Monday, November 28, 2011

Another apostate...  

Dan Drezner, to whom I have linked occasionally, is a noted conservative foreign policy writer whose opinion I always consider, even when I disagree. Like so many others, including yours truly, he has lost the faith with what is masquerading as the Republican Party.
2)  I haven't overtly talked about my own personal political beliefs since the blog moved to FP, but this seems to be an appropriate time to bring it up and then never speak of it again.  When I've published essays like this before, I find liberals write "even conservative Dan Drezner..." while conservatives often deploy terms like "academic elitist" or "RINO." 
In my case, at this point in time,  I believe that last appellation to be entirely fair and accurate.  I'm not a Democrat, and I don't think I've become more liberal over time.  That said, three things have affected my political loyalties over the past few years.  First, I've become more uncertain about various dimensions of GOP ideology over time.  It's simply impossible for me to look at the aftermath of the 2003 invasion of Iraq and the 2008 financial crisis and not ponder the myriad ways in which my party has made some categorical errors in judgment.   So I'm a bigger fan of the politics of doubt during an era when doubt has been banished in political discourse. 
Second, the GOP has undeniably shifted further to the right over the past few years, and while I'm sympathetic to some of these shifts, most of it looks like a mutated version of "cargo cult science" directed at either Ludwig Von Mises or the U.S. Constitution (which, of course, is sacred and inviolate, unless conservatives want to amend it).  Sorry, I'm not embracing outdated concepts like the gold standard or repealing the 16th Amendment.  Not happening. 
Third, David Frum wrote something in New York Magazine that touches on the issues I just discussed, but also articulates something that has been nagging at me for a few years now: 
The conservative shift to ever more extreme, ever more fantasy-based ideology has ominous real-world consequences for American society. The American system of government can’t work if the two sides wage all-out war upon each other: House, Senate, president, each has the power to thwart the others. In prior generations, the system evolved norms and habits to prevent this kind of stonewalling. For example: Theoretically, the party that holds the Senate could refuse to confirm any Cabinet nominees of a president of the other party. Yet until recently, this just “wasn’t done.” In fact, quite a lot of things that theoretically could be done just “weren’t done.” Now old inhibitions have given way. Things that weren’t done suddenly are done.
Also, things that weren't said are now being said.  Or, to be more precise, things that use to be said but ignored are now being taken seroiusly by the GOP's leading lights.  Newt Gingrich endorses the notion that Obama has a "Kenyan, anti-colonial" worldview.  Mitt Romney claims Obama has been apologizing around the world and no longer believes in American exceptionalism.  Herman Cain is [Remember your mercy rule!!--ed.].... Herman Cain.  There's good, solid partisanship -- a vital necessity in this country -- and then there's unadulterated horses**t.  Too much of the GOP's rhetoric on Obama reads like the latter to me. 
So for those reasons, I really am a Republican in Name Only at this point.  And I say this for the GOP's benefit.  The next time someone writes, "even the Republican Dan Drezner has said...." GOP partisans should feel perfectly entitled to link to this post and call me a RINO.  Because it's true. [More]
There is more to foreign policy for the US than doing whatever Netanyahu wants amd ignoring the rest of the globe. But you wouldn't know it from the GOP candidates, save Huntsman and Paul.

Not my party anymore.
Winter touches the sea floor...

(Mostly an experiment to correct an embedding problem, but cool nonetheless)

Saturday, November 26, 2011

Wall Street detour...  

Say what you will about the OWS movement, the idea of "The 1%" has taken root. While many before had questioned how the finance sector added so much value it was entitled to oversize profits, some of our best economic minds are having trouble seeing this to be true as well. In the process of thinking this through some are discovering something farmers have instinctively, if not consciously, believed. (Note my emphasis below)
But the bigger idea, I guess, is that the “normal people” helped by Wall Street are the 1%, and that Wall Street has its “fingers on the scales in their favor”, and that if the scales are tipped towards the 1%, then that means the 99% are the losers. They’re the prey for Wall Street’s predators.
I don’t buy this analysis. I don’t believe that Wall Street is meaningfully improving the lives of the 1%, except insofar as Wall Streeters are the 1%. (Remember that financial professionals make up only 14% of the top 1%, and 18% of the top 0.1%. They’re a large chunk, but by no means the majority.)
In fact, I suspect that the top 1%, if anything, are responsible for a disproportionate share of Wall Street’s income. Wall Street isn’t picking the pockets of the 99% and giving the proceeds to the 1%: it’s picking the pockets of the 1% and giving the proceeds to itself. And Wall Street is taking a whole bunch of money from the 99%, too. But for the 86% of the top 1% who don’t work in finance, I really don’t believe for a minute that Wall Street is helping them out by giving them the hard-earned money of the 99%.
I also don’t believe in some halcyon era when Wall Street was “an economic helpmate” to the 99%. It has always been very good at extracting rents, and very bad at creating wealth for its clients.
Narrowly speaking it’s easy to see where Emerson’s speech is coming from: the housing bubble was certainly instrumental in allowing millions of Americans to live beyond their means. And yes, Wall Street was a necessary part of the machinery of the housing bubble. But of course the Americans who bought beyond their means did not “get to continue living like kings”; instead, they got foreclosure and eviction notices. And Wall Street wasn’t there to help them when that happened.
But I don’t believe that Wall Street has its fingers on any scale. There are wealthy families who have managed to preserve and grow their wealth over many centuries — Italy and Germany both have quite a few of them, the ultimate Black Swan that was World War II notwithstanding. Those families tend to have a lot of real property: income-producing land, if you’re growing things like grapes or trees, is an amazing long-term asset, since the main rents you’re extracting come directly from the Sun. By contrast, the rich families who hire Goldman Sachs to look after their money and end up invested in Global Alpha or pre-IPO Facebook shares tend to be much newer money. They made it quickly, and they’ll probably lose it quite quickly too — it could quite easily all be gone within two or three generations. [More]
Long before I even suspected what was going on in big banks, I resented their seemingly unnecessary fee extraction rackets. This from a 1996 Top Producer article:

