Chain of events: a blog of Food Chain Intelligence

After posting my note yesterday about the need of having a national agenda for the food industry, it was refreshing to hear that at least one Government agency is concerned about food security. The CSIRO has indeed stepped up to the challenge of ensuring that at least part of the resources to this agency are channeled to food security.

In her address to the NPC today, Dr Megan Clark talked about the key role that Australia could play in food production and manufacturing. Australia trades 3 times the food volume required by its current population and many products go to countries that already face limitations on the amount of food that they can produce (e.g. Asia).

An interesting piece of information shared by Dr Clark was that in the next fifty years, the world’s food needs would equal the food production that has been grown, milked, or harvested in the entire human history.

Given that there is no known technology that can double the quantity of the arable land available for food production, we have to look at other, more innovative alternatives. Examples include:

-Genetic engineering to develop agricultural crops that can adapt to the expected climate changes and product quality traits that overcome quality issues arising due to climate change.

-Development of fertilisation technologies and products that lead to decreased use of fertilisers without affecting the output. Preferably, new fertilisers should be less dependant in fossil fuels.

-Better irrigation systems that decrease both water use and the energy required for irrigation.

-Decrease food wastage along the chain and find alternative uses for re-utilisation of food waste. Food waste from households, commercial and industrial sources comprises between 10% and 15% of the 20 million tonnes of waste that ends in landfill in Australia each year [1] [2]. The current recycling rate for food waste is only 10%.

-Improve supply chain efficiencies by adopting innovative distribution systems, sharing of infrastructure, network re-design and the introduction of telematics and computer vehicle routing.

-Invest in water “harvesting” technologies. See example of the Seawater Greenhouse below.

-Introduce renewable energy technology in the agri-food sector.

-Improving glasshouse (protected) production to decrease the energetic needs of these operations and make use of renewable energy sources.

How innovation can change the way we produce food

Take as an example the Seawater Greenhouse concept: it uses seawater to cool and humidify the air of a greenhouse and sunlight to distil fresh water from seawater.

The greenhouse is driven by solar and wind energy. Sunlight is separated into (a) visible light, which passes through the roof and drives photosynthesis;and (b) infrared light, which helps to convert seawater into water vapour.

The structure itself acts as a ‘wind-catcher’, facing into the prevailing daytime wind to assist ventilation. Fans are required under most conditions. The wind-fan combination moves air through the front evaporator and chills the sea water, which then provides cooling for the rear condenser. The condenser in turn generates fresh water.

The overall process is extremely energy efficient. For example, 1 kW of electricity expended on pumping will remove 500 kW of heat. Water can be produced at low energy costs (<3 kWh/cu m).

The development of each greenhouse of this type requires a heavy use of computational fluid dynamics modelling, because the balance of components to get the required rate of humidity, energy and wind varies depending on the climate of each site. Projects of this type have been completed in Oman, the United Arab Emirates and Tenerife (Spain).

The Seawater Greenhouse is an alternative for sustainable provision of water for agriculture in arid, coastal regions. It presents interesting possibilities for Western Australia, which has the longest coastline of any state. However, some inland regions below the sea level could be potentially used. Inland areas present lower relative humidity, which leads to greater potential for water extraction. We have been told that Seawater Greenhouse Ltd has now selected a site in which they will showcase the first Australian Seawater Greenhouse.

PS. Thanks to Gerry McEvilly for alerting me to the Seawater Greenhouse technology.

[1] Oke, M., et al., Waste and recycling in Australia. 2008, Hyder Consulting. A Report Prepared for the Department of Environment, Water, Heritage and the Arts p. 1-141.
[2] Morgan, E., Fruit and vegetable consumption and waste in Australia, VicHealth, Editor. 2008. p. 1-54.

The Agri-Food Skills Conference (24-25 Sept 2009) was a mixed bag of fantastic sessions and discussions with some presentations that frankly, were disappointing. For example, we spent a good hour discussing whether the name VET was attractive or not to the Gen Y (it was not) and how other more sophisticated names could change the mind of potential students. I am sure that some found this topic interesting. Me? I was bored to tears…

One of the most exciting presentations was the “Call to Arms” for a National Food Industry Agenda by Kate Carnell. Kate stated that agribusiness is becoming the “new mining” sector in Australia.

The sector continued its growth despite global recession: the latest Australian Bureau of Statistics figures indicate that agriculture and food manufacturing increased in 3% and 5.4% between June 08 and June 09, respectively. These results are significant at a national economy level, given that food manufacturing represents 21% of the total manufacturing sector in Australia.

The food sector is also the largest employer (315,000 people and half in rural areas) and the largest exporter of value-added products ($24.7 billion in 2008).

