Bayer Aktiengesellschaft (BAYN) Earnings Call Transcript & Summary

Good morning. Thanks a lot for joining us today here on this event. I appreciate your presence here. I hope that we can have a good dialogue today. This is all about a dialogue -- is having that conversation. My name is Rodrigo Santos, as Cristina presented me. It's great to be here representing my organization with my colleagues here at Bayer. This is what we do every day. We work in agriculture. We invest in agriculture. But before I start, let me once more say thanks to Mr. Oleg and his wife for having us here. Thank you very much. It's a pleasure, and I wish all the conversations about farming and ag would happen in farms. I may be suggest to [ Davos ] to happen here in the future because that would be much more impactful if all the people that are talking about agriculture meet Mr. Oleg and the farmers and with them in the field. That makes a huge difference when you work. I was walking with Mr. Oleg this morning when we did a tour here in his farm. And Mr. Oleg, I remember my conversation with my father when I was working with you because you mentioned some things that was very particular to me when I was back there in Brazil, walking with my father in the field. And it's amazing you mentioned about what you learned from your father is a sixth generation of a farming here. And in the end of the day for the next generations as well. For the farmers, one of the most important thing is the soil. What are we going to see today here, how the manage the soils because that will be generations after generation. The crops they will leave in the end of the season, but the soils will be here, and we're going to talk a little bit about that today. So it was a pleasure to be here having this short tour. So let me talk a little bit about what we're going to have. We're going to have a dialogue here. So I will be very short. I will not take a lot of your time here because I want to hear also from the panel, very excited, different fields, wonderful experience to share here today. We have a challenge. And if I would just frame the challenges what we heard from the farmer from Ukraine, and we work with the farmers this year in Ukraine, it's amazing. Amazing what they did in -- having the war there, how they manage their crops, how they really did another season was amazing to see, and we work with them every day. There was a impressive challenge that I've never seen in my life. But the war in Ukraine just brought additional challenge to the food security. And I think there was a wonderful debate now more and more present in every conversation that we have about the importance of food security, how can we produce enough affordable, safe, health food for not only the 8 billion people that will be in November, next month, we're going to have 8 billion people in this planet. But in the next decades, we're going to have 10 billion people in this planet. How we're going to produce enough food for that? Affordable one. At the same time, at the same time, let me emphasize that, how we're going to mitigate the climate change? How we're going to help that one? The beauty is that what you're going to see today here in the field, what we're going to talk about agriculture. Agriculture is part of the solution for food security and for climate change and it's all about sustainable agriculture, regenerative agriculture. This is the solution. When I walked here at this morning, I remember that in the last 20 years, agriculture has changed dramatically. If you forecast for the next 10 years, will change again. Will change again and will be important to have and to drive that change. So the first challenge is, this year, 150 million people to hunger again. Not only we didn't improve, but we went backwards on the fight against hunger, that's quite unique. Last night, I was watching the news in Africa about the drought in Africa and the impact of hunger again. So that's the first challenge. The second one, the climate, climate change, how can we manage the 2 things? We and I will share my perspective here. I have the privilege to travel around the world to talk with farmers like Mr. Oleg, but I had this year the opportunity to talk with the farmers in Africa, in India, in North America, in Latin America. And it's amazing the passion they share about what they do and how we can work with them to tackle these 2 challenges at the same time. And that is all about sustainable agriculture. We at Bayer, and I'm here presenting the company. Of course, we believe there is an importance behind that, is innovation, science, technology. Science and technology was extremely important to the place that we are today and we'll continue to be in the future. And when I talk about science and technology, I'm talking about different ways of that, not in one way, but all different ways. I'm talking about breeding. We're going to see hybrid wheat, as an example, we're going to talk about normal -- the conventional breeding technologies, but we are going to talk also about gene editing. We're going to talk about biotechnology. We're going to talk about crop protection, we're going to talk about digital agriculture, as a very important element, biologics. All these different technologies, and there is no one single solution. We don't see that. And farming, I heard from Mr. Oleg this morning, Farming is changing every year. You have new process, new pressures. So all the different tools are extremely relevant for that one. You heard from that farmer in Ukraine, and that's what I heard from the farmers in Africa this year, they need technology, they need innovation, they need things to help them to tackle the 2 issues that we were talking. And one of the key goals that we have at this company when we invest close to EUR 2 billion per year in R&D. We have 7,000 scientists working right now while we are here developing new technologies for agriculture. That's what we do. That's our passion. We are all connected in this company fighting every day to the challenge that we see with one single vision that is Hunger for None, Health for All. That's our passion, and that's what we do. But -- let me stop here because I'm very -- I know that you are very interested to see the debate here, the panelist. Again, thank you, everyone, for coming here today and all the ones that are also watching us live on the stream here. And again, finally, we're going to hear more from Mr. Oleg when we go for the tours and in the afternoon, but thank you very much. And with that, I will invite Tom to start our debate here. Thank you.