Much has been said about the single-minded focus of farmers for land. Interestingly enough, we are not the only profession with such prejudices. I have noticed accountants and financial advisers, for instance, tend to favor money, especially cash or easily convertible assets. The reason is analogous - they “farm” these assets like we do land. If you make your living by moving others’ money from one form to another, seeing it tied up for centuries in land, which ends their involvement (and commissions) is not attractive.[More]
The global financial sector is not earning its pay, IMHO. "Efficient allocation of assets", my posterior! We have cash piling up in companies and banks while deflation remains an ominous threat in the developed world, for the fifth year running. Does that sound efficient to you?

What finance has done is perfected rent-seeking tactics for all those who prefer cash as an asset over all other things. In a totally unexpected development, the world is awash in such assets, as the growing global economy and technology /productivity have generated more available capital and simultaneously tempered demand for private investment. We have enormous wealth looking for somewhere to be.

I feel perversely lucky I have always been absolutely terrible at managing money, and piled my wealth into other forms instead. Moreover, debt is one really good method to countering to the One Percent, when you think about it.  Nobody embezzles a loan.

When the game is rigged against you, don't play. And while everyone should feel free to to mock and deride the loopy protestors in the Occupy movement, it should give you pause that there is some serious kernel of truth fueling this anger.

Friday, November 25, 2011

Why staying home...  

Is a smart idea.  Unless (as is often the case) your family /friends make Black Friday shopping a social event that contributes to your holiday festivities, you could save money staying home and cleaning the gutters. (I don't want to talk about it)
What the professor has determined with a complex computer algorithm for consumer electronics, others have found through less scientifically rigorous means for other products, including clothing and toys: despite all the ads that suggest otherwise, the lowest prices tend to come at other times of the year.
In the case of toys, stores actually offer the steepest discounts in the weeks immediately following Thanksgiving because they want to unload the inventory not swept up on Black Friday, said Dan de Grandpre, who has tracked deals for 15 years at
“Toys have a very short shelf life,” he said.
“On Dec. 26, they’re not really useful to retailers anymore, so they have to get rid of it and start slashing prices early in December.”
And it is a precise window of opportunity. In the week or so before Christmas, toy prices shoot back up, Mr. de Grandpre’s tracking shows, as last-minute shoppers come stampeding for Barbies and Lego sets and stores are less desperate “because they’ve been able to reduce their inventory.” [More]
I also wonder if the recent steep slide in corn prices won't bring rampant machinery sales to an abrupt halt, much as it did this summer when we didn't know what we had in our fields. I think we are much more sensitive to such exterior phenomena than before, maybe because we are buying a lot of stuff we could postpone or even do without, rather than badly needed equipment.

Wednesday, November 23, 2011

Better mice...  

Note how fast it returns to the start after mapping.

Update: the embedding isn't working. Click here.


Ya gotta believe this kind of software will be what we turn on at the entrance to a field soon.

Tuesday, November 22, 2011

Password sense...  

Of all the places to find a better password system, xkcd was not my first thought:

 [Click to embiggen]

Roll your own here.

Sunday, November 20, 2011

A mandate by any other name...  

The fervor on the right for the SOTUS to declare the health care insurance mandate unconstitutional is far from a stand-alone issue. I have written before about the comparison to the ethanol mandate, but it is even more abstruse legally than I had imagined.

For instance, if the ACA mandate doesn't pass muster, it could impact the 1938 Farm Bill, which undergirds every farm bill since.
The role the Wickard decision will play in the health care reform lawsuits that are now before, or headed toward, the U.S. Supreme Court is unclear, because some lower court judges have refused to use the 1942 case as precedent, while others have.
ISU’s Harl notes in his article that “one of the more influential opinions from the appellate courts” did take notice of Wickard and upheld the health care law “as within the power of Congress to legislate under the commerce power.”
Of particular interest, Harl said, is the fact that the three-judge panel of the District of Columbia Court of Appeals that made the decision was headed by Judge Laurence Silberman, a conservative judge who was appointed by President Ronald Reagan in 1985.
The Silberman decision, Harl wrote, stated that “Wickard … comes very close to authorizing a mandate similar to (the health care legislation), at least indirectly.”
Also, Harl noted, “Judge Silberman, in the opinion, concluded with the statement ‘we are obliged — and this might well be our most important consideration — to presume that acts of Congress are constitutional.’ ”
Harl’s article concludes with a question: “What are the chances that the current (Supreme) court will follow the path taken by the District of Columbia Court of Appeals and uphold the legislation?”
The high court, he wrote, “has a choice — overturn Wickard v. Filburn or, at least distinguish it, which could be difficult to do, or uphold the 2010 health care legislation.” [More]
Moreover, striking it down will really complicate other applications of the Commerce Clause, which has allowed Congress to meddle in all kinds of sectors to reward constituents/supporters.

