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
6. 
   

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

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 gas....it'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)

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: http://www.ewg.org/agmag/2015/09/california-moves-protect-citizens-monsanto-s-gmo-weed-killer

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