Homeland Security Watch

News and analysis of critical issues in homeland security

August 5, 2010

Food security: Do economies of scale suppress risk resilience?

Filed under: Biosecurity,Catastrophes,Strategy — by Philip J. Palin on August 5, 2010

In responding to catastrophe – an 8.0 and above earthquake, a thousand year flood, a cascading  biological contagion, etc.  –  right after providing potable water is the problem of food distribution.  In some of Lee Clarke’s worst case scenarios there is a more basic problem of maintaining food production.

This week both of Australia’s leading political parties added food security to their list of policy priorities for the current national election. One member of the Australian Senate writes, “The world has embarked on a dangerous era of food insecurity and imperialism which will fuel conflict and famine if it is ignored. Australia is not immune. Land and water should be treated as strategic resources by us as they are by many in the world.”

The Department of Homeland Security explains that  Homeland Security Presidential Directive 9, “establishes a national policy to defend the agriculture and food system against terrorist attacks, major disasters, and other emergencies. America’s agriculture and food system is an extensive, open, interconnected, diverse, and complex structure providing potential targets for terrorist attacks. U.S. agriculture and food systems are vulnerable to disease, pest, or poisonous agents that occur naturally, are unintentionally introduced, or are intentionally delivered by acts of terrorism.”

Given the obvious importance of food, are there vulnerabilities in the current food system worth particular attention?  Well, as a possibility, help me refine this hypothesis: Economies of scale suppress risk resilience.  

The food system is one context where this hypothesis might be tested. Over the last half century increasing scale and specialization of production and processing have significantly reduced the consumers cost of food as a proportion of overall income.  The source of this savings has, however, also substantially reduced the number, diversity, and  distribution of producers and processors. This narrows the ability of the food system to bounce back from a catastrophic event. 

If this is true for the food system might it also be the case for other supply chains?

I am the son and grandson of grocers.  I grew up working on the farms of downstate Illinois.  In my lifetime I have seen the food system move from what now seems simple, to complicated, to a sort of complexity and – if a catastrophe would occur – to potentially teetering on the edge of chaos.

Some of my earliest memories are of farmers backing their trucks up to grandpa’s slaughterhouse.   The hogs and cattle — rarely some sheep — were off-loaded into the two dozen wooden stalls attached to the white cinder-block slaughterhouse.

Monday through Saturday nearly everyone listened to the Dick Herm Report on WBYS radio (We Bore You Stiff, the older kids called it).   With the bark of an auctioneer Herm would give the regional and Chicago prices for agricultural commodities. Grandpa paid a few cents less per pound than the Peoria market. For some bigger producers it made financial sense to get more per pound by trucking their livestock to Peoria or beyond. But for others, given the cost of time and gasoline, one of several nearby receiving yards or processing plants did fine.  For most farmers livestock was only one of several products.  When I chored with my friend Jeff we would slop the hogs, feed the chickens, hay the beef cattle, weed the beans, and give the dairy cows grain to eat while we milked them.

My dad’s grocery stores bought dressed hogs from my grandpa’s (and other’s) slaughterhouse.  At each grocery store a butcher would saw the carcass into various cuts of pork and grind the sausage. 

Cause and effect was knowable even by a six year-old.  The livestock were born, raised, slaughtered, packaged, sold, and eaten all within several miles of each other. I knew the farmer, processor, butcher, and buyer. The production, processing, and distribution nodes of the food system — at least in downstate Illinois — were thick and overlapping.  The supply chain was densely redundant, complicated and in some ways complex.

Above, the Cynefin Framework

Today pork production — and most agricultural production – is much more highly concentrated.  In 1969, according to the US Department of Agriculture, 644,882 farms raised 89,296,278 swine.  By 1992 186,627 production operations sold 109,775,439 pigs and hogs.  That’s a shift of 138 head per farm to 588 per farm.  In 2002 the number of production sites had fallen by more than half to 78,895.  In 2002 over half of all swine were raised on “farms” with over 5000 head each.

The geographic range of pork production has also narrowed.  Take out Northern Iowa and Eastern North Carolina and very few of us will have ham for Christmas or even a ham sandwich for lunch.  Pork processing is even more concentrated than production.   Many food products have experienced similar consolidation and concentration.

Today, compared to my early days, the supply chain for food is much more streamlined, specialized, and price efficient.  In 2004 a hog producer with 1000 head spent about $40 per hundredweight.  The same year raising a hog farrow-to-finish cost the producer with fewer than 100 head almost $80 per hundredweight. (See Hogs Lead Way in Transformation)  In 1969 the retail cost of pork chops was about $1.39 per pound.  This week many stores are selling assorted pork chops at $2.49 per pound. At least one regional chain is advertising a “Big Sale” with pork chops at $1.99 per pound. Given forty-one years of inflation that is an extraordinary bargain.

Economies of scale in production, processing, and distribution have contributed to price containment of pork and other foodstuffs.  This is a real benefit.  Is there a cost?