To be sure, a number of the Supreme Court's Commerce Clause cases have used the word "activity" to describe behavior that was either regarded as within or without Congress's authority.  But those cases did not purport to limit Congress to reach only existing activities.  They were merely identifying the relevant conduct in a descriptive way, because the facts of those cases did not raise the question--presented here--of whether "inactivity" can also be regulated.  In short, we do not believe these cases endorse the view that an existing activity is some kind of touchstone or a necessary precursor to Commerce Clause regulation. . . .
Indeed, were "activities" of some sort to be required before the Commerce Clause could be invoked, it would be rather difficult to define such "activity."  For instance, our drug and child pornography laws, criminalizing mere possession, have been upheld no matter how passive the possession, and even if the owner never actively distributes the contraband, on the theory that possession makes active trade more likely in the future.  And in our situation, as Judge Sutton has cogently demonstrated, many persons regulated by the mandate would presumably be legitimately regulated, even if activity was a precursor, once they sought medical care or health insurance. [More]
 And it's just that simple.

Seriously, the legal fallout from this case will be immense regardless of the decision.

Update: Another opinion that cites Wickard as an important guiding precedent.

Thursday, November 17, 2011

Another feckless prediction...  

Fertilizer prices may have peaked. 

No, seriously. 

Aaron and I are revising our P & K apps in light of the outcome of our cash rent negotiations. My pattern has been to simply slow the buildup on fields that need it.

But whether the Fertilizer Oligopoly can repeat their slowdown to limit supplies is to be seen.

According to the International Fertilizer Industry Association (IFA), there are currently 250 fertilizer production capacity expansion projects under way globally and planned investments of approximately $88 billion through until 2015, including huge projects in China, the Middle East and Latin America.
Among the minerals, nitrogen production capacity is growing particularly quickly.
Capacity is seen 19% higher at 229.6 mmt by 2015, driven by expansion in China, India and Latin America, where authorities are seeking to increase self sufficiency and in Africa, where there are the most accessible deposits, according to the IFA.
Meanwhile, regarding urea, the Middle East and North Africa are set to become more important because of the energy cost advantages.
"New capacity is being built to take advantage of cheap gas in Qatar Saudi Arabia and Iran, among other spots," said Calum Findlay of UK fertilizer merchant Gleadell Agriculture.
Another area in which heavy investments are being made is potash and, as a result, large potash surpluses are expected from 2015 onward, according to the IFA. Canada will have the biggest surplus, providing a readily available source of potassium for U.S. farmers. By 2015, North America will produce 39% of the world's potash.
In the area of phosphates, rock mining capacity is expected to grow 26% between 2010 and 2015 with the largest growth areas in Africa, which has the most readily accessible reserves.
In the short term, phosphoric acid supply remains tight but that should ease in the next three to four years as 34 new plants are planned for completion between 2010 and 2015.
With food and feedstuff prices still near all-time highs, demand for fertilizers remains buoyant. But affordability will keep a lid on demand. That's because, at current levels, fertilizer prices are around 30% higher than what is considered a natural equilibrium point against agricultural commodity prices, according to CRU analysis. [More]

Another curious development is the glut of crude in the Midwest and the unusual reaction.

The decision to reverse the flow of a key oil pipeline should alleviate a supply bottleneck that has trapped crude in the Central U.S. for the better part of this year.
It will also raise the price of oil in the U.S., and could restore some of the lost legitimacy of the main U.S. crude benchmark.
Benchmark crude on the New York Mercantile Exchange jumped above $102 a barrel after Wednesday's announcement that Enbridge Inc. (ENB) and Enterprise Products Partners LP (EPD) would reverse the direction of the Seaway pipeline to transport crude from the oil hub of Cushing, Okla., to refiners on the Gulf Coast.
The reversal should help drain the brimming tanks of oil in the Midwest, where elevated inventories and a shortage of outgoing pipelines have depressed the price of crude on the Nymex, also called West Texas Intermediate, compared with Europe's Brent benchmark for much of this year.
Pending regulatory approval, the 500-mile pipeline could ship an initial 150,000 barrels of oil a day from Cushing to the Houston-area refining market by the second quarter of next year, Enbridge and Enterprise said.
After pump station additions and modifications, the capacity could rise to 400,000 barrels a day by early 2013, the two companies said.
That flow should help reduce oil inventories in the Midwest, which have been elevated for much of the year. Over the past 12 months, commercial crude held in storage in the Midwest has risen 4% to 91.2 million barrels last week, according to Department of Energy data.
"It enables the increasing amount of oil production to get to the refining centers on the Gulf coast in an economical way," said Andy Lipow, president of the Houston oil-industry consultancy Lipow Oil Associates.
Seaway isn't the only pipeline in the works that will transport crude out of the Midwest. TransCanada Corp.'s (TRP) expansion of its Keystone pipeline, which carries Canadian crude into Cushing, will offer an outlet to the Gulf Coast as well. [More]
I am embarrassed to say I thought they were one-way pipelines.


