Wednesday, April 30, 2008

The real reason I'm self-employed...

Excerpts from unfortunate resumes:
  • My last employer insisted that all employees get to work by 8:45 every morning. I couldn't work under those conditions.
  • My goal is to be a meteorologist. But since I have no training in meteorology, I suppose I should try stock brokerage.
  • Completed 11 years of high school.
  • Being in trouble with the law, I moved quite frequently.
  • I want a boss of average height, not too tall, though not strangely small (though I guess I could get used to just about anything given time).
[Even more]

[via mentalfloss]
Making the pool deeper doesn't help people swim...

Our new blogging talent, Tanner Emkhe, sees right through the mess at the commodity exchanges. And he is not shy about explaining it to old cowboys like Steve Cornett.

And his answer is exactly the kind of free-market theory that prompted dismay at the Bear Stearns bailout and various mortgage crisis solutions being proposed. Interestingly, the over-regulated European markets are not seeing the damage we are. Could it be that government interference isn't per se bad?
It is instructive to compare the American financial mess with the economic situation in nations that resisted deregulation. Old Europe tends to get a scornful press in the United States. But Europe is not suffering a financial meltdown today - mainly because Europeans (with the exception of Britain and Switzerland) took only a few sips of the financial Kool-Aid so heavily promoted by US banks.

A few European banks did get into trouble last summer, because they bought some toxic subprime securities made in America. But the European Central Bank, in its first real test since the Euro made its public debut in 2002, has performed well and the crisis has largely passed. Here, the Fed keeps lurching from bailout to bailout. [More]
One odd thing in this debate, however, is the unique focus on agriculture that ignores the larger economic trend. Tanner's solution - "force" banks to lend more - is based on a kind of dollar-for-dollar armaments race. What it ignores are a few tiny obstacles. First, I don't want to be the bearer of bad news, but there seems to be a bit of a GLOBAL CREDIT CRUNCH rumored to be going on. Banks cannot lend because their balance sheets are so impaired. Try selling some municipal bonds, for example. Let me put it simply - there is no money to lend.

So even if throwing "big money" is the right thing to do, the only place to get that kind of cash is from the government. Oh wait, that besmirches the purity of the free market with government interference. So Tanner's suggestion is a bit ingenuous. No government regulation, just government money. Sounds familiar.

Second, even if we could throw money at it, if the numbers are so huge behemoths like Cargill are simply saying "no", maybe we should respect their judgment. I'll bet they have a few finance and economic eggheads shouting "Stop digging the hole deeper!"

Tanner's solutions look good on a term paper, just like letting housing prices deflate 40% strikes many purists as the tough love needed for economic virtue to be reestablished here in the US. But it turns out the enormity of of economic system and the recovery time from such a debacle could be decades. Theoretical economic systemic solutions are crisp, elegant, and utterly oblivious to their collateral damages. Those of us with a horse in this race see it otherwise.

The commodity markets are not sacrosanct institutions ordained by Providence. They are man-made constructs with arcane and less than perfect rules. If we can adjust the rules to compensate for for economic conditions we have never encountered and never imagined, why shouldn't we?

Talking tough is easy, but insisting on arbitrary regulations simply because "rules are rules" while the walls are collapsing is not an optimal solution. That's why the Fed is acting in imaginative new ways, and why I support equal innovation in a market that is clearly laboring to function. Letting the chips fall where they may works for routine economic problems, but crises of this magnitude need to be handled with more attention. Often the chips are bigger and fall in unexpected places.

Steve's position strikes me a guy who has seen and felt a few chips, and watched other friends do so as well. Tanner's answer is politico-economic scripture. There are more choices between them than they might suspect, I think.

Tuesday, April 29, 2008

Don't talk to me about toy tractors...

When you can collect pocket protectors.

Impress the ladies! Entertain your friends! Live the engineer life!

(Short sleeved white shirts sold separately.)

[via info nation]

Monday, April 28, 2008

Speaking in graphics...

I think we are hurtling toward a new balance between words and pictures because graphs, diagrams, and animation can express ideas that are much harder to describe in words in a fraction of the time.

The next generation could receive much more of their information this way.

[via info nation]
A special kind of math...

The corn growers' favorite hired data cruncher points out yet again what a good deal ethanol mandates are in states like Missouri:
The use of a 10 percent ethanol blend saved Missouri drivers 7.7 cents per gallon at the retail pump in 2007 for a total savings of $158.2 million, or $40 for each of Missouri’s 3.9 million licensed drivers. Reflecting current gasoline and ethanol price movements the savings are expected to average 9.8 cents per gallon or $72.80 per driver this year as 10 percent ethanol is used statewide in 2008.
Increased use of ethanol will continue to save money for Missouri drivers over the next decade
although the size of the savings will depend on pattern of gasoline and ethanol prices. Using price projections for motor gasoline and wholesale ethanol through 2017, we estimate that the use of E-10 will save Missouri drivers an average of 7.2 cents per gallon at retail over the next decade. This amounts to annual savings of $214 million or $54 per driver. The details of this projection are shown in Table 1. [More]
If you take the time to read the analysis, you'll note he includes in the 51-cent blender's subsidy in the ethanol price. So the taxpayer spends 51 cents to save the consumer 8 cents, according to my cyphering. Sorta like crop insurance. And with $4 gas, it looks like a whopping 2% off.

This is a federal income redistribution system, not a fuel strategy.

