Projects Funded for Ben Gordon
Evolution of Supply Chains to Implement Innovation –The Case of Pre-Packaged Salads
David Zilberman, Madeline Schatzberg, and Ben Gordon
1. To expand a conceptual framework for a design of supply chains to include dynamic considerations and diffusion over space and time.
2. To develop a conceptual framework to understand the alternative route that is employed by researchers to produce cultured meats.
3. To develop a conceptual framework to assess the implications of different strategies on design of supply chains for production and distribution of the meat products and for procurement of feedstock.
4. To assess the potential economic and environmental impact of alternative cultured meats on various sectors of agriculture, consumers, as well as the environment. This analysis will be conceptual.
5. To consider how alternative policies may affect the evolution of the industry.
6. To numerically provide orders of magnitude estimates of the impacts under alternative scenarios.
Agrifood systems consist of multiple processes where feedstock (agricultural products) are transformed to final products. Modern agriculture is characterized by new technological innovations that lead to development of new supply chains, that may result in new or modified product or services and specialized trading arrangements – for example, modern livestock processing technologies resulted in transition towards contracting or vertical integration (Zilberman et al. 2017). Du et al. (2016) develop a static conceptual framework to determine the capacity of the supply chain in terms of total output as well as the reliance on vertical integration and contracting under uncertainty. Zilberman et al. (2017) present direction to expansion of the analysis to incorporate multi-processes supply chains and credit considerations. Better understanding of supply chains requires analysis of its dynamic, evolution of investment in processing versus feedstock production, and spread over space and time. The first element of the proposal will provide this expansion, using an optimal control framework that recognizes variation over space and time (see for example Xabadia et al. 2006). We are interested in assessing the conditions that will determine investment in establishment of the original technology versus investment in building the feedstock capacity, and expanding the marketing network over time.
The main effort in this project is to use this framework to understand and to compare the evolution of an alternative approach to produce animal-free meat. There are different approaches to production of these meat products. For example, Memphis Meats Inc. is developing technology to grow meat from self-reproducing animal cells. On the other hand, Impossible Foods is based on patents of formulating plant-derived protein into a meat substitute product based on capacity to convert plant-based materials into a meat-like protein texture. Other companies produce egg white proteins (Clara Foods) and dairy proteins made through fermentation (Perfect Day). Working with Lichun Huang, we identified more than 30 companies working in this space with research support in the hundreds of millions of dollars. Interviews with Pat Brown, from Impossible Foods and others suggest that the basic premise of the industry is that alternative strategies will produce products equivalent to traditional meat products (beefs, poultry, pork, etc.) in terms of taste, texture, and nutritional content in an environmentally sustainable manner. In principle, these products are likely to have higher input use efficiency in converting feedstock to a final product and reduce greenhouse gases (because they wouldn’t require the energy of all the life activities of the animals). However, the diffusion will be gradual and they will result in specific requirements for feedstocks that will be grains, beans, vegetables, spices, etc. Farming, food processing, and cooking will be more integrated. We will develop a report on all the potential avenues of the evolution of the industry and then a conceptual framework to assess some of the implications. Under different assumptions, we will look at the potential supply chains that will be involved, the potential markets, and demand for agricultural feedstock in different locations and different conditions.
In our analysis, we intend to also consider some of the policy issues. Regulations of biotechnology can affect the speed of the evolution of the industry, as well as regulation of climate change. Food safety regulation and animal welfare regulations may play a major role in the future of the industry, as well as a variety of protective measures by different countries with strong livestock sectors. We envision conceptual analysis on some of the major implications that would allow quantification based on the data available from the industry as well as from scientists at UC Davis as well as other locations. But this is a first effort that will attempt to identify alternative scenarios that will be shaped by policies.
The movement towards cultured meats is in the nexus of modern biotechnology and logistics, and concerns about climate change, food security, and animal welfare. Much of the research and development in this area will be done in California. Once this sector evolves, it will have a significant impact on the California livestock sector. This sector may change the structure of agriculture and the agri-food sector, and it’s important to understand the possible evolutionary path of the structure of agri-business and their implications. Policymakers and the academic community have been challenged to understand and analyze the growing role of contracts and vertical integration in agriculture, and understanding this evolution, especially in the context of culture meat, is important. Identifying some of the positive and negative side effects of cultured meat and assessing policies to address them is another important challenge.
Using Micro Geoengineering for Adaptation to Climate Change in Agriculture
David Zilberman, Ben Gordon, Itai Trilnick, and Scott Kaplan
Specific Objectives of the Project
1. To develop a conceptual framework for assessing the value of geoengineering techniques, in this case modifying weather on the level of a tree crop, to adapt to the effects of climate change.
2. To apply the use of kaolin clay to enhance the chill portions necessary for adequate bloom out, which ultimately drives yield.
3. Conduct a literature review and interview Farm Advisors to obtain quantitative parameters for current technology practices and allocation of inputs in response to shorter chill portions.
4. To assess the economic benefit of this technology under various climate scenarios in the Central Valley of California.
Summary of Results
Climate change is likely to increase temperatures in California in a manner that will affect crop productivity. Already we have seen increases in winter temperatures that reduce chill factor, which is essential for blooming of fruits and nuts. Insufficient chill can result in drastic impacts on yield. One approach to deal with it is through micro-climate engineering, namely lowering the temperature around the tree during its dormancy before blooming. Farmers and extension developed a technique where they spray orchards with a clay-like substance (kaolin) to reduce solar radiation. This micro-climate engineering technique is estimated to reduce losses.
Our project developed a methodology to predict the impact of this adaptation technique applied to the case of pistachios. One of the challenges is that temperature throughout a season is a random variable and varies over space and location. Working with agronomists, we obtained estimates of the costs and impacts of kaolin application under different scenarios, and then estimated the future expected discounted gains from application of kaolin to pistachios over various time periods. Our analysis takes into account the growth, demand and supply of pistachios, and possible changes in acreage as part of adaptation to climate change.
Our results suggest that in 2030, expected annualized profit gains from micro-climate engineering in California pistachios is between $214 to 612 million, depending on the growth in demand and the extent of adaptation. But consumers gain much more, $643 million to $1.84 billion, through lower prices and increased consumption. These impacts are significant given that the revenue of the industry is between $1 to $2 billion annually. Expected gains are higher if variability is increasing, and the early results suggest that micro-climate engineering may benefit other crops and address other sources of losses as well.