Thank you, Rodrigo. Thanks very much indeed, and welcome, everybody. We will get started now with Panel 1 of 2 panels that we'll have this morning. This one focused on fighting the current food crisis and strengthening food security. So as you've just heard from Rodrigo, obviously, agriculture really having an important role to play here as being part of the solution and helping us tackle both those twin challenges of food security and climate change. So to speak to me on this panel, I'm honored to welcome the following guests. So first of all, I'd like to invite up on to the stage, Sara Menker, CEO and Co-Founder of Gro Intelligence; Franck Gbaguidi from the Eurasia Group, a source of intelligence in a complex world. Thank you, Franck; Jorge Fernandes, who's joining us from the World Food Programme Innovation Accelerator and Ruramiso Mashumba, an award-winning farmer CEO of Mnandi and Chair of Zimbabwe Farmers Union Youth. So thanks all very much for joining me on the panel. We're going to talk through a couple of topics this morning. The balance between sort of the urgent measures and the need for sort of a more long-term thinking around developing further sustainability in agriculture, how we boost food production in the face of these climate challenges that we're facing, the harsh weather conditions that we see all over the world, and the importance in all of that of small holder farmers and what they can do and how we can support them.

So first of all, Sara, let me turn to you. So thank you very much indeed for joining us. Gro Intelligence is a very interesting company, a company that brings together data insights and things around the world's ecology and how that links to financial markets to the economy to all sorts of aspects of our lives. Maybe you can help us here a little bit to kick us off the insights that you're getting at the moment, the things that you're looking at it Gro Intelligence, what's that telling us about the extent of the crisis that we are in? And what does it imply about how things are going to further develop?

All right. Thank you for having me here. I think let me maybe contextualize a little bit of where we are as a world today and sort of thinking about the crisis, which -- one of the things I always sort of say about sort of the Russia-Ukraine war is that it was adding fuel to an already burning fire. It didn't create a food crisis, it just made it much worse. So if you look at just a basket of food. So look at your major sort of grains, some vegetable, oils and protein and a basket globally and you look at what price changes have -- what -- how prices have changed around the world since the start of 2020, you're looking at in the U.S. it's somewhere in the order of magnitude of about 75%. Norway, it's 125%. Sudan, it's almost 2,000%. Syria at 700%. It's the first time where literally nobody is immune. And the combination, especially now of essentially, like I said, some structural changes that started to occur in early 2020. But while we were in COVID lockdowns, combined with climate disruptions, combined with the Russia-Ukraine war and now the strength of the dollar have sort of put us in really sort of unprecedented times, right? So I think one is just the undoing of it will take time. There's -- looking at things in short time frames of year-to-date, et cetera, I think it's the wrong way to look at the current crisis because then it helps us understand it. So what changed? I think you look at the supply side, we've just had a number of unprecedented supply-side shocks, right? Whether it's extreme droughts in major growing regions like the U.S., Brazil, Argentina, et cetera, or on the flip side, disruptions on the flooding in places like Pakistan, right? So you sort of have extremities essentially sort of taking over in terms of the supply side on climate. And I think sort of just understanding and contextualizing climate disruptions is a key part of it. The second is if you had supply chain disruptions that has just made the cost of operations significantly higher. Third, you have fertilizer and a fertilizer crisis and the price of fertilizer has quadrupled essentially. So input costs for farmers have gone up. And that's 30% to 40% of your production costs. And I think that's actually one thing I'm worried about for next year and the year after is really sort of an availability crisis, not even an affordability crisis, which is where we were this year on the fertilizer front. And then on the demand side, I think the really sort of big picture is that there was some big structural changes out of China. And that China became a structural importer of grain in 2020. So -- if you look at the numbers of a mix, again, people just overly focus on corn, but the feed mix in China is quite complex. So you just need to look at the full basket of grains. In 2020, China imported about 80% more grain than it did in 2019. Its baseline was low, but in 2021, despite lockdowns, it imported another 143% from 2020. This year, despite all the lockdown and despite price increases, it's imported the same amount as it did last year. So that structural change in demand, combined with supply-side shocks, I think is sort of what we're dealing with. So I just wanted to sort of maybe lay that out.

Great fantastic empirical basis for our discussion, I think, today that you've just set out for Sara, and I want to come back to you on some of the things that you maybe see as being potential ways to alleviate some of the challenges. But Franck, maybe I can ask you to kind of build on what Sara just shared with us. I mean, obviously, Eurasia Group has got kind of a broad global perspective on the dynamics and the forces that are happening in the world today. I mean, what is your organization's view about how this develops further? I mean, is the crisis in any way, do we see signs of it lessening? Do we see signs a bit worsening, where do you see it going from here?

That's a good question. Thanks, Tom. I think the main point here to understand, and I totally agree with what Sara said is that moving forward, what we're seeing is that the crisis are actually worsened. So people are experts [indiscernible] are actually more worried about 2023 than 2022 when it comes to food security. And I think that's maybe the part that we are missing in the conversation. And then the tension that we have is how do we make sure that we lessen that impact? How do we make sure that we -- that it becomes less disruptive across the world, whether it's in emerging markets or whether it's in industrialized markets. And bridging that gap will require efforts from various stakeholders in a way that we pretty much haven't seen before and definitely not on the agricultural side. The tension here, I find is that as we've experienced firsthand, the direct impact of geopolitical tensions on food security, we would expect after this and after what we've seen in the past few months, sort of massive support towards sustainable agricultural solutions, the same way that we saw on the energy side, right? So on the energy side, you saw the innovation of Ukraine that led to this massive push towards more fossil fuel use temporarily. But in terms of the longer-term prospects, it's very clear that we are accelerating the decarbonization pathway and the renewable sources. We have not seen that same shift on the agricultural side. We haven't seen -- actually, in terms of the numbers, the shift of financial support towards sustainable agriculture solutions has declined since the beginning of the invasion of Ukraine. So the question then becomes how do you mimic what we saw on the energy side towards agriculture and the way to do it really is to reframe the conversation towards most of the food security aspect. The same way we're talking about energy now in terms of the energy security aspect, and that's how you bring in sustainable agricultural element and [indiscernible] it into it. And that means that you frame your incentives that when it comes to your interactions with farmers, you don't just focus on this [ stakes ]. Obviously we talked about carrot and [ stakes ], you don't focus on the [ stakes ], but you also focus on the carrot and making sure that they have more incentives to meet you where you want them to go in terms of sustainable agricultural practices. So it's a long -- kind of like a long road ahead. Unfortunately, the prospects are not that great, particularly when you think of international conferences like COP 15, the Biodiversity Conference, we see that all of the targets that are related to agriculture are actually being revised down or being watered down and having a hard time to move forward in terms of the negotiations. So it will require massive efforts from policy makers from private sector institutions, from farmers themselves, and we are yet to -- we have yet to reach that level of consensus among different stakeholders, and we need to find ways to better collaborate together, huge road out but we can frame those solutions for tomorrow.

