Fork The System

Tina Owens on the rising risk of conventional farming systems

• Sherry Shu • Season 1 • Episode 13

Share episode

Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.

0:00 | 29:30

Our thirteenth guest is Tina Owens, the lead of the Resilience and Agriculture Lending and Insurance Coalition (RALIC) for the Transformational Investing in Food Systems (TIFS), an organization aiming to bridge capital markets with the strategies, tools, and financial innovations to direct financing towards regenerative and agro-ecological food systems. 

Welcome to Fork The System — a podcast spotlighting the innovators, researchers, and advocacy leaders reimagining how we feed the world.

Resources:


Feedback Form: bit.ly/forkthesystemfeedback

Transcript: https://docs.google.com/document/d/1rXjg_BuimU1vO_2d9cHfzNFJ7A0j0n34yrhLRlfzh1o/edit?usp=sharing

Speaker 1

So we actually have a very mechanistic mindset when we think about this through a capitalist lens, where we've been trained to think that conservation equals less profits, less money, bleeding hearts, that you have to have some tree hugging, you know, level of modus operandi in your own personal belief system to adopt these things, and that it's not at all about good business, when instead the data actually says the opposite.

Speaker

I'm your host, Sherry Shu, exploring how we can build food systems that are sustainable, ethical, and free from animal suffering. Today, I'm here with Tina Owens. Tina is the lead of the Resilience in Agriculture Lending and Insurance Coalition, or RALIC, for the Transformational Investing in Food Systems, an organization aiming to bridge capital markets with the strategies, tools, and financial innovations to direct financing towards regenerative and acro-ecological food systems. Tina is from a multi-generational farming and dairy family. So, Tina, it's so great to speak with you today and learn a bit more about everything you do.

Speaker 1

Yes, thanks, Sherry. I'm delighted to be here and I look forward to talking about regenerative impact.

Speaker

Yeah, very exciting. So just starting off with understanding a bit about your career history and what got you to where you are now. From what I know, you spent two decades working at two of the world's largest food companies. So that's Danone as well as Kellogg's. So tell us a bit about how being a part of these large food systems has led you to the work that you're doing today.

Speaker 1

Yes. So it's my pleasure to share. Spent 17 and a half years with the world's largest cereal maker and got to see from the inside out what global innovation looked like, how food scientists put new products together, what marketers were motivated by, what the pricing discussion was for procurement leaders, et cetera. And my claim to fame there was actually working on non-GMO and organic sector systems for large brands at a time when they were moving out of the dusty natural foods product shelf and into the mainstream for Walmart and other large channels. And so it was a time of large growth. And then it kind of petered out. It actually, you know, kind of capped at the top with consumer interest when a whole bunch of other brands entered the space. And so getting to see the boom and bust of consumer brands and where they have access to consumers or don't, the decisions that were made is an important part of my learning journey. And then I went to the world's largest yogurt maker and learned a lot more about what was happening with policy and regenerative finance. So ended up working on one of the world's first regenerative finance portfolios, grant philanthropic and impact investing capital to help farmers convert to regenerative ag. And I have found after 21 years in those two systems that as much as the companies would like to say they're having an impact on certain things, it's still driven by consumer interest on shelf and market price in many ways. So to impact the system at a larger scale, I needed to move beyond those company-specific outcomes and actually work on the systems that impacted everybody. So one of the first things they did was start the Nutrient Density Alliance to work on the consumer interests to regenerative for soil health and nutrition. And what I'm currently working on is back to supply and demand structures where I spent a lot of my years in big CPG. And that is working on actuarial data that's missing. So being able to understand what institutional investor interests are in those companies, what the C-suite at those companies uses decision making, how individual portfolio decisions are made versus company-wide decisions, all of that has given me a different view of the system level change that needs to happen in order to support the scalability of regenerative agriculture. Not just, you know, proving that we have pilots with outcomes that have positive metrics, but how you actually ladder these things up into a very large existing system in a way that's meaningful.

