Wednesday, September 30, 2015

Big Data, Ag Finance, and Risk Management

I recently was reading an article on AgWeb, How the feds interest rate decision affects farmers; and the following remarks stood out to me:

“You need to plan for higher rates. Yellen said in her remarks that the expectation is that the federal funds rate will rise to 1.5% by late 2016, 2.5% in late 2017, and 3.5% in 2018, so increases are coming. You can manage those hits by improving your efficiency and productivity in your fields and in your financials, which will allow you so to provide detailed cost projections and yield estimates to your banker. “Those farmers who are dialing those numbers in will be able to negotiate a better interest rate, simply by virtue of all that information,” Barron says.”

So to me this brings up some interesting questions. How interested are lenders in knowing about farmers data management and how they are leveraging their data generated across their enterprise? Does your farm need an IoT strategy? Or will these things work their way out in the financials lenders already look at regardless?

Regardless of what lenders are after, it would make sense to me that producers would want to make the most of their data to manage productivity and efficiency in both good and bad times. Firms like FarmLink come to mind.

From a research perspective, I would have some additional questions:
  1.  Is there a causal relationship between producers that leverage IoT and Big Data analytics applications and farm output/performance/productivity
  2. How do we quantify the outcome-is it some measure of efficiency or some financial ratio?
  3. If we find improvements in this measure-is it simply a matter of selection? Are great producers likely to be productive anyway, with or without the technology?
  4. Among the best producers, is there still a marginal impact (i.e. treatment effect) for those that adopt a technology/analytics based strategy?
  5. Can we segment producers based on the kinds of data collected by IoT devices on equipment, aps, financial records, GPS etc.?  (maybe this is not that much different than the TrueHarvest benchmarking done at FarmLink) and are there differentials in outcomes, farming practices, product use patterns etc. by segment

See also:
Big Ag Meets Big Data (Part 1 & Part 2)
Big Data- Causality and Local Expertise are Key in Agronomic Applications
Big Ag and Big Data-Marc Bellemare
Other Big Data and Agricultural related Application Posts at 
Causal Inference and Experimental Design Roundup

Friday, September 25, 2015

EconTalk: Matt Ridley, Martin Weitzman, Climate Change and Fat Tails

In a recent EconTalk podcast with Russ Roberts, Matt Ridley comments on a previous discussion with Martin Weitzman regarding the tail risk associated with climate change:

"the fat tail on the distribution, the relatively significant even if small possibility of a really big warming has got a heck of a lot thinner in recent years. This is partly because there was a howling mistake in the 2007 IPCC Report, the AR4 Report (Fourth Assessment Report: Climate Change, 2007), where a graph was actually distorted. And a brilliant scientist named Nick Lewis pointed this out later. It's one of the great, shocking scandals of this, that a graph--and I'm literally talking about the shape of the tail of the graph--was distorted to make a fatter tail than is necessary. When you correct that, the number gets smaller. When you feed in all these 14 papers that I've been talking about, all the latest observational data, 42 scientists involved in publishing this stuff, most of the mainstream scientists--I'm not talking about skeptics here--when you feed all that in and you get the average probability density functions for climate sensitivity, they turn out to have much thinner tails than was portrayed in the 2007. And that Martin Weitzman is basing his argument on. So the 10% chance of 6 degrees of warming in 100 years becomes much less than 1% if you look at these charts now."

Very interesting, because I thought Weitzman's discussion of tail risk was compelling. Unlike Nassem Taleb's characterization of tail risk and GMOs. I think a key to policy analysis must  revolve around getting the distribution correct, particularly the tails of the distribution, then getting the discount rate correct as well. Will there ever truly be a consensus in relation to climate change policy?

EconTalk: Matt Ridly on Climate Change Consensus

In a fairly recent EconTalk podcast with Russ Roberts, Matt Ridley discusses the consensus about climate change:

"if it's true that 97% of scientists are all of a particular view about climate, then let's go and ask what that view is. And if you go and look at the origin of that figure, it was that a certain poll--of 79 scientists, by the way, an extraordinarily small sample--said that, 97% of them agreed that human beings had influenced climate and that carbon dioxide was greenhouse's not referring to a consensus about dangerous climate change. It's referring to a consensus about humans' ability to affect the climate."

