Digitalization And Cows: A Productive Marriage. MOOOOOO
Can digitalization transform the dairy products industry? There are good reasons to think it is.
Will we have enough food to feed the growing population by 2100? According to Science Magazine, there is an 80% probability that the world’s population, now 7.2 billion people, will increase to between 9.6 billion and 12.3 billion in 21001, a population growth between 30% and 70% in only one generation. In addition, with climate change challenges and aggressive cost competition, it has become increasingly important for corporations to adapt their business and operating models to take advantage of available technology and catch up with growing demand. Dairy products companies are not the exception. They are re-writing the history of this industry making use of digital technology.
Cow milk and dairy products have been part of humans’ lives since 7,000 B.C when cattle became herded2. Since colonization, dairy products in America have been part of our diets as some of the earliest settlers brought cattle from several European regions in the 1600’s2. Before industrialization, the business and operation model of dairy farms were pretty simple. Farmers created value by exchanging hand extracted milk for help in their farms. As populations began to grow and human settlements became larger, the market required a change in the production processes to catch up demand. With the industrialization revolution, dairy companies adapted to incorporate large-scale production methods that have re-shaped the industry2. Today, the most common business model is one in which large milk cooperatives transform raw milk, acquired from independent farmers, into ready to consume dairy products that are commercialized in retailers.
Figure 1: Traditional business model in the dairy industry4
To increase milk production and reduce costs, cooperatives and farmers have made use of available digital technologies. Some examples of key usages are:
- Sensors attached to heifer’s tails that notify the farmer by text when the cow goes into labor, or when it is ready for insemination. This enables the farms to increase survival and production rates while saving time3.
- New agricultural practices that increase pasture output per hectare. These practices include digital auto controlled irrigation systems that keep track of weather conditions and automatically decide when pastures need water. This contributes to cost reduction and overall yield increase4.
- Digitalization of pedigree and milk production records of cattle is helping farmers choose the best animals to breed, transferring the best genetic attributes to new generations increasing overall production5.
- Better management of diseases by the creation of digitalized cow’s files, routine monitoring, disease prevention and control systems. All these things have enabled the farms to have an Integrated electronic medical records set up, detailed by animal, facilitating the implementation of statistical analytic functions to reduce disease rate and guide cow immunization6.
- Wireless sensors inserted in cow’s stomach to detect when the animal’s temperature rises above 31℃ indicating a change in pH, enabling immediate intervention which traduces in potential milk production increase of 10%3
To continue taking advantage of the world’s digitalization and internet of things, I think the milk producers should also consider creating the Uber of milk. This application could potentially connect producers and consumers bringing better, cheaper and fresher dairy products to the average household. I think this could be possible by creating scale in the application, including not only milk, but also vegetables and fruit producers that want to trade their products. This interaction could reshape the business model by disintermediating the cooperatives ultimately bringing additional profits for the small farmers.
In conclusion, digitalization not only creates great opportunities for the different players in the dairy industry but also brings the possibility to transform the current business and operating models. In a world in which the population is expected to grow between 30% and 70% in the next 84 years, now is more important than ever to continue developing new technologies and ideas to survive as human civilization. Will we have enough food to feed the growing population by 2100? 649 words
1 Alon Keinan, “Recent Explosive Human Population Growth Has Resulted in an Excess of Rare Genetic Variants,” Science Magazine, May 11, 2012, http://science.sciencemag.org/content/336/6082/740.full, accessed November 2016.
2 Linea Carlson, “Milking the Truth: The Facts about Dairy Farming in the United States” (paper, Carleton College), https://apps.carleton.edu/curricular/posc/assets/Carlson_Milking_the_Truth.pdf, accessed November 2016.
3Nesta Organization, “Precision Livestock,” http://www.nesta.org.uk/news/precision-agriculture/precision-livestock, accessed November 2016
4 Capstone Partners, “Technology & Business Models in the Dairy Industry” PowerPoint presentation, February, 2015.https://static1.squarespace.com/static/5509ff29e4b0ed764d676b33/t/552f307fe4b034c9174b212f/1429155967462/kim_walker_presentation.pdf, accessed November 2016.
