Monday, February 28, 2011

Great Ad...

Silly as it is, it is a reminder of the intensifying linkage between animals and humans.
Junkbox, Episode GMT...

Tile are running. I've started too.

Sunday, February 27, 2011

It actually never occurred to me...

I might be right about the Chinese yuan and their food problem.  But guess who supports appreciation in their currency all of a sudden?
China’s yuan traded near a 17-year high after Chinese Premier Wen Jiabao said a stronger currency will benefit the nation’s economy.
While the appreciation will be gradual, strength is beneficial as it curbs inflation, Wen said yesterday in an online interview with citizens. The government has set an annual economic growth target of 7 percent for the five-year period through 2015, compared with 7.5 percent for the preceding five years, Wen said. [More]
Commodities just got a little cheaper for some.

[Note also the slower growth targets.]

Saturday, February 26, 2011

Amen Twofer...

First, Ryan Avent says what I mean about the impending government shutdown.
What really makes this so upsetting, and it's really, genuinely upsetting, is that these proposed cuts are basically useless. America doesn't face a short-term fiscal crisis; its debt is dirt cheap. America faces a long-term fiscal crisis due to projected increases in government health spending. So Republicans are cutting short-term discretionary spending to address a fiscal crisis that doesn't exist while ignoring the fiscal crisis that does exist. Their proposed cuts aren't emerging from any cost-benefit analysis; rather they seem designed to spare GOP interests at the expense of Democratic interests. And to do this, they're prepared to—potentially—cost the American economy 2 percentage points of growth.
It's really remarkable. It's remarkable how things have deteriorated in so short a time. Last year, the president's bipartisan deficit commission recommended deficit cuts that didn't focus on the short-term, and that did put defence and entitlements on the table. Now Republicans are declaring that they'll shut down the government unless all of their demands are met—demands with virtually no redeeming value. This is no way to govern. No way at all. [More]
Next, Will Wilkinson hammers it on the WI union flap.
There’s something about the union demonstrations in Madison, and the excitement it has caused on the left, that reminds me of the Tea Party. I think I’ve figured it out what it is. The advent of the labor movement is at the heart of the left’s sacred creation myth. The sense on the left that unions are under siege gives them something to fight for with a bracing sense of historically-rooted identity and moral authority. Similarly, the sense on the right that America’s foundational values are under siege gave the Tea Party something to fight for with a bracing sense of historically-rooted identity and moral authority. Of course, the Tea Party has about as much to do with the values of the American founding as John Adams has to do with Raytheon, and public-sector unionism has about as much to do with preventing worker exploitation as Eugene Debs has to do with unfireable $100,000 a year public-school teachers. But it’s nice to have a team, and a noble lineage, and to get out there and really give the bastards who are stealing our country hell. [Source - but...ahem, I sorta lifted the whole post]
What they said. 

I got nothin' to add.
China, ctd....

Did some surfing on my own and found this re: heavy metal pollution and grain in China. This appears to be Kevin's source.


Here's more on the problem.

 Meanwhile, both central government agencies and local governments in charge of areas with heavy metal pollution remained silent.
All this shrugging-off is unacceptable. It’s a fact that excessive levels of cadmium were found in rice grown in several areas, and the public had the right to be informed.
It’s true cadmium poisoning is not as dangerous as, say, cyanide. And contamination levels found so far have not been too much higher than the levels considered safe. But these arguments are outweighed by the widely recognized danger to human health posed by the accumulation of cadmium in the body. In fact, heavy metal poisoning tends to be chronic, and any clinical evidence may take years to surface.
Already, we’ve seen cases of heavily polluted rice fields in some areas of the Guangxi region and Hunan Province. Some villages in these areas have reported local citizens with symptoms of cadmium poisoning. Meanwhile, rice is still being grown in paddies laced with cadmium. It’s also being sold and eaten in those areas.
Thus, government inaction in the face of this toxic threat has – and continues to – put human health at risk. And the public should be made aware of the wider problem of heavy metals polluting the nation’s farms. Not only cadmium but also by other toxic metals such as lead, arsenic, mercury, copper and zinc may be tainting the nation’s rice as well as other crops.
China has given a lot of attention to food safety in recent years. But soil pollution is the greatest threat to the nation’s food safety. Even the government’s environmental protection authorities have conceded this fact. Up to 12 million tons of grain are estimated to be tainted by heavy metals every year, costing the economy more than 20 billion yuan. Human health is jeopardized as harmful substances from polluted soil make their way into crops and our bodies, causing disease.
All this heavy metal pollution has persisted due to prolonged government failure to act. Tackling soil pollution is difficult, but authorities should not use technical hurdles as an excuse to ignore the problem. Nor should they hide the truth or play down the problem for fear of public panic. Instead, government officials should take advantage of this new spike in interest to review their environment, farm and food management practices, and then take a holistic approach to tackling the problem. [More]
As you can tell from the above source (read the whole article) this event will be used to buttress the case against industrial agriculture and many modern farming techniques in favor of agrarian ag.  But you can't get much more agrarian than China right now.

What is suggests to me is we may be picking exactly the wrong time to decide we are victims of too much environmental regulation. All of our carping about the costs of compliance will seem pretty petty when confronted with a public that wants to know how we will prevent such a mess here in the US.
Chinese history you need to know...

Right now. I am finishing Mao's Great Famine by Frank Dikotter. It is an appalling account of the social and economic consequences on the insane "Great Leap Forward" in the late 1950's and early 1960's. It is not an easy read as the author painstaking documents absolutely horrendous accounts of starvation, stupidity, corruption, death on an imaginable scale, etc.  [I believe I have also recommended a much earlier book about that same event: Alive in a Bitter Sea.]

But this week's market action and these remarks by Kevin Van Trump prompted me to add to my speculation about China, food and the immediate future.
MUST READ...China's Years Of Pollution Could Actually Cost Them A Huge Portion Of Their Crop
China's poor farming practices and years of polluting their land may have finally caught up with them.  The news is just starting to surface, but from what I was told last night millions of acres of Chinese farmland could actually be polluted with heavy metals.  The Chinese government may have actually know of the problem since 2007, but have been able to keep a tight lid on things until now.  Sources claim that 12 million tons of grain may actually need to be destroyed or may have already been destroyed in the past few months.  The story circulating is that China had been pressed to build massive irrigations systems several years back to eliminate ongoing drought issues.  The land and water sources where the water was pulled from was later found to be highly polluted with heavy metals and other toxic substance.  The authorities, at all levels, have tried to hide the problem even though cases of pollution and pollution-related diseases, above all in children, have been breaking out like wildfire.  There have been documents uncovered that former Land Minister Sun Wensheng warned the government in 2007 that at least 10% of China's 295 million acres of farmland were actually contaminated by heavy metals, toxic pollutants, and cancer-causing cadmium.  Prime Minister Wen Jiabao and Environment Minister Zhou Shengxian were put on the spot and have promised to start some type of clean-up campaigns after admitting that metal poisoning had become much worse than they had ever anticipated.  Supposedly the Environment Ministry, yesterday announced on its website a plan to tackle pollution in 14 heavily affected provinces.  However, in typical Chinese political fashion it refused to provide any details about how much damage and how extensive the problem has become.  The plan and details of the problem are still being considered a national secret.  If this is true it could certainly be the "smoking gun" that China has been trying to cover up, and could ultimately let the cat out of the bag.  If it hasn't happened yet, I can almost guarantee you China's poor environmental practices will ultimately catch up with them.  
(Kevin doesn't offer any links to this, but I've e-mailed him for any source he can share.)

