EEP101:Challenges and opportunities

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EEP101Challenges and opportunities

• David Zilberman
• Zilber_at_are.berkeley.edu
• University of California Berkeley

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Overview

• Major challenges
• Energy
• China and india
• Opportunities
• New IT
• Biotech
• Lessons of adoption in ag
• Implication

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Energy income growth and increased demand

• The good new- income world wide is growing
• The bad news- so is demand for energy
• Current unutilized capacity of oil are at less
  than 5 percent
• One million barrel reduction in production of oil
  generates immense pressure and raises prices
• Should the upper price gasoline be 3,3.50 or
  what?

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Fuel choices -from bad to worse
type Positive Negative
Oil cheap Non renewable dirty
Gas Clean Non renewable
Nuclear No climate change Dangerous Non renewable
Wind Cheap clean Birds, location
Solar Clean renewable Need development
Biofuel renewable Needs land
Hydro Cheap renewable Fish, investment
Hydrogen clean Need RD

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Energy and Resources Energy Consumption
Consumption per capitaUnits Kilograms of oil
equivalent (kgoe) per person per year
AustraliaAUS 5,974. CanadaCAN
7,999.5 FranceFRA 4,458.6 GermanyDEU
4,263.5 GreeceGRC 2,622. JapanJPN
4,091.5 Korea, RepKOR 4,131.8 KuwaitKWT
6,956. NorwayNOR 5,920.6 PortugalPRT
2,465.1 SingaporeSGP 7,103.0 SwedenSWE
5,762.3 .United KingdomGBR
3,993.8 United StatesUSA 7,920
Factors Income Population density Fuel price
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Energy and Resources Energy Consumption
Consumption per capitaUnits Kilograms of oil
equivalent (kgoe) per person per year
AngolaAGO 662.1 BangladeshBGD 144.9 EthiopiaETH
284.9 GeorgiaGEO 461.9 HaitiHTI 257.4 IndiaIN
D 514.3 IndonesiaIDN 710.5 YemenYEM 190.9 Zam
biaZMB 607.7 ZimbabweZWE 774.
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Chinas pork production
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China water situation
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China from exporter to importer of petroleum
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New Waves of Information Technology

• CommunicationInternet, video
• Enhanced computing
• Remote sensing/ Geopositioning
• NetworksWeb
• Wireless
• MiniaturizationMicro and Nano

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Expanding Capabilities Meeting Latent Demand
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Identification and Tracingin regulation and
marketing

• Who did it ? Identification of source of
  pollution, etc. Transition from non-source to
  source-point pollution control policies.
• Who made it ? Identity preservation and product
  differentiation. Value capture in retailing and
  biotechnology.

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Differentiation Discriminatory Treatment in
Production

• Transition from uniform treatment of
  heterogeneous elements within the system to a
  precision system, where heterogeneity and
  variability are recognized and treated over space
  and time.
• Enhancement of productivity by
• Improving quality
• Increasing yield
• Reduced cost

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Aggregation Creating Markets

• Building a critical mass for differentiated
  products.
• Match-making
• Resale
• Cooperative buying and selling
• Enhanced price discovery
• E-marketing is in its infancy and worth 150
  billion annually.

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Overcoming Barriers of Space and Time in
production management

• Video conferencing
• Remote monitoring and treatment of living system
  applications in
• Veterinary medicine
• Pet control
• Wildlife management
• Water resource systems

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Elements of Agricultural and Environmental IT
Packages

• Package Multicomponent
• Requires multidisciplinary cooperation in
• Information science
• Natural science
• Decision science
• Engineering

Monitoring
Diagnosis
Prescription
Application
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Determinants of Technology Specification

• Technological feasibility
• Cost
• Demand
• High quality premium --gt investment in
  sophisticated quality control system
• Low value of saved inputs / minimal gain in
  output --gt reduces incentives for precision

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You can guess the use, impact, and value of a new
technology ahead of time but you cannot know
it.
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Research on adoption aims to understand
Who adopts and when How to market new
technologiesHow policies affect adoption
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• On the Adoption and Impact of Information
  Technologies in Agriculture, Resources, and the
  Environment

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Adoption-Dynamics ProcessS-Shaped Function of
Time
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Adoption within Diverse Populations

• Early adopters have most to gain from technology,
  tend to be younger and more educated.
• Adoption is triggered by crises, higher prices,
  or regulation.
• Credit constrains adoption.