This is similar to what I wrote before back in 2008  after actually reading the IPCC 4th Assessment report. And more recently I have commented on how difficult it may be to solve the knowledge problem and actually attempt to price carbon (for which there is no consensus), and given this consensus view, from a policy perspective, the science just might not support doing anything drastic to try to stop climate change (i.e. carbon taxes, CAFE standards, other regulations).

So I continue to think that you don't  necessarily have to be a climate change skeptic or 'denier' to be a denier on climate policy (or at least push back a little)

Friday, September 11, 2015

Does California's EPA really have an 'intent' to put Glyphosate on its list of 'known' carcinogens?

There have been some recent headlines lately about California's EPA expressing an 'intent' to put glyphosate on its list of 'known' carcinogens.

Here is one example:

Yes, a subgroup of the WHO did suggest not long ago that glyphosate was a 'probable' carcinogen, but I wonder if hairdressers, or third or swing shift workers are going to get a warning printed on their payroll slip telling them that along with roundup herbicide, their profession is known to the state of California to cause cancer?

Here's more:

"In recent years use of glyphosate has exploded from 10 million pounds in 1993 to 280 million pounds in 2012. More than 90 percent of soybeans grown in the United States are genetically modified to withstand Roundup, which ends up in the beans themselves. More glyphosate is found in genetically modified soybeans than non-GMO varieties....The widespread use of this toxic herbicide in GMO food production is one reason more than 90 percent of Americans want foods containing genetically engineered ingredients to be labeled. Americans should have the same right as consumers in 64 other countries around the world when it comes to knowing what’s in their food."

'Widespread use of this toxic herbicide?' That is a very interesting statement. Sure, toxic might make sense in comparison to a pure source of crystal clear mountain spring water. But we are not going to sustainably feed the world on rainbows, fresh cut flowers, and crystal clear water. 

Of all of the chemicals used in modern agriculture, roundup is one that should be most applauded by those with environmental and health concerns, not stigmatized. When you consider its relative toxicity compared to a number of chemistries it has replaced, and its prominent and complementary role in GMO crops and the associated drastic reductions in greenhouse gas emissions, increased practice of no-till, and reduced runoff and groundwater pollution (i.e. nitrates in groundwater and algal blooms among other things) you might consider the roundup + roundup ready technology as one of the 'greenest' technologies ever put on the market.

Of course, maybe there is some inherent rent seeking going on behind the scenes, special interests interested in labeling and others might see the success of a sustainable technology like this as huge barrier to their political agenda, or business strategy (think Chipotle). The more this can be stigmatized in the media and through political means (like labeling or California's prop 65 list) the better they set strategically in advancing their agenda. Of course, it also (at least short term) doesn't hurt the other manufacturers of more toxic chemicals and might help get back some market share! I'm sure those happy about the California news would never consider it, but I think a world without roundup (or glyphosate in general) would be a world with more toxic chemical intensive agriculture.

Oh yeah, and Americans deserve the same right as citizens in 64 other countries and the world for that matter of having a food and regulatory system based on sound science and rigorous economic policy analysis.

See also:

Modern Sustainable Agriculture

Public Choice Theory for Agvocates

Monday, August 24, 2015

How Safe Is Your Ground Beef? Well, you tell me did you cook it properly?

I have recently came across an article in consumer reports:

This really gets interesting at the end when consumer reports actually recommends only grass fed and/or organic beef. (Never mind the negative environmental/sustainability issues that can also be associated with that) And their results on bacterial contamination are based on irrelevant comparisons between 'raw' ground beef. They did not test differences between properly handled and prepared ground beef, because the differences would be zero! It also makes me wonder, by making these kinds of recommendations are they possibly endangering some consumers by shaping perceptions in such a way that could promote 'risk homeostasis' - making consumers feel safer and likely take fewer precautions if they buy organic/grass fed premium brands? It seems to me the only responsible thing they should recommend is proper cooking and handling since that has the largest significant impact on safety regardless of how it's raised or marketed. I haven't actually unpacked the analysis or methodology on the 'raw' beef comparisons (as irrelevant as they may be) but am interested to see what kind of reactions come about from those that have!