For another view, the AAA has numbers of its own.
The anger over high gasoline prices was the main impetus behind the 2005 and 2007 energy bills and their successively higher ethanol mandates. The public may have mistakenly assumed that ethanol is cheaper than gasoline, but reality is beginning to hit home. When everything is taken into account, including the lower fuel economy from ethanol-blended fuel, the mandate is adding to the cost of driving—which is precisely why ethanol had to be mandated in the first place. The AAA calculates that ethanol has recently cost 20 to 30 cents per gallon more than regular gasoline.[1] And that does not take into account the heavy taxpayer subsidies, including a 51-cent-per-gallon tax credit, without which ethanol would be even costlier. [More]
I'm not sure the "savings" numbers will guide public sentiment for very long. As oil prices and corn prices climb, the debatable economics of ethanol become harder to demonstrate, and the crowd of grumblers is growing. And some of the grumblers are other biofuel producers.

Just as farmers for years had linked food price to commodity price, consumers are choosing the obvious connection as well. A few more months of household budgets dominated by food and energy costs could throw a real wild card into the politics of biofuels.
Order your shrimp cocktail now...

For my generation, the very idea of Viet Nam can still be still touchy. I am not a Viet Nam veteran, but I am a Viet Nam-era veteran (under the North Atlantic). But some of the pain of the powerfully moving Viet Nam War Memorial subsides when I read stories like this.
Vietnam's agricultural miracle was achieved by a simple but powerful device: the invisible hand of Adam Smith's free market. Having snatched the land from the people in the disastrous collectivisation, the government gave it back to them (evenly shared among households) on longish leases, starting in the late 1980s. This was similar to China's agricultural reforms around the same time, which also greatly reduced poverty by giving small farmers exclusive rights to work their plots. However, in China the freehold of the land remains vested in local collectives, without a clear indication of who represents them. That allows unscrupulous local officials to sell land to developers from under the feet of farmers. In Vietnam the freehold remains with the central government, so such problems are rarer.

Creating large-scale and equitable land ownership—one of the biggest privatisations yet seen—was one of several steps that freed Vietnamese farmers to conquer the world, explains Vo Tri Thanh of the Central Institute for Economic Management in Hanoi. Another was the stabilisation of the economy in the mid-1980s, bringing inflation down from a hair-raising 1,000% or so. A third was the gradual liberalisation of farm prices. Also important, says Mr Thanh, was Vietnam's increasingly open trade policy. [More]
Farmers around the world are suddenly in the spotlight. And for an occupation of last resort, I am happy to see so many international colleagues suddenly experience a moment (hopefully longer) of prosperity. They also reinforce the importance diplomatically of free trade. But since we get shrimp from Viet Nam, I noted this passage with interest:
Until now the government and the international agencies advising it wanted farmers to move away from bulk commodities and diversify their crops faster. However, says Mr Chhibber, the World Bank's boss in Vietnam, the recent recovery in commodity food prices should prompt a rethink. Perhaps, with the world crying out for just the sort of staples Vietnam is good at growing, it should stick to them. In February President Gloria Macapagal Arroyo of the Philippines, which is struggling to feed its growing population, publicly asked Vietnam to guarantee its supplies of rice. The Vietnamese government is beginning to worry that diversification may have gone too far, with many rice growers in the Mekong Delta having switched to shrimp farming.
Just to be sure, I'm loading up on shrimp at Sam's this week. I'll keep them in the basement freezer beside my 82 bags of rice.
Maybe it's not a "spike"...

Many people of experience and knowledge have been totally wrong about oil prices. First of all, we are struggling with the China-India-Brazil-Russia appetite for raw materials. But oil has defied those who saw a sharp drop as US consumption headed south. They forgot it's not all about us anymore. F'rinstance, here's Michael Swanson, noted economist for Wells Fargo and frequent ag meeting speaker last October (2007):
Even if Chinese growth were to slow, it doesn’t appear that OPEC would allow prices to fall significantly below $60/barrel. Given the current lack of excess capacity in the global petroleum market, OPEC should be able to manage price control with relatively minor supply cuts, which will not cause the cartel undue stress. The only real threat to OPEC is a major economic recession reducing demand more than they are willing to cut supply. Since the old joke is that economists have successfully predicted 10 of the last 3 recessions, there is always someone predicting a recession at anytime. However, a recession does not appear like a good bet in the next year, which means that oil prices will stay in their current range of $55 to $75 a barrel for the next couple of years. [More]
Now compare and contrast with this sobering scenario:
Increasingly tight oil supplies will continue to push the price of oil
higher with the cost of crude hitting US$150 a barrel by 2010 and soaring
to US$225 a barrel by 2012, forecasts a new energy report from CIBC World

This will result in skyrocketing consumer gas prices in the U.S. with
the national average price easily topping $4.00 this summer, reaching $5.50
in the summer of 2010 and hitting close to $7.00 by 2012. [More]
And some analysts think that's optimistic. Regardless of who you put your money on, it would appear consumers are already reaching the tipping point for changes in energy consumption. Take the cherished SUV as one example.
As gas prices pass $3.50 a gallon nationally and the economy teeters on recession, independent used car dealers like Hoyos and massive chains like AutoNation Inc. are having trouble selling used SUVs as buyers prefer smaller, more fuel-efficient vehicles likes hybrids and crossovers (CUVs). Crossovers such as the Ford Edge, Honda CR-V, and Toyota RAV4 have more interior room and more rugged styling that the average car, but with a lighter chassis and generally better gas economy than an SUV.

Used SUV sales in March were down 14 percent nationally compared to last year, according to data compiled by CNW Marketing Research. That follows drops in used SUV sales of more than 8 percent for the first two months of the year, compared to the same months in 2007.

