Even though I saw it coming...

It's worse than I imagined. The tragic fallout from closing horse slaughter plants and the collision with feed costs and the housing crisis is becoming a big problem.

The global food and fuel crisis is resulting in more than just people going hungry. Rising grain and gas prices, as well as the closure of American slaughterhouses, have contributed to a virtual stampede of horses being abandoned — some starving — and turned loose into the deserts and plains of the West to die cruel and lonesome deaths. Horse rescue projects, which are mostly small, volunteer operations with limited land and resources, are feeling the consequences of this convergence of events. In the meantime, many now unaffordable horses are being sold to abbatoirs south of the border where inhumane methods of slaughter are practiced. [More]

Don't get me wrong, there is no I-told-you-so scheudenfraude here. Just a sadness that animal welfare advocates don't face end-of-life issues for companion animals any better than we do for our own species. And we are just beginning to see the consequences, I think.

So unwanted US horses, if not abandoned to die a lingering death or wander onto a motorway, are being shot and dumped illegally. how humanely one doesn't wish to think. Being slaughtered for meat would probably be a lot more humane. And some US horses still are - except this now entails being painfully trucked to distant slaughterhouses in Canada and Mexico. The US Humane Society wants to stop even the export of horses for slaughter; some animal scientists predict an "equine tsunami" if they succeed.

I think most of us hate the idea of cruelty to animals, especially intelligent domesticated creatures like the horse. But efforts to protect animal rights should lead to less cruelty, not more of it. It seems the animal rights people have shot themselves in the foot.

It reminds me of when activists liberated all those mink from European fur farms, helping the bloodthirsty little weasel, an American native, destroy yet more European wildlife. [More]

This outcome is not simply irresponsible. It is immoral. And it will set back animal welfare advocacy efforts immensely.

Blog Wars...

One of my favorite comics has nailed the blogosphere with a series of great send-ups.

The series starts here and is continuing.

We need a better marketing plan...

The food-fuel debate may be over before corn farmers realize it. With the exception of a few in-house economists, the overwhelming consensus of Big League Economists [plenty more examples] is exactly what common sense is leading many consumers to conclude: ethanol takes corn acres away from food production, and the effect hits the world's poor the hardest, because they consume mostly grain.

Even one of agriculture's oldest stalwarts and Past Master Diplomatic Justifier of Farm Policy, Keith Collins is stating the obvious:

The Agriculture Department’s own longtime chief economist, Keith Collins, who retired in January, said that ethanol was the “foot on the accelerator” of corn demand — an essential feed for animals, as well as a part of many diets — and merited renewed debate. He said Congressional mandates for ethanol would require farmers to grow more corn for conversion to biofuel, at the expense of feed corn and other food crops.

“You’re building in tremendous increase in demand,” said Mr. Collins, who emphasized that he was not necessarily against ethanol. “It’s an increase that is going to feed into food prices.”

The United Nations report, the global agriculture outlook through 2017, said prices for farm crops will remain substantially higher over the next decade because of fundamental changes in demand, though they will gradually decline from current highs.

Because the recent spike in crop and food prices has been caused in part by temporary factors like drought, the report predicted that prices should decrease as weather conditions return to normal and crop yields improve.

“At least we hope they are temporary,” said Angel Gurria, secretary-general of the O.E.C.D., alluding to the potential impact of lasting climate change on agricultural production.

In addition to reviewing ethanol policies, the report said governments should reconsider trade policies like export bans that do not allow farmers to take advantage of higher global prices for agriculture commodities. [More]

I think we are just starting to see the effects of $6 corn on food prices here due to the longer response time from the meat industry - especially beef. In high-grain-consuming countries, the results are in your face right now. One clue will be to watch the tenor of the debate at the World Pork Expo this week. It is crucial to remember that the lion's share of the economic good ethanol does for farmers is restricted to grain farmers (and more especially, grain farmowners) - not all farmers.

The debate will also be roiled, oddly enough, by growing consumer experience with higher blends of ethanol. Consider this e-mail I received last week responding to our Roundtable on US Farm Report.

I am a central IL farm wife who talked her husband into buying a 2008
Chevy Impala which is a flex fuel car. Our first few tanks of gas we got

28 mpg. we then tried 2 tanks of ethanol which dropped our mileage to 17

mpg. That was about 15000 miles ago and the best we have done with
regular gas since the ethanol is 23 mpg. I have tried working with the
dealer who tells me that unless the computer on the car shows an error
message there is nothing they can do. I then contacted GM and was told
the same thing. I am a farm wife who would really like to support
ethanol but frankly for us it has not worked out well at all. Could you
tell me how I can contact Beth Lowry? I am at my wits end with this car
and at this point don't have much good to say about ethanol or GM. I am
constantly being told that no one has seen a mileage drop like we have
experienced. Our last two cars have been Impala's but the next one won't

be and if we can't find someway to improve the mileage on this gas hog
we won't consider ethanol again.

It has been a mistake, IMHO for the biofuel industry to downplay the reduced mileage of E-85, and highlight those few outlier examples of nearly equivalent, or physics-defying better mileage of higher ethanol blends. The stuff on has 70% of the energy of gasoline, fer cryin' out loud. When consumers like the lady above run into reality, telling them, "Who ya gonna believe - me or your own eyes?" seriously undermines any shred of credibility the ethanol industry has left. Pushing to install E-85 pumps will only replicate such experiences, I suspect. In the end, those pumps will serve mostly those who buy the stuff for non-economic reasons, like reducing Mideast oil imports (snicker).