Fantastic. Thank you, Franck. So that idea of the partnership being very essential, but maybe I can kind of throw the question a bit to you, Jorge, as well. I mean, thinking about it from the World Food Programme's perspective, this idea of a reframe, this idea of kind of thinking differently about the situation that we have around food security, food sovereignty, whatever the expression is that we use. How do you see that? And how do you see that specifically kind of maybe on the ground with some of the actions that your organization is driving?

I believe innovation and partnerships are key, particularly in the nexus between humanitarian aid and climate action towards Food Systems transformation because, unfortunately, and I think Sara alluded to it, we leave an unprecedented food crisis globally, right? It's never been this bad in many, many years, unfortunately. 1 in 10 people or 828 million people go to bed hungry every day, right? We have 345 million people that are suffering from acute food insecurity, 50 million people are actually knocking on the door of starvation. This is a massive crisis that we hadn't seen in a long, long time. And it's a consequence of what we call the 4 Cs, it's climate change. It is the conflict, its COVID-19 and its rising costs, which are really pushing us over the edge now. And we really need to come all together to make [indiscernible] and try to get ahead of the curve because if this year is bad because of particularly inflation and the impact on pricing, next year will be even worse. It will be a combination of pricing and availability and shortage. We talked about fertilizers, we talked about many other things. So the question is how do we work together with all agents in the ecosystem, including governments, including the farmers themselves big and small, but we are particularly concerned with small holder farmers in terms of bringing the solutions not only for the production side but also for the management and the prevention of food waste, right? Because we -- that is an equal big challenge, and we can talk more about it as it is on the production side. But definitely, innovation and partnerships are key, and that's very much what we're focusing globally, but also at the national level.

Thank you, Jorge. And love to come back on some of the points that you just raised also around this kind of balance between the short- and the long-term, what we need to do for the next year or years and then how we keep focused on our long-term goals. But maybe Ruramiso, to throw it over to you at this point in time. I mean, you obviously also have a very close to the ground connection with the network of farmers in the part of the world that you are from. Can you talk us through a little bit the greatest challenges that they face? I mean what are some of the things that small holder farmers maybe are talking to you about, the things that they see as being the big challenges and risks at the moment?

Thank you so much. So myself, I'm a farmer. And I'm also working with women farmer. So I'll share what we experience. So right now, not only before COVID, we were already challenged with increased price pressure because of climate, increased droughts every year, the rain seasons are so unpredictable. So farming was already difficult. Then COVID happened. Now we have a whole disturbance in the supply chain. As farmers, we are price takers. So we don't determine how much we can sell produce for. And fuel has doubled in Zimbabwe. There are no subsidies for fuel, fertilizer is triple. And yet the price we sell to the market, it's still the same. So I would say we think that we're pretty much just growing now just to hobby farm, but farmers are getting poorer and poorer and you have no choice but to sell your produce because you don't have facilities to hold or to store. So when we look at what poverty looks like it's getting worse. Unfortunately, before we were talking about 2030 goals, and saying that we hope to become better. But unfortunately, the way things are going, farming is getting more and more hard. And without proper interventions, without dialogue, there is going to be a total disaster. So many times, farmers when I'm talking, they ask, if they hope because how are you going to control -- how are we supposed to produce with what we have? So we are always talking about we need better and more efficient systems in order for us to remain sustainable because farming as it is right now, it's really scary for a lot of people. And last season when we sold our crops. In fact, beginning of this year, the price did reduced because the market was trying to buy at the lowest and then sell at the highest price and farmers had no choice. So I think the greatest challenge in sustainability is that farmers always left behind. Sometimes you have these conversations, but farmers are hardly included, no is their voice, their challenges ever thought of. People always think of how can we safeguard ourselves before they think of the farmer. But the future would need a better sustainable methods because when we have all these farmers die of hunger, we shall not have the food on the plate.

Thank you, Ruramiso for that very powerful perspective. I mean maybe I can pick up the idea that you talked about interventions, you talked about more efficient systems. Also talked a little bit about sort of solutions generally. Maybe what are the things that we're looking for in terms of the types of solutions, the types of things that can make a direct impact in the situation that we're in, Jorge, do you want to pick that 1 up?