Friday, July 03, 2015

The Use of Knowledge in (a Big Data) Society

I recently ran across a very interesting article in Forbes titled "Big Data vs. Hayek" that made some observations about how companies were using big data in ways that might at first seem anti-hayekian. For example:

“They found the centralized algorithms were outperforming decentralized local manager knowledge consistently, and profits went up….It’s not just apartment owners either. So-called revenue management software is also widely used by airlines and hotels….It’s also notable that Uber uses an algorithm to set prices rather than letting drivers set them”

“What’s interesting about such centralized, algorithmic approach to price setting is how un-Hayekian it is. In particular, I’m thinking of Hayek’s essay “The Use of Knowledge in Society” where he makes the case for the use of decentralized markets to utilized widely dispersed information to make choices.”

I think of course, yes corporations do tend to act and behave in ways that are anti-hayekian. (see this EconTalk podcast Coase, externalities, the firm, and the state of economics):

"If capitalism and markets and prices, the Hayekian system of communicating information via price signals, if it works so well, why do firms exist? Because firms are almost by definition top down rather than bottom up. They use command and control rather than purchases within the firm, although there are exceptions to that. Some firms do use price signals for their decision-making inside the firm. But many firms do not. Their decisions are made not by prices but by fiat, by decisions on the top. "

Firms exist in general because they seem to find that the 'costs' of using the price system to allocate resources internally can tend to outweigh the 'benefits.' There is a lot more to Coase's theory of the firm, but given this basic premise it is not surprising that in many cases firms will choose to use a more centralized approach than a decentralized one, and in certain cases Big Data, the internet of things (IoT), and modern computing power and analytics can toy with those tradeoffs at the margin. So in some cases we might find big data incenting more centralization and less in others. The Forbes article actually makes this point in the conclusion:

"Instead, these marketplaces provide ratings and other informational systems that help buyers and sellers overcome information asymmetries, and are helping markets function better and even more dispersed than before..."

It could be the case that when it comes to internally facing resource allocation decisions, certain practices within firms seem to have more of a decentralizing flavor, while big data is forcing the invisible hand on the customer facing decisions by allowing firms more than ever to leverage very granular bits of data related to each customer's particular knowledge of circumstances, time, and place. The internet of things is one example. As I have mentioned before, in the agriculture sector, local knowledge can be key in big data applications (See Big Data: Causality and Local Expertise are Key in Agronomic Applications).

Dan Frieberg points out some very important things to think about when it comes to using agronomic data in a Corn and Soybean Digest article "Data Decisions: Meaningful data analysis involves agronomic common sense, local expertise." 

The following quote from the article is telling:

"big data analytics is not the crystal ball that removes local context. Rather, the power of big data analytics is handing the crystal ball to advisors that have local context"

Also, when it comes to product line offerings in terms of seed choices and hybrid seed technology, big data and analytics is forcing companies to offer more options tied to local knowledge (see What does the farmer say...about seed choices? (Channeling Hayek))

"The choice of what crops we should grow, how they should be produced in terms of management practices and technology, and ultimately the variety of foods we choose to consume is an example of what economists refer to as the knowledge problem. While it might be possible to patent a given trait or hybrid, no one company can get too firm a grasp on this knowledge problem, regardless of their market share in the seed industry today. (not to mention, no government agency would have sufficient knowledge either). Given the vast array of considerations in seed choice and management practices, there is always going to be an incentive for some supplier to cater to the unique needs of individual producers, as advances in genomics and technology drive production not farm by farm or acre by acre but inch by inch."

I agree 100% with the conclusion of the Forbes article:

"we should not get ahead of ourselves in declaring the death of decentralized knowledge and decision-making."

Farm Link and the Rise of Data Science in Agriculture
 Big Ag Meets Big Data (Part 1 & Part 2)

Thursday, June 25, 2015

Jurassic World: Mutant dinosaurs more likely related to technologies used in organic & conventional farming?