Anyway, match that up with these passages from MGF:
Mao's Great Famine (Frank Dikötter)
- Highlight Loc. 998-1005 | Added on Sunday, February 06, 2011, 10:27 PM

But most of the time buildings made of mud and straw were torn down to provide nutrients for the soil. Walls of buildings where animals had lived and especially where they had urinated, such as stables, could provide useful fertiliser. At first old walls and abandoned huts were destroyed, but as the campaign gained momentum entire rows of houses were systematically razed to the ground, the mud bricks shattered and strewn across the fields. In Macheng, nestled against the south of the Dabie mountain range in Hubei, thousands of houses were demolished to collect fertiliser. In January 1958 the model county was exalted by Wang Renzhong, party secretary of the province, for reaching a rice yield of six tonnes per hectare: ‘Let Us Learn from Macheng!’ the People’s Daily declared rapturously. Once it had been praised by Mao for its experimental plots, Macheng became a shrine.
Mao's Great Famine (Frank Dikötter)
- Highlight Loc. 1005-14 | Added on Sunday, February 06, 2011, 10:28 PM

In the following months it attracted half a million cadres, including Zhou Enlai, foreign minister Chen Yi and Li Xiannian. By August a new record was achieved with a yield of 277 tonnes of rice per hectare: ‘The Era of Miracles!’ the propaganda machine proclaimed.18 On the ground the pressure was unremitting, wild boasts and false figures vying for attention. In one Macheng commune the head of the Women’s Federation took the lead by moving out of her house and allowing it to be turned into fertiliser: within two days 300 houses, fifty cattle pens and hundreds of chicken coops had been pulled down. By the end of the year some 50,000 buildings had been destroyed.19 Trying to outdo one another, other communes throughout the country followed suit. In Dashi, Guangdong, a commune that also attracted nationwide attention with its ‘Twenty-five-Tonne Grain University’ and ‘Five-Thousand-Kilo Field’, local cadres pulverised half of all houses in Xi’er.20 Other organic matter found its way into the fields: in parts of Jiangsu province, the land was covered in white sugar.
Mao's Great Famine (Frank Dikötter)
- Highlight Loc. 3494-3506 | Added on Monday, February 21, 2011, 01:38 PM

Throughout the country the irrigation projects, built by hundreds of millions of farmers at great human and economic cost, were for the main part useless or downright dangerous. Many violated the laws of nature, resulting in soil erosion, landslides and river siltation. We saw how in Hunan, a province blessed with fertile soil, river valleys and terraced fields, lush mountains covered with primeval forest were defaced by local communes during the steel drive. The denuded mountains were washed bare by torrents, since there was no longer a canopy to intercept rainwater. As the capacity of forests to retain water was degraded, natural hazards were amplified into disasters. Large irrigation projects that had disrupted the natural flow of water with stopbanks, culverts, reservoirs and irrigation channels only aggravated matters. Accumulated deposits heightened the bed of local rivers in Hunan by up to 80 centimetres, so that water threatened to spill over and flood the neighbouring villages.39 Local reclamation projects made things worse. Launched by the state and local communes in response to food shortages, they showed little sense of stewardship of nature. In Hunan over 100,000 hectares were opened up, much of it on steep mountain slopes. The rain then flushed the soil and took it to the newly built reservoirs, choking them with sediment. One team in Longhui reclaimed ten hectares on a gradient against the mountain: the runoff from torrential rain in May 1962 took enough soil to silt up thirty dams and five roads.40
[BTW, these are what clippings look like when uploaded from a Kindle. The numbers are footnote numbers that lose formatting.]

For some reason I am fascinated by this period as it was a time when I was just beginning to be exposed to world events via The Weekly Reader. I remember reading about the GLF at the time, so I assume the Chinese did a masterful job of telling about the scope of their incredible and stupefyingly illogical programs.

Please also listen to my commentary on USFR this next week as I add in Hu's own biography (he's an engineer, for one thing) to my earlier remarks to guess what might be going through his mind right now. Also keep in mind he can remember the horror of the GLF firsthand.

Thursday, February 24, 2011

Lost comment...

I dunno what's going on with Blogger, but a recent comment by Derek on this post doesn't show up on my browser. (The "Recent Comments" section is a little funky too.)

Here it is:
Here is an interactive map I found of large (I assume CAFO) livestock operations across the U.S. You can even click on counties. Yes, the intent is questionable, but it does show interesting trends.
The map is pretty interesting. Check it out. Here is the map for broilers, for example.

But the intriguing thing for me is his phrase "intent is questionable". While I don't want to presume his meaning nor pick an argument, it is a common reaction to an obviously anti-big-farm website. But does intent really matter if the information is correct?

Farmers dismiss information depending on the source, not the quality. Al Gore could utter eternal truths and every word would be suspect. Yet for all the spluttering about the EWG subsidy database, I have never seen one criticism that the data or the presentation are inaccurate.

You can't demand sound-science based decisions if what you really support origin-approved facts.

The evidence for epistemic closure in agriculture continues to pile up.

Wednesday, February 23, 2011

Not quite a total time-suck...

But close. Check out this interactive map of counties that displays dozens of different demographic, economic and ag statistics. This one shows percent of farm operators over 65, for example.

[Click to embiggen]

Powerful graphics tools like this often show patterns, trends, oddities, and simple surprises you would not notice in a table of numbers. Here's a population rate of change showing how IL counties are essentially depopulating unless you have a university, medical or other government powerhouse - or are a collar county.

The more I use tools like this, the less I am certain about my own home and community. We see it from too close up for real perspective.
Find your own revelatory map and send me a screen shot/link and I'll post it.

Tuesday, February 22, 2011

Imagine you are Hu Jintao right now...

Things have been going freakin' great. I mean, China's growth rate is the envy of the world, you've got more dollars than Bernanke stashed away, and your economic problems are relatively minor.

Or were.

First of all, even with your control of the state owned media, you realize Twit happens (to leak through). Now as your anxious comrades are calling you to share, it seems popular opinion about authoritarian regimes has dropped a little in the polls lately.
Skittish domestic security officials responded with a mass show of force across China on Sunday after anonymous calls for protesters to stage a Chinese “Jasmine Revolution” went out over social media and microblogging outlets.
Although there were no reports of large demonstrations, the outsize government response highlighted China’s nervousness at a time of spreading unrest in the Middle East aimed at overthrowing authoritarian governments.
The words “Jasmine Revolution,” borrowed from the successful Tunisian revolt, were blocked on sites similar to Twitter and on Internet search engines, while cellphone users were unable to send out text messages to multiple recipients. A heavy police presence was reported in several Chinese cities.
In recent days, more than a dozen lawyers and rights activists have been rounded up, and more than 80 dissidents have reportedly been placed under varying forms of house arrest. At least two lawyers are still missing, family members and human rights advocates said Sunday.
In Beijing, a huge crowd formed outside a McDonald’s in the heart of the capital on Sunday after messages went out listing it as one of 13 protest sites across the country. It is not clear who organized the campaign, but it first appeared Thursday on Boxun, a Chinese-language Web site based in the United States, and then spread through Twitter and other microblogging services.
By 2 p.m., the planned start of the protests, hundreds of police officers had swarmed the area, a major shopping district popular with tourists.
At one point, the police surrounded a young man who had placed a jasmine flower on a planter outside the McDonald’s, but he was released after the clamor drew journalists and photographers.
In Shanghai, three people were detained during a skirmish in front of a Starbucks, The Associated Press reported. One post on Twitter described a heavily armed police presence on the subways of Shenzhen, and another claimed that officials at Peking University in Beijing had urged students to avoid any protests, but those reports were impossible to verify Sunday.
The messages calling people to action urged protesters to shout, “We want food, we want work, we want housing, we want fairness,” an ostensible effort to tap into popular discontent over inflation and soaring real estate prices. [More]
Your attention focuses on the protesters' first demand, but then you remember the inconvenient truth just whispered to you recently by your agricultural advisers: the crop isn't good.
The Chinese government has said the country's worst drought in decades is likely to continue, putting the winter wheat harvest at risk.
The Ministry of Agriculture said the drought had worsened in some wheat-growing regions despite snowfalls.
Large swathes of China have had almost no rain since October, affecting millions of hectares of crops and leaving many short of drinking water.
Analysts say crop shortages in China could affect prices around the world.
The country's central bank is offering emergency loans for drought-relief projects in northern, central and eastern areas.
Officials are trying to calm fears over shortages, saying the country has enough in reserve to meet demand.
But food prices have been rising quickly in China for months - and people are grumbling, says the BBC's Michael Bristow in Beijing.
China's leaders will not want this latest drought to push prices even higher, our correspondent says.
Last month, the authorities pledged $15bn (£9.4bn; 98.6bn yuan) in support to help farmers cope with the effect of the drought.
Forecasters say the dry weather could continue well into the spring. [More]
Suddenly the urgency of maintaining exports by artificially keeping the yuan cheap runs headfirst into the vision of a Tienanmen-Square version of Tahrir Square.

