You are here

Why Indigo Ag Believes Agriculture Needs to be Decommoditized

Linking grains with specific users who will pay more will increase on-farm profits, says Indigo Ag’s CEO.

If you’re expecting a rah-rah speech about agriculture from David Perry, you’ll have to stick around a while. The chief executive officer of Indigo Ag tells a litany of problems in modern agriculture before he gets to solutions. He told those attending this week’s Indigo Ag’s BeneficialAg 2019 meeting in Memphis, Tennessee, that: 

  • Average U.S. corn yields lag behind what’s attainable. He points to last year’s National Corn Growers Association Yield Contest winning yields that ranged from 343 bushels per acre (dryland) to 477 bushels per acre (irrigated) that vastly outpaced the U.S. average corn yield in 2018 of 176.4 bushels per acre. “Those are the same seeds,” says Perry. “There are just all sorts of stressors on those fields that limit genetic potential.”
  • Land degradation impacts 25 million acres annually on a worldwide basis. “Thirty percent of global land has already fully degraded,” he says. 
  • We use 30% more fresh water (worldwide) than can be replenished, 70% of which is used by agriculture. “It’s second only to oil and gas,” he says. 
    Pesticide residues remain on over 50% of vegetables.
  • Fertilizer runoff is creating dead zones where freshwater enters oceans.
  • Agriculture creates 25% to 35% of human-caused greenhouse gas emissions.

What’s more, farmers aren’t making money. It’s not the market’s fault, he says. “Today’s crop prices are relatively high compared to historical levels,” he says. “They are lower than the peak from 2008 to 2013, but they still are fairly high based on historical level.”

So Where’s the Rub? 

“It is the price of farm inputs – the seeds, chemicals, and fertilizer that farmers need to run their operations,” says Perry. “Where commodity prices have gone up 50% at today’s level vs. 1975, input prices have gone up over 400% (in that same time frame). The average farmer is less profitable today than the average farmer was in 1975. So, four decades of technology have not gone to benefit the farmer.  It has gone to those selling seed, chemicals, and fertilizer.” 

Meanwhile, consumers say they will pay more for healthy and sustainable food. “Almost all of the growth in the food industry comes from products with the claim they are healthy and sustainable,” he says. “Organic is the best example of this. That’s what organic means to the average consumer—healthy and sustainable—and they are willing to pay significant premium for that. So, it makes sense that we need a new system.”

And the Solution is…

Perry sees the answer as the decommoditization of agriculture. “As long as farmers are producing commodities, we lack incentives to adopt the practices that improve quality and sustainability. Right now, we have a sea of sameness.”

He points to what’s happened in the coffee industry as an example. Decades ago, consumers had little choice in the plain-Jane coffee scene. Today, they can buy coffees in a number of flavors sourced in specific ways from a number of countries in a specialized industry. “Specialty industries have higher margins,” he says. “If we can make the change (from commodity agriculture), we would be better for it.”

One way Indigo Ag is trying to crack this marketplace is via its Indigo Marketplace where it connects growers directly with buyers for grains destined for a specific end use. Examples include:

Even No. 2 yellow corn – the backbone of the corn industry – can be decommoditized, he says. For example, beef producers are willing to pay a premium for No. 2 yellow corn with a higher protein concentration than average. Meanwhile, ethanol producers are willing to pay a premium for No. 2 yellow corn with a higher carbohydrate concentration than average.

It’s challenging to link buyers with sellers of these specialized grains, he says. Still, Indigo Marketplace generated $57 million in cumulative marketplace demand last week, going to that level from 0 in June 2018. 

Agronomics

Perry says changes to agronomic technologies need to be made. Indigo Ag has its origins in the microbial space, working with microbes in a crop plant. The goal behind microbes is they can help plants become less reliant on inputs like commercial fertilizer and become more efficient in nutrient and water uptake

Perry also envisions solar-powered autonomous weeding robots that could reduce dependence on herbicides. “For the first 10,000 or so years of agriculture, weeds were managed by mechanical means,” Perry says. “We pulled them up and hoed. Then we killed weeds with chemicals, which became the predominant paradigm for a long time.”

Problems, though, have resulted with herbicide-resistant weeds. “Weeds have never developed resistance to the hoe," he says. 

He says other benefits result from saving money by not applying herbicide. Compaction issues are also reduced, as robots would have a lighter soil footprint than sprayers. Less herbicide use would also appeal to some consumers, he adds. 

Digital agriculture will also play a part, he says. “Agriculture has been slow to adopt digital technologies, in general,” he says. “This lack of technological adoption risks pushing our food system out of balance, as demand for food outpaces our ability to supply it.”

Carbon Sequestration 

Perry also sees potential for farmers to be paid for sequestering carbon through practices like no-till to curb the impacts of climate change. 

Erin Fitzgerald, CEO of the U.S. Farmers and Ranchers Alliance, agreed in a panel session following Perry’s address. “I think we can solve climate change flat out with agriculture at the table,” she says. 

Soils have ability to store more carbon than is commonly thought, says Andrew Smith, chief scientist at the Rodale Institute. “The tipping point is adding cover crops,” he says. When that’s done, deep soil samples 1 meter deep reveal high levels of carbon deep in the soil. 

It’s critical to add cover crops with no-till, he says. “In our system, no-till without cover corps is actually one of the poorer soils we have,” he says. 

Annie Dee, an Aliceville, Alabama, farmer who no-tills and uses cover crops, recalls a story that an Extension agent once told her about the importance of pairing no-till with cover crops. “He said, ‘It’s like going to senior prom with your sister. You’ve got to go, but it wasn’t the same concept as going with another girl.’ ”

Read more about

Tip of the Day

Tech Tip: Know a System’s Limitations

While technology has given machines incredible abilities, trust comes in the form of understanding what a technology can and cannot do.

Talk in Marketing