But the real detonation could be caused by this springs wet weather which prompts the loss of a few million corn acres and a couple of bu/A in yield to produce a little too little corn for all our current customers.

That's when things will get moving. And if Hillary is playing the I-told-you-so game in preparation for 2012, and McCain steps into the White House, the current administration's precedent of unilateral executive action could allow the old subsidy foe the opportunity to change the rules of this rigged market.

All that could be avoided. Let go of the tariff and blender credit, and shift the blame to the market, which will sort out winners and losers more fairly than any legislator. The risk is low and the defense gains for the corn industry immense.

Don't pay the ransom...

I've escaped. Not only have we been struggling to plant some beans, we bumped into a strange computer problem this week and I haven't been posting nearly enough to satisfy my compulsion.

Apple has automatic upgrades for their programs (similar to Microsoft), which generally run unseen in the background and work great. But when they released a whopping new upgrade to the operating system software - Leopard - it weighed in at 420 MB. Along with some other smaller upgrades our two computers had some heavy lifting to do - and some bandwidth to occupy.

Only on satellite like Hughesnet, they frown on bandwidth hogs. Fair enough. (In fact, it's called Fair Access Policy]. I don't download movies so it was no biggy. But when you do suck up too much time on the system you get a "timeout": for 24 hours your max speed is about the same as dialup on a bad phone line. It took me minutes to open AgWeb, for example.

So when my Mac tried to download the elephantine file, it tripped the penalty and we could barely get our mail on Thursday. Before I could figure out what the *&%$^ was going on, Jan's computer tried the next night and locked us up again. I've canceled the auto update for the time being, and if I get up at 3 AM and manually download the files, I can workaround the FAP limits (no restrictions from 3-6 AM).

We come out of the penalty box this morning sometime, and with the gentle floods we received last night, I seem to have some time to get some serious posting done, so check back later today.

Thanks for reading.

As for the beans, the news is less good...

Why Calculus III classes still suck...

I went to an all-male engineering college. In fact, to this day, I cannot understand how serious learning can go on with women of the opposite sex actually in the same room as testosterone-afflicted young men. Maybe it isn't.

Anyhoo, that was back in the Dark Ages of Engineering, and women of all genders are now welcome - nay, urged, begged, dragooned - to enlist in our pocket-protector profession.

But they aren't.

Now two new studies by economists and social scientists have reached a perhaps startling conclusion: An important part of the explanation for the gender gap, they are finding, are the preferences of women themselves. When it comes to certain math- and science-related jobs, substantial numbers of women - highly qualified for the work - stay out of those careers because they would simply rather do something else. [More]

Well, I never! After all we've done for them!

There is a flip side to this discovery. Those women who are drawn to science and technology remain a departure from the norm. While this can be a challenge, it can also be an advantage.

These things will work themselves out over generations, not months. The start we have made to open all careers to all people will doubtless prove wonderfully wise long after we have struggled to understand.

So, how was your Tuesday?...

Mine went something like this.



They say the sun may shine tomorrow...

[via RGS]

Gaming the gas pump...

A milestone of sorts yesterday. Jan couldn't fill up the Blazer before hitting the purchase limit - $75. Which makes this idea interesting.

In any event, the principle underlying GTA's success is obvious. There are few things Americans--especially of the male variety--love more than either cars or competition, and the two in combination are a nearly unbeatable pair. Which is why we're pleased by the recent trend in the automobile industry, in which it's become increasingly common for carmakers to include fuel-efficiency gauges that display prominently the number of miles per gallon a car is getting at each instant. Toyota's Prius, among other models, comes with such a gauge, and Nissan announced last year that all new vehicles will be equipped with one. In trials, the gauge has prompted smoother and more efficient driving, which can increase fuel efficiency by 10 percent or more. Conservation, which was once, in the words of Vice President Cheney, merely a "sign of personal virtue, " becomes something far more appealing: a sign of personal superiority. It would be even better if the gauges displayed one's fuel-efficiency percentile, putting Americans in direct competition with each other for gas-sipping bragging rights.

In fact, it's becoming clear that the strategy of calling the public's attention to its energy-consumption habits holds real promise for spurring more efficient living. A few years ago, Mark Martinez, manager of program development at Southern California Edison, was searching for ways to get the utility's customers to conserve electricity. He hit upon the idea of an Ambient Orb, a small globe which he programmed to glow red when electricity consumption was high (making power from the grid more expensive) and green when it was low. Within weeks, customers to whom Martinez handed out Ambient Orbs had reduced their peak-period power usage by about 40 percent, voluntarily saving both money and energy (see Richard H. Thaler and Cass R. Sunstein's recent piece, "Easy Does It," April 9). [More]

This is also why I favor large screen readouts with numbers about 2' high of yields on combine roofs. Then you could drive by and see how a field/farmer is doing.

If you want people to change their habits, find a way to keep score.

And we are changing our habits. While they said it couldn't be done, we are driving less.