I'm thinking you keep buying commodities - all of 'em. And you let the yuan creep up to make the cost lower. And you let the factory owners lump it.
After only five years...

I've learned how to embed a link into a comment.

There is life in this old brain after all.
What we're not talking about...

When we talk about health care reform: access to insurance. While many are adamant about being forced to buy insurance, this problem really is trivial compared to the other extreme.
My husband, teenage daughter and I were all active and healthy, and I naïvely thought getting health insurance would be simple.
Why did we even need insurance? First, we wanted to know that, if we had a medical catastrophe, we would not exhaust our savings. Second, uninsured patients are billed more than the rates that insurers negotiate with doctors and hospitals, and we wanted to pay those lower rates. The difference is significant: my recent M.R.I. cost $1,300 at the “retail” rate, while the rate negotiated by the insurance company was $700.
An insurance broker helped me sort through the options. I settled on a high-deductible plan, and filled out the long application. I diligently listed the various minor complaints for which we had been seen over the years, knowing that these might turn up later and be a basis for revoking coverage if they were not disclosed.
Then the first letter arrived — denied. It never occurred to me that we would be denied! Yes, we had listed a bunch of minor ailments, but nothing serious. No cancer, no chronic diseases like asthma or diabetes, no hospital stays.
Why were we denied? What were these pre-existing conditions that put us into high-risk categories? For me, it was a corn on my toe for which my podiatrist had recommended an in-office procedure. My daughter was denied because she takes regular medication for a common teenage issue. My husband was denied because his ophthalmologist had identified a slow-growing cataract. Basically, if there is any possible procedure in your future, insurers will deny you.
The broker then proposed that the three of us make individual applications. Perhaps one or two of us might be accepted, rather than the family as a group.
As I filled out more applications, I discovered a critical error in my strategy. The first question was “Have you ever been denied health insurance”? Now my answer was yes, giving the new companies reason to be wary of my application. I learned too late that the best tactic is to apply simultaneously to as many companies as possible, so that you don’t have to admit to a denial.
I completed four applications for each of the three of us, using reams of paper. I learned to read the questions carefully. I mulled over the difference between a “condition” and “something for which you have sought treatment.” I was precise and succinct. I felt as if I was doing a deposition: Give the minimum true information, and not a word more. I was accepted by exactly one insurance company. So was my daughter, although at a 50 percent premium over the standard charge for a girl her age. My husband was also accepted by one insurer but was denied by the company that approved me.
Our premiums, which were reasonable at first, have increased substantially over the last six years; the average annual increase has been 20 percent. I now am paying premiums that are more than double what they were initially. And because these are high-deductible policies, we still are paying most of the medical bills ourselves.
The new health care reform legislation is not perfect. Nothing that complex could be. But I have no doubt that the system is broken and reform is absolutely essential. If we are not going to have universal coverage but are going to rely on employer plans, then we must offer individuals, self-employed people and small businesses a place to purchase insurance at a reasonable price. [More]
Been there, done that. And I would hazard a guess that anyone who has tried to get individual coverage in the last few years is highly likely to support some form of universal coverage divorced from employment.

Watching the union-busting efforts in WI generates mixed feelings for me. While I am not a big fan of unions, I don't think having an equal-sized opponent to bargain with say, Ford is a bad idea. But ending public employee unions could have a surprisingly harsh backlash for farmers.

I know of several uninsurable, very successful farmers whose wife's teaching job is singularly about health insurance coverage. Any cracks in the benefit packages for public employees could be disproportionately felt in rural areas where small businesses seldom offer coverage, or if they do, less compared to local and state government.

When coverage is lost for any reason, it's amazing how quickly many come to embrace some change from the status quo for health insurance in America. While there seems to be a feeling we can simply mandate insurability and not coverage, the insurance industry cannot tolerate that added expense without new customers.

There are several ways around mandating coverage, and they are looking more credible as the debate intensifies. But stories like the above will resonate with more voters, and like Medicare recipients, their political stances could become more flexible.
So long, jet jockeys...

As a submariner, I developed a lifelong antipathy to pilots, especially Navy pilots. Half-athlete and all-ego, they took arrogance as a primary virtue simply because they routinely accomplish stupefying feats of coordination and daring, such as landing on a carrier in high seas.

Underwater-nerds loathed them and their macho allure to women.

But the military of the future won't need these glamorous heroes very much, and when they do go aloft, their risks will be much worse than usual. To begin with, we're rapidly switching expensive fighters for cheap drones "piloted" by gamers is a basement somewhere.
The recent meteoric rise of UAV development, highlights an issue of the growing importance of UAVs in the future and leads to the corollary issue of whether UAVs will replace manned aircraft’s roles and missions.  The bottom line is that the Services still need an organic capability for a continuous, on-demand, all-weather platform to provide intelligence on the battlefield. In addition, the Services must execute these operations quickly, safely, and cheaply.  As such, UAVs may be a significant part of the answer since they have proven their combat mettle in Operations DESERT SHIELD, DESERT STORM, and now Bosnia.  Once a strike capability is fielded, then the manned aircraft community will be really threatened.  UAVs will continue to replace manned aircraft in many areas, but only time and technology will tell how much. [More]
Even when we do need full-sized planes, they won't need jockeys either.