Like those obnoxious comment trolls who try to be the first to comment, I'm calling first. A reader remarked he had heard nothing about "shallow loss" payments being amber box payments for WTO purposes, as I remarked on Sunday.

Yesterday the USDA backed up my analysis.

Meanwhile, USDA Chief Economist Joe Glauber said Tuesday that most of the programs under consideration would be likely to be categorized as trade-distorting under WTO rules.
The "shallow loss" revenue program would probably be categorized as a product-specific trade distorting subsidy in the amber box, disaster aid would be non-product specific in the amber box, direct payments linked to the cost of production would be amber box and the new dairy program could be categorized as green or amber or put in the mid-distorting blue box depending on how it is finally constructed, Glauber said. [More]

This pig just found an acorn.

Tuesday, November 15, 2011

The new face...  

Of the Plains. Hint: it doesn't look like me.
For generations, the story of the small rural town of the Great Plains, including the dusty tabletop landscape of western Kansas, has been one of exodus — of businesses closing, classrooms shrinking and, year after year, communities withering as fewer people arrive than leave and as fewer are born than are buried. That flight continues, but another demographic trend has breathed new life into the region.
Hispanics are arriving in numbers large enough to offset or even exceed the decline in the white population in many places. In the process, these new residents are reopening shuttered storefronts with Mexican groceries, filling the schools with children whose first language is Spanish and, for now at least, extending the lives of communities that seemed to be staggering toward the grave.
That demographic shift, seen in the findings of the 2010 census, has not been uniformly welcomed in places where steadiness and tradition are seen as central charms of rural life. Some longtime residents of Ulysses, where the population of 6,161 is now about half Hispanic, grumble over the cultural differences and say they feel like strangers in their hometown. But the alternative, community leaders warn, is unacceptable. [More]
As we have become expectant of instantaneous, radical changes in our world, we often miss the merely rapid social changes happening around us. My grandchildren will live in a different rural America, it seems. Nor do I think this demographic trend will stop at the Mississippi, although the economic structure variations will certainly revise its pattern. But it is hard to ignore the consequences of a shift like this:

[Click to enlarge][Same source]


Monday, November 14, 2011

The really big problem...  

I have become more convinced than ever our global economy is confronting a growing obstacle in the form of human-obsolescence on the producer side. Sure we need consumers to buy goods and services, but our demand for workers to supply them languishes without signs of a turnaround. (Which also explains the lack of consumers, duh.)

It is hard to look at technology and not see the the reason. The recession has had the odd consequence of promoting technical upgrades to lower production costs, lowering even further the need for people.

The question for me is not when where will the consumers come from, but what will they do to earn a living?
FEAR of displacement from one's job by a superefficient machine is as old as modern economic growth (which is to say, about two centuries old). It is somewhat surprising that there has not been more made of the possibility of technological unemployment during the recent recession and lacklustre recovery. Technological unemployment was widely cited as a problem in the 1920s and 1930s, a time during which productivity was soaring, inequality and unemployment were high, and instability was the norm.
The argument that rapid technological change may be generating labour market problems is given a lift in an interesting new ebook by Erik Brynjolfsson and Andrew McAfee, entitled Race against the machine. The opening chapter attempts to cast the book as a means to understand present high unemployment, which is a little unfortunate; most of current labour market weakness can be explained by weak growth, and weak growth is well explained by weak demand. It is, however, a useful contribution to the discussion of what has gone wrong in the American economy in recent decades.
The stylised facts of that poor performance are increasingly well known. Real median income has stagnated, especially over the last decade. Inequality has risen dramatically, driven by huge increases in top incomes. Employment growth has disappointed. At least some of the blame for all of this, the authors argue, can be laid at the foot of new technology. It's an interesting twist on the themes developed by Tyler Cowen in his ebook The great stagnation. Mr Cowen argues that a major slowdown in innovation is constraining potential growth, while new progress in information technology isn't providing benefits to most workers. Mssrs Brynjolfsson and McAfee tweak the argument, writing that innovation has been gathering pace and having an increasing impact on labour markets. In a nutshell, new technologies are displacing workers faster than the economy can find new uses for them. [More worth reading]
The standard answer is education, but there are signs that solution isn't working like it used to as well. Demand for college graduates is slow, salaries are dropping, and meanwhile education costs spiral upwards.

Adding more graduates to this scenario seems like pouring fuel on the fire to me. What is often ignored is technology is replacing all kinds of workers - not just those on assembly lines. In fact, the very lowest level jobs may be the most secure: hotel maids, garbage collectors, nurses aides, janitorial workers, etc.