I just came back from several days visiting my parents. Most of the 400 acre  family farms that I knew as a kid have been consolidated.  Except for acreage owned by the Amish and a few small organic operations, corn, soybeans and cattle are what you see again and again stretching over the horizon (and there are long horizons in central Illinois).

Dad has sold his grocery stores and grandpa’s slaughterhouse closed twenty years ago. When I asked the local market’s meat manager (no longer a butcher) about where his meat comes from he laughed and said, “Off the truck, before that who knows.”  Because the supply chain originates far away and draws on unknown sources there is an impression of complexity.   And across these attenuated supply chains there are complex characteristics: lots of filters, need for pattern recognition, and some aspects of adaptive response.

But is the food system “complex” as defined by the Cynefin framework?  The crowd sourcing of many more independent producers and processors has been reduced and standardized.  Open markets have been replaced with much more predictable production contracts.  The entire system has been reengineered and squeezed to maximize every penny-per-pound.  In some ways, with fewer participants and fewer relationships the food system is actually much simpler than four or five decades ago.

Toward the end of his brief video overview of the Cynefin framework David Snowden warns, “The boundary between simple and chaotic is different from the other boundaries…  If you start to believe that things are  simple — you start to believe that they’re ordered, you start to believe in your own myths, you start to believe that past success means you are invulnerable to future failure — you effectively move to the complacent zone which is the boundary between simple and chaotic and you fall over the edge in a crisis… and recovery is very, very expensive.”

Have economies of scale so simplified the food system that we can now sense it on the very edge of chaos?

(Editorial Note:  Last week John Comiskey encouraged me to apply Cynefin and/or Tara to a prospective problem.  He suggested a cyber threat.  I decided to focus on a network — the food system — that I understand better than I understand most cyber networks.  But it seems to me these issues of consolidation, centralization, simplification, and such might have analogies to the cyber domain.  For now, though, that is only a hypothesis.)

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8 Comments »

Comment by William R. Cumming

August 5, 2010 @ 2:30 am

Absolutely wonderful post. Until we have a single organization that understands the food chain, both security and supply, and that seems to exclude the highly penetrated Department of Agriculture and Food and Drug Administration by corporate lobbyists the vulnerability grows daily.

Where I live in the Norther Neck of Virginia in 1940 and including the so-called Middle Pennisula of VA there were over 100 vegetable canning ops of commercial scale, providing not just food but employment. Now there are NONE, NADA, ZERO. But some signes of local growth of local farm markets. Great time of year wit cheap fresh sweet corn, tomatoes, Lopes! My front 8 acres is rented out and filled at the moment with field corn. They let it dry out completely and grind up for feed and other purposes.

Comment by Dan O'Connor

August 5, 2010 @ 8:31 am

Great post Phil;

I agree completely that open markets have been replaced with much more predictable, effective, and efficient production contracts. Our food enterprise is truly a modern marvel! The volume of food created and distributed is massive. The entire food system has been engineered, reengineered, highly automated, and margins of error reduced to maximize yield. In some ways, with fewer participants and fewer relationships the food system is actually much simpler than four or five decades ago. But is it truly simpler or a bit of an illusion? In our need or drive for efficiency and inexpensive food, have we have created a vulnerability?

Our just in time logistics train, a product of Japanese innovation and consolidation for business sake appears to be potential Achilles heel. Is it too big to fail? Is our system so efficient, so centralized, and so automated that it is incapable of adaptation and resilience? Our food enterprise is a very fragile complex adaptive system and has a veneer of depth and resilience. How far our food travels before reaching our plates is a reflection of our way of life and has a significant effect on our environment. It is estimated that the average meal in the U.S. has traveled approximately 1,500 miles from the farm to the plate. That’s an average. I imagine it being slightly shorter in the production months of summer and longer in the cooler, winter months.

This transportation requirement means the consumption of fossil and/or non renewable fuels, which impact our carbon footprint, congestion, concentration, and need for consolidated distribution centers. This is in addition to the fuels used in food processing, and the fuels involved in raising livestock and growing crops. Food production is very energy intensive. Some estimates suggest that as much as 10-15% of our annual energy consumption is used in the growth, manufacturing, and distribution of food. Also add in the petrochemicals for fertilizers.

With only 5 percent of the world population, the U.S. consumes nearly 12 percent of the globe’s annual synthetic nitrogen fertilizer production. And we’re producing less and less of it at home — meaning that, as with petroleum, we’re increasingly dependent on other nations for this key crop nutrient. In addition count all the water necessary to irrigate lands never intended to be farm land, the nitrogen infused runoff, and large amounts of antibiotics needed to sustain our food requirements and viola; complexity!

Excellent reads like The Omnivores Dilemma, Food Inc, and/or Fast Food Nation offer much in the way of explaining the state of our food supply and consolidation issues that keep food moving but also demonstrate that lack of decentralization creates a National vulnerability.