The agri-food sector is also a significant contributor to innovation, with an R&D expenditure of $331 million and over 4,000 product launches in 2008 alone. I note that these R&D figures are controversial: while Kate’s figure is consistent with data from OECD and from the ABS, the latest Australian Food Statistics 2008 report from DAFF reckons that R&D expenditure was in the order of $3.8 billion…ummm, in a year that saw so many agri-food lab closures and the decrease of funding for food R&D grants and manufacturing?? Please explain…

Anyway, given the impact of the agri-food industry, it is surprising that no efforts to improve the leadership of the sector have been initiated or even supported by the Government.

Calls for a national food industry agenda are not only made by the AFGC. The Australian Conservation Foundation (ACF), the Public Health Association of Australia and individual submissions to different government forums (including mine) have also raised this issue.

Having a national, whole-of-the-chain food strategy is needed because we face challenges in many diverse and complex areas. For example:

-Food security. David Pimentel, the renowned professor of ecology from Cornell University, states in his book “”Food, Energy and Society” that in 15 years we will need to increase food yields in 33% to feed the projected 8 billion population. Despite the fourfold yield increases per hectare experienced during the Green Revolution and the recent genetic engineering advances, per capita grain yields have been in decline for the past 20 years.
- The downward trend in rural work force and all indications that the trend of population concentrating in cities will continue.
-The current challenges faced in several environmental fronts such as water, arable land, biofuels, the industry’s carbon footprint and food waste generation.
-The concept of peak oil and the vulnerability of our food chains to oil prices and extreme weather events.
-The future conditions for food production as predicted by CSIRO and the IPCC, which will affect growing seasons, outturn quality and yield, evaporation and water losses in irrigation, among other impacts.
-The obesity epidemic.
-The power imbalance in food chains in Australia.
-The emergence of new food safety threats, e.g. methicillin-resistant Staphylococcus aureus in meat products.
-The effect of other health epidemics (e.g. swine flu) in the level of preparedness of the industry to function under pandemic conditions.

Need I say more?

I think it is time to get over the idea that food was a Liberal flag. Unless this Labor Government starts to get interested in how food is produced, manufactured and distributed within Australia and to the world, this country will miss huge opportunities and potentially, food self-sufficiency. The New Zealand Government has recognised the potential of the food industry by earmarking $190 million for the new Primary Growth Partnership. This puts to shame the DAFF four-year, $35 million Regional Food Producers Innovation and Productivity Program (RFPIPP). Let’s add the very proactive role of the Government in decreasing R&D centres in primary production. Overall, the Australian Government could do better for the food industry.

The Government has established the Commonwealth Commercialisation Institute. Public consultation was open for a VERY brief period (14 Aug-4 Sept) and in a constricted manner (the ‘consultation’ was consistent on filling a form with pre-made questions).

It seems to be that the bulk of the opinions is being sourced from selected research organisations, industry players, the financial sector and State and Territory Governments.

Anyway, the new Institute should “bridge the gap between research and the successful commercialisation of new products and services”. We would hope that this initiative fills the gaps left in the proposed new R&D Tax incentive.

A paragraph that I thought was a bit odd in the previously discussed R&D Tax paper is “Core R&D activities are systematic, investigative and experimental (SIE), of which experimental is the most significant element. SIE activities involve innovation or high levels of technical risk..”

I always thought it was the other way around: innovation involves R&D and normally, high levels of risk. But not necessarily technical. In fact, the most common risk (and the greatest barrier) is the financial risk. Hopefully the new Institute will address this aspect.

For more information click here.

The Australian Government released today a consultation paper for the new R&D Tax Credit.

As you may remember, in its response to the Venturous Australia report the Government announced the new R&D tax strategy. The consultation paper expands on how the Government proposes to execute the new Tax Credit. In summary:

1) The proposal covers a non-refundable 40% Standard R&D Tax Credit (for companies with a turnover over $20 million), and a 45% Refundable R&D Tax Credit (for companies with a turnover of less than $20 million).

2) Companies will no longer need to distinguish between their base and incremental expenditure on R&D in working out their claim. It is the location of R&D activity in Australia that will count under the new scheme, rather than where the resulting intellectual property (IP) rights reside.

3) Both Australian-owned or foreign-owned companies are elegible, as long as they are incorporated in Australia (by company read ‘company group’ ).

4) The Government does not have a defined position on whether allowing a company to claim expenditure in relation to R&D to be conducted overseas (provided that some R&D has been undertaken in Australian first) or simply support R&D conducted in Australia without exceptions.

5) The proposed R&D Tax will continue the ‘on own behalf’ rule: the entity claiming the R&D tax concession is that who:
– bears the financial risk associated with a R&D project;
– has control over the R&D project; and
– effectively owns the project results.

6) The consultation paper presents a list of ‘questionable’ activities that have been covered in the past by other R&D support schemes.

