Sunday, January 27, 2008

The coming "tsunameat"...

I will be reading Steve Cornett even more closely now, since my brief discussions with livestock producers at various meetings. Steve captures well the larger picture for the livestock sector, and often shares some surprising insights that help crystallize vague intuitions of my own.

Consider his latest about agriculture and a small community:
None of them are farming, by the way. The fellow who owns that land moved in. So what those farm kids do now: real estate agent/builder; nursing home owner; old folks home administrator; city manager’s wife; retired army colonel; software designer in Dallas; veterinarian; retired ag teacher; minister.

That’s all I can think of right now, but the point is made. These folks are not, as my parent’s generation were, leaving because they were pushed by hard times. They left because A)We don’t need them farming because we got tractors bigger than our parent’s houses were; B) because they got good educations and don’t have to farm and; C) because in the modern world, daddy doesn’t have to send the smart kid to town and give the farm to the one that can’t make it outside. Now you send the runt to college to learn journalism and you keep the prudent one home to manage the family LLC. [More]
Industrial agriculture is shedding people because we don't need them, and no subsidy low-interest loan will overcome that fact. I will trying to outline what that could mean in an upcoming TP column.

But Steve goes on to address a growing concern I have for our livestock industry - an inability of consumers to do the math necessary to grasp how much meat we consume and how it is possible to produce it.

A few critics do, and while I am unsure of their power to effect consumption changes, I do think their voices will add to the problem about to explode in the form of meat prices.
A sea change in the consumption of a resource that Americans take for granted may be in store — something cheap, plentiful, widely enjoyed and a part of daily life. And it isn’t oil.

It’s meat.

The two commodities share a great deal: Like oil, meat is subsidized by the federal government. Like oil, meat is subject to accelerating demand as nations become wealthier, and this, in turn, sends prices higher. Finally — like oil — meat is something people are encouraged to consume less of, as the toll exacted by industrial production increases, and becomes increasingly visible. [More]
Briefly put, meat prices need to escalate drastically to overcome feed costs. To have this occur at the beginning of a downturn is ominous, but those who hang on may be able to gain some pricing power under the cover of rampant general inflation that strikes me as very likely. (Much more on this later this week).

Every outlook opinion for the hog industry I have seen lately read something like this: Alas, Babylon! And as the last of previously contracted cheaper corn and/or soymeal is consumed, the deeper into the red the meat industry slides.

Now throw in a looming regulatory problem to comply with pending food safety legislation. (More on this later as well). This looks like a perfect storm for meat producers and eaters.

And we will not emerge unchanged.


Bill Harshaw said...

John, problems with the links in a couple of your posts--to and to the Cornett blog.

Here's the error message for the latter (using Firebox):

CpConsole error '800a01a8'

Object required

/Console/Library/CPContent.asp, line 127

John Phipps said...


Thanks - I think I've got 'em fixed.