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Lessons of Low-Volume Irrigation Drip,
Microsprinkler

• Diffused very slowly over 20 years, currently
  covers less than 10 of farmland.
• High adoption rates on high-value crops, fruits,
  and vegetables, and in landscaping.
• Gardeners are farmers too.
• Spurts of adoption following droughts.
• Adoption is higher in locations with high prices
  of water, sandy soil, and steep landlocations
  where the technology is most profitable.
• Drainage problems trigger adoption.

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Lessons of CIMIS

• Benefits in the early 1990s were estimated to be
  15 times the cost.
• Agricultural water savings, 10 to 40
• Yield effect, up to 10.
• Led to adoption of advanced management.
• Unintended major uses were also in
• Urban water use
• Pest control
• Legal procedures
• Spawned a private network of weather stations
  with software management strategies.

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Computers in Agriculture

• Slow adoption rates only 25 in 1990, today
  close to 75.
• Early adopter characteristics
• larger, with multicrop integrated operations
• younger, more educated,
• Adoption enhanced recently by
• Lower cost, user friendliness
• network externalities
• fun factors
• Most adopters used word processing, billing, and
  business applications much less use of
  managerial application.

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Technology leaders

• Small number of leaders push frontier
• DRIP,Computers,varieties,crops
• Innovation is tough
• Mostly in high value crops
• Automation
• Saves labor,chemical water
• Increase quality
• Reduce risks-physical financial
• Cheap inputs reduce incentives to innovation
• Regulations enhance adoption-
• Timing matters

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Agricultural Practices in the Information Era

• Software and remote sensing ease compliance to
  pesticide-use registration requirements.
• Electronic water markets.
• Web and e-purchasing of inputs.
• Cooperative electronic purchasing.
• Electronic consulting.
• E-marketing of flowers and other high-value
  output.
• And thats only the beginning.

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Precision farming potential in irrigation of
cotton
Realizing the potential requires perfect
information application
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Factors affecting gains from precision

• Ability to monitor the variables that count
• Correct reading of information- 5 misdiagnosis
  may lead to losses
• Timeliness
• Effective and diverse response options-
  e.g.heterogeneous field conditions may benefit
  from diverse genetic choices (Biotech and
  Precision may go hand in hand)
• Ability to replace or reduce polluting inputs

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Gains from quality
High quality
Price of peaches
1.00
Low quality
.30
Time
Midseason
Quality measured by sugar content flavor and size
can triple prices. Seasonality matters
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Willingness to pay for green and clean

• gt10 of consumers will pay gt25 for pesticides
  free crops
• Prime markets(Japan) reward minimal chemical and
  biological manipulation of foods
• Yard care industry grosses gt 40 Billion annually
  nation wide
• Golf courses gross gt 6 Billions in California
  annually
• Stigma effect of contamination reduce price of a
  unit of housing by gt50K
• During next decades
• Several Billions are planned to be spent animal
  waste
• Tens of Billions on water quality

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Complementarity of IT and new Biotechnologies

• New biology will increase varietal choice
• Need capacity for changing variety and treatment
  within fields
• Need documentation of treatment,state of plants
  and immediate response to changes

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GMO, Separation and tracability

• Consumers discriminate between products and
  desire purity
• Need to separate different varieties- in
  particular GMO/Non GMO
• GMO increases costs of traditional varieties
  -worry about separation
• Gain from Gmo need to be bigger than cost of
  extra treatment
• Some Gmo products may be less desirable- others,
  fortified food, more desirable- producers will
  look for differentiation

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Putting it together

• IT and biotech will provide opportunity to
• Increase productivity to allow bio fuel
• Conservation of resource
• If we double or double or triple farm
  productivity - we can use part of our land to
  grow fuel
• If we reduce energy consumption in US and
  developing world by 50-70 we can accommodate
  increase demand elsewhere

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Policies and incentives

• Aggressive RD
• Incentive for conservation
• 2 fuel tax on non renewable
• Reasonable regulation ( replace fear with reason)
• Awareness - small is beautiful

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Product differentiation and tracability

• Separation is not sufficient- you need to know
  who made it to assign liability
• Tracability is needed to address concerns about
  food borne diseases
• It is crucial for supply chain management-
• Following products throughout the chain
• Paying producers for what they actually
  produced- rather an average price
• It is crucial for environmental friendly high
  quality agriculture
• It requires new application of It for food and ag
  systems

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Think Locally act Globally

• Ag and environmental IT will provide export
  opportunities- most ag and resource problems are
  outside the US
• With or without Kyoto CO2 emission reduction and
  sequestration will be rewarded- monitoring will
  be required
• Transition from water extraction to improve water
  efficiency- source of new global demand
• Development increases demand for environmental
  amenities- It will allow to provide them cheaply