Absolutely. Some of these challenges are very recognizable not only in Zimbabwe, but in a lot of the places where we operate and first of all, it comes from the sheer understanding of the recognition that 35% of the global food supply is coming from small holder farmers that are operating on 2 acres or less, right? And that is a massive amount if we think about it. But yet, they are the least supported when it comes to information, knowledge, capability building, access to financing, access to insurance. So how can we actually create innovative solutions that are suitable to -- also bear circumstances, the price points that they can afford and things like that. So we're very actively working with innovators across the globe to do exactly that, how can we attract them and support them in validating but also adjusting their innovations towards that being that with start-ups like Arable that has a data management system, targeting model, the farmers be it that with micro insurance companies as far as, be it with processing technology that allows for these post-harvest management because we see a lot up to 1/3 of the global food supply is actually wasted, particularly in Sub-Saharan Africa where, let's say, the infrastructure is not there. So working on things as simple as an aromatic bag or warehousing capacity, but also processing the crops shortly after harvesting so that more of the value stays with the farmers. These are difficult examples that we can jointly bring about to actually make sure that they earn a fairer share of the value that they produce and actually allows them to actually graduate out of poverty because very often, they are just there on subsistence level, that's why we help them also in many other ways, even financially. But hopefully, they can also cater for themselves and be part of the solution that we want for the future.

Great. I'm going to turn and take some questions from the room or online in one minute, but maybe I can also just ask you, Sara, as well for your perspective on solutions. So we obviously had one very kind of concrete perspective there from Jorge. I mean I think when you were talking, you were also thinking more broadly around partnerships, for example, different ways of approaching the crisis that we're in, I mean is there maybe something that you can add there in terms of the types of approaches that we should be pursuing, you think?

Yes. I mean, I will say one of the things that has been most shocking to me, and maybe it shouldn't have been, but it was -- is just how much educating we've had to do in sort of the past 6 months to the world about our global food systems and food security, including our world leaders who haven't paid attention to it. So when we talk about sort of solutions and we talk about partnerships, part of what my role has been has literally been just being an educator, like fact-based education around where do we stand? Where are we coming from? Because ultimately, the scale of the challenge can't be tackled by a few. It needs real collective action. And it reels -- it needs a lot of money. And that's not going to come unless the people who control the money are paying attention to these problems, right? It also requires collaboration across industries in a way that I think we haven't done before. So for example, I say energy security, food security. Food security is energy security. And we're not doing both well right now, right? And the lack of communication and dialogue between the energy industry and the food industry was shocking to me. I was a former energy trader, so we speak both languages. And so even serving as a translator in those 2 worlds has sort of been -- a way of sort of moving things effectively. But I think that ultimately, to fund these challenges at scale, we also need sort of the capital markets to step up in a way that they haven't before. So the example I give is when I was an oil and gas trader, which I was, when a producer came and said, I want to sell oil 2 to 3 years forward, when I started, that was really difficult. When I left, we were buying oil and gas 20 years forward. What did that do? That funded a new wave of innovation in even the conventional energy markets that drove down the cost of things like natural gas, which displaced coal, still not there, but like the move to renewables really has been a long journey, but it's been an expensive one. And many, many players around sort of the capital markets stepped up to do that. We need that level of education and that level of up-leveling on sort of the global system as a whole to fund innovation because this is going to be really expensive change. And it's not funding it day-to-day or year-to-year, we have to start funding it a decade at a time. And we're still at 2 years forward in U.S. corn. So we have a ways to go. There's hope. But I just think it's like real structural change that needs...

Sure. But that's a great point of view, the long-term perspective on innovation. I mean, obviously, innovation in our industry also takes a long time. The cycles are long. But that sense of a transition, the recognition that these things take time, I think, is important. Maybe, Franck, I can invite you to join in that conversation. Just something you said earlier on, reminding me a little bit of this tension between the kind of the short-term and the long-term, right? I mean it's -- I think sometimes hard to get the balance right. What do you think are some of the factors that help us to continue on this long-term sustainable transformation of agriculture whilst also tackling some of the short-term issues that we have?

Well, building on Sara's point, because it's exactly where we are today. The issue remains funding. The issue remains the financial support that you have behind the solutions. They won't happen overnight without that type of structural massive capital investment and that oftentimes comes from policy, right? You need to -- if we're talking about ending harmful agricultural subsidies that comes from the regulatory perspective. And then that will hopefully then trickle that on the financial market. What we're seeing right now is that transition is not happening at the moment. Last year, of the 100 countries committed to transform their national food plans. What is happening? What is the update? Do we have some sort of implementation mechanism moving forward? There's nothing that has been said on this topic as we are going through a massive crisis. So the question then becomes, are we taking this crisis as an opportunity to maybe look further and try to correct and right the wrongs that we've been doing in the past? And I go back to Sara's initial point on the education and raising awareness. We talk sometimes to some MPs and I had this conversation earlier before the panel to some MPs who would tell you I have never been to a farm in my life. So okay. So you've never been to a farm, but you are designing very plans that are going to affect all farmers moving forward. So those are the type of kind of like tensions and bridge that we need to reconcile moving forward. So that means you end harmful agricultural subsidies, you try to do it at the global or the national level. And then you need to ensure that it trickles down at the local level. While we see a lot of time when it comes to the solution is that we tend to forget that agriculture doesn't operate in a vacuum. It operates with specific cultural norms and specific kind of like historical practices. How do you make sure that when you devise the spin, when you unlock that funding, it then translates into practices that can actually spend the taste of time. That is another challenge that we're having at the moment. And then when you really kind of like close the loop, I think that we need to -- and you see it on time with the assistance programs that are coming up. It's not just about having dedicated incentives right? It's also about once you have those incentives, how do you follow up on those? And how do you make sure that they go all the way where they need to be? So let me give you a concrete example. When we provide training, right? Like you say, you take [indiscernible] organization that provides training to farmers. That's one step. But are you just going to provide free training or are you going to pay them as you provide that training because they are taking time out of their day when they're already making very small margin, as you said, to do that training for you. So it's also like in thinking about it through an entrepreneurial lens, through kind of like a private sector lens that will then help us switch the outcomes that we've been looking for.