5 National Dairy Research Institute, “Dairy Cattle Breeding,” http://www.ndri.res.in/ndri/Design/ShowDivisiond.aspx?id=Dairy%20Cattle%20Breeding%20Division, accessed November 2016.
6 Lin LiHongbin, WangYong, YangJianbin, HeJing Dong and Honggang Fan, “A Digital Management System of Cow Diseases on Dairy Farm” (paper, International Conference on Computer and Computing Technologies in Agriculture), http://link.springer.com/chapter/10.1007/978-3-642-18333-1_5, accessed November 2016.
Student comments on Digitalization And Cows: A Productive Marriage. MOOOOOO
Thanks for the post! I had no idea there was so much innovation going on in the world of cow farming. One thing I always wonder about when people start investing in new technologies is whether or not they’re missing the forest for the trees. In this case, I wonder if maybe the investments in digitization, tracking, etc. are going to be in vain, if petri-dish meat or lab-created milk finally reaches scale.
I agree that while such initiatives are admirable, it could be that the answer lies elsewhere. Natural milk production efficiency can only be pushed so far; we will inevitably have to look for alternative sources of nutrients and diversify our food base if we are to keep up with the demands of an ever growing global population. This is a first step, but the ultimate answer might not lie in increasing the number of livestock, but decoupling food production from livestock production altogether, as Art suggested above. This might have the least impact on the environment in the long-run and might prove to be the most sustainable course of action.
Really interesting. FoodTech is a fascinating and bizarre space–consumers are dubious/hostile to innovation (eg, our collective outrage over GMOs), but our growing population (and demand for food) impels us to seize every advantage–to include digitization. Like Art, I’m curious about the long-term impact of cow-free dairy. But in the short-term, I wonder how some of these innovations will be received by the public. I could certainly imagine a large segment of the public feeling uneasy about sensors inside the cow’s stomach. Likewise, I could see a negative reaction against new innovations in selective breeding, similar to what has already happened with modern chickens.
Even if only a small fraction of consumers respond negatively, it could have a major impact on the industry. California is the nation’s largest dairy producer by a wide margin and has some intensely activist foodies. In 2008, the state overwhelmingly passed Proposition 2, which imposed stringent new regulations on livestock farmers. If activists raised concerns about the new technologies utilized by the state’s dairy farmers, it seems highly likely that a similar measure targeting the dairy industry could be put on the ballot.
Great post. I think that the impact of these technologies can be quickly realized and with an upfront investment, and buy in from farmers has the potential to produce almost immediate benefits. A single owner’s buy in could produce a quick investment and quick and measurable returns for the owner. While other commenters have raised interesting concerns about alternative forms of meat, I see the cattle industry maintaining a strong position in the market. Measurable increases in efficiency and better utilization of resources has the potential to begin to snowball as resistant farmers see the benefits of digitization in an ancient field and begin to adopt the technologies as well.
Great post and very interesting topic!
It seems like a great example of how technology can transform of a seemingly traditional industry. Here is another technology that’s super interesting: “fitbit for cows”!
Really enjoyed this piece! Looks like new tech is creating many new opportunities in the dairy industry. I think we should also consider the scale required to reap a positive return on investment in these emerging digital products. I assume most independent dairy farmers possess a great amount of knowledge and expertise in how to best manage their farms, and the limited scale of their businesses allows them to maintain close daily contact with their herds and pastures. The animal-embedded sensors, auto-controlled irrigation systems, and digital record systems you mention in your post would serve to decrease the amount of time farmers would need to be present in the field to make informed decisions, enabling the success of larger milk farms with less human oversight. However, for the owner of a small or mid-size farm, the cost of investing in some of these technologies might be too high, especially if the tech mainly serves to replicate their own observations and judgment. Perhaps this implies that a major shift in the dairy industry’s traditional business model is now at hand – that the many independent milk farms shown at the top of Figure 1 are due for consolidation and roll-up, as investments in these new digital systems will result in higher levels of cost reduction and yield increase when conducted at scale. MOOOO!