Stanley Aronowitz and William DiFazio wrote a pretty gloomy book in 1994 with the striking title, The Jobless Future. Here is a Harvard Educational Review discussion of the book (link). What is most discomforting in reading the book today is the degree to which the factors they identify seem to be today's headlines. What does jobless mean here? In a word, it means that the US and other OECD countries will never recover the number and quality of jobs they need in order to regain the middle class affluence they had in the 1950s and 1960s. The future will involve work -- but not enough jobs to ensure a low unemployment rate. Here is their assessment in 1994:
For there is no doubt that we have yet to feel the long-term effects on American living standards that will result from the elimination of well-paid professional, technical, and production jobs. At the same time, nearly everyone admits that many of these jobs are gone forever. (xi)
The central structural factors they identified in 1994 are still key parts of our economic environment today: technology innovation replacing labor, rising productivity producing persistently flat labor demand, shifts in the structure of the economy towards finance and service sectors, and internationalization of production. [More gloomy pondering]
I cannot see why our profession will be exempt. In fact, only land ownership seems to be a guarantee against displacement: when your buy a farm, you buy the right to name the farmer.

We are currently in the process of attracting many young and youngish farmer aspirants back to rural America. More than a few I suspect are doing so because of lack of alternatives such as mentioned above. Like professions such as law, medicine, administration, management, etc. demand for workers in our industry - regardless of how highly trained - will be limited.

We know what happens when labor demand falters. It can be seen in history books in examples as diverse as Middle Age economies (guilds) to the USSR (an economy based on who you knew). Jobs will be THE commodity of the future, I'm afraid. And the social and economic gaps between those who do and do not have one will widen and worsen.

Sunday, November 13, 2011

Why I'm not talking much about...  

The SECRET FARM BILL NEGOTIATIONS. This near-farcical drama has been portrayed as circumventing the legislative process (a fair charge, IMHO), probably futile, generating an even more complicated program, and anti-small farms.

I have followed the leaks and speculation, but there are some good reasons why I think it will be a waste of time.

1. The proposals I have seen smell like Yellow Box payments WTO-wise.
These green box subsidies have to be government-funded, not by charging consumers higher prices, and must not involve price support. They tend to be programs that are not directed at particular products and include direct income supports for farmers that are decoupled from current production levels and/or prices. [More]

The "shallow loss" idea definitely is linked to current production, it seems to me. And for farmers who carped about feet-dragging on the FTA"s to turn around and deliberately invite WTO sanctions would be breathtakingly counterproductive.

2. The CBO will not score it as generously as the writers imagine. While we never have been able to predict what a farm bill will cost - and always underestimate badly - one reason many farmers are interested is because an insurance-type outcome could make the safety net a true hammock. This doesn't happen unless we siphon more off the treasury, not less. I don't think the CBO will share the Gang  of 4 budget smoke-and-mirrors optimism.

3. The AFBF is not amused. I think the sprawling farm organization senses a whacking loss of clout should corn, soy and cotton advocates push the shallow-loss idea through.
The American Farm Bureau Federation also has sent a letter to members of the House and Senate agriculture committees questioning the development of any farm bill proposal that covers "shallow losses." Several proposals effectively involve gap coverage that would protect farmers' income up to 90% levels. Effectively, a farmer buys crop insurance at 75% protection levels, and the shallow plan would cover anywhere from 10-15%, depending on the proposal.
Farm Bureau said "a shallow loss program is a drastic departure from any previous farm policy design" and that "our biggest concern is that by reducing the risk of shallow losses, farmers may be encouraged to take on more risk than they would in response to market signals alone."
Farm Bureau said creating a shallow loss program would increase moral hazard because "insured individuals may engage in riskier behavior with only a $250 deductible, they may drive faster or in more extreme weather conditions than if they purchased a high deductible policy." See link below.
Farm Bureau's choice of a comparison led one commodity lobbyist to ask, "What are they drinking or smoking over there?" The letter puts Farm Bureau at odds with cotton, corn and soybean groups that have all proposed new crop programs. [More]

4. Finally, I am not optimistic the Super-Committee will get a package done. The big stick was supposed to be draconian cuts to defense, but those are either less alarming to many in Congress than previously imagined or seen as avoidable with legislative sleight of hand or by just ignoring them. In addition, letting the Bush Tax Cuts expire would be the single easiest way to address the budget deficit. There is no big win for getting a deal, looks to me.

So my bottom line: this is most likely just farm media filler and political blithering for use in upcoming campaigns in farm states.

Saturday, November 12, 2011

True mystery meat...  

I'm not a  big fan of the McRib.  It's too messy, especially for the road and the texture defies mouth analysis. But I'm far from being it's biggest critic.

Some point to the lengthy list of unappetizing ingredients. But hey - what prepared food or restaurant fare doesn't read like that?