These include:market research, testing and promotion;quality control;’cosmetic’ modification (as distinct from true new product development); management/efficiency studies;research in social sciences, arts or humanities;demonstration of commercial viability, tooling-up and trial runs;routine collection of information;commercial, legal and administrative aspects of patenting or licensing; activities associated with regulatory compliance;and technology ‘cloning’ (the reproduction of a commercial product or process by a physical examination of an existing system or from plans, blueprints, detailed specifications or publicly available information).

7) In excluding the aforementioned activities, the Government is tightening the definition of R&D. Eligible core R&D activity is defined as systematic, investigative and experimental activity that:

(a) involves both innovation and high levels of technical risk; and
(b) is for the purpose of producing new knowledge or improvements.

8 ) By excluding any commercial activities associated to closing the innovation circle, the Government establishes that the incentive will primarily go to core R&D.

9) Supporting or ‘non-core’ R&D is not defined in the consultation paper, but the intention is to decrease claims made on this category. Several strategies are proposed, such as capping this expenditure, attracting a lower rate of assistance and others.

10) The final question raised in the paper is how software development should be treated. In-house developed software in the current Tax concession is not covered, because the company has to demonstrate multiple sales of the software in question to be included.

The entire consultation paper can be found here.

Interested parties are invited to comment on the consultation paper, before 26 Oct 2009. Consultation sessions will be run from 28 Sept to 19 Oct. The specific dates can be found here.

In his 3rd address to the National Press Club, Prof. Lambeck talked about increasing Australia’s presence in international science initiatives. Prof. Lambeck was adamant about the importance of accessing ideas and technology developed overseas, but he was even more vehement about the need to develop Australian-based science & technology (ST) and adapt innovations created elsewhere.

While there are public investments currently dedicated to the Future Fellowships program (designed to attract 200 national and international mid-career researchers), Prof Lambeck also referred to the current gaps of funding for international collaboration initiatives, particularly in the context of Australia’s role to help solve global challenges.

I agree with Prof. Lambeck in that innovation does not mean ‘buying’ off-the-shelf technology. The specific and pressing needs of Australia such as environmental issues, biosecurity and others require much more than passively waiting for new developments created elsewhere to flow to the country and then hoping that someone will undertake the adaptation of such technologies. Instead, Prof. Lambeck advocates for the use of S&T to develop new knowledge and building capability, with emphasis in niche areas where we can be competitive.

I also agree in that it is very difficult to find a clear link between R&D expenditure and national prosperity. For example, I have studied the link between innovation and a firm’s ability to increase its competitiveness in the food industry. In this area, European studies (see Grunert et al., 1995) failed in finding a link between innovation activity and business performance in the European food industry. These inconclusive results may be attributed to the concept of innovation itself, which extends beyond R&D to encompass a wide range of technological and business activities. Adding to this complexity, food chains involve various players, including farmers, manufacturers, retailers and suppliers of various goods and services such as information technology, ingredients, transport, storage and packaging.

Where I found myself disagreeing with Prof. Lambeck’s views was in the importance of having a national innovation system that is congruent with national priorities as well as international priorities.

Commercialisation is one of such drivers: while I recognize the need to fund basic research and provide opportunities for postgraduate science training overseas, I believe that closing the circle of innovation in Australia (which by definition involves commercialization) is far more important. The reason is simple: in 2007, private expenditure in R&D in Australia surpassed $12 billion. In the same year, the Government committed $6.5 billion to innovation programs. Therefore, without appropriate mechanisms to ensure enterprise-driven R&D, our national R&D system would collapse.

So it was somewhat disappointing to hear that Prof. Lambeck had not given much thought to the role of commercialization in the Q&A session.Is it, perhaps, that the AAS does not see science with a commercial purpose as part of their sphere of influence? I hope not. We need all ST organizations working in harmony and to me that includes recognizing the value of innovation as a tool for competitiveness.

I also gave some though to one question that referred to the role of internet communications as a replacement to face-to-face contact and the need of decreasing travel to decrease costs and carbon footprints.

This is an old argument. My view on this is that virtual networks can be helpful and can decrease travel miles, but there are several cases where first-hand experience and direct communication cannot be replaced. Particularly in science and technology, where the concepts discussed can be pretty difficult to grasp and reading a report or a book may not cut it. I have experienced in the past unnecessary travelling where the items discussed could have been dealt with at a distance. But some of the best intellectual exchanges I have had with people have happened in face-to-face meetings, some pretty good ideas have been written in a napkin over a meal or over a beer at the end of the day. I suspect I am not alone on this

Reference:
Grunert, K., Harmsen, H., Meulenberg, M., Kuiper, E., Ottowitz, T., Declerk, F., Traill, B. and Göransson, G. (1995), “A framework for analysing innovation in the food sector. Centre for Market Surveillance, Research and Strategy in the Food Sector”, MAPP Working Paper 33 p.