Yes. Excellent. Thank you, Franck, for that perspective. I'm just going to look around the room and see if there is a question from the audience here. If not, I have questions from the chat. In fact, one relevant question, maybe Ruramiso, I can take you into this one. So thinking about small holders, thinking about their very important role in the topic of food security. Can you help us understand a little bit how, for example, the top of digitalization might be relevant there? And can it kind of play a greater role in this crisis situation that we find ourselves in than perhaps previously thought. What are the applications? What are some of the potential ways that, that could accelerate the transformation of the sector?

Definitely, digitalization has a role to play for farmers. But over the years, I've had a lot of organization work on developing sort of platforms that farmers can use. But it's always good to consider the level of education the farmer is at before developing. Like mentioned earlier, that sometimes these things are developed by someone who's never been on the ground or understands the lack of education that some of the farmers might have, not all. But you'll find that some of the farmers that I work with, when we do trainings, we sometimes invite guests because who might speak in English, and they hear absolutely nothing. So you need to consider is the language that I developed this, can it be translated to the local language because it can be developed and no one can hear it. That's one. Then there's the accessibility of the Internet in those rural areas. Do they have -- is there an off-internet platform that can be developed so that they don't necessarily have to be connected because we do not have fast Internet like you have here. Our Internet is very -- and expensive and not affordable for some in the rural areas. And also the type of phones they have. So and also the complexity, like sometimes so many times that have people who come and speak to my community. They speak such high-tech language that you think assume that maybe they have some education in. But a lot of the women who we work with, they actually never even attended 3 years of school, so they don't know the language of farming. They know the farming, but they just don't know what you mean when you say a certain terminology. So it's very important to really realize who are you developing this for because they are, of course, medium capacity farmers, commercial farmers. So if you're going to develop for the very marginalized, go to the community, spend some time or gather information and really find out and then also understand what is it they're struggling with. There are some things like understanding the climate, understanding conservation agriculture, those things our farmers really disparately needed, they can't find the information. So there's so much digitalization can do, but it needs to be correctly designed or else to have no impact.

Right. And put in the right context and obviously, there's some fundamentals there but understand it as well that need to be addressed through education. Beyond digitalization, maybe there are other technologies or there are other innovations that you would hope to see coming to small holder farmers that could make a transformational difference you think?

There's lots of technology, I think, technology is the future is not working fast enough, mainly by developing stuff that we cannot find or access. You only hear at it on some international platform, but you never -- no way to even find it. So even like access to finance, I think that we need to relook at how it's financing because a lot of the small orders, we're depending on our financing model for our banks, our banks are giving us a 20%, 30%, and they want their money in 3 months. That's just the way it is in Zimbabwe, and there's no way. But I think that there can be other platforms that can be designed, where you can actually find other ways of borrowing money, and people just don't want -- they don't want a lot of money. They want to borrow $500 so that they can start their small project. So there needs to be other innovative methods with booking borrow, and then they can return the money at a reasonable rate and also consider the time that it takes for me to plant, to first procure the crop, the input plant, take to market, get my money and then pay back, be considerate of that time. So I think there is a need for developing of proper financial models. There needs to be development of access to the inputs. Inputs, we talk about them like they're easy to find. I can tell you that they're not always easy. No a good variety is easy to know, no information on that variety, how to grow it, when to grow it. That information is just not found at times. Access to the correct technology in Africa, sometimes or even in Zimbabwe, we don't know -- we can't access the correct equipment. We don't know where to find it, we don't which is the best. So there's so much like gap from the real us on the ground and other people who are doing all these fantastic things. We just can't find each other. Until we find each other, then maybe we can start solving some of these solutions.

Thank you, Ruramiso. So Jorge, I mean, maybe also you can help me answer one of the questions from the chat here as well and building a little bit perhaps on what Ruramiso talked about. Is -- the question is, how do you promote agricultural literacy in African young farmers looking at technology and finance? I mean maybe one for both of you there -- but I saw you wanting to respond a little bit to what Ruramiso said?

We are present in 120 countries, but we work a lot with local organizations and NGOs that know the context, know the people speak the language, which is very important in order to be successful in these interventions. And we always try to localize whatever idea we have. And these 2 points that you mentioned are absolutely key access to information access to technology, but also access to finance that is affordable, right? Micro finance tends to be prohibitively expensive in most parts of the world if provided at all, right? We're working on one of this particular project, which we call SheCan, because we also wanted to make it about women economic empowerment and financial inclusion, which is exactly about that, which is providing my access to micro finance that is ethical, collateral-free, affordable interest rates and not so much creating an over-indebtedness spiral that very often happens with micro finance. And we do that by working a lot with what we call village savings and lending groups that the community helps each other. First of all, building that capability, that information, that literacy and that there's also this peer-to-peer support that is very strong in these communities that one helps thy neighbor. And this is allowing us to reach several thousand people this year in Peru, Zambia, Rwanda on the way to go into Malawi and Nigeria, a few other countries exactly to promote that there is a transformation around the micro finance landscape that do come and serve these people. But micro finance is one example. Micro insurance is another one because people also need their safety nets, things that we take for granted are often not even available to these communities, right? And the rest is access to data and information, right? Knowing which crops, knowing where to get the right inputs, access to fertilizer, access to low-tech technology that can be operated by people that have different degrees of literacy level. So basically customizing things to the reality of the small holder farmers that we are working with, while working as well with local governments and other parties in the national level to provide the right context right advocacy, but also the right incentives so that we promote this change that we see happening in. And we see promising signs, but there's so much more to do because the need is so great.