The lack of depth and resilience in the food chain has a variety of causes. The previously mentioned uber efficiency, just in time logistics capability and capacity, transport energy, production energy, and yield per acre models all differ geographically. Also, the introduction of southern hemisphere production (NAFTA) and the economics of commodities and foodstuffs all affect the balance.

Food importation is up across the board, meaning additional transportation costs, increased distances, potential conflicts with border hostilities, and external distribution centers exist and have some degree of impact on the bottom line.

So while it is in our best interest to attempt on some level to reach a degree of energy independence, so is it in quest for food independence. While it’s a bit of a pipe dream to decentralize and distribute food nodes across the Nation, I think there has to be a recognition that as we identify our vulnerabilities and areas of reduced resilience we have to weigh Phil’s point;

“Given the obvious importance of food, are there vulnerabilities in the current food system worth particular attention? Well, as a possibility, help me refine this hypothesis: Economies of scale suppress risk resilience”

Our ability to bounce back and absorb an interruption coupled with our lack of diversity, lack of resilient communities, and self sustaining farm areas (http://www.polyfacefarms.com/principles.aspx) does in fact create, in my view, a security vulnerability and risk for disruption. The millions, if not billions of tonnage moved annually is a reflection of our automated, logistical capability. Does our now inherent capability also paradoxically create vulnerability and security issues? I think so. Our efficiency and consolidation is both a blessing and curse and warrants some discussion as to its relevance and importance in the homeland security encyclopedia of tasks.

Great post Phil and thanks for sharing.

Comment by 66

August 5, 2010 @ 9:29 am

“These guys from the Joint Chiefs of Staff looked at this and we began talking about developing it as a first of a network of national security sustainability sites, I mean, how cool could that be?” http://www.worldchanging.com/archives/011065.html

Eat better and truck less.

Comment by William R. Cumming

August 5, 2010 @ 9:52 am

I thought just in time logistics was an AMerican concept adopted first by Japanese? DEMING?

Comment by Dan O'Connor

August 5, 2010 @ 10:52 am

Bill;

I have never heard it presented as a black and white/ action consequence like that. I’ve read a good bit about Deming and his work. Deming was an expert in statistical analysis and in quality control techniques. His ideas had revolutionary impact on Japan post WW II. He taught top management how to improve design (and thus service), product quality, testing and sales (the last through global markets) through a variety of methods, including the application of statistical analysis.

Deming’s methods were more popularly known “Total Quality Management” or “TQM,” essentially, giving birth to a long list of Japanese methods and processes used in post-WWII Japan. They are also well known today. The TOYOTA PRODUCTION SYSTEM is perhaps a synthesis of this and other ideas, concepts, and models. The USMC went through a TQM phase in the late 80’s-90’s…

Of course, Deming’s ideas needed the help of a country ready and willing to embrace them and Japan was definitely ready and willing. As Henry Ford once said… “You can’t build a reputation on what you are going to do.”… and Japan was certainly the first to put these ideas into action in many of their largest facilities. It was, in essence, a perfect fit between ideas and culture.

While I do not recall his direct impact on JIT, one could say it was a mutually emerging phenomona. His mantra of eliminating needs for lots of inspections by eliminating errors on the front end and building quality into the product in the first place is part of his larger methodology. John Wooden also echoes some of that do it right first theme in an excerpt from one of his coaching theories.; “If you don’t have time to do it right, when will you have time to do it over?”. So in one sense, his manufacturing models and analysis can be seen as a potential catalyst.

From Wikipedia
Kanban (or kamban in Hepburn romanization–kanji ??, katakana ????, meaning “signboard” or “billboard”) is a concept related to lean and just-in-time (JIT) production. According to Taiichi Ohno, the man credited with developing JIT, kanban is one means through which JIT is achieved.

So, not necessarily exclusive but also not collaborative either. I’m going to check out more on this…
Thanks for the comment and “I’ll get back to you”.

Comment by Philip J. Palin

August 5, 2010 @ 3:55 pm

I apppreciate the positive reinforcement. Part of my goal with this post was to explore John Comiskey’s challenge of using a risk framework prospectively. I hear Bill, Dan, and 66 (BTW, the number on my football jersey for four years) saying that at least for the food system this prospective application seems credible… worth more careful analysis.

I will mention that applying Cynefin took me somewhere I did not expect to go. I began with an assumption that the current food system was more complex than in my youth. But as I used the sense-making properties of the framework it was increasingly clear that in at least some important aspects the food system has been radically simplified. I am not yet ready to fully adopt that conclusion, but I perceived the framework was being effective in helping me view inputs in a new way and shake up some assumptions.

Comment by Christopher Tingus

August 6, 2010 @ 7:04 am

I would enjoy hearing Bill Clinton’s perspective on this…someone pls invite his comment!

Great post! Very interesting and necessary.

Comment by William R. Cumming

August 6, 2010 @ 10:55 am

Concentration on small improvements seems to me the essence of DEMING not the great leap forwards WEST seems to always desire.

Hey, how many posters and commentators on this blog are endangered species–prophets in their own land.

JIT might just mean JIT to kill US.

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