That trend has sent used SUV prices plummeting, giving owners a shock when they try to trade theirs in and find out how little they can get. [More]
If the SUV folds can monster pickups be far behind? While farmers everywhere would sooner part with their faithful dog, I'm seeing more careful choices and strategic compromises. We'll keep the monster 4WD pickup, but just use it for pulling NH3 tanks and serious stuff. We'll run around the farm in a four wheeler, or even a used mini-truck from Asia.

And when gas hits $7, we'll walk all the way to the shop from the house.

And what will happen to suburban sprawl?
Given the supply constraints, he says the U.S. will have to rethink suburban sprawl, bringing an end to strip malls, big-box stores, and other trappings of the automotive era. Kunstler, 59, predicts a return to towns and cities centered around a retail hub—not unlike his hometown of Saratoga Springs, N.Y. But the shift to this new paradigm, he says, will be painful. (Kunstler could be off the mark; he predicted technological Armageddon after Y2K.) BusinessWeek writer Mara Der Hovanesian spoke with Kunstler about suburbia, which he calls "the greatest misallocation of resources the world has ever known." [More]
Even if we tell ourselves (and anyone who will listen) we saw this coming, we are still woefully unprepared, I think. I know I am, but Aaron and I are rethinking our long-term strategy incorporating sky-high fuel, fertilizer, land, rent, and seed prices.

Right now, it doesn't look exciting.

Sunday, April 27, 2008

Nothing cute here at all...

I despise the treacly fwd:fwd:fwd-type e-mails sent by far too many retired persons who have my e-mail address. But I think I'm about to be sucked into that black hole.

Seriously, some of these letters to God are mildly amusing.

[via Presurfer]
Why folks move to the country...

A bad neighbor schedule:

6:30 a.m.: Let Tuffy out for barking session.

7:30 a.m.: Test car alarm.

7:55 a.m.: Bring in Tuffy.

8 a.m.: Clean entire backyard, front porch and driveway with leaf blower.

9 a.m.: One-hour aerobics dance workout.

10:30 a.m.: Rev car engine for one hour.

12 p.m.: Tree trimming! [More]

The article is by Steve Martin - one of my favorite comedians. I listened to his autobiography, "Born Standing Up" while commuting. It was illuminating and extremely well-written. The experience was like having him in the car with me telling his story.
Giving them wings...

Our local school district is barely functional, and the results of education have been dropping for decades as measured by college graduation rates, for example. But the idea of consolidating - and answer obvious to all for two generations now - has consistently been thwarted by school teachers who are employed there, parents who favor locality over education, and the familiar attachment local resideants have for the school they attended.

And so education declines, the school struggles financially, and things fall apart. We're not alone.
Even the most defiant schools superintendent will admit that rural districts face challenges. South Dakota allots about $4,500 for each student. Though small districts receive a bit more cash, districts that lose students lose money. Many districts, including Rutland, have to raise extra money locally to cover their costs.

The biggest difficulty, however, is finding teachers. Mr Fahrenwald is Rutland's superintendent, physics teacher and bus driver. There are fewer teachers to hire: the number of state students graduating with a teaching degree dropped by 30% between 2000 and 2007. It doesn't help that South Dakota's salaries for rural teachers are the second-lowest in America.

Consolidation, legislators hope, may begin to offset these trends. A merged school means recruiting one algebra teacher, not two. Don Kirkegaard, the head of a consolidated district in the north-eastern part of the state, says he now has more money for pension accounts, special education and capital expenses. Critics say that the savings are often lost because of greater bureaucracy.

But the debate over rural schools hides a sad irony. The better a small town educates its pupils, the more likely they are to seek jobs elsewhere. According to a study by Pennsylvania State University, returns to investment in human capital are much lower in rural areas than in urban ones. [More] [My emphasis]
It was the highlighted sentence that grabbed my attention. That is exactly what a few good teachers did for me and my sons. But in our case, I returned, and equally inexplicably, so has my son. But our classmates who made it through college did not, for the most part.

It could be that mediocre schools are the logical answer for small communities who can't afford to lose any more population.

Saturday, April 26, 2008

The world's most expensive grain bin...

May pay off in the long, long run, after all. [More about the Platinum Grain Bin here] My Cargill rep forwarded an article (it's in the Spring 08 issue of Grain and Feed Manager that is not posted on their website, so I'm reluctant post it in its entirety here) Written by Glen Ludwig for grain merchandisers, he looks at grain handling from a new angle - theirs. He makes several good points, but I have excerpted the ones that struck me.
  • The most highly valued service provided to producers by the country elevator is fast turn around of grain transportation vehicles at harvest, a service from which most elevators
    generate no direct revenue. There's a disconnect between value to the customer and revenue generated for the service provider. In many cases investment in grain receiving capability has been short changed by elevators in the last 5 years, as focus has been on increasing storage capacity. Until demand subsides the cost to build and operate grain storage and receiving capacity is likely to continue to escalate.
  • Elevators provide a large percentage of the grain storage in Illinois and to a lesser extent in the other states CAS serves. As production agriculture continues to consolidate and cash rented acres increase, grain producers are likely to be less interested in building on-farm grain storage. This is particularly true if a fast unload is being provided at the elevator. Elevators with strong profits and solid balance sheets may well have the
    opportunity to increase the percentage of the crop stored at the elevator. [My emphasis]
Come to think of it, large operators seem to spring up more readily near terminals or processors which can unload lots of grain in a hurry (just an impression - no hard data to back it up). While certainly not deliberate, this complementary advantage would be a strong contributor to shifting to cash rents which, as stated above then discourages on-farm storage. Which raises demand for fast fall unloading...

