What Are We Really Selling?
Merchandising grain is about more than standard grading factors can communicate to buyers. New ways of organizing field-level data add value and enable Scope 3 reporting compliance.
According to Investopedia, social license “refers to the ongoing acceptance of a company or industry's standard business practices and operating procedures by its employees, stakeholders, and the general public.” Industrial agriculture has lost its social license and is seeking ways to get it back, by focusing on the additional services that farming can provide, in addition to growing food.
Thanks to all the new subscribers who have signed up recently for Prairie Routes Research. This reporting series explores the new and shifting financial considerations in farmland management decisions, like payments for Scope 3 emissions data in field crop production.
Governments Start with Carrots, then Turn to Sticks
When industries need to change in ways that don’t offer immediate improvements in the profit structure of the various players, policies and corporations together shift economic signals using a combination of ‘carrots’ and ‘sticks’. Governments typically begin with ‘carrots’ like Canada’s On-Farm Climate Action Fund (OFCAF), to spur farmers to begin changes.
As governments gain confidence of the programs’ political support, they can shift towards ‘sticks’, like California’s newly-passed mandatory emissions disclosure law. Another example being market access denial on the basis of pesticide residues in grain shipments, shows how regulatory ‘sticks’ have knock-on effects all the way back through supply chains.
Connecting the Dots
Scope 3 emissions in ultra-processed foods stem largely from emissions that occur in growing the crop. Food brands seeking disclosure of field-level data start by identifying the crops of origin that get turned into the ingredient list on its products. For example:
Corn is the origin crop for cornmeal, corn syrup, popcorn, tortillas, tacos, chips, grits, and many more common retail foods including soft drinks. Corn is also the main ingredient for livestock feed, making it a contributor to Scope 3 emissions on meat.
Canola oil is a common choice for restaurant deep friers; it’s also bottled for retail sale, and used as a feedstock in biodiesel. The byproduct of crushing canola seed for the oil is canola meal, another livestock feed ingredient.
Wheat isn’t just milled for flour and made into bread, crackers, cookies, etc., it’s also a common ingredient in pasta, ethanol, and animal feed formulations.
Field peas are the common low-cost ingredient in fractionation for the composites, isolates and starch used for dietary supplements like protein powder and plant-based meat alternatives. Dry peas are also extruded for Asian noodles, milled into gluten-free flour substitutes, and fed to livestock.
This relatively short list of crops makes up a significant portion of the primary ingredients in today’s ultra-processed foods. Much of the farm equipment used on these fields has the technology to digitally capture data on field-level emissions, like fuel use, fertilizer rates, and the timing of applications.
The biggest hurdle to sourcing this data from farmland and machinery owners is their mistrust of the grain and food companies that are asking for it. Another major challenge is the chasm of communication and information-sharing interoperability between the machinery on the field and the supply chain stakeholders that need its data for reporting compliance.
Enter: The Broker Note
The services of a broker have long been valued in agriculture, by buyers and sellers alike, to manage the complexities of storing and merchandising grain. Especially when the quality parameters are many, and are paramount to the value of the final product, the support of a grain broker can go a long way to setting expectations, supporting quality control, organizing logistics, and managing paperwork for painless and successful contract execution.
Prairie Routes has developed a brokerage platform to introduce the opportunity to farmers to provide field-level data to buyers in the way that would enable it to be monetized. With our experience and creativity, we have honed in on the humble broker note as a template to manage data from many fields, and market it for farmers who have valuable outcomes to sell, to buyers along the supply chain.
In order to establish the line of sight back to the field of origin, this has to be placed on top of a grain purchase contract. Which brings us to the classic question in marketing, “what job are we actually hiring grain to do?”
The Answer is Everywhere
Enhanced scrutiny of modern foods demands grain sellers provide safety and nutrition, which is no longer assumed to be present since agriculture lost its social license. In addition, the pollution, erosion, species and habitat loss from past decades of modern agriculture now demand that farmland owners regenerate degraded areas, and prove that their work is effective.