has allows them to be

Even more of a net exporter of Calories. Does that corn get repurpose to go to China or other places or do the supply chains not work? quickly enough to be able to make those kinds of shifts. The answer is it's complicated because not all corn is corn. So similar to

Apples having many, many different varieties. You're producing different types of corn for different use cases. So corn for human consumption versus feed versus fuel. Is slightly different makeup. Many people say in talking about the coronavirus that will never return to normal, but there's gonna be some sort of a new normal. Do you have any emerging ideas about how

agriculture and the food supply chain. Will be different. I think there's a couple of ways. One is supply chains and food and and agriculture in general have been built on this concept of economies of scale. So

You produce very large quantities, drive down the cost of production, therefore Чипер кост, морс провидers. and cheaper costs for the consumer too, right? So that translates all the way down to the consumer. Now when you have something like coronavirus happening, you start to expose the weaknesses in your supply chain because over dependents to a single region or a couple of suppliers also means that in times like this you don't have options. So the quality and the value of what is called optionality will go up. That means that supply chains will start to look

and have to look more diversified. I cannot imagine boardrooms that will not be asking the question, what are we doing to make sure that our supply chains are significantly more resilient and diversified. That does mean that the cost of production, the cost of procurement, all of that could go up. So Companies will have to rethink How they

better manage the risk. Associated with that diversified supply chain through financial markets. And one of the things that comes to mind for me as somebody who used to be a trader before I started this company was thinking about the efficiencies that were brought into multiple markets just due to Better information flow that created much larger amounts of liquidity. You have to reduce the volatility, and that volatility has to be passed around through multiple marketplaces, et cetera. So what we will see is also some more formalization of agricultural markets in ways that we haven't seen before. The reality is that food and agriculture and supply chains and food and agriculture are way more complex than energy.

We call them commodities, but they're very, very different because oil is oil. The way you produce it is the same. They could be slightly different grades of it and stuff like that, but It's actually fundamentally the same product, whereas We cover tens of thousands of agricultural products. Each one has a very different set of rules. Are you going to create 10,000 different markets? rethinking how managing the risk is gonna be really key to making it successful, but supply chains are gonna have to be diversified.

And so that means that if you're trying to plan your business You really don't have any sense about what the prices are gonna be. The range is so wide because of that volatility. Yes. You're better off going to Vegas is what it tells you. And uh that's not That's not a good thing. It is a very intricate world you're in. I mean, if I'm hearing all this right, it's very intricate because some of the solutions you're saying are having better data and we're starting to have better data thanks to efforts that you and others, I assume, are are also doing. But at the same time

That data becomes more Perishable itself as the conditions in the world shift around it, right? No, I would argue that Answers lie in the data. price and demand and supply and climate You start to learn and pattern recognize, and you can start to ingest and create live predictive models.

That actually help you forecast these relationships. So what happens is you can start to build Forecast models for supply that actually tell you fundamentally In the early part of the season, it is temperature that matters most.

to this crop. In the middle part of the season, it's actually rainfall that really matters. That is one of the beauties in all the machine learning models you can build and you do build on top of data, and it's that concept of data to knowledge and knowledge to something even greater. I'm hearing you right. There are reasons, maybe more reasons than there used to be between the data And maybe openness to be more optimistic. That we can meet those challenges.

Yeah, I don't think any of the challenges are insurmountable. As long as you take one a holistic view, you have to kind of take A holistic view from An agricultural system standpoint, which is think of it as an entire system, not A single crop, not a single type of product.

And also holistically from a global standpoint, because again, this concept of A food crisis, there's many say flavors to it, right? One is A version where The total aggregate supply that's produced in the world. can no longer meet the total aggregate demand.

You know, if you just wipe out the concept of a country and you make the world one place. that there's a mismatch between the two. Then you have another type of a food crisis, which is The inability to get

Food from a place where there is excess supply. to where areas have import needs because they have demand that's greater than supply. The flavor of food crisis we're seeing now is this latter type. Which is

It's as much a distribution problem. As it is a production problem. Whereas for the countries that are facing a crisis, so in some of the regions as I mentioned in East Africa or Southern Asia, which can really face real crises this year. They will be not enough supply problems, but it's not. gonna be because there isn't supply to feed them from the rest of the world. It's cause we haven't figured out how to optimize the supply chain in such a way that you don't make that happen, which is what makes it kind of a shame. This has been such an education for me.

Sarah, so so thank you. I want to ask you, these are stressful times in general. And I'm curious for you personally. Do you feel that stress? How do you handle that stress?

And do you have any advice for uh other leaders who might be listening about how And other folks were listening about how they might Think about managing their own stress. Like I said. I feel like I can't unsee what we see in the numbers and

When you look at agricultural data and you're looking at anywhere in the world, you're seeing the real world. It's not like tracking the Dow Jones or the S P, which is it's a financial representation of the world. You're kind of looking at the physical real world and you see the stresses of it. And so You know, we just launched this first real-time monitor of drought around the world. So you can now look at duration and intensity of drought for any part of the world on a consistent basis. Nobody's ever done this before. And I was like pressing play on maps and I was like, Oh my gosh, it does show Australia on fire. How many parts of the world are in drought right now? And you're just like, No, I don't want to note. And so I will say, like in early March when I called my mom, I would literally like wake up in the middle of the night because like I'd be seeing locust attacks in my dreams. And so I feel the pain that so many people are going through. And so part of how I've been handling it is by saying, Well, we can do something about it. Let us as a company continue to have the commercial goals we have, but where we can actually serve a humanitarian purpose, we should one hundred fifty percent go in overdrive mode that way. And that that has actually been very helpful. Cause it's like you're doing something versus just waking up with nightmares. So that's one, which is just being actively helpful. That helps

Quite a bit. The second is I've been doing a lot of puzzles. A lot of puzzles. Yes. And they actually you're putting pieces it's kinda like what my job is in some ways, but it's it's a way of stepping away from the day to day job and using your brain in a similar way, but

towards something beautiful. So I used to travel a lot, so I'm doing a lot of puzzles of just different parts of the world. Well, you've given us a lot of pieces of the puzzle to put together and I I really appreciate it. Thank you for Sharing your insights and your time with us. Thank you for having me. Thanks. I'm Bob Safe and thanks, everyone, for listening. Masters of Scale Rapid Response is a Wait What original. The show is recorded remotely using sanitized audio gear.

It's hosted by me, Bob Sapian, Masters of Scales editor at large. and Masters of Scale host Reed Hoffman. Our executive producers are June Cohen and Darren Triff. Our supervising producer is Jay Punjabi. Our producer is Jordan McLeod.

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