The X-47B is a unmanned fighter sized aircraft developed by U.S. firm, Northrop Grumman. The vehicle is just a test bed but is hoped will lead to an eventual unmanned fighter aircraft. The past decade has seen a dramatic increase in the use of UAV’s (Unmanned Aerial Vehicles) but thus far most UAV’s have been fairly primitive and used priarily only for recon or light strike support. Nothing designed thus far has really had the ability or purpose to replaced manned aircraft. The X-47B is a prototype which if successful will lead to the eventual replacement of manned aircraft in the United States Navy. [More]
But the real coup de grace will be the weapons they are up against. Dogfights with laser defenders aren't really movie-ready drama - they're split second target practice. And that very real possibility just became more possible.
Translated from the Nerd: Thanks to Hernandez, the Navy will now have a more powerful death ray aboard a future ship sooner than expected, in order to burn incoming missiles out of the sky or zap through an enemy vessel's hull.
"Five hundred [kilovolts] has been the project goal for a long time," says George Neil, the FEL associate director at Jefferson Labs, whose Rav 4 license plate reads LASRMAN. "The injector area is one of the critical areas" of the whole project.
The free-electron laser is one of the Navy's highest-priority weapons programs, and it's not hard to see why. "We're fast approaching the limits of our ability to hit manoeuvring pieces of metal in the sky with other maneuvering pieces of metal," says Rear Adm. Nevin Carr, the Navy's chief of research. The next level: "fighting at the speed of light and hypersonics" -- that is, the free-electron laser and the Navy's Mach-8 electromagnetic rail gun.
Say goodbye to an adversary's anti-ship missiles, and prepare to fire bullets from 200 miles away, far from shoreline defences. No wonder the Navy asked Congress to double its budget for directed-energy weapons this week to $60 million, most of which will go to the free-electron laser.
It won't be until the 2020s, Carr estimates, that a free-electron laser will be mounted on a ship. (Same goes for the rail gun.) Right now, the free-electron laser produces a 14-kilowatt beam. It needs to get to 100 kilowatts to be viable to defend a ship, the Navy thinks. But what happened at Jefferson Labs Friday shrinks the time necessary to get to 100 kilowatts and expands the lethality of the laser. Here's why.
All lasers start off as atoms that get agitated into becoming photons, light that's focused through some kind of medium, like chemicals or crystals, into a beam operating on a particular wavelength. But the free-electron laser is unique: It doesn't use a medium, just supercharged electrons run through a racetrack of superconductors and magnets -- an accelerator, to be technical -- until it produces a beam that can operate on multiple wavelengths.
That means the beam from the free-electron laser won't lose potency as it runs through all the crud in ocean air, because its operators will be able to adjust its wavelengths to compensate. And if you want to make it more powerful, all you need to do is add electrons.
But to add electrons, you need to inject pressure into your power source, so the electrons shake out and run through the racetrack. That's done through a gun called an injector. In the basement of a building in Jefferson Labs, a 240-foot racetrack uses a 300-kilovolt injector to pressurize the electrons out of 200 kilowatts of power and send them shooting through the accelerator.
Currently, the free-electron laser project produces the most-powerful beam in the world, able to cut through 20 feet of steel per second. If it gets up to its ultimate goal, of generating a megawatt's worth of laser power, it'll be able to burn through 2,000 feet of steel per second. Just add electrons. [More]
Pilots will not release their grip on the stick easily. The Navy is top-heavy with ex-pilots at the flag rank, and their community is pretty solid. And this labor demand problem is even more troublesome to the USAF. But sooner or later the lack of rides and the problem of defense budgets will make them quaint reminders of how Grandpa used to fight wars.

Like cavalry.

(I hate horses, too)
We are the fuel...

If it has not been made abundantly clear to farmers how they are linked to the popular uprisings exploding (and I don't think that is hyperbole) across the Mideast, let me belabor the point.

It's about commodity prices and food, as much as dictatorship.
Of course, prices rose during the Egyptian protests only to fall back as it became clear that Mr Mubarak would depart without significant civil unrest. The same thing could happen this time around. But as the popular uprising gains momentum and moves across borders, bigger issues may loom. Iran is home to a restive opposition movement—and over 10% of the world's proven oil reserves. And if China were to catch the fever for democracy? It's difficult to know how that might impact the global economy. China makes up a much larger share of global activity than it did in 1989.
Amid all the uncertainty, one thing does seem clear: events have a way of building on themselves. The combination of high unemployment and rising commodity prices has fueled dissatisfaction across the Middle East. The resulting unrest is influencing commodity prices. And that, in turn, may make life more difficult for marginal households in other countries, setting the stage for still more political upheaval.
One watches and hopes for the best. But leaders of more stable countries need to be working hard to make sure they're prepared for the economic impacts of something less than that. [More]
In short, it looks to me that the unpredicted rise in food commodities has been so abrupt and injurious to so many, that political triggers have been tripped. The corrupt political regimes there barely coped with a semi-stable global economy. They have no capability of addressing a real challenge, and that is now baldly apparent to their people. For example, they don't even have the political skill to address the public with the spin and persuasion we routinely expect.
In Sayf-Al-Islam's rambling speech last night on Libyan State television, he blamed the current unpleasantness in his country on, as near as I can determine, crazed African LSD addicts. 
This isn't going down as well as Sayf had intended, and Libya seems less stable than 24 hours earlier.  Indeed, Sayf's off-the-cuff remarks managed to make Hosni Mubarak's three speeches seem like a model of professionalism, which I would not have thought was possible a week ago.  
Indeed, it is striking how utterly incompetent leaders in Tunisia, Egypt, and Libya have been at managing their media message.  Speeches are announced, then never delivered on time, and then delivered with production values that woulds embarrass a public access channel in the U.S.  It's like political leaders in the region have discovered blogs just as the young people has moved on to Twitter or something.  [Er, no, that's the United States--ed.]  Oh, right. 
Having just finished a week of intense media whoring, methinks that one problem is that most of these leaders have simply fallen out of practice (if they were ever in practice) at personally using the media to assuage discontent.  I've been on enough shows on enough different media platforms to appreciate that there is an art, or at least a tradecraft, to presenting a convincing message in the mediasphere.  Authoritarian leaders in the Middle East are quite adept at playing internal factions off one another.  That's a different skill set than trying to craft a coherent and compelling media message to calm street protestors no longer intimidated by internal security forces. [More]

He-Who-Must-Not-Be-Spelled provided an equally bizarre public performance last night. This is the backdrop grain traders are trying to game. Meanwhile, we are moaning about why we didn't hold onto our crops.

Thank goodness, we didn't. Like ethanol plants which will run out of $4 corn contracted in Dec 2009, the food industry is just beginning to adjust to higher input prices. This volatility takes some time to be felt, but it does impact the system.
3. The current 12-month inflation rate for finished consumer foods in January of 3.8% is only slightly higher than the 3% average over the last ten years, and is lower than six of the months over the last year, e.g. 4% for November, 4.6% for September, 5.7% May, 6.6% March, etc.

4. The average inflation rate for finished consumer foods over the last 12 months of 3.9% is lower than the 6.7% average from 2007-2008. 

MP: Perhaps this explains some of the disconnect between all of the news reports about rising wholesale and commodity food prices globally, but no signs yet of rising consumer food inflation (1.5% CPI food inflation through December 2010).   [More]
As demand and supply (in that order, I think) of meat forces prices higher, US consumers may be some of the last to become restive about food prices. Nonetheless, I believe it will come, and the obvious targets will be ethanol and farm subsidies.

And if the protests in the Midwest are mildly successful or even sufficiently disruptive, I would not rule out food-price rallies in Washington.

Monday, February 21, 2011

If you can't beat it...

