Big Agri and the foodie feedback loop
Chicago
BIG Agriculture is stuck in a foodie feedback loop. Chipotle Mexican Grill's decision to phase out genetically modified foods, Panera Bread's ban on 150 artificial ingredients and a recent move by McDonald's to stop buying chickens fed with human antibiotics are part of the same trend. Consumers are revolting against industrial agriculture and demanding a return to more authentic fare. There's the risk of a snowball effect as others follow suit.
The backlash is real, but intellectually muddled. While scientists worry that fattening livestock with human medicines poses risks to health, genetically modified (GM) foods are widely considered safe. Artificial preservatives might be hard to pronounce, but they also cut food waste and help prevent food poisoning - benefits that often get lost in the debate over what counts as "wholesome".
Food choices nevertheless often hinge more on social values and politics than science, and it's hard to fault companies for responding to consumer tastes. The ripple effects are being felt across the food chain. Tyson Foods, the biggest US poultry producer, said it would stop using human antibiotics a few weeks after McDonald's did. It will doubtless find ways to pass on the higher costs to customers.
Among the perceived worst offenders, Monsanto arguably would have a harder time finding alternatives if the backlash gets severe. The US$57 billion seed company's rich trading multiple of about 25 times forecast earnings implies strong demand for its genetically engineered seeds as farmers race to feed a growing, more affluent population.
Monsanto wants to diversify, evidenced by its US$45 billion offer to buy Swiss pesticide maker Syngenta, which was declined. Even if a deal can't be struck, however, Monsanto probably has less to fear from the foodie backlash than recent headlines suggest. Most genetically modified crops harvested in the United States are used to feed animals and make ethanol. Even trendy Chipotle has stopped short of requiring that the pork used in its tacos be free of any genetically modified organism (GMO).
New and better products also could help Monsanto. The first wave of herbicide-resistant crops gave the impression the company was only really interested in genetic modification as a means to sell more weed killer. If the foodie revolution really is about values, new drought and flood-resistant seeds that help farmers cope with climate change represent a chance to reset the debate.