Speaker

That's very interesting. And I think definitely having that understanding of what the incentive structures are for the main decision makers, often in the hands of power that are these big food companies, is like very, very critical. Just taking a step back, actually, what is regenerative farming, or how would you define the practices of regenerative ag that farmers are trying to implement?

Speaker 1

So what's funny, you saw me smile when you asked that question is regenerative farming and the definition of it is a very hot topic and has been for several years within the insiders of the regenerative movement. That said, it is based on the same principles and practices across every definition, no matter where you're at in the system. And that is keeping continuous cover on the ground, um, doing rotational crop plantings, and um, wherever possible, not tilling, or doing animal integration. And so regenerative ag is really about going back to an indigenous wisdom-informed way of agriculture while understanding the scale and mechanization of existing food systems. You know, and when I even say food systems, I'm conscious of the fact that most of what we grow in the US, for example, is for feed and fuel. And so those large scale systems aren't actually going into food per se. Maybe some of their derivatives are. Yeah. But it is actually acknowledging that nature has a role to play that we've overlooked through chemical or mechanical extraction, and that we need to peel back those layers and go back to something that's about using plants, not chems, and that that leads to better outcomes for the soil, and that that can be delineated at a level of risk and economic opportunity that most people have never even dreamed. And that some of that data is now possible to see using AI methodology. And we'll talk about that next because we'll talk about some of the work that I'm leading relative to that. So I'm not going to go into every definition of regen ag. I did the highest level of overview of it there. And let's leave it with the punchline of soil-centered food systems and move on.

Speaker

Yeah. It's very interesting to hear that it's developed off of indigenous knowledge of agriculture. I actually didn't know that because I always thought that's an area that we've heard indigenous groups have a lot of wisdom in and we need to incorporate them more into normal supply chains, but I actually didn't know that's also how we fed into this whole regenerative agriculture term and movement. So that's really, really fascinating. Tying in the two things you just said, first, that you really noticed that consumer demand was really, really critical for food companies to change their practices. And then also, now that we kind of have a definition of regenerative farming, I'm curious how you see the regenerative movement unfolding differently potentially from past movements. So, like organic or non-GMO foods, are we seeing similar levels of consumer demand for regeneration and who is driving the movement?

Speaker 1

Well, and this is one of my favorite questions to answer right now for the system because having a 10-year look back now on what I expected to happen in the last decade versus what's actually happened. While I think a lot of us thought that we would follow some of the principles of segregation and audited supply certification that the non-GMO and organic movements followed, it's ended up being a lot more complicated than that. You know, a lot of the scope three emissions, reporting, and traceability is something that not just one company is responsible for. So whereas with an organic certified product that's segregated, brought to the consumer, there's a label, there's certification, there's demand, there's probably a price premium attached with that. With regenerative, it has not been that straightforward. And in fact, what the farmer needs to convert to regenerative agriculture might be a different set of tools that are more on the financial services side than what consumer demand would be for just one crop in their rotation. So I want you to imagine a standard, uh, let's say Midwest US farmer that's growing corn, soy, and wheat in rotation. So transferring those three amongst fields in different years. And one of the large food companies has a demand for the wheat, but not the other two. But the farmer is expected to change practices maybe on just the wheat. The rest of the system isn't really set up to help them transition those practices across all three of those products all at once. And the food company doesn't actually take the other two products that the farm grows. So there's been a lot of barriers to the lack of willingness to segregate that volume coming off of farms, apply a premium to it, ask consumers to pay for it. And instead, it's ended up being a lot more focused on what the farmer has to pay for their own business services, what they save in costs on inputs by reducing the amount of chemicals that they're using in their fields or the amount of field passes that they're doing because they're using cover crops or other forms of agriculture. And it's been more about the macro and microeconomic outcomes related to operating loans and crop insurance and seed sales and distribution channels. I had not expected it to take that form, actually. So I'm in a bit of a post-consumer view now on the regenerative movement, where there's two things. One, there's that demand signal that hasn't happened for the farmer in the way that we would have expected. And two, that consumers can only buy what they're being offered. So if the consumers aren't being offered a segregated product that's about regeneration, they might want it and they might even signal demand for it, but it may not actually be there. Or you'll have to go to a specialty retailer like Whole Foods or elsewhere to get it.