Make it a crop. Amaranth is showing up in the grocery stores in "ancient breads".
The idea of making modern bread out of old-style grains isn't new. For decades, Glendale-based Food for Life has been making Ezekiel 4:9 Bread, inspired by the list of grains in the Bible passage for which the bread is named; the bread contains wheat, barley, rye, oats, millet, corn and rice.
Newer products assert that they're made with grains that "are true to their original form," as Trader Joe's Ancient Grain Bread (made with quinoa, oats, amaranth, Kamut, millet, teff and barley) states on its label.
The ancient grains — confusingly — are not all grains. Grains are technically grasses. By that standard, Kamut, spelt and wheat are all grains, but quinoa and amaranth are not. Still, the common term "grain" has stuck for all of them.
"Grains" such as quinoa, amaranth, spelt and Kamut are called "ancient" because they've been around, unchanged, for millennia. By contrast, corn, rice and modern varieties of wheat (such as hard white wheat and hard red spring wheat) have been bred selectively over thousands of years to look and taste much different from their distant ancestors, said Mian Riaz, director of the Food Protein Research and Development Center at Texas A&M University. Modern corn, for example, bears little resemblance to wild corn from long ago.
However, the fact that they're little changed from antiquity doesn't necessarily make the ancient grains more nutritious than modern ones, said Joanne Slavin, professor of food science and nutrition at the University of Minnesota. [More]
 Yes, that amaranth. I think.
Amaranth has been cultivated as a grain for 8,000 years. [1] The yield of grain amaranth is comparable to rice or maize. It was a staple food of the Aztecs, and was used as an integral part of Aztec religious ceremonies. The cultivation of amaranth was banned by the conquistadores upon their conquest of the Aztec nation. Because the plant has continued to grow as a weed since that time, its genetic base has been largely maintained. Research on grain amaranth began in the US in the 1970s. By the end of the 1970s, a few thousand acres were being cultivated.[2] Much of the grain currently grown is sold in health food shops.
Grain amaranth is also grown as a food crop in limited amounts in Mexico, where it is used to make a candy called alegría (Spanish for happiness) at festival times. The grain is popped and mixed with honey. In Maharashtra state of India, it is called 'Rajgira' राजगीराjaggery in proper proportion to make iron and energy rich 'laddus,' a popular food provided at the Mid-day Meal Program in municipal schools. in the marathi language. The popped grain is mixed with melted
Amaranth grain can also be used to extract amaranth oil - a particularly valued pressed seed oil with many commercial uses. [More]
This reminds me of the Jerusalem artichoke (BTW. it is neither) scam way back in the '80s. It took some time to get rid of those residual populations, I can tell ya. I'm trying to imagine what kind of rotation you would use - especially for the crop immediately after.  Nor can I remember seeing amaranth settings for my combine.

Is this stuff much different from the loathsome pigweed of glyphosate resistance fame?  I don't remember the bright red color shown above, but maybe it never really ripened.
Now let’s look at the vilified pigweed for a minute. First the name, ‘pigweed’, makes it an easy target for demonizing. Who could possibly appreciate something so base as ‘pig’ and ‘weed’ combined?
Before we go any further, I would like to state the true and dignified name of pigweed: it is used to refer to several wild species of the genus Amarantus. The word comes from the Greek amarantos and means the “one that does not wither,” or “never-fading”.
This plant family includes a wide variety of species, some of which are cultivated for their nutritious leaves (oft-compared to spinach), others for their grain (which is actually a pseudo grain or seed). Various wild species of amaranth are saddled with the label pigweed, particularly in North America, and several of those now feature on the list of the world’s weeds that have developed a resistance to glyphosate.
(Apparently, the weedy types are also edible and taste much like the cultivated kinds. They simply don’t grow as large or produce as many leaves or seeds.)
The ‘never fading’ aspect therefore seems not just refer to the flower — which indeed keeps its deep reddish or rust color for a long time — but it also aptly applies to the sheer tenacity of the plant itself. It flourishes in a large variety of soils (from acidic to alkaline) and climates (from hot to cold); wild amaranth comes back without being planted; it grows in dry conditions; and some species thrive even in fields treated with glysophate — never fading. [More]
I suppose this stuff could catch on, perhaps in marginal areas. Or places with uncontrollable populations. Looks like a "Plan B" to me!
Amaranth grain can be popped, flaked, or ground into a high-protein flour. Currently in the U.S., more than 40 products contain amaranth grain in one form or another. The crop is well adapted to the midwestern and western U.S. It is drought tolerant and is best planted during late spring. Since the seeds are very tiny, some growers use insecticide boxes on their drills or planters to plant amaranth. Others use a vegetable seeder. The grain is harvested with a combine. Typical yields from amaranth range from 600 to 1,200 pounds per acre. [More]
I wonder what the weed control plan would be?

Another odd point: don't feed it to chickens.

Sunday, February 20, 2011

Sequels suck...

The new version of Monopoly. With no money.

The classic tokens, properties, and plastic buildings have been retained, but there's no paper money; dice; or Chance or Community Chest cards.
The tower does all that, along with barking instructions to players, as seen in the vid below. An added feature involves sending a plastic cab around on a rail to dodge taxes, and the tower can sometimes announce random events like a horse race or property auction.
In classic Monopoly, players wheel and deal with each other, screaming for rent and hiding $100 bills up a sleeve or under the board. In Monopoly Live, they seem to be interacting with the computer. Is that the purpose of a board game? [More]

Plus you'd have to think up new ways to cheat.
Time to buy a Kindle...

Not just because I've been droning on and on about them, but to read "The Great Stagnation" by Tyler Cowen. It is only available in e-book form. I've followed his jaw-droppingly prolific and thoughtful econblog for years, and this short e-book captures many assertions he has made with clarity and solid supportive argument.

Basically the thrust of the book is America has captured all the "low-hanging fruit" - culture changing technology and business innovations like the cars, electricity, antibiotics, etc. that had the effect of lifting the whole economy regardless of income level. Progress (and especially income growth) from now on will be much more incremental and he is not at all sure it will trickle down far beyond the top layers.
Most well-off countries have experienced income growth slowdowns since the early 1970s, so it would seem that a single cause is transcending national borders: the reaching of a technological plateau. The numbers suggest that for almost 40 years, we’ve had near-universal dissemination of the major innovations stemming from the Industrial Revolution, many of which combined efficient machines with potent fossil fuels. Today, no huge improvement for the automobile or airplane is in sight, and the major struggle is to limit their pollution, not to vastly improve their capabilities.
Although America produces plenty of innovations, most are not geared toward significantly raising the average standard of living. It seems that we are coming up with ideas that benefit relatively small numbers of people, compared with the broad-based advances of earlier decades, when the modern world was put into place. If pre-1973 growth rates had continued, for example, median family income in the United States would now be more than $90,000, as opposed to its current range of around $50,000.
Will the Internet usher in a new economic growth explosion? Quite possibly, but it hasn’t delivered very good macroeconomic performance over the last decade. Many of the Internet’s gains are fun — games, chat rooms, Twitter streams — rather than vast sources of revenue, and when there have been measurable monetary gains, they often have been concentrated among a small number of company founders, as with, say, Facebook. As for users, the Internet has benefited the well-educated and the curious to a disproportionate degree, but apparently not enough to bolster median income.
Beyond the income slowdown, there is a further worry: an increasing share of the economy consists of education and health care. That trend is not necessarily bad, but in these two areas, results are often hard to measure. If health care costs rise 6 percent in a year, for example, that counts as higher G.D.P., but how much is our health actually improving? It’s an open question. America spends more on health care than other countries, but those expenditures don’t seem to produce uniformly superior results. And while there have certainly been gains in medical treatment, we may be overvaluing them. In education, we are spending more each year, but test scores have stagnated for decades, graduation rates are down and America’s worst schools are disasters.[More of his op-ed that summarizes the book]
There is plenty of fodder for discussions and the e-book has triggered an avalanche of response, the ones I thought best I include below. 
3. How do we get more value out of our health care and education dollars? This is where a lot of our money is going, and it's also where advances could do the most good. Unfortunately, the current trend is toward rapid growth in costs and, at best, stagnation in quality. If health care comes to consume 25 percent of our economy and we're not living substantially longer or healthier lives than we are today, that'll be a lot of growth we wasted. And growth we waste is little better than growth we don't have. But education and health care are firmly part of the political argument, and the political argument is becoming less and less focused on solutions and more and more about acting out resentments and anxieties and arguing about things we know how to argue about. In the health-care sector, for instance, we spend a lot of time talking about insurers and very little time talking about how to coordinate care for the chronically ill. Given what we want out of the system -- lower costs and more health -- that's downright backwards. In education, we talk often about unions but rarely about poverty or early-childhood programs. [More]
This above point by Ezra matches my greatest concern about our economic future: we will become a culture dominated by universities and hospitals, and we are already hurtling toward it, as factory workers re-train for visiting home care jobs.
One great virtue of Cowen’s account is that he brings into the picture several overlooked trends that have played a large role in America’s historical economic ascent. Once accounted for, the more politically-motivated accounts of the country’s economic performance of the last 40 years are revealed to be incomplete at best (in the case of conservatives) or cartoonish at worst (in the case of Krugman). By upending the standard narratives that describe where the nation has been and where it’s headed, the book will influence your sense of the politically and economically possible.
Of course, there’s something deeply upsetting about his story, since it suggests there’s not much that can be done about some problems the nation faces: if the low-hanging fruit is gone, slower growth and lower rates of innovation are likely inevitable. And when Cowen says we simply must accept that as a nation “we thought we were richer than we were,” that’s tough for any optimistic American to hear. [More]