For the last few years in some quarters I've read claims that American drivers will drive themselves to financial ruin before they respond to higher gasoline prices and cut back on driving. I'm more of the school that people will restructure their lives (change jobs, move to be closer to jobs, do less recreational driving, etc) out of necessity. My view is that Americans can cut their gasoline usage in half once the need arises (and it will arise as Peak Oil bites harder). Well, with oil north of $100 per barrel and price shocks biting hard American drivers traveled 4.3% fewer miles in March 2008 than in March 2007. [More]

For us in rural America, this expense is hitting even harder. Lifestyles centered on a vehicle will change or disappear altogether. I'm even going to hazard a prediction: entertaining friends at home will make a modest comeback.

I'm also thinking the "taxi-driver-Mom" syndrome is due a rethink as well. Maybe Sarah doesn't need to be in 6 sports and activities. She can just pick one. And maybe "traveling teams" will scale back as well.

OK - that's just crazy talk.

User comments from a "Vista" sprayer...


Just like I finally realized Vista was a magnificent dog, so too I have realized my upgrade to the newer Apache sprayer was a similar poor choice.

I have happily owned an Apache 850 for three years, but the old-style cab (essentially a 4430 cab) was a bummer. So this spring I upgraded (I thought) to the new style 2008 Apache AS710.

Gentle reader, don't go there. Somehow the good people at ETI have managed to screw up a good machine and foist it upon hapless buyers as an improvement. I have waited until I had several days of operation, and the diligent attention of my salesman before posting this, but it's time to call this a fiasco.

To begin with, my old sprayer had the same JD engine and an 850 gallon tank. It handled the load OK, but when spraying beans planted on chiseled ground, you would have to switch to a lower gear in wet spots. The new machine, however, decides for you when it is time or appropriate to shift. The shifter senses velocity and RPM, and coupled with the torque converters, manages to make the machine as lethargic as possible.

Not to be outdone, the engineers who designed the controls obviously had never sprayed a field in their life. The main propulsion control is as unintuitive as the Electoral College - and with much the same result.

The old machine control was similar to a combine propulsion control lever, but who wants to use standardized controls? Instead, you are gripping a joystick with multiple, similar buttons that (wait for it) increases motor RPM by forward motion - not forward position. In other words, the joystick isn't a throttle, it's a whip. This thunderingly stupid operator interface is extremely difficult to adapt to, and it gets even worse.

To reverse, the old machine had an idiosyncratic movement: a "U" - reverse was the right side of the "U". After a few passes I adapted, unlike combines with a Forward = Forward; Backwards = Backwards control lever. The new Apaches, however, invent their own rules.

First, you have to hold a joystick button constantly to travel in reverse. But be careful, if you accidentally hit that button - one of 8 on the joystick - the transmission shifts into neutral. Surprise!! And as for shifting into forward, don't even think about it until the RPM is below 1400. It will just ignore you. Shifting "on the go" as most farmers know it from tractors is similarly regimented.

But wait - there's more. RPM overrides prevent engaging unless conditions are approved by the machine. The result: lost minutes in the corners of fields trying to get the damn machine to move.

I know what you're thinking: Old John has lost it in his dotage. Fair enough. But it took me about 10 minutes to become comfortable with the old Apache and I'm at 5 days and counting with this one.

The last straw was when I complained about how underpowered the machine seemed compared to my old one. The tech rep pointed out that because the tank was smaller (750 gallons versus 850 gallons) they turned the engine down 15 HP! The same engine! I mean, after all, how can you sell the big ones if the smaller machines work adequately?

Bottom line: like my experience with Windows Vista, this Apache upgrade has proven to be a bust. Maybe I'm the only troglodyte who can't appreciate their weird control system, but I'm also the dope who paid them 6 figures for a sprayer that a person who previously drove a nuclear sub can't handle easily.

Bad engineering deserves criticism. I think the 2008 Farm Bill made that clear. I have praised my old Apache in public for free, so consider this another straight opinion.

At some point...

It just becomes vanity. The "largest" self-portrait in (on?) the world.




[via Presurfer]

Everybody had a safe landing...

Not only did the Phoenix Lander arrive OK,


but the old house from our farm is now securely perched on a new foundation.



And a place is opened up for a new house.


Now if we could just get the beans in the ground!

High prices => fewer farmers...

One of the ironies of our farm policy and the folk-economics of our profession is the enduring belief that farmers leave the profession because of low prices. Like all seemingly obvious observations, it is simple to grasp and easy to equate to low pay for employees. But that may not be the largest factor. Not even on the other side of the world.

It's not because of threats to the farm business far from it. Farms are getting bigger and their ownership is consolidating among a shrinking number of major players.

The trend towards mega-farms is already creating some huge, farm-based business empires and attracting the attention of corporate investors keen to taste some cream from the dairy industry's profits.

The biggest dairy farm businesses, such as those controlled by Fonterra director Colin Armer and Timaru-based accountant Allan Hubbard, own thousands of hectares of prime dairy land around the country and are likely to have annual revenues approaching $100 million, placing them among the ranks of this country's biggest businesses.

Consolidation of farm ownership in fewer hands has been happening for many years but is gathering pace as high dairy prices help push up the value of land and smaller farmers decide to sell their family farms to their bigger and more prosperous neighbours.

The result for the dairy industry is that the big are getting bigger and the small players are leaving.

"I think the business model is actually changing," van der Heyden said.