Voila - ladies and gentlemen, a positive feedback consolidation loop!

While I have groused about not having a range of ethanol plants and river terminals within 4 miles to choose from, maybe I should count myself lucky to be living in relative backwater without development pressure or easy grain disposal.

There are many factors contributing to grain farm consolidation and the rise of BTO's. As noted below in the comments, more than a few of us struggle to pinpoint exactly why this is so unsettling. I will try to explore the reasons in a later post, but like this example, I suddenly see (or imagine I do) more subtle influences leading grain farming down this path to a very few operations. Not unlike animal agriculture, I might add.

From the need to equalize bargaining power on the input side (it takes a UAW to bargain with a GM), high commodity prices, increased risk, apparent economies of scale, and technology fallout, the range of causal factors is wide and interrelated. It appears rental land will be increasingly controlled by ambitious, aggressive and result-oriented businesses. So far, I have seen no evidence outraged competitors have developed viable counter-strategies to slow the trend. As for government policy saving the day, farmers won't even support any meaningful limit on payments, so why should elected officials care about farm size?

Discovering exactly why the tide is flowing one way may take more time than some of us have, but the consequences have been laid out more sharply this year than ever before.

And I suspect 2009 will be even more shocking to too many middle-sized farmers.
Would this work for you?

Hard to believe, but sometimes it's not an engineering problem...
...The tenants of a large office building complained about the increasingly poor elevator service. A consulting firm specializing in elevator-related problems was employed to deal with the situation. It first established that average waiting time for elevators was too long. It then evaluated the possibilities of adding elevators, replacing existing elevators with faster ones, and introducing computer controls to improve utilization of elevators. For various reasons, none of these turned out to be satisfactory. The engineers declared the problem to be unsolvable.

When exposed to the problem, a young psychologist employed in the building's personnel department made a simple suggestion that dissolved the problem. Unlike the engineers who saw the service as too slow, he saw the problem as one deriving from the boredom of those waiting for an elevator. So he decided they should be given something to do. He suggested putting mirrors in the elevator lobbies to occupy those waiting by enabling them to look at themselves and others without appearing to do so. The mirrors were put up and complaints stopped. In fact, some of the previously complaining tenants congratulated management on improvement of the elevator service... [More]
I wonder what "ag" problems are really people problems? For instance, I still believe we are trying to build the wrong kind of safety net for too few people. We think it's about income, when it could be about controlling life's greatest worries.

[via growabrain]

Friday, April 25, 2008

At least he didn't use the word "uppity"...

In a gaffe that could become ethanol's "bitter" echo, the normally reasonable Sen. Charles Grassley - from the state with more at stake with hog exports than many - blamed the Chinese for choosing protein and thus raising the price of food.
"If part of our problem is that the Chinese are going to eat meat and you've got to have corn and soybeans to feed the Chinese their meat, then why isn't it just as legitimate for the Chinese to go back and eat rice as it is for us to change our policy on corn to ethanol?" Grassley asked in a conference call with reporters. [More]
One could point out one small incongruity with his comparison. Our government mandated ethanol consumption, Chinese consumers shelled out hard-earned yuan for better diets. Oddly, when you have eaten mostly rice all your life, you don't have to lobby Congress to decide if you'd like something a little more nutrient-dense in the rice bowl.

Stranger still is the slow campaign in Iowa to phase out their livestock industry all the while they lament it's passing and wring their hands over what's to be done.

With pork exports to China looking like this...


..tell me again why we can't find a way to share some calories with paying customers? The livestock industries have belatedly decided to stand up and at least offer some resistance, and they have some numbers on their side.
Last week, a study funded by American beef, pork and chicken producers estimated that the total cost to taxpayers of the corn ethanol mandates now exceeds $33 billion per year. That's equal to about $106 per American citizen. While the soaring cost of the ethanol are maddening, even more galling are the continuing claims by a group of ethanol apologists who insist that the ethanol industry is having no effect on food prices. Those spurious claims are being made at the same time that the World Bank is warning of a global food crisis and unrest is increasing in several countries due to soaring food prices. [More]
The comment doesn't read well taken from context, I know, but hey - welcome to 2008 political discourse, Senator. And the awkward attempt to conflate improved diets for some of the world's poorest with the politically inflated incomes of US corn farmers is lamentable, and hardly reflects the Senator I thought I knew.

As the level of the food-fuel debate descends and the positions harden, cooler heads should decide just who we think we are. Do we "feed the world" (his words) or take care of No. 1?

Like I have said before, we'd better come up with some corn this fall.

And at the rate our farm is going, somebody is going to have to pick up my slack.

Thursday, April 24, 2008

China and my future...

One of the preeminent (and prolific) economics bloggers, Tyler Cowan, has this interesting outlook on commodity prices.
When all those new Chinese engineers and scientists are at the peak of their creative powers, this relationship will reverse itself and commodities prices will plunge. But it's quicker to produce another toy than to bring about a new Green Revolution, so in the meantime commodity prices are very high. I give the current price trend another ten or fifteen years or so to run. Eventually high commodity prices will seem permanent and then the bottom will drop out.

We've never had a rapid and successful migration of hundreds of millions before, ever. [More]

It's becoming obvious to me I can't begin to know enough about China. But from what little I have grasped, the movement off the farm there is almost incomprehensible, especially to farmers here.

Thanks to a recommendation from...uh, someone...I'm reading China Shakes the World. I hope to make more sense of it soon and will share what I discover.

Wednesday, April 23, 2008

Everybody has to be somewhere...

If you haven't read Greg Vincent's masterful article about cash rents in Central Illinois in the latest Top Producer, you really need to. And also check some of the response he has been getting.