The more unsettling accounts are how the umm, meat is processed.
Roger Mandigo is an emeritus University of Nebraska animal science professor credited with the technology that made the McRib possible. And here's its story, straight from the meat scientist's mouth.
Roger Mandigo earned induction into the Meat Industry Hall of Fame for his invention of "restructured meats."
Back in the 1970s, Mandigo tells The Salt, he was approached by the National Pork Producers Council (the folks who later brought you "the other white meat") to create a product with pork trimmings that could be sold to the fast food giant.
"The pork producers wanted to see more pork on the menu, and they were targeting McDonald's," Mandigo said.
Mandigo went to work in the lab and came up with a new take on an old-fashioned technology: sausage-making. Instead of just stuffing pork meat inside a casing, Mandigo used salt to extract proteins from the muscle. Those proteins become an emulsifier "to hold all the little pieces of meat together," he says.
"All we did was reuse the technology that had been around for hundreds of years and emphasize that we could shape products to shapes people wanted," he says.
And here is where our story takes an interesting twist: Seems the McRib was not born in the shape of its current pork patty. The original concoction Mandigo made was formed as a faux pork chop.
McChop? Maybe not.
"[McDonald's] chose the shape," Mandigo said. "They wanted it to look like the boneless part of a backrib."
That's why Mandigo is adamant that he was not the father of the McRib, despite getting the credit for it all these years. [More]
Still others use the McRib to bash modern hog production methods.
Bad news for fans of the infamous McRib: The Humane Society filed a legal complaint against Virginia-based Smithfield Foods, which supplies the pork for McDonald's sandwich. In an undercover operation from 2010, the animal rights group says it uncovered a number of disturbing farming practices, including the use of tightly confining gestation crates that cause sows to suffer "from open pressure sores and other ulcers and wounds," with nary a veterinarian in sight. Will these gross allegations sully the reputation of the barbecue-sauce-slathered sandwich?[More]
But the most curious element is the intermittent appearance of the McRib on the MacDonald's menu. There is even a theory for that.

Now, take a look at this sloppy chart I’ve taken the liberty of making. The blue line is the price of hogs in America over the last decade, and the black lines represent approximate times when McDonald’s has reintroduced the McRib, nationwide or taken it on an almost-nationwide “Farewell Tour” (McD’s has been promising to get rid of the product for years now).

Key: 1. November 2005 Farewell Tour; 2. November 2006 Farewell Tour II; 3. Late October 2007 Farewell Tour III; 4. October 2008 Reintroduction; 5. November 2010 Reintroduction.
The chart does not include pork prices leading into the current reintroduction of the McRib, but it does show it on a steep downward trend from August to September. Prices for October, 2011 hogs have not been posted yet, but I suspect they will go lower than September—pork prices tend to peak in August, and decline through November. McDonalds, at least in recent years, has only introduced the sandwich right during this fall price decline (indeed, there is even a phenomenon called the Pork Cycle, which economists have used to explain the regular dips in the price of livestock, especially pigs. In fact, in a 1991 paper on the topic by Jean-Paul Chavas and Matthew Holt, the economists fret that “if a predictable price cycle exists, then producers responding in a countercyclical fashion could earn larger than ‘normal’ profits over time... because predictable price movements would... influence production decisions.” At the same time, they note that this behavior would eventually stabilize the price, wiping out the pork cycle in the process).
Looking further back into pork price history, we can see some interesting trends that corroborate with some McRib history. When McDonald’s first introduced the product, they kept it nationwide until 1985, citing poor sales numbers as the reason for removing it from the menu. Between 1982 and 1985 pork prices were significantly lower than prices in 1981 and 1986, when pork would reach highs of $17 per pound; during the product’s first run, pork prices were fluctuating between roughly $9 and $13 per pound—until they spiked around when McDonald’s got rid of it. Take a look at 30 years of pork prices here and see for yourself. Also note that sharp dip in 1994—McDonald’s reintroduced the sandwich that year, too. Though notably, they didn’t do so in 1998.
(I’m sure all the sharp little David Humes among us are now chomping at the bit—and you’re right to do so! This proves nothing. It is just correlation—and the sandwich doesn’t always appear when pork prices are low. In fact, the recent data could prove that McDonald’s actually drives pork prices artificially high in the summers before introducing the sandwich—look at 2009’s flat summer prices. Could that be, in part, because there was no McRib? On the other hand, food prices were flat across the board in 2009 so probably not. So, no, this correlation proves nothing, but it is noteworthy.)
Because we don’t know the buying patterns—some sources say McDonald's likely locked in their pork purchases in advance, while others say that McRib announcements can move lean hog futures up in price, which would suggest that buying continues for some time—and we can’t seem to agree on what the McRib is made of—some sources say pork shoulder, others say a slurry of offal—it’s hard to really make any real conclusions here.
The one thing we can say, knowing what we know about the scale of the business, is that McDonald’s would be wise to only introduce the sandwich (MSRP: $2.99) when the pork climate is favorable. With McDonald’s buying millions of pounds of the stuff, a 20 cent dip in the per pound price could make all the difference in the world. McDonald’s has to keep the price of the McRib somewhat constant because it is a product, not a sandwich, and McDonald’s is a supply chain, not a chain of restaurants. Unlike a normal restaurant (or even a small chain), which has flexibility with pricing and can respond to upticks in the price of commodities by passing these costs down to the consumer, McDonald’s has to offer the same exact product for roughly the same price all over the nation: their products must be both standardized and cheap. [More]
This strange sandwich provokes strange reactions in consumers. But it's most lasting effect may be the piling on consequence of yets another restaurant/grocery offering that should not be examined in detail.