"I think this is a general business trend. The businesses need to grow and their scale gets bigger and bigger."

Fonterra processes about 95% of the milk produced in this country and the trend shows up in the shrinking number of its farmer shareholders, even as the volume of milk it is processing continues to increase.

In 2003 Fonterra had 12,600 suppliers, but that has since declined to 10,500.

Asked where that trend could end up, van der Heyden said: "No one knows. But I think in the next 10 to 15 years you are probably going to have 4000 to 5000 [dairy] farmers in New Zealand." [More]

It has been my experience that our farm policy does little to help smaller producers stay in the business, and given the example above in New Zealand, our farm policy is producing the same results as virtually no policy. The Kiwis don't subsidize their agriculture.

The recent passage of the much-maligned new farm bill will continue to provide evidence of this failure. By sending subsidies regardless of size or wealth, no shelter from consolidation is built in.

This is not necessarily a bad thing, but it is far from the policy advertised and we could have gotten the same result for little or no taxpayer money, as NZ demonstrates.

[Is it me, or does the picture look photoshopped? That is the strangest topography I've ever seen in a pasture, but then again, it's one reason I would love to visit New Zealand.]

Change the calculators to slide rules...

And you have the theme song of my college life.





Ya gotta love the hair, at least.

[via slashdot]

A new problem with the farm bill...

[via Mankiw]

If you are a Republican, anyway. If McCain carries the rural subsidy-absorbing states where legislators tremble at the idea of NOT voting for such pork-laden entitlements, what does that say about the importance of this issue compared to the real problems many in those states worry about: jobs, immigration, the war, gas prices, etc.? Sen. McCain has been "talking straightly" about farm subsidies.

John McCain opposed the farm bill. In an impassioned speech on Monday, he declared: “It would be hard to find any single bill that better sums up why so many Americans in both parties are so disappointed in the conduct of their government, and at times so disgusted by it.”

McCain has been in Congress for decades, but he has remained a national rather than a parochial politician. The main axis in his mind is not between Republican and Democrat. It’s between narrow interest and patriotic service. And so it is characteristic that he would oppose a bill that benefits the particular at the expense of the general.

In fact, in this issue, McCain may have found a theme to unify his so far scattershot campaign. He has always been an awkward ideological warrior. In any case, this year may not be the best year for Republicans to launch a right versus left crusade. But McCain has infinitely better grounds than Obama to run as a do-what-it-takes reformer. [More]

Given the scorching rhetoric and general condemnation of the farm bill here and around the world, defending this vote will be a labor of reluctance for GOP members.

The recent farm bill was a $300 billion, subsidy-laden grab bag of handouts to special interests. Mr. Boehner railed against the legislation on the House floor, urging GOP members to vote against it. The bill passed by a huge margin with the help of 100 Republicans. President Bush vetoed it, and the House promptly overrode the veto. "I wouldn't describe the farm bill we're voting on as change," he told me in something of an understatement. "As I said on the floor, we can do better."

Perhaps that's why Mr. Boehner has recently switched from cajoling to trying to use the GOP's recent misfortunes to scare Republicans out of their torpor. Some in his party are already marking down the special election losses in conservative districts in Illinois, Louisiana and Mississippi to lack of money, bad candidates and a poor message. Mr. Boehner is painting the defeats as "real wake-up calls" and warning members to think hard: "Every race is different, and there are a lot of reasons why those three races were lost. But it is clear that the American people are anxious for change. . . . and Republicans have to show we can be ready to deliver it." [More]

And if crop progress continues to sputter and grain - and worse yet, - food prices are even higher by November, and red states still vote red for President, I think a light will dawn on many that future farm program votes are not sacrosanct must-deliver issues, even for the most rural districts.

I know if it were not for his intractability on Iraq (which seems to be undergoing "re-messaging"), this issue would sway my vote for McCain to enable this scenario. Unfortunately too, I'm in downstate Illinois - a place with no political oomph whatsoever.

The farm bill passage battle may be over. Living with the victory may squander all the public support agriculture has acquired over previous generations of responsible self-reliance. And in the process rewrite some political dogma for the right.

Trying for another successful landing...

We're not the only folks trying to arrive without a disaster. Tomorrow evening, NASA' s Phoenix Lander brings it home to the Red Planet.

But first, they have to get the lander on the ground, and that's where the worry comes in. In fact, they have a name for it in the Mars exploration community: "seven minutes of terror."

Seven minutes is all it takes for a spacecraft travelling neary 13,000 miles per hour to hit the Martian atmosphere, slam on the brakes and reach the ground.

During that time, onboard computers will be working at a manic pace as the spacecraft deploys its parachute, jettisons its heat shield, extends its three legs, releases the parachute and finally fires its thrusters to bring it down for a soft landing. Hopefully.

"Everything has to go right," NASA Associate Administrator Ed Weiler said. "You can't afford any failures."

It's risky business. Historically, 55 percent of Mars missions have ended in failure. And tensions will be particularly high with the Phoenix spacecraft. [More]

The central mission is the discovery of organic matter near the polar regions of Mars, and with it the very real possibility life is more common than we think. This is my great hope: to escape the human-centric vision of the universe that overstates our importance and prevents us from seeing our species as anything but the pinnacle of life.

