The end of every year brings an endless amount of “best-of lists” and a spate of predictions for the coming year that have little chance of being correct. However, that doesn’t stop political pundits, financial moguls, or industry technicians like me from trying to imitate Nostradamus.
I have written such articles before, but as I sit down to write this one, I’m resisting the urge to go back and look at what I predicted for the rendering industry a few years ago – I’m starting with a blank page. Having just begun reading The Autobiography of Mark Twain, I admire his method of speaking randomly on topics of interest with no sense of chronological order or worry of completeness. However, you will not have to wait a hundred years to see this list, nor will it be a literary marvel, but I hope it will be of interest to renderers.
1. More Regulation
One does not have to be clairvoyant to come up with this one, but industry does have a wave of new things coming regarding food safety. The new laws and regulations are not necessarily bad news, and in many ways reflect successes of the National Renderers Association (NRA) and others in keeping them reasonable. Given the “lay of the land” and a regulatory environment, the question has never been whether or not to have more food safety regulations, but what form they would take.
The so-called lame duck session of Congress in December 2010 passed a number of laws, including the Food and Drug Administration (FDA) Food Safety Modernization Act. It is no accident that this new law follows closely the program laid out by NRA and the Animal Protein Producers Industry (APPI) in the Rendering Code of Practice. The centerpiece of the bill is the requirement for identifying a plant’s hazards and developing a written risk management plan for those hazards, just as the rendering industry has been doing in its Code of Practice for the past five years.
However, there is much work ahead as many of the sections of the act require rulemaking and compliance guide development by FDA on a specified timeframe. NRA will continue to be involved. On a plant level, it is critical to be involved in the Rendering Code of Practice if you are not already. The APPI Committee of NRA will hold another members-only training session on the code this June.
Another regulatory activity at FDA is the Draft Compliance Policy Guide for Salmonella in Animal Feed. NRA, APPI, and other feed industry organizations have fought for more than 20 years to get FDA to approach Salmonella in a more reasonable way. If finalized as drafted, the new policy guide for Salmonella will for the first time codify in regulation the approach of separating food and feed in terms of Salmonella policy, and consider species-specific serotypes when analyzing hazards reasonably likely to occur in feed. However, this progress on species-specific serotypes dictate that the rendering industry’s process verification testing also be more specific to rule out the serotypes of concern. Each plant should review its testing strategy to be in the best position possible to prevent recalls and other challenges that can be avoided.
After relatively good news on the FDA regulation front (compared to how it could have been), it’s much more difficult to find a silver lining in what the Environmental Protection Agency (EPA) is doing. EPA has been a very “activist” agency, promulgating a large number of regulations with no regard for the impact on the economy or jobs. One thing to watch here is the new Congress and how the less regulation-friendly senators and representatives dream up ways to slow down or stop the current EPA administrators. The incoming chairman of the House Energy and Commerce Committee has said he opposes the regulations on greenhouse gases and indicated he would lead efforts to revoke EPA regulations in the next Congress. Even if some of the new EPA regulations are revoked, there will be increasing restrictions on emissions to both air and water.
Senator Mark Warner (D-VA) came up with an excellent idea. He said that in the last 20 years, there have been 130,000 new regulations and the burden is starting to choke business, stifle innovation, and negatively impact the economy. Warner proposes that any agency recommending a new regulation offer to get rid of one already on the books. It would be great if this became a trend.
2. Everyone Wants a Say in Food Safety
Most of the food regulations described above were a result of this continuing trend. An overabundance of cheap, tasty, nutritious, safe food may even be partially responsible for the public abdicating their own role in what can make them sick. Food safety is even morphing to include animal welfare issues and human obesity.
Some want to take all decision power away from American citizens so some food choices are not even offered as if people have no control over what they put in their mouth. But the core of the trend is a few well-documented cases of people getting sick from an avoidable food contamination. With pulse-phase DNA fingerprinting, much enhanced inventory control and traceability, and new regulations, there’s no place to hide. Coupled with a very aware public and fantastic diagnostic tools in health care, there will continue to be great scrutiny on food production as every case is found and publicized.
In all likelihood, the number of mortalities and morbidities in this country are probably at an all-time low, but the expectation is zero. The president, Congress, FDA, state governments, activist groups, and customers all want a piece of this action. Marketers will even use any edge as a wedge to disparage the competition. The best strategy here is to run a very tight ship, improve continuously, and always operate as if you are being watched.
There have been many false starts over the last 30 years. In the early days, sustainable agriculture was promoted by a few dedicated out-of-the-mainstream farmers and encouraged by activists. But those trying to make a living from the land had the image of sustainability requirements becoming a heavy ball and chain dragging them down and making them non-competitive.
Now, the concept of sustainability is becoming much more robust and economically feasible by considering the “triple bottom line” of social responsibility, environmental performance, and profitability (also known as “people, planet, profit”). This is something the rendering industry can live with because renderers have been doing the many important parts of this for over 100 years. Our challenges in the near future will include convincing regulators that regulating renderers out of business would cause great environmental harm, and convincing the rest of animal agriculture that they cannot approach true sustainability without partnering with the rendering industry.
4. Redefining “Natural”
As much as it annoys those who are efficiently producing safe nutritious food in the mainstream, the marketing strategies of “organic,” “natural,” and “local food” are gaining at least niches that garner attention. As soon as a niche gets big enough to be profitable, a big multinational corporation takes notice and targets that market to the chagrin of the activists. The truth is that the world cannot be fed without the multinational corporations, and it cannot be fed with organically grown local food. In any case, there is talk now about redefining “natural.” This means those involved in the niche are competing with each other with differing standards and they want regulation to level the field.