We are already rewriting history in our heads to imagine the past as free from many of the problems that plague us today, but the truth as Tyler points out, is probably closer to the explanation we simply didn't pay close enough attention to economic symptoms we now obsess over, such as median income going flat.
Going forward, Tyler raises several important questions. How do we encourage technological progress? How do we manage slow growth? And if and when we get a new round of technological breakthroughs, how do we manage those? These are his suggestions:
  • Raise the social status of scientists
  • Be part of the solution to the current rancor, not part of the problem. Don’t demonize those you disagree with.
  • Have realistic expectations.
  • Be ready for when more low-hanging fruit actually arrives because sometimes low-hanging fruit is dangerous
  • Be prepared for a recession that could last longer than we are used to.
Let me comment on two of these. First, the point about raising the social status of scientists. In his state of the union address, President Obama made a big deal about innovation. But he did not highlight a single current scientist. Instead, he featured two brothers, Robert and Gary Allen, who own a Michigan roofing company. Good politics–but perhaps not the right message to kids.
Second, don’t demonize those you disagree with. The point Tyler is making that politics becomes a lot harder in a slow-growth economy, where expectations have to be ratcheted down. The center has a real purpose. [More]
On that note, I will stop quoting the many, many available commentaries. It is a good idea to resurrect a center. Not the center the right thinks we have now moved to, but one that is supported by solid research of what Americans truly value and what they are willing to trade to get it. I am encouraged moderates will once again become the action figures of the future as the extremes simply have no answers for Tyler's questions.

After considerable thought, I have begun to wonder is our tiny sector is immune from the stagnation. After all, we are seeing record incomes. But as he points out, this rise is only enjoyed by fewer and fewer of us. Even as a relatively fertile age of ag innovation helps to keep our output relatively low-priced, benefiting everyone else, it is also a powerful tool for concentration of farm income.

The problem with comparing our profession with other economic activities is this disconnect between macro statistics and individual well-being. In fact, we will likely see that the upcoming years of plenty will be enjoyed a very, very small number of farmers. Technology is, as Tyler says, labor-displacing.

Friday, February 18, 2011

Budget cutting...

Is easier said. As we watch the House struggle to actually agree on actual cuts to actual programs, instead of merely agreeing the whack billions in general, it was illuminating to me to discover cutting spending is now less popular than it was in 1980.


(I note with interest the trend-defying attitude about defense cuts.)
 It shows that there is considerably less appetite for cutting spending today than there was in 1981. Considering how little spending actually got cut in 1981, this suggests that Republicans may have a lot less political capital to play with than they imagine. It also suggests that their strategy of front-loading spending cuts in the fiscal year 2011 is very ill-conceived. They are using up all the political capital they have for cutting spending in a way that is highly unlikely to be successful and that will not yield long-term savings. By the time they get around to doing something about entitlements, they may find that budget cutting exhaustion and frustration has set in and there is no support left for big budget cuts. It may be that they have one bite at the budget-cutting apple and they are squandering it. [More]
Bartlett certainly has a better feel for this than I do, but to me it suggests there is some confusion about the "will of the people". Getting too far in front of it can be dangerous to careers.

 This result and the weakness of our economy makes me tend toward considerable skepticism about how much even the Republicans will agree to cut, let alone the whole Congress. It also makes the longshot of the "grand bargain" look like the best horse to back.
 The gang of six – Coburn, Crapo and Chambliss along with Democrats Kent Conrad of North Dakota, Illinois' Dick Durbin and Mark Warner of Virginia -- have actually been meeting for months, but the episode shows how hard it will be for both sides to join hands and jump together into a public debate. If Social Security reform is the most politically radioactive issue in American politics, then overhauling Social Security, Medicare, Medicaid, defense budgets, discretionary spending and taxes all at once is akin to throwing oneself into a nuclear reactor. If you come out glowing, it's rarely in a good way.
Looming deficits will take drastic action to fix and the sacred cows, entitlements and defense chief among them, will have to be slaughtered. A successful grand bargain will require both parties to expend their combined political capital. Success promises mutual benefit, while failure ensures mutual destruction. [More]
In fact, I'm mildly optimistic after sufficient sturm und drang something will get done. It will be abused as too little/much, too fast/slow, and will be just enough to hold the the Hounds of Hell from our collective throats until another day.

It's just our way.
Take your meds...

Just don't ask.

I feel better already.
Good EPA, Bad EPA...

You can always get an applause line at a farmer meeting by bashing the EPA. But oddly, farmers fearing more regulation probably don't mean good regulation, just stuff that makes them change how they act.

Consider this overdue step in pesticide regulation pushed by the EPA.
Start counting. Glyphosate is now a Group 9 herbicide. Valor is Group 14. The new corn herbicide called Peak is a Group 2. The premix Capreno—it’s a Group 2 and Group 27. It’s all part of a new herbicide labeling system that groups products by site of action. Knowing the site of action is a key to developing a systems approach to managing weed resistance.

The Canadians know all about it. So do the Australians. Farmers in both of those countries have used a standardized numeric system to help them rotate herbicide chemistry for years. Peter Sikkema, a weed scientist at the University of Guelph, says farmers in Canada are much more likely to tell you they are struggling with Group 2 herbicide resistance than to mention ALS-resistance. “We adopted the system about 10 years ago,” says Sikkema.
The new herbicide labeling remains voluntary in the United States, but the Environmental Protection Agency has requested that registrants add group numbers to labels. You can expect to see the codes pop up more frequently as the push continues to delay development of resistance. After all, Group 1 is much easier than saying acetyl CoA carboxylase or ACCase Inhibitor. [More]
Pesticide companies are not thrilled about this development, I'm sure, because suddenly changing names and reshuffling mixes will be less effective in giving the appearance of new chemistry.  I note that the US is coming lately to this rather obvious decision aid, and I'll bet real money without implied EPA leverage, it would not have happened.
We should also keep in mind the EPA is the controlling agency when it comes to the ethanol mandate. (Remember 2008 and Gov. Perry) As we have already seen in the case of E15, corn growers have a lot riding on the rulings from the EPA. Which makes me wonder about making them the whipping boy for every perceived grievance with government rules.

Thursday, February 17, 2011

Winner-take-all publishing, and more...