To get as worked up as I am about this amazing effort, watch this really cool video from NASA.

Why the blogging has been slow...

To make a place for my son and his family to build a new home at our farm (way more on this later), we decided to raze my parent's house, in which I had grown up. It was not an easy decision, but remodeling looked like one of those "where do we stop tearing things out?" nightmares. This is the house, smack in the middle of our farmstead.


A friend and neighbor who does excavation work and fixes my frequent tile holes was going to demolish the house. But he came to me shortly after we first talked and asked if he could move the house instead. His son and wife, also neighbors all of 2 miles away, were looking for a way to move up to a larger home.

Works for me.




So we've been moving (OK, mostly watching and interfering) a house.


There were a few glitches, like getting stuck. For future reference: the traction and hydraulic power of a excavator should not be underestimated.


Trees can also be an issue, especially late in the evening when everybody is worn out.


But we got it [approximately] above the new foundation.


Which is where we are as of this writing.


I will interview survivors for a future post.

[Note the unusual garments for May 23 in central IL]

Thanks for your patience. What is it about these types of activities that commands our full attention like few other events can?

Business cards you'd be proud to hand out...

Some of my favorites:



[More]

[via MR]

This may sting a bit...

While supposedly over 1000 farm organizations (doesn't that strike you as more than plenty?) celebrate the new farm bill, Congress seems to be in party-pooping mood. As I posted yesterday, blaming index funds has burst into high fashion just in time for scapegoat season.

"This unbridled growth raises justifiable concerns that speculative demand - divorced from market realities - is driving food and energy price inflation, and causing a lot of human suffering," said Sen. Joseph Lieberman, I-Conn., chairman of the Homeland Security and Governmental Affairs committee that held the hearing.

With oil approaching $130 a barrel and a global food crisis looming, the panel heard testimony from experts about how speculative investment by institutional investors and hedge funds may be contributing to food and energy price inflation. [More]

Frankly, my dear, I don't give a hoot about how to precisely apportion the blame [credit?] for the commodity boom.

But I don't want to be in the line of fire when this baby blows, either.

So here is the test for readers at home: If you really, really think that demand alone is driving grain prices, buy the developing swoon as others bail out. If you think we've been bouncing along in a bubble, sell yesterday.

But there would be some bizarre irony in a bloated farm bill passing one day, and landing a crippling blow to grain trading the next. To be fair, I think specs will find a way around any lame legislative barrier, but things could get really silly for a while.

Color me credulous, but I think the possibility of a mediocre crop grows with every day I put on a sweatshirt. You are not going to keep prices down with that kind of problem, no matter how tall you can't be to enter the pits.

Hard to find a happy ending...

To the oil picture. (Unless, of course you own some wells) As the argument rages on - with powerful logic on both sides - between speculation and fundamentals as the cause for commodity price increases, I think I am wandering between the camps debating a which is the chicken, and which is the egg.

First, the case for oil, which may be the core driving commodity. The fundamentals all seem to eventually point to China.

Are such projections plausible from the point of view of potential demand? During 2006, China used about 2 barrels of oil per person. For comparison, Mexico used 6.6-- Chinese oil consumption could triple and they'd still be using less per person than Mexico is today. The U.S. used almost 25 barrels per person. According to the data collected for a new research paper by Max Auffhammer and Richard Carson, there were 3.3 passenger vehicles per 100 Chinese residents in 2006, compared with 77 in the United States. Yes, I would say that these astonishing numbers for potential future Chinese oil demand are not at all inconceivable. [More of a very readable analysis]

At which point, who wouldn't want to place a bet on oil prices? Just like stodgy old money returning to farmland (Prudential just bought a chunk near me, I heard yesterday), where are you going to get the returns we've seen in the commodity markets?

I think we can rule out the mortgage industry, for example. While many farmers would like to cast commodity speculators (or perhaps today better labeled "investors") as oily wheeler-dealers, if you depend on a pension payment for your retirement income, these guys are White Knights.

The big question we producers are all trying to wrap our mind around is how do I know when to get off this rocket? While we will likely be fixated on wheat production and corn yields, because of asset allocation of index funds, maybe we should concentrate on oil, the Leader of the Pack.

There are two good reasons for this. as has been noted before, high oil prices protect the ethanol industry better than any subsidy, so some of those future plants might actually be built if oil continues to climb. That corn/acre source issue seems secure to me.

Second, though I expect oil demand to begin to drop here in the US (we will drive less and more carefully) everything I have seen indicates to me developing countries can more than absorb our drop. This is China's demand growth curve, for example.


Further, even if we struggle through a long bout of "recession-like" conditions, it doesn't look like the rest of the world will follow. Our share of the global economy probably has peaked.

The question now is whether investors have taken too much comfort in the Fed's ability to keep markets functioning. While the Fed's willingness to lend to financial institutions should prevent another Bear Stearns-like calamity, some observers believe the last two months' rally reflects a rosier view of the markets and the economy than is warranted. [More]

Bottom line: learn to farm and live with as little fuel as possible. Apply fertilizer with an eyedropper. Study electricity fundamentals and deploy its power every chance- our link to our only cheap energy: coal. Finally, expect a ferocious margin squeeze starting in about 2010 as costs rise to pressure the maximum prices grains can be sold at.

