Monday, December 03, 2007

Whattaya done for me lately...

A reader commented on a previous post regarding raising the RFS mandate:
Curious of your thoughts as I share the same concern. I made a comment a year ago to a group of farmers: some strictly grain, some strictly livestock, and some livestock/grain, and I was saying basically dance with the one that brought you (livestock). However, the overwhelming response to my statement was a matter of the money looks great and we will take any market.

My question then was how can you turn away from livestock, especially since this meeting had a number of livestock farmers? I had to remind some that although corn may have been $2.00 in recent years, what would it have been without the livestock sector.

Maybe this is some frustration. I want us to find alternative fuels, I want a sustained environment, but I also want to be able to see livestock producers stay in the black while grain farmers prosper as well.

What is your thought to the future of this arguement? How will it trend in the future? And how is it being played out with other producers you have had the pleasure to speak with?
I add it here because I have been pondering the implications of these growing divides in agriculture. I too have had little feedback from grain producers which evince any concern for their former #1 customers - the livestock sector.

I think there are several influences at work. First, the animal sector (with the possible exception of cow-calf) has already undergone the intense concentration now just occurring in industrial grain production. Consequently, to many of us on grain farms, livestock producers don't look like peers. The face of the animal industry is company spokesperson for Tyson or Smithfield.

As the livestock sector concentrated it also virtually disappeared from many areas - like my part of IL. It's pretty easy to care less about those you never actually meet.

I say this because it is my personal linkage to Ken Maschoff that forms a different and more sympathetic response. When I think of large swine producers I at least have a personality to fill in the image. Likewise, meeting some actual (albeit very large scale) dairy producers last month at the Elite Producers Conference put human faces on another industry.

In short, grain producers are indifferent to the livestock sector because we have few ties to personalize the economics. And the sheer size of the consolidated animal operations ignites prejudice as well - "Big and ugly is big and ugly, " as one corn grower told me.

Secondly, if there are personal ties to grain customers, it will be to 1) ethanol plants in which they have some stake (financial, employment, community, etc.) 2) feedlots and other grain users who forge close local supply chains, and 3) grain merchandisers who have wisely realized sourcing grain in the future may not be as simple as fiddling with the basis.

Cargill has been way in front in forging myriad ties to grain suppliers like me. I think their marketing, health insurance, storage, college funds, etc. options deepen the linkage vertically along the supply chain. And I think those efforts will pay off big-time at some point of stress.

It would also appear that Farm Bureau has been singularly unsuccessful in facilitating horizontal ties across agriculture. Perhaps this task is impossible, to be fair. But FB is the only organization that even touches all the players. It is also possible that the hollow nature of FB membership (to have FB insurance you must be a member) unsurprisingly fails to engender any true linkages, since the only thing members have actually committed to is an insurance policy.

Producers continue to specialize and as they do they become more of a link in a manufacturing chain (ethanol) than a member of a profession (farming). They will tend to align their social and informational lives this way, and any sense of a farming "community" will change to a much narrower sector. This need not be considered a bad thing, but it does suggest to me that once again our reliance on a picture of agriculture from the 1950's to solicit sympathetic subsidies not only is misleading to the public but self-deceptive. we are increasingly product-specific specialists - at least in the industrial sector of agriculture.

All grain users should be looking at Cargill and asking what can they do to deepen their relationships with those who provide them feed or feedstock. It may be long term contractual relationships that assume some of the production risk in exchange for reliable supply. It could be "frequent supplier" programs that reward perennial suppliers (well-designed programs have been shown to be incredibly successful). I've been pondering a great deal about what my supply chain bonds could look like in the next decade - I'll be writing more in Top Producer about it.

But one of the first steps could be to stop having our national meetings alone. Have cattlemen speak to corn growers in the blunt language of fellow professionals. Have ethanol coop board members show up at poultry contract grower meetings. One reason many of us are uneasy about the apparent growing risks of our link in the value chain is we have so few communications with our adjacent input/output cohorts.

The use of mandates to shape agriculture will likely produce surprising consequences. More than a few of them could be collateral damage to our oldest customers.

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