Terhi Latvala is currently working at the MTT, Agrifood Research Finland, as a Principal Research Scientist. She received her PhD in Agricultural Economics concerning “Information, risk and trust in the food chain: Ex-ante valuation of consumer willingness to pay for beef quality information using the contingent valuation method”. Her expertise in the field of research covers consumer-orientated food chain, interaction of producers and consumers in the food chain, and quality and responsibility issues in food chain. Previously she has worked as a Agricultural Economist for Pellervo economic research institute. Currently she is a member of several boards and associations including: Editorial Review Board of the Journal of International Food & Agribusiness Marketing, Nordic Association of Agricultural Scientists (NJF) and European Association of Agricultural Economists (EAAE).

Can you envision major wild cards (positive or negative) that may occur in the next 20 years?

In a sense, agriculture and food industry is moving rather slowly onwards, so very rarely the changes are occurring fast or at least I can’t say that sudden and immediate significant “shock waves” are typical for the field. However, on the other hand, the changes can still be surprising.

Perhaps this is more of a weak signal, but I’d see wild card in the development of how population is growing and at the same time the consumption of food stuff is increasing. The wild card here is the transition from the old state of overproduction to a situation where all land fields are in use, but the demand of food stuff continues growing. In a sense, it is a “slow wild card” that is headed little by little. Although the progress towards this situation may seem slow, I would still consider it potential within the next 20 years. Or at least the influences are recognizable, although its realization won’t be full.

Another negative wild card would definitely be some sort of from foodstuff to human transmitted disease. This could actually happen very fast and suddenly. There have been several signals for this type of wild card, but it would be major, if the disease transmitted through foodstuff, through something we eat.

Another a bit more complicated wild card would be that volatility of market prices e.g. in food prices, is going to either increase or stay as a permanent phenomenon.

Obviously technological innovations are always respectable wild cards, and in my opinion a true wild card would such an innovation that would make the entire food chain function in transparent way. In other words, technological improvements that truly make the food chain (from inter alia farmer to manufacturer to trader to customer) transparent. This would naturally, have to be realized globally as today no nation is able to provide such “system of total transparency” by itself and still keep up with profitable trade.

- Constancy of price volatility in food market

- Infectious disease transmitted through (animal based) food stuff to humans

- System of total transparency

- End of arable land

What will be the dramatic impact of the wild cards you mentioned, and how it should be addressed by future research; in which field?

Well, firstly the system improving the transparency of food chain would influence markets in several ways. For instance, at the moment the markets are functioning on the basis of prices, or low prices. Broadly, this sort of a wild card would effect on the manufacturing process of food stuff. For instance, responsibility would be emphasized here. If we are genuinely able to create market where the qualities of products (food stuff in this case) are clear and available when the item is purchased, people can choose products on the basis of certain quality criteria. Of course we have this types of systems such as EAN codes, which collect information to different data banks, but the technological innovation that it would require and is still lacking is a different kind of system that could work with different kinds of databases.

Furthermore, about the wild card concerning the end of arable land and global demand of food stuff would change particularly agriculture and food industry as well as the appreciation of the field. In this way, although it cannot yet be seen happening, yet it is not necessarily only a negative wild card, and it also gives hope for this field [agriculture and food industry]. It would be significant also here [in Finland], as we have plenty of arable land, which is not cultivated because it is not profitable enough. It would mean a stronger transition to global markets instead of functioning locally and regionally.

The permanent food price volatility would mean in the future that we permanently have this sort of price fluctuation. In the future this would mean that without a proper system or safety net for countries that cannot afford to buy food in the period of high prices the consequences could be severe particularly the poor, increasing among other things inequality and famines.

Well, if I may specify the needed fields for research in themes, they are definitely price volatility and transparency that I consider the most important for the current research and also in the EU research. Supposedly, this would require research work in multiple fields. For instance, we already have very fast alarm system for tracking animal diseases and their development, which functions globally. However, if we consider the price and quality part, we require more research in technology to create a proper application for how the information is shared. This would require very efficient composition of quality system. In a way, the price volatility and improving its transparency is equally an improvement of the quality. This would also require more openness and better statistics. On the other hand, immaterial rights are a question here; who owns and is allowed to use the information. In addition, as the others but also the food price volatility –situation would need serious changes in policies.

On the other hand, if we think of increase in global demand of foodstuff and population growth, instead of only trying to improve the cultivated plants and increasing the production, we could concentrate on improving the bio masses and minor flows that are developed in the food industry. So, in the end, I would emphasize in the research improving the transparency and its supporting technological solution as well as consumer information and its immaterial rights (; what information to whom and who is allowed to own, give and use the info).

What are the weak signals that (if detected) could hint at a growing likelihood (or imminent realization) of the wild cards that you mentioned?