But I'm ruling out a calamitous collapse of oil prices, such as many believe will echo the 70's. Like grains, oil could drop a bunch and still be painfully high. It will simply take lots of misery to force the oil supply and demand curves to intersect in the future.

Attitude matters...

The prevailing sentiment in much of American politics has been macho confrontation. Indeed, Sen. McCain seems to be staking his presidential hopes on belligerence: All-War, All-the-Time. This curious mindset arises not from a confidence of strength, which the US surely possesses in abundance, but from the fear that we no longer 'have it".

As they say, adversaries can smell fear. And I think this is what Steve is describing in his latest look at the beef trade with South Korea.

There is nothing in the agreement forcing Korean consumers to eat our beef. But the agreement says the government will let it in. So be it or else, as far as I’m concerned. I'm not a fan of welchers. Drop it and let them deal with Obama and his protectionist base after next year’s election. [More]

I think Seoul sees a weakened and slightly desperate trading partner who is becoming increasingly irrelevant - or at least ignored - due to our weak currency and slow growth. America still commands the heights, but too many of our leaders have found a vein of fear to be mined for political gold, and have thus convinced too many of us we are under attack by giants of awesome power. The world looks at us and realizes we can be easily exploited as we search for new threats daily.

The politics of fear work for a while, but soon fall prey to the problem of boredom. The latest presidential approval ratings look like reviews from "Gigli". This is an disengaged audience. Meanwhile our trading partners have learned they can say, "Oh yeah, you and what army?", knowing full well where our army is.

Cosmic coincidence...

Just this morning, two e-mails arrived within moments of each other. It was like wild karma, man.

First, this from Delta Farm Press by Elton Robinson quoting Jeffery Harris of the CFTC:

“Simply put, the economic data shows that overall commodity price levels, including agriculture commodity and energy futures prices, are being driven by powerful fundamental economic forces and the laws of supply and demand,” Harris said. “These fundamental economic factors include increased demand from emerging markets; decreased supply due to weather or geopolitical events; and a weakened dollar. “Together, these fundamental economic factors have formed a perfect storm that is causing significant upward pressure on futures prices across-the-board.” [More]

That point of view is proving to be a tough sell for cotton producers as Elton elaborates.

But here is the next e-mail from a reader who asks, "Is the party over?" This testimony from Michale Masters of Masters Capital Management LLC regarding his view that Harris is roughly completely wrong.

What we are experiencing is a demand shock coming from a new category of
participant in the commodities futures markets: Institutional Investors. Specifically, these are Corporate and Government Pension Funds, Sovereign Wealth Funds, University Endowments and other Institutional Investors. Collectively, these investors now account on average for a larger share of outstanding commodities futures contracts
than any other market participant.

...


Chart Two shows this dynamic at work. As money pours into the markets, two things happen concurrently: the markets expand and prices rise. One particularly troubling aspect of Index Speculator demand is that it actually increases the more prices increase. This explains the accelerating rate at which commodity futures prices (and actual commodity prices) are increasing. Rising prices attract more Index Speculators, whose tendency is to increase their allocation as prices rise. So their profit-motivated demand for futures is the inverse of what you would expect from price-sensitive consumer behavior. [More]

Frankly, I haven't read through the whole thing thoroughly yet. (Too much fun mowing roads)

But I thought I would make it available and then add an update to this post this evening or so.



[Thanks, Tom]


File location

Like taking money from...umm, Congresspersons...

The Washington Post has been reading AgWeb, and alerted by Jim Weisemeyer's analysis, reached much the same conclusion as I did about farmer participation in the ACRE program. I think the most amazing part for me is this program finally is aligned to benefit recidivist forward-sellers like me.

A blog item posted Monday by the agricultural magazine Pro Farmer described the new program, known as Average Crop Revenue Election (ACRE), as "lucrative beyond expectations," and said it is a "no brainer" for farmers to sign up for it.

The Agriculture Department estimates that subsidy payments to corn farmers alone could reach $10 billion a year if prices -- which have been $5 to $6 a bushel -- were to drop to $3.25 a bushel, a level seen as recently as last year. The $10 billion figure assumes most farmers would participate in the program, a view disputed by key lawmakers. [More]

If prices, like we all gloomily fear, start to drop, then we could reap a cheaply bought insurance payment even while profiting from aggressive forward sales. (Gosh - sounds kinda like the Katrina LDP bonanza) This is not the outcome I want, of course, but sometime in the last few weeks, as the pushback from commodity buyers strengthens, it is one that looks more likely to farmers than before.

It would also allow me to just about balance out some unfortunate forward sales I am still eating my way through right now.

I wonder if the crop insurance money machine has realized this farm bill amounts to a double cut in their whopping profits? I bet they have legislation poised to add money back in.

More provocative to me still is the surprising idea that a vote for the farm bill might not be the be-all and end-all for rural state politicians that tradition says it is. Check these informal poll results, for example. Not too different from these numbers. What if rural legislators LOSE because they voted for the farm bill? Given the paltry number of voters who benefit even in rural states, the outrage building over food prices, and the now-revealed budget exposure, the voter math is likely less favorable - and in some districts perhaps negative. Now add in a Republican candidate who has vowed to end subsidies.

This vote is not a political sure-thing. If elected, McCain could get the job done.