Yes. Yes. And maybe you can ask for a question in the room. So there's a question here, if somebody has a microphone? Here it comes. Galloping through the room here.

I'm Olaf Storbeck from the Financial Times. I have a question to Rumariso (sic) [ Ruramiso ]. What's in Zimbabwe and your personally, what's your view on these kind of multinational giants like Bayer. Do you see them -- do you perceive them as a kind of sort of good providing innovative product? Or is it kind of more an engine kind of a company or companies which kind of -- increase their profit at the moment, increased profit margins and kind of capitalize on these food shortages?

Okay. Thank you for that. Well, I see the role of companies to really support everyone that they are producing product for. So my thoughts would be that a lot of these organizations understand that they do need the farmers. It's difficult to make profit without any of the farmers. So they do need to ensure that the farmers are also trained. They have access to the correct tools for them. I think that's why sometimes you have these dialogues so that they can understand the exact need of the farmer, different climatics, different environment. So I'm hopeful, and I see that there's a lot of work that's being done because maybe many years ago, there was farmers hardly used to give their voices. But there's been this urgency, especially when we're working with organizations like the FAO, which have really bought farmers on the platform and connected us to organizations that maybe we would not know of or speak to share our needs with the organization so that they can better develop materials and solutions for us. So I think it's about building the relationship, and it takes time. And over time, we should build new relationships where we can be better supported because we do need the organizations to correctly develop things that affect us. I hope that answered your question.

Invite others to share a perspective on that, but also maybe kind of related to the question that Mr. Storbeck asked. What more should companies be doing, frankly, to help in the situation of trying to secure food supply? Sara, please. Looking at you, but didn't...

No. I think one of the things that actually sort of starting the company 8 years ago, one of the hard things about being a data company was that we -- we started a company in an industry that's actually largely been built on too much mistrust of one another, right? So trust has been -- was sort of fundamentally broken, and I didn't fully recognize it because -- and I noticed it when we'd go to hedge funds who buy our data and they'd be like, well, you publish a lot of stuff for free. Am I going to find enough signals in this to make money off the trading? And then we would go to sort of public institutions and they say, well, you sell to evil hedge funds and big companies and how can we trust you if -- like how can you actually care? And it was always this like dichotomy of an either or and we had to pick a side. And I used to say and I still believe that data, information, knowledge is a bridge to understanding and to building trust. And I think we've crossed that sort of that barrier now where we do develop public goods as a private company. But we don't. We serve large companies. But what that has also done is create the bridge and understanding of sort of a dialogue to start to occur at a level that I don't think used to happen before. There's still a long way to go, but I do think we need to sort of in sort of our food systems, reframe this narrative that we sort of built in our heads of it's an either/or, and it's sort of David-Goliath, et cetera, because we sort of all need to sort of survive together. And like there's a famous quote that says, eating is an agricultural act and rewrote it to say living is an agricultural act in the sense that every -- from the moment we wake up, everything we interact with has some type of agricultural component to it, and we don't recognize it as humanity. And so I think that sort of reframing that sort of dialogue, but also sort of building trust is such an important component of this journey.

Yes, absolutely. Jorge, I saw you nodding now...

We need everyone, right? The challenge is so great that we need both the public and the private sector to come together and really forge that partnership in order to tackle the issue. Let me put it in perspective. We have plans this year for a total budget of EUR 24.5 billion to reach 153 million people. We are close at EUR 9.5 billion year-to-date. That sounds a lot, but that means there are people in the ground that are deciding who gets help and who does not, right? So how can private sector companies, large companies contribute, both through funding, but also the capabilities, right? Making their technologies affordable to the people that needed the most, which other ones that organizations like ours are trying to help. There's so much that private sector can contribute both large and small companies, but especially the multinationals that have the capabilities and the presence on the ground in the place that we are to actually make a contribution through their science, their offerings but also making their knowledge, their capabilities successful to those people that can actually benefit most and does that make a step-up towards getting out of paid then maybe being able to cater for themselves being more resilient as a community, I think there's a lot of opportunity that we can tackle also because it is a necessity. We really need to act now like otherwise, like I said before, we're going to have an even greater crisis in the year, years ahead where we will have more famine, more migrations, more potentially conflict in the back of this. So you have to -- the time to act is now.

Great. Thank you, Jorge. So we've touched on this, I think, in several ways, but Franck, I just want to ask you to help us kind of answer this question from the chat. What's the best way to connect top-down global and bottom-up local measures to transform Food Systems to strengthen food security? Do you have a perspective there on what the best, most effective manner is that we can kind of bring these 2 pieces of the puzzle together?