The pattern of economic rewards shifting to small number of participants in a given sector is perhaps best illustrated in publishing. This has been noted before as technology allows a few authors to dominate sales.
In a winner-take all economy, however, small differences in skills can mean large differences in returns and we have moved towards a winner take-all economy because technology has increased the size of the market that can be served by a single person or firm.  Sherwin Rosen laid this out in a 1981 classic, The Economics of Superstars and Robert Frank and Robin Cook have a good popular account, The Winner Take All Society.  Here is how I explained it a few years ago in a post titled Harry Potter and the Mystery of Inequality.
J.K. Rowling is the first author in the history of the world to earn a billion dollars.  I do not disparage Rowling when I say that talent is not the explanation for her monetary success.  Homer, Shakespeare and Tolkien all earned much less.  Why?  Consider Homer, he told great stories but he could earn no more in a night than say 50 people might pay for an evening's entertainment.  Shakespeare did a little better.  The Globe theater could hold 3000 and unlike Homer, Shakespeare didn't have to be at the theater to earn.  Shakespeare's words were leveraged.
Tolkien's words were leveraged further. By selling books Tolkien could sell to hundreds of thousands, even millions of buyers in a year - more than have ever seen a Shakespeare play in 400 years.  And books were cheaper to produce than actors which meant that Tolkien could earn a greater share of the revenues than did Shakespeare (Shakespeare incidentally also owned shares in the Globe.)
Rowling has the leverage of the book but also the movie, the video game, and the toy.  And globalization, both economic and cultural, means that Rowling's words, images, and products are translated, transmitted and transported everywhere - this is the real magic of Ha-li Bo-te.
Rowling's success brings with it inequality.  Time is limited and people want to read the same books that their friends are reading so book publishing has a winner-take all component.  Thus, greater leverage brings greater inequality.  The average writer's income hasn't gone up much in the past thirty years but today, for the first time ever, a handful of writers can be multi-millionaires and even billionaires.  The top pulls away from the median.   
The same forces that have generated greater inequality in writing - the leveraging of intellect, the declining importance of physical labor in the production of value, cultural and economic globalization - are at work throughout the economy.  Thus, if you really want to understand inequality today you must first understand Harry Potter. [More, and please not the excellent links in this extract as well]
 Well, it just got worse, as Borders falls into bankruptcy.
Or some publishers may just drop their midlist authors. The blockbuster mentality in which publishers concentrate their marketing and promotion on the books they perceive as guaranteed sellers has long made the midlist author's life difficult. The additional financial burden imposed on publishers by Borders bankruptcy may well be the tipping point for many writers whose sales numbers are less than stellar.

It's an understandable strategy in difficult financial times. But books are so much more than a product. Books help us gain insight or perspectives on issues that matter. They allow us to escape reality and delve into stories or worlds unknown. They inspire us, educate us, change us. Their variety enriches both our culture and our lives.

Which means that ultimately, Borders' bankruptcy makes us all poorer. [More]
As the book industry collapses, publishers will be reluctant to bet on anything but proven winners. So expect short racks with Grisham, Brown, etc. How they will identify the next wave of these proven winners remains a mystery.

This concentration of income to a few is all very curious for the publishing industry, but that couldn't happen in agriculture, of course.  Or could it?

Think about the accrual of economic advantages to large operations. There are the obvious economies of scale, which lower fixed costs. But in addition, those who sell to us and buy from us love working with a much smaller number of customers/suppliers and often sweeten the transactions for big players: deeper discounts for machinery, special grain contracts, etc.

This in turn adds to their ability to dominate arenas like cash rent, which closes the positive feedback loop to push us toward a tiny number of large operations in grain farming.

At this point you might be expecting a rant about why this is economically and morally wrong, but I don't share those convictions. Once consolidations left us facing a handful of buyers (ADM, Cargill, CHS, etc.) and sellers (JD, Case, Monsanto, etc.) on each side of our business it became imperative for farms to grow in order to muster any leverage at all.

Right now we are simply pipelines - a ways for Monsanto to get revenue from Cargill, for example. The corporate decision is to calculate how large a flow the pipeline can tolerate. Read closely the corporate stock guidance from such entities and it becomes obvious they are not pricing to generate specific margins or cover costs, but simply what the farmer (pipeline) can bear.  The correlation between corn prices and fertilizer is convincing evidence of our feeble power in the marketplace. It is even more pronounced for landowners via rents.

One major balancing factor is competition, but that seems to come and go. While I am not claiming collusion, there is eerie coincidence in machinery, fertilizer, seed pricing, etc. especially in good times like now.

This trend will continue until farming entities of some sort emerge with commensurate power in the market. Already a 10,000 acre corn grower can wrest concessions, but once we are down to a few thousand such operations, individual power in the marketplace will begin to reappear, simply because each customer will represent significant revenue/profit.

This means like publishing, a few will make virtually all the money. And like publishing, technology will fuel this growth and make it impossible, I think, to divert.  While there will still be lots of farms, essentially all the production will coalesce into the few.

Our question is how to become one of the few. And I think that answer has not been fully developed yet. As more pressure is applied, innovative farm entities could provide the vehicles necessary to secure a future in grain farming. We just don't know what they look like yet.

Wednesday, February 16, 2011

Then what are good times for?...

I read Paul Neiffer regularly. He offers timely advice on accounting matters. But this post had me scratching my head. With considerable moral condescension, he advises us silly farmers how to manage the current wave of prosperity.
As an advisor, I would recommend that a farmer take advantage of these good times by doing almost the exact opposite of what is shown above.  In other words, when prices are very good, a farmer should:
  • Keep their lifestyle the same or even reduce their living expenses,
  • Pay the tax man with these high priced commodities, if you defer it, you will most likely get a lower price and owe no tax,
  • Not covet the neighbor's half-section, but rather wait for the price adjustment and buy it for cash when times are bad,
  • Expand their liquidity to at least 50% of annual sales,
  • Keep their machinery for another year or two [More]

Let's break this curiously Puritanical admonition down just a little shall we?
  • OK, we should LOWER our lifestyle when things are good - and they are really, really good for most grain farmers at least right now. I'm assuming he would not advise raising expenses when the economics are worse, so is there any time we can - with our accountants permission, of course - trade the wife's car for one that starts most of the time or take the family to The Mouse?
  • Now he is a market adviser predicting lower prices. How were the guys who sold out at previously "good" prices (say, $4.50) served by this advice to sell and "pay the tax man". They only missed a 50% pure-profit gain, that's all. (DAMHIKT) But then their taxes would have been higher - the horror! When a financial adviser starts predicting prices, it's time to ask what you are paying him for.
  • Yeah, I'm sure that same piece of ground will show back up in a couple of years. Of course, this strategy hasn't worked for, ummm, 25 years or so, but someday it will. Land is not a fungible investment like stocks. My rule of thumb is you get one chance every generation for nearby land. The guys I see farming today aren't the ones who waited to buy when land got cheaper because then they were even more pessimistic.
  • CPA's love liquidity and especially cash because it's easy to count and find ways to extract commissions on transactions. Can't do that with farmland. It just sits there all illiquid, appreciating, providing job security, and generating whopping returns. 
  • Timing machinery decisions by "how good things are" is nonsense. These are productivity and economic analysis. Right now, for example, investing in new technology has been shown to be one the biggest components of profitability. I will grant that trading when there is a line at the dealer is a bad idea, but I suspect Paul has never advised farmers to trade at anytime, even though getting machined up before now and being able to pause for a year or two is looking like a good strategy.
It's disheartening to see such a (unintended, I'm sure) patronizing lecture on the handling of our own wealth. While I'm sure Paul has seen examples of unneeded extravagance that led to financial problems, I think these are increasingly isolated cases in our industry.

Accountants have a strong bias toward cash as THE FORM of wealth. There is never enough cash to make them happy, in my experience. But this David Kohl-like guidance on how foolish we are to deploy our gains in ways that make us happy or secure a distant future casts serious doubt on the objectivity of any financial adviser.

