U.S. Markets closed

Food-As-Software Will Make A Chunk Of Ag-Sector Trucking Obsolete

Growing investment and consumer interest in laboratory-grown meat will change the dynamics of the meat industry, said RethinkX in its food and agriculture report. It expects the industrial animal farming segment to shrink by 50% by 2030. RethinkX is an independent think tank that works on analyzing and forecasting the extent of technology-driven disruption and its societal implications on consumer-facing industries.

"The cost of proteins will be five times cheaper by 2030 and 10 times cheaper by 2035 than existing animal proteins, before ultimately approaching the cost of sugar," said the report. "The impact of this disruption on industrial animal farming will be profound. By 2030, the number of cows in the U.S. will have fallen by 50% and the cattle farming industry will be all but bankrupt."

Food-as-software as it is called, will cast a long shadow on the livestock ecosystem because it will remove the need for rearing animals and the necessity for cultivating animal feed across several million acres of land. RethinkX puts forth the argument of disruption not just for the meat industry but for allied segments like the milk industry.

Lab-grown meat would allow production houses to move much closer to its consumers, which will drastically reduce the need for hauling meat across thousands of miles to its destination.

Ultimately, the prices of food brought in through the new production system will be "more stable and resilient" compared to farm-produced food, as lab-grown meat will be sheltered from supply and price volatility issues that arise due to seasonality, climate change, and other economic and political obstacles.

When a consumer buys meat from the local supermarket, he also pays for the logistics costs that are bundled with the product. Logistics involves hauling fodder for livestock, which in many instances, are imported from as far as China. It also includes transportation of livestock to the slaughterhouses, processing stations, and finally to the storefronts.

Increasing lab-grown meat consumption would lead to a contraction in all these markets, which will eventually lead to a fundamental shift in international trade relations. "Decentralized food production will be far less constrained by geographic and climatic conditions than traditional livestock farming and agriculture. Major exporters of animal products, like the U.S., Brazil and the European Union, will lose geopolitical leverage over countries that are currently dependent upon imports of these products," said the report.

RethinkX points out that this disruption will reduce the demand for oil within the U.S. agricultural sector by at least 50% by 2030, which at current consumption rates will be equivalent to 150 million oil barrels. "Savings on transportation costs will result in a permanent boost in annual disposable income for U.S. households, totaling $1 trillion by 2030," said the report.

FreightWaves CEO Craig Fuller had pointed to this seeming drop of trucking fortunes within the agricultural sector in his commentary article on the for-hire trucking market. "While autos are incredibly important, no sector outside of retail is as important to the trucking freight markets as agriculture. Agriculture is about to get completely disrupted by technology. Indoor and vertical agriculture will have an e-commerce level impact on farming," he wrote, while making a case for how plant cultivation was getting disrupted alongside the livestock market.

Meanwhile, rising consumer interest in lab-grown food has helped clean meat and indoor farming startups thrive, as the niche segment gets inundated with millions of dollars of venture capital funding. Public reception regarding such companies has been compelling too, as artificial meat startup Beyond Meat saw its stock price shoot up by over 200% in the first week of its initial public offering (IPO) this May.

The change ushered in by the lab-grown food segment is disruptive and will dawn on the trucking sector sooner than most anticipate. The industry needs to work around this and will have to contend with a massive drop in hauling volumes, as the agricultural sector currently accounts for 31% of the total ton-miles of freight moved with the U.S. and makes up 18% of the total revenue the trucking market generates every year.

Image Sourced from Pixabay

See more from Benzinga

© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.