Well, basically we already have seen examples of the price volatility, but its future consistency is the wild card here. First, proper weak signal to indicate this sort of development was the peak in [food] prices. Basically, this is a symptom of the development when global demand is growing the storages are diminishing, which easily causes influence in prices. In case, the demand is much higher after 20 years than now, it is safe to assume that the effect on food prices is the same then. However, there are several other weak signals indicating the continuous trend of the price volatility in food prices. For instance, if we take an example of the grain price peak, which was due to several bad crop seasons, which also were seen further in the whole chain as increased prices of animal feed-stuff and increase in input and their prices. In the grain markets countries began to overreact to crop forecasts, which made market very fragile. When the prices went up all the time, even the slightest changes influenced strongly to prices. So, all these small signals influenced in the grain markets in such way that year by year the storages of the biggest countries in agricultural business continued to decline. There was over a 5 year period of continuous decline, and eventually we ended up in the situation that there were grain left only for 54 days for the entire world. This meant that if land was cultivated today, it would take 54 days to get the next crop. So, this 54 days was the point where countries begin to act nervous. There are probably 5 significantly big grain exporters in the world, and even if one of them is having problems, it will fast become significant problem for the global market prices. Another signal here that is widely argued is the area transformed from food production to bioenergy production. I suppose, this is a huge deal for example in USA with maize cropping, but in the EU the bioenergy production is somewhat 1.6%, which does not influence greatly our markets. Anyway, when the times became more critical, several exporting countries implemented embargos or export bans, or as for instance Argentina, who imposed a levy, so that farmers needed to pay taxes on exported grain. Obviously, all of these increases prices from before. Moreover, of course lowering the food prices happened by increasing production. So, basically at the moment it is possible to increase production, because we have enough arable land. However, if the food price continues to be volatile in such strong way, the effects will become harsher particularly to the countries that are not able to buy food when the prices are high.

peak in prices

bad crop seasons

increase in prices of animal feed-stuff

increased cultivation of non-food crops

national policies such as embargos for exporting foodstuff

In the light of the previously mentioned weak signals, it is quite obvious what the weak signals are for the “End of arable land” –wild card: basically all the weak signals I mentioned above. In addition, as I also mentioned in the beginning, the future scenario here would be that all the field “surplus” we have in the EU now, because of profitability, would be in use. So, of course, if the surplus field will be in use, this resource is long gone in the price volatility –situation. It is an interesting thought what would be the reaction [of countries, particularly major exporters] in the 54 days –point in this scenario. Speaking of the grain prices, the systems and policies already existed, but when the prices rose, exporters began to implement embargos. In other words, they [exporters] kind of began to change their policies, which radically influenced in the world food prices.

continuous growth of world population

continuous and strong global demand of foodstuff

overreaction to forecast for crops

changes in policies

continuous reductions in food storages (of the major exporting countries)

Well, then there has been a lot of discussion about the transparency or more like the of transparency in the food chain. I would say the most significant weak signal here is funding. There are plenty of ongoing as well as starting research projects that on way or the other are trying to develop the transparency in food chain. For instance, the very first project funded by the EU was called “Transparent food”, which aimed to map the area of research that is needed concerning this issue.

debate on the methods needed

funding

ongoing and future research programmes on international and national level

As mentioned in the beginning, there has been several weak signals indication the development of foodstuff-to-human transmitted diseases. For instance, there has been bird flu or the latest epidemic, swine influenza where animals and humans suffered from the same disease. Luckily, e.g. the bird flu was not a disease transmitting from foodstuff to humans. However, there was a case during the swine influenza where pigs had caught the disease from human, so it was not only an animal-to-human but also human-to-animal transmitted disease. All these indicate the possibility of this wild card.

You mentioned more than one wild card or weak signal, can you identify any causal relationships between them?

I suppose, actually that this quite obvious now after our discussion. Particularly the peak in prices ‑signal and the transparency -card have already caused discussion even in political level, since the food chain is argued to be transparent also as to prices. Of course this was due to the development where the end product prices finally came down, the input prices were still high.

Anyway, also the card concerning the ‘End of arable land’ is very much connected with the food price volatility. In the end, actually all of these wild cards and weak signals seem to be connected by information. In other word, each weak signal indicates that there is an insufficiency in the information chain and in that who and how shares the information. For example the wild card concerning food consumption and the arable land would require follow-up systems to monitor and foresee the storages. Perhaps the common factor here is chain information; if it can be improved, so that it functions better and more transparently, it immediately influences other factors as well.

What is your opinion on the concept of wild cards and weak signals? What methods/processes for their identification do you consider the most suitable?

The concepts “wild cards” and “weak signals” in my opinion as a researcher [not a foresight specialist] are good, but in the end the interpretation and its subjectivity should be accounted somewhat better; for example are wild cards always sudden or could they be in slow motion but eventually accounting significant changes. I also wondered the “weak” word as I am not sure whether it is the best word to describe the concept “weak signal”.