After all, if you know the answer is always going to be "no", why pay to ask?

Monday, February 14, 2011

JunkBox, Episode XXXOOOXXX...

Bright, shiny objects.
Food choice and income...

I was struck by Chris Clayton's casual semi-endorsement of food intervention by the government in a glancing reference in a recent column.
I was going to write this blog about people being able to use food-stamp debit cards in California at fast-food places. Yeah, really. But someone pointed out that in L.A. they have been doing that since 2005. It's still a big issue in other parts of California and, yes, I'm floored that we can let people use food stamps at a Jack-in-the-Box on one hand, and then preach about obesity on the other. [More]
This a curious, but widely held contradiction in farm country, I think. On one hand we rise up against foodies who want to tell us what to eat - stinkin' vegans, etc. At the same time, we are mightily offended at our tax dollars being used for the "obesity fodder" for the poor.

My question: Is fast food bad for poor people, but good for the rest of us or what?

I think the underlying issue, however, is twofold. First, we hold many unfounded ideas about who the poor are and how they live, and second we resent the necessity of utilizing those same folks to get the farm bill approved.

But much of what we think about food stamp (SNAP) recipients is inaccurate. It is a startlingly Red State phenomenon (check out this very helpful map) with Oregon, Michigan, Washington, and Maine thrown in. Which makes me wonder whether Republicans have really thought this latest rant against the poor through.

Other misunderstood characteristics:
There have been several notable changes in the characteristics of SNAP households between 1989 and 2009. Some of the most striking changes are noted here.
The primary source of income among SNAP participants shifted from welfare to work. In 1989, 42 percent of all SNAP households received cash welfare benefits and only 20 percent had earnings. In 2009, less than 10 percent received cash welfare, while 29 percent had earnings.
The percentage of households with no cash income of any kind more than doubled. In 1989, 7 percent of SNAP households had zero gross income. This increased to nearly 18 percent in 2009. Similarly, the percentage of SNAP households with zero net income, who received the maximum benefit, rose from 18 percent in 1990 to 37 percent in 2009.
The average SNAP household’s income remained close to 60 percent of the poverty level. When SNAP participation levels decline, average    household    income    rises    slightly. Conversely, income falls when participation levels increase. However, the variation is small, ranging from an average income that is 56 percent of poverty, when caseloads were rising rapidly in
1993, to 63 percent of the poverty level in 2000, when caseloads were low.
Households have gotten smaller. In 1990, the average SNAP household contained 2.6 persons. In 2009, the average had fallen to 2.2 persons. During this period, households with one person rose from 32 percent of all households to over 46 percent.
The percentage of participants who are children remained fairly steady. In 1990, half of participants were under age 18, about the same percentage as in 2009. However, the share of households with children fell from 60 percent in 1990 to 50 percent in 2009. This is primarily due to an increase in single-person households. [More]
Much of the animus toward the program may be quietly racial, as the image of an obese African-American single mother pops into farmer minds easily (based on my asking them when they begin their what's-wrong-with-America speech - hardly scientific but telling nonetheless).

But the racial profile is even less clear-cut.
Based on a study of data gathered in Fiscal Year 2006:
  • 49 percent of all participants are children (18 or younger), and 61 percent of them live in single-parent households.
  • 52 percent of SNAP households include children.
  • 9 percent of all participants are elderly (age 60 or over).
  • 76 percent of all benefits go to households with children, 16 percent go to households with disabled persons, and 9 percent go to households with elderly persons.
  • 33 percent of households with children were headed by a single parent, the overwhelming majority of which were headed by women.
  • The average household size is 2.3 persons.
  • The average gross monthly income per SNAP household is $673.
  • 43 percent of participants are white; 33 percent are African-American, non-Hispanic; 19 percent are Hispanic; 2 percent are Asian, 2 percent are Native American, and less than 1 percent are of unknown race or ethnicity. [More]

More concerning to me, especially as this recession still struggles to provide many jobs, is the growing cultural divide between the have-jobs and the have-nots. With empathy falling from favor, and a
just-world vindication of the poor deserving somehow their status, the idea a permanent underclass with virtually no upward mobility chances becomes more possible.

Strangely enough it is this disconnect that leads many to embrace the conviction that the poor are poor because they make really dumb economic choices. I'll ignore the astonishingly stupid economic decisions we now recognize the rich and middle class made in the last few years, and focus instead on new research that suggests to me I would probably be making similar decisions in similar circumstances.

There are also serious cause-and-effect arguments to be made on this assumption.
There is so much nonsense here it’s hard to figure out where to start. First of all, some of the factual claims aren’t even supported. For example, on obesity, they cite a study finding that obesity declines with educational level. Then they assert: “Given the strong correlation between education and income, there is little doubt that the poor have more trouble maintaining a healthy body weight.” Yes, given the above, it is likely that there is a negative correlation between obesity and income; but it is also likely that that negative correlation is explained by education, not by poverty. Couldn’t they have made the effort to find a study with the facts they need instead of just assuming?*
Second, and more importantly, if we assume for the purposes of argument that more poor people are obese, it’s an enormous leap to say that this is because they make worse judgments. There are many other possible explanations. Here are a few, each of which I find more compelling than the behavioral one:
  • It’s more expensive to eat healthy food than unhealthy food.
  • Many poor people work long hours or have limited child care options, which makes it harder to buy and cook healthy food from the grocery store.
  • Poor people have worse health care than rich people.

 One other than springs to mind for me is access to grocery stores vs. fast food. 
People who live in poorer neighborhoods in the U.S. are less likely to have easy access to supermarkets carrying a wide variety of fresh produce and other healthy food, an analysis of 54 studies confirms.
But they probably have plenty of unhealthy fast food joints to choose from, Dr. Nicole I. Larson of the University of Minnesota in Minneapolis and her colleagues found.
"The research I reviewed suggests there is a need for new policies and other local actions to address the problem of poor access to healthy foods in many lower income, rural, and minority communities," Larson told Reuters Health.
Evidence is mounting, Larson and her team note, that segregation of neighborhoods by "income, race, and ethnicity" plays a major role in US health disparities, and accessibility to healthy -- and unhealthy -- food may be a factor. [More]
And from a straightforward dollars per calorie calculation, fast food is a far better buy than ingredients. Which of course, is another problem, but on one level obese poor people are making Adam-Smith-approved choices.

This is especially true for the unemployed. Until you have experienced this personally or a  close family member, it is easier to promote the idea SNAP and similar programs enable slackers. Doubtless there are many who game the system, but there are more, I believe, folks like this:
Whatever the demon or deity, I was, of course, grateful. But 15 months of unemployment does something to you, changes you. The obvious horrible thing about poverty, of course, is that you can’t buy things, but poverty also dices and shreds whatever self-esteem you might have left after losing your job and your apartment. I remember the weekend I had $3.48 in the bank and was hoping my food stamps would electronically replenish on Monday so I could eat, and recall wondering whether there was a state of the soul beyond humility. [More]
The acid test is when you know some folks personally who use SNAP, and for whom it makes a big difference. Many of these people may be new users in the last few years and are deeply embarrassed by their situation, but I for one am glad we have this type of safety net particularly because of my profession. Farmers should have a natural interest in hunger, I would think.

No government program works perfectly, and before I would throw stones at SNAP participants for their choices, I would ponder how I would rationally explain economically some of my government handouts and what I do with that money.

If we are outraged about food advocates wanting to tax soda, for example, why are we upset about welfare recipients buying soda? Let's pick one side and stay on it.