I knew this piece would open up a can hard feelings, but there are still many people who feel that those who currently farm should continue to farm. And to my way of thinking too few of them understand their actual relationship with landowners.

But the point that always confounds me is the "local business" argument. The theory (see comments above) is Big Time Operators blow in from "other places" (presumably the land of Mordor) and bring all their fertilizer, seed, etc. with them, hence starving local businesses.

OK, but where do those inputs come from? In many cases, a local dealer somewhere else. And this retailer is doing great, thanks to his BTO. As far as seed, I would imagine BTO's often are farmer-dealers to get the discounts available from this way-too-many-layered business - hardly a new strategy. Indeed, in my part of the country Moody Farms has opened their own fertilizer, chemical, etc. supply business for themselves and any farmer that actually adds to the choices of local producers.

One solution for local businesses then is to grow your own BTO, and hope one of them becomes a really BTO. But the main point is inputs are still being bought folks, and even BTO's are local somewhere. They likely go to church, complain about school teachers, and even dabble in local politics, just as often as mm, non-BTO's.

When we're looking for moral high ground to justify our fragile competitive position, at least we should aim for logical scenarios.
Coming soon to a location near you...


Great photo, powerful idea.

Tuesday, April 22, 2008

This is why...

I mumble on and on about broadband Internet access. Like leaves dropping from trees, individual financial, social, and personal transactions are migrating on-line. For the best reasons: cost, speed, accuracy, depth, and freedom.

Now add one more mundane exercise: the annual report.
Recognizing this, many companies have scaled back their annual reports in the past decade. They have forsaken the high-concept narratives for what's known as a 10-K wrap—taking the no-nonsense 10-K document filed with the SEC and wrapping it in a few pages of content, usually a letter from the CEO. Fifteen years ago the 10-K wrap was a sign of a corporate hair shirt. In the 1990s, when I interviewed Mel Karmazin, the publicity-shy and frugal CEO of Infinity Broadcasting (and now CEO of Sirius), he boasted that his annual report was nothing more than a 10-K with a cover sheet. Now that's standard practice. According to a survey by the National Investor Relations Institute, in 2006 54 percent of companies reported that their annual reports had morphed into 10-K wraps, up from 47 percent in 2004 and 16 percent in 2002. The percentage is certainly higher today. Among their number: Time Warner and my employer, the Washington Post Co.

But today, even the regulators seem to agree that the wrap is a profligate use of paper. In August 2006 the NYSE dropped its rule that companies must send hard-copy annual reports to shareholders (though they must still provide a copy of audited financial statements on request). The SEC still requires companies to provide an annual report to shareholders. But this requirement can be fulfilled with a 10-K or a proxy. Last year the SEC adopted a new rule that said companies, instead of mailing 10-Ks and proxies, can make them available on their Web site so long as they send notice of the availability of these documents to shareholders. They must still provide hard copies upon request. (The rule became effective for larger companies as of Jan. 1, 2008, and will apply to all companies starting next January.) [More]
I have met with irritated pushback from USFR viewers who want me to send them information by mail, or resent my constant references to on-line information. Those who don't have or like Internet communication seem to me to live with the conviction that it's just a few techno-nuts like me that are the problem. This is my great fear.

Those who cannot take the increasingly brief time to learn simple Internet skills will be dispossessed as surely as those who refused to get phones in my father's generation. However correct may be their judgments about the elegance, permanence, and tastefulness of e-mail, for example, it does not alter the fact that the Post Office is a Dead-Letter-Walking.

We need to work to make the right answer the easy answer, and to stop apologizing for progress. I absolutely defend the rights of those who choose not to adapt to new technology, but I also refuse to accommodate their inflexibility.
Life imitates art...

This headline of urban farming is "ripped from the script" of an old (and beloved) British sitcom.

Now compare and contrast with "Good Neighbors".
Everybody's favorite argument...

Whether it's food vs. fuel, good food vs. bad food, science food vs. nature food - more and more our minds are operating like a sophomore boy a hour before supper. We can't NOT think about food, it seems.

For example, food is now - by popular demand (literally!) - in crisis.
Rising food prices are creating the biggest challenge the World Food Programme has faced in its 45- year history, ``a silent tsunami threatening to plunge more than 100 million people on every continent into hunger,'' the United Nations agency said.

About 100 million people have been pushed deeper into poverty by the higher cost of food, the Rome-based agency said in a statement on its Web site today. The organization plans to release new estimates next week of how many people have urgent hunger needs, according to the statement. [More]
The economics of food has undergone such a violent transient consumer minds are reeling with the possible consequences. And if shortages of staples like rice and wheat cause wide-spread hunger, I'm not sure we know how governments will respond.

It's all very well for corn growers to point out how little corn prices affect food prices here in the US, but the story is quite different when your diet is mostly grain - like rice.
“We are the canary in the mine,” says Josette Sheeran, the head of the UN's World Food Programme, the largest distributor of food aid. Usually, a food crisis is clear and localised. The harvest fails, often because of war or strife, and the burden in the affected region falls heavily on the poorest. This crisis is different. It is occurring in many countries simultaneously, the first time that has happened since the early 1970s. And it is affecting people not usually hit by famines. “For the middle classes,” says Ms Sheeran, “it means cutting out medical care. For those on $2 a day, it means cutting out meat and taking the children out of school. For those on $1 a day, it means cutting out meat and vegetables and eating only cereals. And for those on 50 cents a day, it means total disaster.” The poorest are selling their animals, tools, the tin roof over their heads—making recovery, when it comes, much harder.

