Thank you Roger (Berry) and good morning everyone. I appreciate the opportunity to address this group of agribusiness men and women on a subject that is foremost in all of our minds. I'm referring to the challenge of global food security and the powerful global trends that affect each and every one of us.
To put it bluntly, our world has a problem. We must double the food supply – double what we produce today in the next 40 years, and do so in a sustainable manner if we are to feed tomorrow's global citizens.
The solution lies in closing the productivity gap – the difference between today's rate of farm productivity growth and the rate required to meet future demands.
I'd like to spend some time this morning discussing the challenges our industry faces as we prepare for a world with 30 percent more mouths to feed – in just a few more decades. And I'll share with you how John Deere is working to make our customers more productive than ever, so they can meet those challenges.
So what's behind this need for higher productivity? The answer lies with essentially three major megatrends impacting our world today – a growing global population, increasing incomes and urbanization.
Let's take a closer look at each of those dynamic forces. You've all heard the predictions – the world’s population is projected to climb from approximately 7 billion today to more than 9 billion by 2050.
Consider that by the time I finish my remarks this morning, about 4,500 people will have joined the ranks of the global population. That's 9,000 new inhabitants of the earth every hour!
Feeding these additional people, not to mention sheltering and clothing them, brings with it numerous challenges. First, we must double output with basically the same amount of land, water and other inputs such as fertilizer.
Another way to describe this challenge: Agriculture will be called on to produce more food than in the previous 10,000 years, with little or no increase in resources.
Many people don't realize that much of the world's productive agricultural land is already in use. While incremental acreage can be brought into production, it tends to be less fertile, more costly to farm, and often less suitable for sustainable agriculture.
Clean water is also becoming increasingly scarce – both for urban and industrial needs, as well as for agriculture irrigation. Water scarcity already affects a significant portion of the population on every continent. Expanding industrialization and urbanization further increases the competition with agriculture for available fresh water.
Also adding to the challenge are the effects of climate change on food production. Experts believe the impacts of a changing climate may have the most agricultural effect in the regions of the world that already are struggling with food security – regions with less capacity to adapt.
Beyond population growth, increasing incomes also drive the need to double food output.
Consider that over half of the global population today lives in countries whose economies are growing at an annual rate of 6 percent or more. Forty percent are in countries growing at an 8 percent rate or more.
As incomes in these countries rise, more people join the ranks of the middle class. Now this may mean earning just a few additional dollars a day, but it's enough for people to upgrade their diets. This creates more demand for meat and animal protein in particular, in turn creating greater demand for grains.
The final global trend that significantly impacts our ability to ensure agricultural development and productivity growth is urbanization. A more affluent population is fueling a migration from rural to urban areas. This is resulting in a reduced supply of farm labor, a greater requirement for modern farm machinery, and a massive need for infrastructure development to deliver food and ag products to the centers where it is consumed.
In 2007, for the first time, more than half of the world's population lived in urban areas. By 2050, that figure is expected to reach 70 percent, with nearly as many people residing in cities as live on the entire planet today.
With John Deere's increasing presence in China, I travel to that country on a fairly regular basis. It’s absolutely mind-boggling to see the sheer number of roads, bridges, and buildings under construction. By some estimates, the equivalent of a brand-new city of one-million people is being built every month!
Against this vigorous backdrop of powerful global trends, let me take a minute to explain how John Deere fits in the picture.
For nearly 175 years, John Deere has enabled human flourishing by offering advanced solutions to those who produce our food, fiber, and fuel, beautify and protect our environment, and build and maintain our homes and critical infrastructure.
From the time that our founder John Deere invented the first commercially-successfully self-polished steel plow, our company has been driven by a consistent purpose – improving productivity and efficiency of our equipment for the benefit of our customers.
Today, we are a world leader in providing advanced products and services for agriculture, construction, forestry, lawn and turf care, landscaping and irrigation. We're a leading worldwide manufacturer of off-highway diesel engines and operate one of the largest equipment finance companies in the U.S.
Like our operations, our customers span the world, from the smallest subsistence farmers in Sub Sahara Africa working just a few hectares of land, to the massive farms of Brazil's Mato Grosso, spanning thousands of acres.
No matter their size, all of these customers are benefiting from technology in some way, driving improved productivity and efficiency.
The issue of increasing agricultural productivity is nothing new, with dramatic gains over the years. In fact, the typical U.S. farmer today feeds more than 150 people, six times more than in 1960.
But it's important to note that the rate of annual productivity improvement has slowed in recent years. In the face of that decline, some analysts suggest productivity must increase by about 25 percent in order to grow enough food to meet society's future needs.
Further advances in farm machinery could play a big part in attaining this goal, and there's no question that equipment has been getting larger, smarter and more powerful for some time.
For example, you might be surprised to learn that today's large John Deere tractors have more lines of software code than early space shuttles!
In fact, our GPS technology can guide a tractor and implement in the field with near-perfect precision. This means less overlap in tillage and chemical application, saving time and money and minimizing environmental impacts.
The other (and much more exciting) productivity enhancing capability leverages an integration of GPS and wireless mobile technology. At John Deere, we have framed this integration in a strategy we call John Deere FarmSight.
John Deere FarmSight connects GPS and integrated wireless mobile technology to link together all the critical elements of a customer's operations: equipment, owners, operators, ag consultants and the dealers.
This approach offers solutions for today's productivity challenges in terms of yield, water and other natural resource consumption, reduced labor input and traceability. FarmSight allows customers to gather and manage information about their operations in three main areas.
First is the area of Machine Optimization which helps farmers and John Deere dealers easily manage equipment maintenance and monitor vital machine data, like fuel level, service needs and diagnostic codes.