Yes. No. And I do agree. I actually like how the question is framed because it's both, right? Like it's top, bottom -- top-down, but it's also bottom map. So you need to have like the 2 perspectives at the same time. I'm a firm believer in global framework because I do believe that they give everyone some sort of a road map, right? Like at least we are moving in the same direction. So having that sort of like clear trajectory, whether it's a 2030 outlook or a 2050 outlook. It helps everyone move into the -- move in the same direction, then you need to make sure that it trickles down further. And then you need to also make sure that there are some sort of monitoring or implementation mechanism that allow you to track progress over time and everywhere. I think the issue, particularly when it comes to agriculture or with the topic that I cover for you go, which is biodiversity and oftentimes both are in the same conversation is that it's extremely local. So it's like how do you end up having a global framework for a topic that has been extremely local with different localized impact from one place to another. Sometimes even within the same region or some region or within the same country. And that requires even more efforts and even more cooperation and even more discussions. And so I think that means that when you draft those global framework, you have to have some sort of space and flexibility to ensure that you can have exemption so that you can have differentiated targets for specific countries and so on and so forth. So when you talk about sustainable agricultural practices and you talk about scaling them up further, we have to have some sort of understanding that the pace with which it's going to go in Europe or in North America is going to be different than Sub-Saharan Africa, for instance. So than Latin America. Then when you take it to that step, you have to realize, okay, then what's missing in those regions for them to get to the next level, and often times that's funding. So then it comes the question of where is that funding? What does the financing come from? And obviously, there has to be some sort of global move versus global South cooperation. And we don't see that happening right now. So you cannot have those expectations without having the funding and you can have this expectation without having some sort of trickle-down conversation from the top level to then the local level. Unfortunately, that hasn't happened yet. I do think that things are slowly but surely moving in the right direction because we're seeing the parallel conversations happening. On the EU side, you have the Farm to Fork strategy that is moving forward. You have the nature restoration lot has been proposed in June to reach full nature by -- full nature restoration by 2050. So you kind of like see those regional building blocks coming up. So on the U.S. -- the IRA bill is dedicating EUR 20 billion to Climate-Smart agriculture. So things are kind of like moving forward in that sense. But then you also have to look at how do that, that takes place locally and that means more collaboration with different countries. That is more collaboration with different farmers associations. I mean, more collaboration with different industry lobbies. And obviously, particularly in countries where government's funding are quite limited because of the multiple crises that are happening at the same time. That means the private sector stepping in and big companies also playing the role. The last one that I would like to add on this is that we need to hold each actor accountable for what they're actually responsible for. And I find that sometimes the conversation tends to move a little bit beyond that spectrum. Take the case of fertilizer companies, right? Oftentimes, when I hear the [ crescent ] backlash against fertilize the company, it's about the excess use of their product. But in reality, one could wonder, does it have really anything to do with them and with the work that they do. And we don't then move the conversation to how they could have more sustainable practice when it comes to phosphorus mining or when it comes to ammonia production or potassium production, when it comes to their warehouse or in-country distribution, so across the supply chain. So having those really segmented conversation as to what it is that you are supposed to do and how can you do it? And are you doing it well. I think it's going to be also another step in the right direction.

That's great. Thanks, Franck for that perspective. I'm going to pick that up and maybe move us towards a little bit slowly towards the conclusion with the final question. But before we get there, you mentioned Sara sort of logistics and the entire sort of supply chain equation here. And this is maybe one area that we've not touched on too much. We talked about technology. We talked about digitalization, the need for innovation, the need for partnership. But this idea of logistics as being a fundamental part of this puzzle as well. A question here from the chat, how can we drive more local production, especially in regions affected by climate change, how can we make this more economically viable for farmers? I don't know whether from a markets perspective, Sara or Jorge, Ruramiso from your experiences on the ground, whether you have points of view on that?

Economic viability. How do you solve climate change? No, listen, I think economic viability goes to sort of the financing models conversation, whether it's sort of from a lending standpoint or an insurability standpoint, right? I mean I think one of the things that is going to be critical for our food systems is actually rethinking insurance. Like I think we have to completely rethink insurance. And really, this applies well beyond sort of agriculture because again, insurance affects, not just the production side of things, but the logistics side. So I mean what -- look at what's happening in the Mississippi River right now. Crops are being grown in the U.S., you can't get them out because the water levels are too low. That itself is a climate-related sort of disruption. And so much of sort of what we've left in terms of the how we do insurance actually in sort of agriculture has been left to a few institutions that essentially are warehousing all the risk, that will not be able to warehouse that one-way risk for much longer at the scale that, that will need to sort of be funded and sort of financed, right? So I think -- I mean, we if you look at Odessa and sort of the impact that just the shutting down of Odessa had on global food markets. If you look at the 124 cities and towns that span the Mississippi River, those cities and towns are responsible for 40% of global commodity flows, 40%. So there are places that are incredibly vulnerable and incredibly large. And just we are not thinking about it. So when I think of economic viability, you have to think about economic viability across the stream. So whether it's thinking of lending schemes and what makes that work in Sub-Saharan Africa, which is very different than the Mississippi River. But essentially, you have to think of it as a global portfolio that needs risk management at a very different level.

Makes good sense, Jorge?