Because the problem is not yet reflected in national statistics, its scale is hard to judge. The effect on the poor will depend on whether they are net buyers of food or net sellers (see article); for some net buyers, the price rises may be enough to turn them into sellers. But by almost any measure, the human suffering is likely to be vast. In El Salvador the poor are eating only half as much food as they were a year ago. Afghans are now spending half their income on food, up from a tenth in 2006.

On a conservative estimate, food-price rises may reduce the spending power of the urban poor and country people who buy their own food by 20% (in some regions, prices are rising by far more). Just over 1 billion people live on $1 a day, the benchmark of absolute poverty; 1.5 billion live on $1 to $2 a day. Bob Zoellick, the president of the World Bank, reckons that food inflation could push at least 100m people into poverty, wiping out all the gains the poorest billion have made during almost a decade of economic growth. [More]
Perversely, here in the US and other wealthy nations, the abundance of calories has created the oddest health threat mankind has seen. After millions of years learning to survive on very little food, we have at hand copious helpings of energy-dense comestibles that we can't handle. Indeed, some of our most treasured national dishes are sadly inappropriate for modern living.
Hash-browns are dismissed as “ghastly manifestations of American imperialism” (damned uppity colonials), and Sir Winston Churchill himself might as well be playing Elgar in his Union Jack underpants as we read that: “A good English breakfast never lets you down.” No, it kills you. That's what an English breakfast does. The current £7.25 “Olympic” breakfast at Little Chef comprises: “two rashers of crisp backbacon, British outdoor-reared pork sausage, two griddled eggs, whole-cup mushrooms, crispy sauté potatoes, fresh griddled tomato, Heinz baked beans and toasted or fried extra-thick bloomer bread”.

Olympic? What the hell event do they have in mind, the 3,000m casualty dash? The Triple Barf (also called the hop, skip and vomit)? The Synchronised Massive Coronary? Ye Gods, if that's what our young athletes are going to be packing down daily in advance of 2012 then we'll win even fewer gold medals than the, er, none, which I believe is currently predicted for this whey-faced generation of feckless British fatties.

The fried English breakfast was conceived during the Industrial Revolution (probably) as a form of fast fuel for a working class that actually worked. They ate 3,000 calories in the morning, then they burnt 3,000 calories by lunchtime. Or died when the mine collapsed. But you don't burn 3,000 calories driving a forklift truck, or answering the phone at Argos, or fiddling your disability benefit. The work dies, but the breakfast lives on. Result: obesity crisis. (Knowing this, and fearing the backlash, Little Chef recently moved to slim down “Fat Charlie”, the obese chef who features in its logo, but nothing came of it - presumably because the porky little scrote just wouldn't stop eating.) [More]
But wait - there are even more arguments you can have over dinner. Like GM-food. Sadly, as I suspected, proponents of GM are using the food crisis to ram this science down reluctant consumers. While the science may be correct, even my long-standing support dwindles in the face of this kind of charmless taunting.
Do you hear that? It’s the sound of the organic food fad squealing for mercy!

As the saying goes, the marketplace is always right. With food prices getting unbelievably high, it looks like the world is starting to come around to the idea that not everyone can afford to be such picky eaters. For so very long, GMOs have endured the stigma of being dangerous or unhealthy (ever heard of the term Frakenfoods? Not exactly an endearing name for foods derived from GMOs). But according to this morning’s New York Times piece called “In Lean Times, BioTech Grains are Less Taboo,” high food prices and historically tight grain stocks are making consumers rethink those opinions.

The people who have been able to afford to shop at places like Whole Foods (a.k.a. Whole Paycheck) and label GMOs as dangerous to the human population are now finding that their knees are getting a little shaky under the weight of food prices. While they are far from reaching the point of being worried about where their next meal will come from, the luxury of being able purchase food on a “feel-good” basis is starting to fade. [More]
(All that's missing is the sing-song, "Ha-ha-ha-ha-Ha-ha".)

Yeah - that'll make it easier for folks to choose rationally.

The production cycle time is pretty long for livestock, so the effect of high grain prices on consumer meat choice is still a guess, but my thinking is coupled with relentless news of food shortages and world hunger, the response might be different than we have seen before. The inefficiencies of eating meat for calories vs. grain may alter many diets by choice (and saving money will ease the switch).
What's responsible for this crisis? Many things. Mistaken global trade policies and national mismanagement. The petering out of the Green Revolution. The diversion of crops to fuel. Famine profiteering. None of these are easily addressed by you or me -- but one thing that is in our power is our own diet. It takes an estimated five pounds of grain to produce a single pound of beef.

Even before this crisis, food experts said the world could not feed itself in coming decades if growing populations in developing countries insisted on a meat-rich western diet. That time may already have arrived -- and largely without climate-change induced agricultural disruption. Add droughts and years of failing harvests, and things get seriously scary.

So maybe it's time for taste to take a back seat to conscience. I know that sacrificing meat for veggies won't solve the problem on its own, but it's certainly just as meaningful as using compact fluorescent bulbs or cloth shopping bags, and I do that without hesitation. And it might take a while to reduce my meat consumption to zero, but at the very least I can start cutting back. Starting tonight.

What do you think, Wired Science readers? Will you go vegetarian, too? [More]
The upshot of the food turmoil is the odds of a quiet dinner without controversy, confrontation or attacks of conscience has now diminished for all of us who eat well and regularly.
A career in one line...

I hadn't realized how often Bones pronounced the verdict.

BTW, I read his biography - a birthday present - and to my surprise enjoyed it immensely.