Any real chance to sustain a presidential veto of the farm bill vanished because of what senior House Republicans heard from President Bush when they were summoned May 9 to the White House for a pep talk.

Bush informed the assembled Republicans that he was about to veto the final version of the farm bill for excessive spending. But he went on to suggest that Republicans from agricultural districts, hard-pressed in a tough election year for the GOP, would be free to vote their own interests. This was seen as caving in to the ''aggies.'' [More]

Permit me a wildly unlikely suggestion: What if farmers themselves see the opportunity to simply grow up and move out of the house? What if we are ready for a future without people pandering to us?

Chrisman is the black spot on the left...



Cities at Night: once you get past the narration, it's captivating.

[Via Neatorama]

How 'bout those egg prices?...

Every now and then I see a trend with long term implications I am reluctant to contemplate.

That $100,000 seems like a large sum of money for human eggs today. But suppose that choosing the right egg results in a smarter child with a responsible, calm, and motivated disposition. The boost in life time income could be many times that initial $100,000 investment.

The value from choosing "premium" eggs will soar as plummeting costs of DNA sequencing technologies bring about an explosion of discoveries about genetic variations for controlling intelligence and personality. The ability to choose between eggs based on detailed genetic profile of donors will greatly increase the probability of getting some desired genetic outcome.

The initial genetic screening of potential donors still doesn't control for the randomness of which portion of a person's DNA went into each egg. But that will become a solvable problem. Fertilization of multiple eggs and genetic testing of each embryo is already possible today. Once we know what thousands of genetic variations do to determine IQ, personality, physical attractiveness, and many other attributes screening of multiple embryos will become very desirable. At that point expect to see skyrocketing prices for donor eggs with the most desired attributes. [More]

While we built a moral Maginot line to defend against government-sponsored eugenics, we ignored the power of science to make a desirable end a market commodity.

Remember, we're in the energy business...

Not the water business. I think Julianne is right. The emergence problem could be more significant than the planting date focus. Note even as we catch up slightly to the planting tempo, we are falling behind in actual growth. And I heard some rumbling today at my fertilizer "pusher" that some corn planted right before the last big rains, isn't coming up in spots that looked pretty good to me at the time.

In short, we're low on GDU's. And I'm tired of long-sleeved shirts.

[Sorry about the "shouting" - I'm really not sure why that occurs from time to time]

One reason high profits don't seem to be enough...

I had always suspected that improved profit levels for farmers would boost larger operators much more than small, and the emergence of very large operations paying very high rents would seem to indicate there is some validity to that statement. Still as many of us look at current margins, even the most quarrelsome have to admit compared to as recent as 2006, business is pretty good.

[I know, I know - bad times are a-comin'. I'm just saying most of us will be paying a lot of income tax next February.]

But one big reason for the contentment shortage (the euphoria came and went pretty fast, didn't it?) is that relative reward matters more than absolute reward. In other words, we like doing better than competitors more than doing better than we used to.

But overall, the researchers say that envy trumps ambition: the negative impact of relative position outweighed the positive effects of pay incentives.

It's hard to argue, however, that the finding could be applied broadly to more conventional working environments. In the N.B.A., for example, players know how much their teammates make. If you don't know your colleague's salary, you'd be much less likely to change your effort. And the relatively higher wages professional athletes make may give them more of a cushion to slack off. Someone making 5-figures is more likely to be concerned with things like food and shelter than a player making $1 million per year.

Still, in places where an employee's output is more visible and is directly linked to his pay (like sales or asset management), incentive pay arrangements may be causing more harm than employers realize. [More, and read the excellent comments, too]

While this is eroding the high times for farmers in the midst of unprecedented gain, it also has some implications for other occupations. One in particular is performance pay for teachers. As school boards grapple with this concept, one of the most complicating factors is public knowledge of teacher salaries. In order to be successful, some information shielding may become necessary.

This brain bias sheds a whole new light on the ideal of modesty. As private wealth numbers become easier to find and compare, wealth loses its ability to bring much satisfaction.

Don't ask, don't tell could be a motto for more than one situation.

The best of both worlds...

I was surprised to to be informed we have, in our national economic angst, overlooked some countries that score a double play when food and fuel are the best sellers. Are these the new winners in the 21st Century?

High oil and food prices are a double blow no nation can dodge entirely. Even oil states like Iran are seeing food-price protests. But there's a small class of farm-and-gas exporters for whom the dual spike is more opportunity than threat. Canada, Brazil, Vietnam and Thailand are all enjoying the windfalls, and even war-tattered Cambodia is now reimagining its future. It's "the only country in the world that has oil and gas reserves that are still untapped, as well as land available for agriculture," says Marvin Yeo, who left the Asian Development Bank to start one of Cambodia's first venture-capital firms. [More]

Plus the Canucks can use their muscular dollar to come down south and buy all the fancy health care they have to wait for. I'd be jealous if they weren't such nice guys.

Don't tell me we're falling behind...

As usual, The Onion covers the news other won't touch:

PASADENA, CA—Geneticists at the California Institute of Technology announced Monday that they have developed a tomato with a 31 percent larger price tag than a typical specimen of the vine-ripened fruit. [More startling sciency stuff]

Our biotech scientists know what civilization needs.

Simply shocking news...