Addressing the food supply chain issue is a big the solution. And that can come both from global supply chains. And you mentioned Odessa and WFP has been working very actively on the ground to facilitate the outflows of grain out of Ukraine. And luckily, we see that happening now, and that is reducing some pressure on price points, but especially making it more available to the communities that need it the most. But we also see it at local levels where small holder farmers get the least share of the value they create just because they don't have the access to markets directly. There's too many intermediaries, and we need to rethink those models. So that they also are equipped with the type of post harvest management technologies that allow them to actually preserve and not have to sell immediate upon harvest just because they're afraid of any kind of losses there with past and mold and things like that. So how can we dis-intermediate these supply chains, making the farmers having more access to the end markets and facilitating that? We ourselves are trying to do that with our own purchasing of local food supplies. We purchased from small holder pharmacy in 40 countries on an annual basis, and we're trying to increase that as more and more so that we actually make that most of the value goes to them. But ultimately, it has to come down to facilitate access to markets, creating more awareness about the importance of post-harvest management and also the importance of insurance that they are protected if the unfortunate weather or other event happens, which tends to happen a lot.

Appreciate it. Thanks, Jorge. So Ruramiso, I'm going to come to you for a final first in 4 final questions. I'm going to ask the same thing for 4 of you. Maybe a bit of a quick fire round here to close this out. But -- as you think forward to 2023, we've talked a lot about the challenges that we've been having in 2022, seeing across the food production sector. What do you see as the biggest risk and the biggest opportunity in '23 from your perspective? The others get head start they get a chance to have a think to answer this one.

Okay. Actually, I wanted to add.

Please, yes. go ahead. Yes.

I also wanted to add just on the true cost of food, I think something that people forget because a lot of the times, there is pressure to say food should be very cheap. But if we're going to think about it, what is the true cost and who's going to pay? Because so far, for so long, we've just said the farmers should pay to allow foods to be affordable. But what is the true cost? And I think even just to add on to your next question, I think 2023, we need to really look at this and say, what is the true cost of food? Who pays if we still -- and looking at sustainability, having also a cost, who pays? So I think those are something that I really like trying to puzzle in my head to say, as much as we want farmers to contribute in particular earth, our soil, but who pays for that? Is it always going to be the farmer who pays?

Thank you, Ruramiso. Great closing comments from you. Thank you, Jorge. Turning to you next, risk and opportunities '23?

I think the risk is the increase of price pressure that we see across the globe and also the availability. If you add to that, basically, we are wasting $1 trillion in value in food going to waste every year. That gives you, let's say, a sense for the magnitude of the problems. So I would say -- we need to focus on climate action in terms of mitigating and adapting towards the reality that we have which is more drought, more unstable weather events that are difficult to predict. So how do we provide education, information technology and finance to the farmers that need the most, but also making sure that we don't waste all of us, but also especially very often starting from the farm up with the food that is produced globally.

Yes. I mean our biggest risk is also our biggest opportunity, which is this crisis, right? So it then becomes up to us to figure out what are we making with this? And are we making the most time of it? And are we coming up with solutions that are intrinsically fair? And I think we're not there yet. I go back to my point on differentiated impact. You mentioned earlier that 35% of food production is coming from smallholder farmers that leaves a huge chunk that is not from smallholder farmers. So maybe when we design these solutions and when we have the target, maybe we're a bit tougher on the ones that are not the smallholder farmers and then we expect a bit more from them than from the other. So those are the type of kind of, I guess, targeted frameworks that expect to come out of this crisis if should we use it the right way. .

Great. Thank you, Frank. And finally, Sara.

Biggest risk on the sort of agricultural side to me is fertilizer right now going into sort of the winter, where natural gas prices -- and natural gas is used for heating our homes. That's what we need for producing fertilizer, and Europe is short of fertilizer. We did an analysis this summer where we partnered with the International Fertilizer Association, took anonymized data on sort of different scenarios they had for under different sort of how the world was going to play out and availability was about to play out. We had a base case an optimistic case and a pessimistic case. And looking at sort of nitrogen response rates around the world and application rates around the world, basically saying under these 3 different scenarios, what are we looking at in terms of production and a hit on productivity, especially with regards to nitrogen. And the pessimistic case. We're now worse than the pessimistic case scenario. Those scenarios are being updated, right? But when we did that analysis, and we open sourced. So we partnered with the Gates Foundation. And this is a perfect example of private industry and public sector coming together, developing a tool for sort of the world to understand. And that was going to lead to a reduction of sort of food supply for about 200 million people. That was a pessimistic case scenario. I really, really worry that going into sort of the winter, we basically have a potash problem, a phosphate problem and a nitrogen problem. And we just never had that at that scale. And so from a risk standpoint, I am truly, truly worried about sort of production, productivity, et cetera, into 2020 through 2024, and what regions in the world get hit by that. Places like the U.S. and Brazil will be fine, but places like sub-Saharan Africa, where yields are already low, application rates were already low. When you go from already low to 0, which is where we're headed, that's what that actually means for the crisis is really sort of worrisome. I think from an opportunity standpoint, I'm generally a very optimistic person. It's been hard to be optimistic recently, but from an opportunity standpoint, I really do think that food, agriculture, food systems, et cetera, are now top of my intro every world leader for the first time. I mean it's taken too long. But the same people who make the decisions on sort of weapons to buy are the same people now focused on food systems. And I think we use this as sort of an opportunity to make sure that some of the changes and the attention that's being focused is also driven towards long-term changes so that we're not back in this position again a decade from now because '07, '08, there's a lot of movement and a lot of promises made around never again, we'll look around the corner. We won't be surprised. And then we found ourselves here. So just keeping it top of mind for folks.