Jayson Lusk has an interesting take on Jurassic World:

"In many ways the new animal they created reminds me much more of what might happen from mutagenesis (a technique widely practice in plant breeding for many decades and is NOT regulated as biotechnology, in which seeds are exposed to radiation or chemicals to cause mutations).  The reason I say that is  mutagenesis could cause several possible (and unexpected) genetic changes, which is exactly what happened with the dinosaur.  By contrast,  transgenic (or intragenic) biotechnology typically involves moving one gene from one species (or within a species) to another, in cases where it is well understood what the particular gene does."

I have not seen the movie, but from what he describes in his full post, I am on the same page. He mentions there is some language in the movie that implies that these dinosaurs may have been developed using techniques related to plant or animal biotechnology, or extensions of practices we might be using today in modern agriculture. I would guess then it is based on some sort of embryo transfer and gene insertions related to frogs and some bit of dinosaur DNA based on the post.

But don't misinterpret the title of this post. I am not saying that embryo transfer/cloning/recombinant DNA techniques (or whatever are actually used in the movie I have not seen) are used in organic farming! But if we want to distinguish between technologies used in both organic and biotech crops, and ask among these, which are most likely to produce unexpected 'mutant' results or consequences, the evidence clearly points to organic, or conventional non-GMO methods.

In fact, in conventional and organic crop improvement programs, as Jayson mentions, chemicals and radiation are used specifically to create 'mutant' crops. But the hope is for 'superhero' type mutants not 'super villians.' The only problem is, research shows that these methods are very imprecise and impact thousands of genes in unknown and unpredictable ways compared to transgenic/gmo based approaches!

We also know that based on things like microarray analysis and other research, that even traditional plant breeding introduces greater and unpredictable genomic disruptions than transgenic techniques.

It has always been very interesting to me that despite these differences, there are no calls for labeling conventional or organic crops that use these techniques, but such a strong emphasis on the much more controlled and precise genetic changes brought about by GMOs! (interesting but not surprising for a number of reasons we could get into like rent seeking etc.) And, don't start talking about 'fat' tails or the precautionary principle etc. because fat tail  and precautionary principle arguments would equally apply to organic and conventional technologies if not be even more relevant.

If it comes down to what is more 'natural' we know that research has also shown that the kinds of genetic modifications used in modern agriculture based on specific gene insertions into plants has occurred naturally over time with positive benefits! Just like today's roundup resistant crops were produced using agrobacterium to insert the resistant genes into soybeans, and then the best hybrids containing the gene were selected by plant breeders and sold to farmers, our ancient ancestors selected sweet potatoes containing improved traits conferred by gene transfers from Agrobacterium and they didn't even need a lab to do it!

 See also:


For more references on plant breeding and crop improvement technologies and genomic disruptions see: Biotechnology and Genetic Disruptions

Fat Tails, the Precautionary Principle, and GMOs

Additional References:

The genome of cultivated sweet potato contains Agrobacterium
T-DNAs with expressed genes: An example of a naturally transgenic food crop
PNAS|May 5, 2015|vol. 112|no. 1

Batista R and others (2008). Microarray analyses reveal that plant mutagenesis may induce more transcriptomic changes than transgene insertion. Proceedings of the National Academy of Sciences of the United States of America 105(9): 3640–3645

Baudo MM, Lyons R, Powers S, Pastori GM, Edwards KJ, Holdsworth MJ, Shewry PR. (2006). Transgenesis has less impact on the transcriptome of wheat grain than conventional breeding. Plant Biotechnol J. 2006 Jul;4(4):369-80

Wednesday, June 17, 2015

AgriGenomics - Genomic and Biochemical Mechanisms Associated with Drought Tolerance

"As Dr. Nam-Chon Paek of Seoul National University in Korea stated, 'We all expect that drought will be the major challenge for crop production in the near future. Understanding drought-responsive signaling and the molecular and biochemical mechanisms of drought tolerance in model plants such as Arabidopsis and rice provide new insight into how to develop drought-tolerant crop plants through conventional breeding or biotechnological approaches."