[via Neatorama]

Monday, April 21, 2008

I decided to post this...

Or did I? The idea of free will has been badly undermined by brain science. We could have been deceiving ourselves all along.
You often make up your mind and then wait to find out what you decided.

Already several seconds before we consciously make a decision its outcome can be predicted from unconscious activity in the brain. This is shown in a study by scientists from the Max Planck Institute for Human Cognitive and Brain Sciences in Leipzig, in collaboration with the Charité University Hospital and the Bernstein Center for Computational Neuroscience in Berlin. The researchers from the group of Professor John-Dylan Haynes used a brain scanner to investigate what happens in the human brain just before a decision is made. "Many processes in the brain occur automatically and without involvement of our consciousness. This prevents our mind from being overloaded by simple routine tasks. But when it comes to decisions we tend to assume they are made by our conscious mind. This is questioned by our current findings." (Nature Neuroscience, April 13th 2008)

Do we just have the illusion of free will? Probably. Does our mind fool the conscious part of the brain into believing it is in charge when it is not? [More]
The evidence from the study is more than a little unsettling. The predictive lead time could be as much as 7 seconds.
In the study, participants could freely decide if they wanted to press a button with their left or right hand. They were free to make this decision whenever they wanted, but had to remember at which time they felt they had made up their mind. The aim of the experiment was to find out what happens in the brain in the period just before the person felt the decision was made. The researchers found that it was possible to predict from brain signals which option participants would take already seven seconds before they consciously made their decision. Normally researchers look at what happens when the decision is made, but not atwhat happens several seconds before. The fact that decisions can be predicted so long before they are made is a astonishing finding. [More]
We have known for some time the rational brain's first job is to justify what our emotional (old) brain decides on a whim (or in a "blink"). But revelations like this force us to revalue the Spock perspective as equally flawed as Bones'. It could be that we need faster, smarter computers to simply make up for our much more slowly evolving brains.

I find I am more willing to honor instinctive decisions to very complicated problems (complex negotiations, whether to trust someone, which kind of scone to buy at Panera, etc.) than previously. While there are any number of other reasons for this (early-onset senility, indifference, laziness, desperate needs for approval, etc.) I nonetheless have found my life to be more at ease, and my reaction times greatly decreased.

Plus I have noted most of all so many of the decisions I thought were life changers weren't.

Still ya gotta wonder, "Where do my choices come from?"

Sunday, April 20, 2008

Yes - I think there is one loose...

The Screw Asylum. I suppose it beats collecting Star Wars dolls.

[via Presurfer]
To kill a gram...

Something funny is going on with the kilogram. I blame the French. (Of course, don't Americans always blame the French?) Anyhoo, the Frogs are in charge of the Sacred Kilogram of Destiny - or whatever. And they screwed it up, of course.
About every 50 years, the national prototypes are returned to the headquarters of the International Bureau of Weights and Measures in Sevres, France, to be compared with the International Prototype. During the first major comparison about 1950, scientists noticed discrepancies between the average masses of Le Grand K and its copies. They were concerned but could not discern a trend.

Science was already grappling with inconsistencies in other units and was trying to replace the pieces of metal and other artifacts that delineated the old world. The meter, for example, was changed in 1960 from two scratches on a platinum-iridium bar to a certain number of wavelengths of light emitted from a particular kind of krypton. In 1983, it was changed again to the distance traveled by light in a specific fraction of a second.

At the last major kilogram comparison done in and around 1990, some copies had gained as much as 132 micrograms. A few had lost up to 665 micrograms. The United States' No. 20 was 18 micrograms heavier.

There was no way to tell which was changing: Le Grand K, its copies or both.

Perhaps the platinum in the cylinders was sopping up mercury from the atmosphere. Maybe dissolved gas was escaping from the cylinders. One idea was that cleaning the cylinders with distilled water and ether had altered their weights.

"Nobody has a really good idea why," said Davis of the International Bureau of Weights and Measures. "It's all speculation." [
Personally, I think it is second-hand cholesterol. My theory is I gain weight just by passing a Long John Silver's, and this could solve the mystery of the fluctuating kilogram.

Of course, all this could have been avoided by using God-fearing ounces and lbs.

[via 3 quarks]
Buy some crop insurance, and good things might happen (wink, wink)...

Another meta-problem with our farm policy is if subsidies guarantee profits, everybody wants a slice. Or worse yet - we could get into a SUBSIDY FIGHT, as farm bill interests scrounge for funding for their constituents.

I was just talking to my insurance agent, after buying hail insurance for the second time in my life. (Last year a couple of storms made my heart beat fast - although there was no damage - and I think it's time for my heart to get its aerobic exercise some other way, now).