Speaker

I was actually going to ask, was the organic movement as a result of consumer demand came first and then people started adding that organic logo and creating the certification process, or did the process come first and then people slowly had more and more interest in it?

Speaker 1

No, it's a great question. And what happened with the organic movement? It was an organic movement in that it was very much consumer driven. And a lot of that happened in the 70s and 80s. It became codified into law in the US, for example, in 1990, with interoperability with Europe and Canada after that date. At first, before that 1990 regulation, there were actually 25 different states that had their own definition of what organic meant. And it meant something slightly different in each of those places. And I used to look back at that and use that as an analogy for the regenerative movement when people would say, Oh, there's all these different definitions, there's all these different certifications. How are consumers or farmers going to know it's real? Well, this is how you know a movement has arrived. When that many different parts of the system actually try to take a bite at it, try to understand what it means for their own part of the sector, et cetera. And these additional definitions end up being added on because there's so many different things to take into account. So with organic, it got codified into law that solidified it with government oversight on what it meant. And it's been a growing industry ever since. The exception is while the market is growing, the domestic production is not. So it is a category that consumers continue to demand more and more year on year, but almost the entirety of that demand has actually been held up by imports from other countries. So even with organic, when we look at the success there and what's happened in growth for farmers and prices and consumers, et cetera, if we look under the hood at what's actually happening in North America and domestic production, farmers haven't fared quite as well in taking part in that market. And again, it's about what consumers are being offered in supply and demand systems. So that's where regenerative is moved, but where I've moved to a post-consumer view of regenerative that's more about the financial services and benefit to the farmers and less required of consumer demand that can be replaced at whim from supply somewhere else in the world.

Speaker

Okay, that's interesting. And I think you definitely point out an interesting problem, which is there are certain restrictions in terms of which crops are given this treatment and then what is demanded from the farmer, because at the end of the day, they're not buying every single crop. The misperception I guess I had before about something like crop rotation is that if you're rotating one crop, you can be rotating multiple crops at once. And so you kind of create three different types of almost regeneratively grown items. But I'm hearing now that that might not be the case with the wheat example that you gave. Is there a reason why there are certain products that maybe would not get the same regenerative treatment as another product?

Speaker 1

Yes. So when you think of rotation, you need to think of the fact that that wheat went in a field following corn or soy. Sure. Yeah. And so it's a different field every year. And that field that's going into matters. And if the crops ahead of it weren't regenerative, then the chances that you're going to create a regenerative crop in only one season are very low. Right. So that's where having the full rotation offtake, where you have the corn, the soy, the wheat, or certainly a variety of other crops, we do not only need to talk about those three crops, that those all have some level of supply and demand. If they don't, then it needs to be more about the value for the farmer in actually creating that soil health benefit around things like yield and price protection for themselves on the amount of costs that it takes to generate each uh bushel of corn that they're growing. And that's where there's been a lot of exciting developments that we should talk about as it relates to business risk and actuarial data rather than the consumer demand that we've relied on in the past for these types of system transformations.

Speaker

Okay. Yeah, that makes sense. That's very interesting. Now shifting the actor from the consumer to these financing systems. What does transformational investing food systems or TIFS , where do you come in and how have you started to interact with these financing organizations?