The same thing has happened in the organic world, with 20 years of hammering out regulations, the U.S. Department of Agriculture oversight, and so on. Most of this will be an esoteric exercise among those involved, but there’s some caution for the rendering industry. The best case scenario would be if these marketing niches set their standards to mitigate actual risk from real hazards, but that is probably too much to ask from marketing schemes.
Somewhere in the lore of organic and natural it became popular that animal feed should be “vegetarian.” Nothing scientific about it, it’s not even “natural” for most animals, but it will be a challenge for the rendering industry to not become a target.
5. Humanizing of Pets and Livestock
We are almost all guilty of thinking of our pets as nearly human. They are so cute, they do incredible things, and most of them love us without reservation. This is all fine. In fact, it is mostly good for rendering as the pet food business soars. But people don’t know how to draw boundaries. Many extrapolate the same feelings to chickens, pigs, and cows. Rendering is inextricably linked to the livestock industries as both our suppliers and customers. The animal rights issue is hitting animal agriculture hard and most of the criticism is undeserved. Animal agriculture is searching for new ways to respond and strategic ways to counter multimillion dollar ethics-challenged campaigns against modern production methods. This can affect us all and should be taken seriously.
6. The Digital World Races
Moore’s law describes a long-term trend in the history of computers. The number of transistors that can be placed inexpensively on an integrated circuit has doubled about every two years for more than 50 years. The capabilities of many digital electronic devices are linked to this trend: processing speed, memory capacity, sensors, and the number and size of pixels in digital cameras. This has dramatically increased the usefulness of digital electronics in nearly every segment of the world economy and is a driving force of technological and social change throughout the world.
Rendering may be a straightforward, simple process of logistics, cooking, drying, and marketing, but our world is impacted as much as any other. Newer concepts such as cloud computing, cloud data storage, social networking, and i-everythings are leading to a lack of privacy, insecurity of business secrets, and everybody watching everybody else with no real understanding of what is going on. Almost anything of an electronic nature is obsolete within five years. It will continue to be a struggle to keep up, but many things we don’t think we want (because we can’t even imagine them yet) will make our lives better and help us do our work more efficiently. It will be difficult to ignore all of this and remain relevant ourselves.
7. The Research Crunch
For the last 60 years, the average annual rate of return on public investments in agricultural research and extension has been 48 percent. For most of that time, it has been undervalued, disrespected, and underfunded. The increases in agriculture productivity are surprisingly similar to the digital world described above, but you would never know it listening to the food critics.
The funding situation continues to get worse. Real (inflation-adjusted) federal funding of agricultural research and education programs has declined during the past decade both in absolute real terms and in relative terms to other federal research programs, and to the significance of the food sector. Researchers at land grants and other institutions spend so much time seeking grants to make up the shortfall in state and federal funding that it is hurting productivity.
This trend will lead to more privatization of research. Companies that could make up the difference in funding are more interested in research that helps their own bottom lines by giving them a competitive edge (and rightly so) than they are in giving money to replace public funding that requires full public disclosure of all findings. We will continue to see great technological advances in agriculture, but it may be much less transparent and more often “pay-to-play” than we are used to.
8. For Every Reaction
This section doesn’t describe a trend, but is an observation about the ridiculous nature of most trends.
It seems the bandwagon is always full. During the housing bubble everybody wanted to buy overpriced property. Now, with an abundance of low priced homes, many people with good credit can’t meet the new credit guidelines – another over-reaction to a problem.
Two years ago, the death of the U.S. auto industry was widely assumed, yet recent fiscal quarters broke profitability records. Every spike in fuel prices brings predictions of $5 a gallon gasoline and the end of cheap fuel; but we continue to have cycles in fuel, and every other commodity.
It’s very difficult to be a contrarian investor; even more difficult to be a contrarian in business strategy. However, there could be great opportunity in examining “herd behavior” and figuring out when it’s overdone and about to swing wildly in the other direction.
“Whenever you find yourself on the side of the majority, it’s time to pause and reflect.”
– Mark Twain
The trend prediction here is that trends, bubbles, and fads will continue and most of them will be over-baked at some point, which will create opportunity for the nimble.
9. Global Demand for Everything
The rise of China and India is well-documented, and was showing up on top 10 predictions 15 years ago or more. But now we are hearing daily about Brazil, Turkey, Russia, Colombia, and others.
Since the 1950s, the rendering industry has been among the most aggressive sectors of agriculture in exporting. But, the context is changing. Rather than a few developed nations selling to many developing countries things they can’t produce themselves, we now compete in a global market among many capable industries and economies, in both selling and buying.
The recession stopped or slowed growth in many infrastructures’ production capacity, especially in the United States, and as demand blossoms there will be shortages of many commodities. While we welcome strong markets and high prices for proteins and fats, costs will rise for fuel, concrete, steel, and most everything else we need. Even with good prices, the rendering industry will need to use sharp pencils in business strategies.
10. Economic Recovery
The media seems to love misery, and most reports heard following a great retail holiday season included the caution, “but it likely won’t last.” Nevertheless, there are many signs of economic improvement, not only in the United States, but globally. The world population continues to grow, demand for food products of animal origin continues to increase, and business opportunities in the coming decade will likely be very good. Even though the agriculture sectors have been generally healthy throughout the recession, things could get much better.
The rendering industry is well-positioned to be part of the sustainability movement in many ways, including offering fish meal replacement for aquaculture, closing the loop in animal agriculture by producing usable products from what would be waste, providing feedstock for biofuel, and sequestering carbon in feed ingredients lessening the need for more crop acres.
The rendering industry is well-positioned to cope with new food safety regulations and increased scrutiny of animal feed production. The industry is even positioned well environmentally in spite of the current regulation-happy EPA.
In other words, the world is better off with renderers.
February 2011 RENDER | back