For my mind, this is simply an example of a culture that values quantity over nutrition in food. And one with an abnormally high sweetness demand. McRibs are probably little worse than other fast-food offerings, and as for eating offal, that too is simply a cultural and economic affectation. Protein is protein, and if you don't like the idea of "variety meats", the McRib is simply one way to avoid knowing you're eating them.

Thursday, November 10, 2011

Reportless on the farm...  

Even as confidence in NASS reports falters, budget cuts could be adding to the woes of the agency. So much so that smaller commodities may have to count themselves, so to speak.
In light of funding reductions in fiscal year (FY) 2011 and the likelihood of additional reductions in FY 2012, NASS conducted deliberate reviews of all programs against mission- and user-based criteria, aimed at finding cost savings and forward-thinking business efficiencies so that key timely, accurate and useful data remains available in service to agriculture. As a result, the agency is discontinuing or reducing a wide range of agricultural survey programs. The decision to eliminate or reduce these reports was not made lightly, but it was nevertheless necessary, given the funding situation. Because of the timing of the agency’s survey work during the coming year, these decisions are necessary now. These programs are:
  • Annual Reports on Farm Numbers, Land in Farms and Livestock Operations - Eliminate
  • Catfish and Trout Reports – Eliminate all
  • Annual Floriculture Report - Eliminate
  • January Sheep and Goat Report - Eliminate
  • Chemical Use Reports – Reduce frequency of commodity coverage
  • July Cattle Report - Eliminate
  • Distiller Co-Products for Feed Survey - Cancel
  • Annual Bee and Honey Report - Eliminate
  • Annual Hops Production Report - Eliminate
  • Monthly Potato Stocks Report – Reduce from monthly to quarterly
  • Annual Mink Report – Eliminate
  • Fruit and Vegetable in-season forecast and estimates– Reduce from monthly and quarterly to annual report
  • Nursery Report – Eliminate
  • Rice Stocks June and September reports - Eliminate but continue January, March and August reports
Recognizing the importance of NASS’s data products and services to U.S. agriculture, NASS will make available similar data either less frequently or within the every 5-year Census of Agriculture. The next census will be conducted beginning January 2013 to reflect activities in the 2012 calendar year. [More]
The irony here is these may be the more accurate of all the reports the agency does. But it also presages what could happen to even major commodities.

The most interesting aspect of this announcement is if it will come true.

Many of the reports being cut today, including those on mink, catfish, trout, flowers and honey, were eliminated during an earlier round of budget tightening in 1982. A year later, most of the reports were restored by Congress because of appeals from farm groups.
William E. Kibler, the administrator of the statistics service at the time, said the experience showed how hard it was to eliminate a government program, no matter how small the constituency.
“The commodity organizations out there are pretty strong,” he said. “These congressmen up on the Hill say, ‘$50,000 is not much, let’s give it to them.’ ”[More]
Coupling this with the apparent ineffectiveness of the AFBF influence during the "secret" farm bill debate, and one begins to wonder if the vaunted ag lobby isn't losing steam. At the least, it would appear commodity organizations like the NCGA have taken over the helm.

Tuesday, November 08, 2011

Button down the hatches...  

Alaska is about to be hit by a super-storm.
A ferocious, dangerous storm in the north Pacific is on a collision course with the west coast of Alaska. Referred to as the “Bering Sea Superstorm” by the National Weather Service Office in Fairbanks (NWS), damaging winds, severe beach erosion and major coastal flooding are expected. In some locations, heavy snow and blizzard conditions are also forecast.
“This will be one of the most severe Bering Sea storms on record,” the NWS wrote today.
The storm is predicted to deepen at an incredible rate, with its central pressure crashing from 973 mb this morning to 945-950 mb tonight.
“This storm has the potential to produce widespread damage,” the NWS in Fairbanks said.
Sustained winds of 80 mph (with gusts to 90 mph in some locations) may impact an area the size of Colorado with offshore waves to more than 40 feet according to the NWS Facebook page. A storm surge of 8 to 10 feet is predicted along the coast. The combination of wind, waves, and high sea levels will create many hazards as described by the NWS in a Special Weather Statement:
Double Yikes!

I suspect this is another example of storm intensification due to global warming. I cannot prove this, I admit. But I'm not alone in thinking storms could become more powerful for this reason

Kerry Emanuel, the lead author of the new study, wrote a paper in 2005 reporting an apparent link between a warming climate and an increase in hurricane intensity. That paper attracted worldwide attention because it was published in Nature just three weeks before Hurricane Katrina slammed into New Orleans.
Emanuel, a professor of atmospheric science in MIT's Department of Earth, Atmospheric and Planetary Sciences, says the new research provides an independent validation of the earlier results, using a completely different approach. The paper was co-authored by postdoctoral fellow Ragoth Sundararajan and graduate student John Williams and recently appeared in the Bulletin of the American Meteorological Society.
While the earlier study was based entirely on historical records of past hurricanes, showing nearly a doubling in the intensity of Atlantic storms over the last 30 years, the new work is purely theoretical. It made use of a new technique to add finer-scale detail to computer simulations called Global Circulation Models, which are the basis for most projections of future climate change.
"It strongly confirms, independently, the results in the Nature paper," Emanuel said. "This is a completely independent analysis and comes up with very consistent results."
Worldwide, both methods show an increase in the intensity and duration of tropical cyclones, the generic name for what are known as hurricanes in the North Atlantic. But the new work shows no clear change in the overall numbers of such storms when run on future climates predicted using global climate models. [More]
The combination of more energy from hotter air and more water vapor leads me to prepare for a wider range of weather possibilities. Luckily, I'm not quite as close to an ocean or Arctic air as those guys hunkering down in AK.