Speaker 1

Yes. So what we found is there is a missing middle that needs to be very specifically invested in. And that is the missing middle of data, the missing middle of infrastructure, and the missing middle of finance. And that if you only solve for one of these things, you actually won't have resolved the issue for what needs to happen for a groundswell of support and farmers transitioning or the standard market for regeneratively grown products. What we're working on specifically with RALIC, so I could talk about several different financial innovations that we're doing. I think the punchline for today should be about what we're doing on crop insurance. Because what we found was that every single farmer had to answer this question personally of what they were going to do about crop insurance because, and it's different in Canada versus the US, and we've had a lot of conversations recently with colleagues in Canada. Essentially, farmers are boxed into the practices that are covered that are known to achieve the highest yield in order to get their operating loans. And so the bank will offer them money for the season to be able to plant certain crops, do certain things in a certain order that are known to produce a certain result based on decades of backwards looking data. And as we know, never before in human history has past performance been less indicative of future results. And so what's been found with our colleagues that are working in risk management is that the difference between a farmer practicing cover crops, crop rotation, and no and low till, which are the basic tenets of soil health, the minimum that everybody would agree. Um, the difference between a farmer doing that for three years and a farmer that hasn't done it at all is the same as the difference between a smoker and a non-smoker from an actuarial perspective. So if we go back to 2006, at least in the US, when health insurance started delineating, if you were a smoker, you had to pay a $2,000 premium on health insurance back in 2006. Um, and that's when you started to delineate the coverage for a smoker versus a non-smoker. And, you know, you or I, Sherry, we could maybe we'd smoke for three to five years and we'd quit and we'd recover and we'd be okay. But if we did it for 70 years, the burden not only to our own body and our own health and our own cost, but also the societal cost, especially if everybody around us was also doing it, that burden's more than anyone actually has a big enough budget to cover. And we've somewhat done that globally with soils as it relates to the lack of regenerative practices. And so when you look at the difference between smoker and non-smoker and you play it out not just in the short term, but over the long term, you can start to see about how you're talking about billions of dollars of risk, trillions of dollars of risk when you ladder it up to a global level.

Speaker

So just to clarify, you're saying that there's like monumentally more financial risk or also societal risk when it comes to non-regenerative agriculture, just to clarify.

Speaker 1

It is both, actually. So the societal risk is that there are, and I'm gonna stick with the smoker analogy because it just helps people. Yeah. Um, just like with smoking, you have comorbidities of diabetes or cancer. With agriculture, the comorbidities are disruptive weather events, lack of continuous ground cover leading to flooding, runoff, lack of aquifer recharge, or having severe cycles of drought and not being able to water crops unless you're actually pulling more from the aquifer by doing irrigation, et cetera. So housing insurance is impacted by this, even hail damage and storms for car insurance, property taxes, physical infrastructure around electricity grids, right? Look at how disruptive severe weather events are to our electricity grid. And the middle of us all having national conversations around data centers and you know who needs electricity and where it needs to be, disruptive weather is adding a cost burden to those grid systems at the same time.

Speaker

Isn't uh the issue, though, with these types of insurance-based systems and kind of the actuarial calculus that they don't really account for these societal risks? It's almost like a negative externality that isn't factored into the calculation because their main goal is will this person require a payout in a few years, right, because of some damages or will they lose our money, right? So, like is there enough financial risk such that there is a financial argument for these insurance companies to pursue or encourage regeneration, even if the societal risk isn't factored into their decision making?

Speaker 1

Yes, the answer is absolutely yes. And I wish I could show you some charts in this, but we're in a podcast format. So I can't um so let me let me tell you why. Okay. Um, first of all, if you look in the US specifically, the insurance industry is in free fall. You have health insurance in free fall, you have agricultural insurance, understanding what I'm telling you from the insight out on risk.

Speaker

What do you mean by in free fall? Sorry, not to interrupt.