Once again, Pro Farmer Washington correspondent Jim Weisemeyer has put his finger on a key factor in the new farm bill that I agree will ensure significant budget-busting cost overruns: the ACRE program.

Without cherry-picking his brilliant analysis, I will say just this. I have never bought crop insurance (other than the required CAT for my grain bin loan), and now I won't have to. The ACRE program is a painless way for me to get crop insurance for a piddling price. (In fact, if you are close to the payment limit, participation may effectively extend the top - not sure on this, but I'll find out). In the true spirit of our farm policy, we once again target benefits to people like me who don't need them.

Like Jim, I predict a massive signup for this feature, which will result in whopping payouts unimagined by legislators. Check out the billions we'd get at $4 corn, for example.

In other words, we have a traditional farm bill.

Oh sure, the easy stuff...



Undressed by a Mechanical Shovel! - video powered by Metacafe

Let's see him handle a bra clasp.

Maybe it's a grown-up response, after all...

Greg Vincent drolly compares the Indian response to the food crisis as a sandbox fight between children. To be fair, he enlarges on the simile in the original article in the NYT. However, I would offer a different perspective, trying to see the issue from closer to the point of view of 1.1 billion Indian citizens.

First, as I noted below in the comments, for some bizarre reason, biofuel proponents have seized on the emerging consensus view that diversion of land from food/feed crops to fuel is only ONE of the the reasons for skyrocketing food prices to absolve all blame. Bluntly put, they translate "not the only reason" to read "not a reason at all".

Compounding the confusion, most statements I have read simply stop smugly at that conclusion, implying that multiple causes means we cannot and should not do anything about any of them. I suspect ethanol defenders will even demand equal treatment for causes, in itself reminiscent of childhood: "if you can't lower oil prices, you shouldn't stop shifting acres to biofuels".

And [since the links to the original NYT article don't work] you couldn't read this curious coincidence further down which I found important:

Some economists argue that blaming India’s growth is not only unfair, but makes little sense.

Food prices have not been rising continually as developing nations grew, said Ramgopal Agarwala, a former World Bank economist and senior adviser at RIS, a research institute in New Delhi. “They were static until 2006, then in 2007 and 2008 there was a sudden spark,” he said. But India has been growing for the last decade. This is “not last year’s phenomena,” he said. [More]

Hmmm. What new supply/demand factor could have exploded in 2007-8?

I have watched as a farm community 300+ times larger than ours struggles with their farm bill while we were loading up ours. The big issue: farm debt relief for millions of producers and whether to cap them for big farmers. It sound familiar until you realize the cap is 5 acres and the amount around $130.

India is working as diligently as its famously bloated and inefficient bureaucracy can to narrow the widening gap between educated workers benefiting from globalization and wretchedly poor farmers laboring to make the transition to modern agriculture. While this occurs, and due to our traditional indifference to this particular part of the world, it is easy to characterize Indian voices as the language of a childhood quarrel.

Except that for those of us with Indian doctors, who depend on Indian graduate students to power our biotech research, and or who have done the math on the the economic power of this emerging giant, the child metaphor falls flat.

Not do I think the CEO of one of our largest HFCS customers would find it amusing. Nor the CEO of the largest US bank. Or even one of ethanol's biggest investors.

The cheapest shot was the trivialization of the food crisis as "kink". It may be a kink where wheat is simply AN ingredient, but I bet it looks a whole lot more serious than a kink when wheat is THE ingredient in your diet.

The first would akin to 19th century Ireland, with poor people primarily eating wheat, and we can get odd effects. We could get such behaviour today with the really poor. In 1985, I happened to be an honoured guest at a hamlet in Western Maharashtra. The lunch they served me was: flat bread made of coarse grain. That's it. There was nothing else, just powdered red chili for flavour. [More from a superb article I linked earlier]

A good friend of mine has a son who served in the Peace Corps in a desperately poor country. When he returned home, his son never got over the transition to food in abundance here, and it angered him deeply. My friend tried to understand the enduring resentment his son felt. Most of us simply cannot being to comprehend the effect of profound hunger on lives, and we'd better try to learn.

But my objection does not arise solely from a wishy-washy humanitarian sympathy, although that should suffice. Just as we ignored and condescended to China for decades only to face a future where the Chinese influence touches us often and powerfully, I think India will have a similar effect - and agriculture in the US will not be immune.

Here's a solid example of a reverse "kink" courtesy of those hungry farmers in India: potash prices.

Exports to China by Canpotex and Belarusian Potash will resume in June after a three-month stoppage due to price negotiations. India signed a contract with the two trading companies, which market more than half the world's potash, last month at a record $625 a ton, including freight costs. [More]

And if you think gas prices are high now, wait until Tata's $2500 car hits the streets in India.

Kink that.

If we had a few hundred million citizens who face hunger daily, a farmer suicide problem, and one of the fastest growing populations, we might also be upset when global wheat supplies shrink due to corn displacing wheat acres - regardless of the economic reasoning. And if our traditional supplier told us, "It's your own fault for economic progress," I think I would remember that response for a long time. Even if our biofuel argument were sound (which I dispute), respect for the plight of Indian citizens and refraining from unhelpful metaphors cost us little, even when attacked unjustly (in our opinion).

People are power. I am more convinced of this every day. So despite any economic and social prejudices, I suggest discretion in our language - something we superpower citizens may have to brush up on.