You'll never guess...  

Who said this:

“The state has no business getting involved in a matter between two individuals”

Nope - not Ron Paul.
College doesn't pay...  

For some - it just costs.  College is no longer the guarantee of a good or even adequate job. Especially considering the enormous increase in the cost.
Yes, the college grad will spend years paying off her loans. But eventually her earnings net of loan payments will pull ahead of the high school graduate's. So, case closed. It may hurt to write the checks, or borrow, but college pays.
Well, maybe not.
According to the College Board, it takes 14 long years before the four-year college grad's income, net of loan payments, starts to beat what the high school grad earns. During all those 14 years, college doesn't pay. High school pays. [More]
Recently there has been a vigorous debate about the how much choosing the wrong degree is contributing to this problem. Ryan Avent has the best answer to this criticism, I think.
Personally, I think this kind of blog post—Mr Cowen's—goes a long way toward explaining the current job market malaise for the young. It is remarkable to me how readily old, successful professionals dismiss the labour-market difficulties of young adults as the product of their poorly-chosen majors and general lack of ambition, and on what flimsy evidence they're prepared to base these views. There are now 3.3m unemployed workers between the ages of 25 and 34. That's more than twice the level in 2007. There are over 2m unemployed college graduates of all ages; nearly three times the level of 2007. There are many millions more that are underemployed—unwillingly working less than full-time or unwillingly working in a job outside their field which pays less than jobs in their field. As far as I know, the distribution of college majors didn't swing dramatically from quantitative fields to art history over the past half decade.
Meanwhile, the Wall Street Journal provides us with a handy interactive graphic examining unemployment rates by major according to the 2010 Census. Coming in toward the top of the list and ahead of "art history and criticism" are the sorts of degrees you'd expect, like those falling into "miscellaneous fine arts", but also "computer administration management and security", "engineering and industrial management", "international business", "electrical and mechanic repairs and technologies", "materials engineering and materials science", "genetics", "neuroscience", "biochemical sciences", and "computer engineering". I bet those graduates are all trying to break into puppetry!
I am sure that many young graduates feel entitled to better work than they've managed to find, and some of them probably chose poorly when it came time to matriculate. But I see little evidence that high unemployment is due to the shiftlessness of youths and far more evidence that high youth unemployment is due to systematic weakness in labour markets associated with a shortfall in aggregate demand. [More worth reading]
While I agree there seems to be no evidence students are flocking to dubious majors more so than before, it seems obvious the demands of a thin job market accentuates discriminates against them more. Now add in the the decline in public employment (teachers, administrators, government workers, etc.) which was often the employer of last resort for such degrees and you have the "Dustin" phenomenon.

Trying to laugh at this problem is probably healthy, but there is growing concern among economists - not to mention parents - that the economy is trending away from a solution to this problem.

And the idea of forcing everyone to become engineers or doctors isn't working either. For one thing, there is a huge attrition rate is those fields.

Politicians and educators have been wringing their hands for years over test scores showing American students falling behind their counterparts in Slovenia and Singapore. How will the United States stack up against global rivals in innovation? The president and industry groups have called on colleges to graduate 10,000 more engineers a year and 100,000 new teachers with majors in STEM — science, technology, engineering and math. All the Sputnik-like urgency has put classrooms from kindergarten through 12th grade — the pipeline, as they call it — under a microscope. And there are encouraging signs, with surveys showing the number of college freshmen interested in majoring in a STEM field on the rise.
But, it turns out, middle and high school students are having most of the fun, building their erector sets and dropping eggs into water to test the first law of motion. The excitement quickly fades as students brush up against the reality of what David E. Goldberg, an emeritus engineering professor, calls “the math-science death march.” Freshmen in college wade through a blizzard of calculus, physics and chemistry in lecture halls with hundreds of other students. And then many wash out.
Studies have found that roughly 40 percent of students planning engineering and science majors end up switching to other subjects or failing to get any degree. That increases to as much as 60 percent when pre-medical students, who typically have the strongest SAT scores and high school science preparation, are included, according to new data from the University of California at Los Angeles. That is twice the combined attrition rate of all other majors.
For educators, the big question is how to keep the momentum being built in the lower grades from dissipating once the students get to college. [More]
I also wonder that an oversupply of engineers, etc. might not soon remove these last "safe" degrees, reducing job searches to more a matter of luck and connections than merit.

What I do know is this. I don't recall clearly my sons' graduation ceremonies, but I have a clear recollection of the days they accepted job offers.

At any rate, employing all who want to work is our largest economic problem, IMHO. If others disagree, it may be because their kids are too young or non-existent.

Monday, November 07, 2011

Back in the saddle again...  

If I can remember how to do this, I'm going to ease back into posting.

For Gary who asked for an updated state-country GDP map:

[Here for the interactive source]