Speaker 1

Uh yeah, so health insurance has become so expensive that people can't even afford to carry it and they're abandoning it. In the Southeast, in Florida, and other areas that are hurricane prone, you cannot even get housing insurance, which is typically required to get a mortgage. On the West Coast, in California, in Hawaii, you can no longer get fire insurance because the um drought potential and the level of fire risk is so large. Wow. Um, and, and, and, and in the areas where you still can get insurance, the amount of cost for the insurance is so high that more people are actually abandoning that system. And in fact, there's a group of global actuaries in the UK that have termed the looming insurance risk as planetary insolvency, have actually stated deliberately that the premiums have to be raised to such a level across all these different insurance sectors that the level of affordability basically goes out the window. And so then it creates this perpetual downcycle where you have less markets, you've pulled out of Florida as a housing market, so you no longer have that market to make up the profits you used to have from that, which means you're raising premiums elsewhere in order to do coverage. And so we're in this kind of negative loop right now that impacts all sectors of society in a way where we just see costs going up, but these are actually the underlying factors that are causing costs to continue going up. So when we saw in working with the insurance industry leaders on risk for ag, they are seeing that once you get past that three-year pathway of helping farmers transition, that yield stability comes back in. And so you might still have variation in weather, but the variation in crop outcomes actually becomes much more predictable and yields and regenerative systems tend to be higher, actually, um, somewhere in the three to seven year mark, depending on how much recovery time the soil health needs. And so just like if we were smoking for 70 years and we quit, we wouldn't recover right away, we wouldn't bounce back. We have been doing this form of agriculture, conventional agriculture, with ever deepening damage and outcomes for decades now. It takes a bit to wind that back. And now we need to create the financial incentives for farmers to easily adopt those practices. That's where we're at right now.

Speaker

Cool. So now is the solution to convince these financial actors of this additional risk that's happening? Or are they aware of it? And is there any kind of additional bottleneck that TIFS is trying to eliminate in order to get more financing for regenerative agriculture?

Speaker 1

Yeah, it is the question of the hour. I think it was JP Morgan Chase or JP Morgan issued a report about the transition investment space is now the space for investors to actually look. And so, you know, between them, the global actuaries I mentioned in the UK, the second largest insurance company uh that I'm working with that is talking about smoker-nonsmoker delineation, um, the European Investment Bank and European Parliament coming to the same realization about what they need to do for crop subsidies in Europe related to soil health. There's still the missing middle. Farmers are interested in making this change, but the system hasn't yet adopted what they need. And now the global financial sectors are aware at a level that is about assigning dollars to this risk. And the amount of dollars that we're talking about are so massive that they are eye watering. And then it's about reworking people's mindsets. So we actually have a very mechanistic mindset when we think about this through a capitalist lens, where we've been trained to think that conservation equals less profits, less money, bleeding hearts, that you have to have some tree hugging, you know, level of modus operandi and your own personal belief system to adopt these things, and that it's not at all about good business. When instead the data actually says the opposite. The data shows distinctly that in doing these things, you will stabilize supply chains, remove disruption, help with on-farm profitability, create better actuarial data, create better underwriting data, have higher land profitability, have higher land yield, have better more nutritious food, et cetera, et cetera, et cetera. Like I could go on. And so while we've got lots of data that shows proof of concept, where we're all at now and where TIFS is working at the front edge of is proof of scaling. So how do we now take everything we've learned for 15 years, all indicating the same outcomes and start to scale it in a way that's hitting in the larger parts of the system and not just in like what I would have considered before the non-GMO or organic sectors, which are still individual percentage points of the overall food system, right? How do you start in the middle with corn, soy, and wheat growers, that is the bulk of the existing system, make it so it's safe for them to convert and then move out from there in the normalization of this with different leaders in different parts of the sector.

Speaker

These benefits that you're talking about, are they replicatable across the world? Is it okay? So it's not just the US and

Speaker 1

Oh no. Yeah.

Speaker

And are they financially feasible across the world as well, including in places that maybe don't have the same levels of financing for ag or the farmers are smaller scale, for instance?

Speaker 1

Yeah. I am not the best person to talk about this, but I can tell you at a headline level that the answer is yes, replicable, yes, appropriate. And for example, in the southern hemisphere, some of what we've heard around tree crops like coffee, rubber, cocoa, bananas, what have you, that actually doing polyculture where you're mixing all of those plants together instead of monoculture, where um Natura actually I think found this when they had a palm oil pilot where they went from having monoculture of just acres and acres and acres of just palm, and they actually reintegrated it with the other tree crops. And they saw a 40% increase in yield across the different, yeah, across all of the different crops, right? So this is about rewinding our need for a pristine monoculture factory field to something that is based more on nature. And nature is everywhere, it's the planet, right? So these are principles that are the bedrock of how we interact with nature going forward and then how we assess the risk, the dollars, the human toll, the land toll, and the benefit or cost to ourselves. All of that is what we're all reassessing as a species right now in this moment. And it is a universal truth that can be adopted anywhere.

Speaker

Wow. That's awesome. Nature is so cool. Actually, I don't know the scientific reason behind why the yields are so much higher when you put them all together. I'm assuming it's some sort of like symbiosis reason or living.

Speaker 1

Yeah, living systems.

Speaker

Yeah, which is really, really interesting. So I guess on the discussion of adopting globally, you mentioned some of these financiers that are ringing the bells, so to speak. But do you see any other global policy shifts that are kind of supporting the adoption of regenerative agriculture and where are they occurring?

Speaker 1

This next part I'm gonna answer, but I'm gonna say I can't quite call it regenerative agriculture. Let's say soil-centered systems, because it is the bare minimum of what people would consider to be soil-centered. For soil-centric systems, the financial services sector is now normalizing what it looks like to have global trade around things like sustainable aviation fuel. Now, right there, the regenerative movement would poke a hole in my balloon and say that's not regenerative. But what it is actually doing is training farmers to place a value on the three practices I mentioned cover crop, crop rotation, no and low till, and to make that the future base amount of information that comes along with a global bushel of corn being traded to understand the energy behind how that corn was produced in order for it to go into a global biofuel system. And Asia and Europe have commitments around that. Scope three emissions reporting is becoming normalized. And then there's this thing called ecosystem services, which is a globally recognized methodology in understanding the value of carbon credits, water credits, biodiversity, phosphorus, nitrogen, you know, measuring and assigning a value to things that happen in agriculture that have a monetary cost that has previously gone unseen. Those markets are just getting started. And there is a global trading component to that that is bringing larger forms of capital in year on year and is about to ramp up significantly, probably between now and 2030. And so, if I would leave you with anything for your colleagues, you know, whether they're attending Ivey or they're somewhere else within the business system, is that the natural capital systems and the leadership of them, the complexity of them, the accounting standards, the interoperability, all of those systems are going to be what's next for business leaders to understand. And while AI is a tool that will help us understand that information in different ways, one of the things we should remember is that a lot of those AI data sets were created based off of the mechanistic mindset that got us where we're at. And so, as part of this, we need to understand how living systems are inherent, whether or not markets are tied to them. And that building market data based on how living systems function is a good way forward rather than building AI systems that are based on market functions of yesterday. There's probably an easier way to say what I just shared, but that encapsulates what we need to understand in order to be effective business leaders, in order to not continue the damage that's been done in existing agriculture systems and in recovering profitability first at the farm, but then in lockstep with what happens with our neighbors and our region, with our watershed, with our municipality, our locality, our province, our nation. All of these things are interconnected in ways that have never before been so laid bare, uh, in that we're all in this together.

Speaker

Yeah, I guess like with AI, we're so used to relying on past trends to be able to predict the future or advise the future where this is not a very effective system, right? Like because the future is changing so drastically and we actually need to fix the system that we're going into the future with so it's not based off the problematic or outdated practices of the past. That's not just true of regenerative agriculture, but is broadly true of any system that we're currently operating, because we have a lot of broken food systems, but also other broken systems that we can't rely on past data to fix. Well, thank you again, Tina, for sharing so much about the wonderful world of regenerative agriculture. I learned a lot. And like you, I'm very excited to see how these systems unfold. The work that you're doing towards that is fantastic. And I really hope that more people are able to see the value that it offers financially for the world, for nature, for farmers, and for everyone.

Speaker 1

Well, thank you for the opportunity to talk with you about it today, Sherry. Fork the system. Here we go.

Speaker

That's it for this episode of Fork the System. If you have a guest or topic you'd like to hear about, share your ideas using the feedback form linked below. Until next time.