Crop insurance has become a VERY lucrative business. And everybody and his cousin is showing up to sell.
GAO investigators found that crop insurance companies had rates of return averaging 30 percent in 2005 and 24 percent in 2006, compared with a "benchmark" return of 6.4 percent for sellers of property and casualty insurance. The USDA has also paid the companies $6.6 billion to cover administrative costs in the past decade. Much of that has been passed on to local crop insurance agents -- some of them farmers -- who constitute an influential lobby that has fought changes in the program. The GAO noted that the USDA expects the allowance to increase by as much as 25 percent by 2008 because it is tied to crop prices, now rising sharply, "without any corresponding increase in expenses for selling and servicing the policies." "It's a hell of a deal," said Rep. Elijah E. Cummings (D-Md.). Rep. John J. "Jimmy" Duncan Jr. (R-Tenn.), a committee member, said, "Anybody who's fiscally conservative would be horrified by what we've heard." [More]
And it's not just the nasty ol' left-wing MSM pointing out the horrendous waste, it's farm economists. The numbers are truly mind-boggling - but then so are most farm subsidy schemes.
The crop insurance industry enjoyed another banner year in 2007, collecting $6.5 billion in premiums yet paying out only $3.2 billion in losses. I estimate that the industry will collect a record $2.8 billion from taxpayers. In contrast, the net amount that farmers received from the program in 2007 was only $750 million. Interestingly, since the beginning of this decade, the $11.3 billion in net payments to farmers (indemnities received minus farmer-paid premiums) is about equal to the amount that taxpayers have paid the industry ($11.1 billion). Overall, taxpayers have spent more than $22 billion since 2000 delivering about $11 billion in net payments to farmers, making crop insurance one of the least-efficient means by which taxpayers support the farm sector. [More, via Farmgate]
That's stupefyingly wasteful spending. But it may be about to get weirder. Federal regulations negate the power of the marketplace to bring premiums in line with risk and profit. Because premiums to farmers are fixed by the government, there is no room for competitors to offer better deals and gain market share.

Or is there?

According to full-line insurance agents, one workaround centers on seemingly unrelated services/products/benefits being "unofficially" bundled with the policy. If your lender is also your insurance agent, how "arms-length" is the underwriting policy determining your interest rate, for example?

Now it looks like grain merchandisers will also be looking for a dollop of this insurance gravy. I can envision marketing programs with benefits offered "coincidentally" with crop insurance purchase, for example. After all, one of the big selling points for crop insurance was the confidence to forward sell early to lock up profits.

But forward selling has become problematic, so if grain originators want to limit margin exposure, wouldn't a more involved relationship with fewer, selected growers provide enough bundled obscurity to make buying crop insurance from them look like a really good deal compared to a mere insurance company competitors? Just as lenders have subtle enticements, grain merchandisers could likely find hard-to-prove incentives to help capture a share of the crop insurance windfall.

And ditto with fertilizer companies.

And seed dealers. (If Monsanto worked to get the biotech discount, why not pick up the profit, too?)

So, my guess is this boondoggle product will soon become the "French fries" of farm inputs: "You want crop insurance with that?"
Can you spot the tiny flaw?...

Here's a little puzzle for you. Consider this Disney-esque depiction of a "vertical farm".

Gee, willikers - is this a neato idea! Like most agritopian "solutions" it recycles, self-energizes, and generally produces more from far less. You don't often see stuff like this outside the pages of Popular Science.

Imagine a cluster of 30-story towers on Governors Island or in Hudson Yards producing fruit, vegetables, and grains while also generating clean energy and purifying wastewater. Roughly 150 such buildings, Despommier estimates, could feed the entire city of New York for a year. Using current green building systems, a vertical farm could be self-sustaining and even produce a net output of clean water and energy. [More]
I can't believe this guy even got to page two on his spreadsheet without noticing his energy problem. How much sunlight falls on one tower? Compare with say 80 acres of corn, which has the one of the highest energy capture capabilities of any crop. The crops 3 feet away from the window on say, level 4 won't get enough energy to srpout a mushroom, let alone vegetables.

We are in the solar energy business in agriculture, and it takes millions of acres and carefully bred plants to harvest as much of it as we do. The world needs millions of acres because the sunlight intensity isn't that high - if it was we'd all be medium rare by now.

Still, this perpetual farming machine almost makes you forget that.

Saturday, April 19, 2008

It's a Laffer, all right...

Supply-side economics is not just alive and well in political thinking, it is being embraced as the only life-preserver floating in our sea of federal red ink. The trouble is, it's an anvil in disguise.

The premise that tax cuts yield more revenue was an instant hit for the rich, as you might expect. And by simply lining some charts up side by side (see comment below), you could almost see the proof. Except it turned out to be a correlation that even supply-siders could not convert into cause and effect.
They’re aided in that extrapolation by the simple fact that the American economy grows over time. As a result, even if you cut taxes the federal government will eventually take in more tax revenue than it once did. And that allows supply-siders to fashion a spurious syllogism: taxes were cut in 2001, government revenues are higher in 2007 than they were in 2001, therefore the tax cuts increased revenue. The comparison that really matters in analyzing the impact of the tax cuts, of course, is not between government revenue in 2001 and government revenue in 2007. It’s the comparison between actual tax revenue in 2007 and what tax revenue would have been in 2007 had there been no tax cuts in 2001. And studies that make these types of comparisons—including one by Bush’s own Treasury Department that looked at the tax cuts’ impact on economic growth—find that government revenues would be greater had taxes not been cut. But that hasn’t stopped President Bush from claiming victory. [More]
One of Bush's leading economic advisers, and noted economist Greg Mankiw rejects the idea the Reagan tax cuts "paid for themselves". And he is far from alone.
I used the phrase "charlatans and cranks" in the first edition of my principles textbook to describe some of the economic advisers to Ronald Reagan, who told him that broad-based income tax cuts would have such large supply-side effects that the tax cuts would raise tax revenue. I did not find such a claim credible, based on the available evidence. I never have, and I still don't. [More]
My earlier post referring to this report from the Congessional Budget Office carries more weight in my thinking because it is an effort to model mathematically - not philosophically - how such results could be achieved. Perhaps it could be argued that the CBO aimed for a particular answer, but certainly no more so than than the Heritage Foundation on this issue.

One reason is I have never found the Heritage Foundation to embrace any taxation or reject any tax cut. The second reason is conservative think tanks such as Heritage rightly point out the REAL problem is uncontrolled government spending, and vigorously rail against it, but then seemingly shrug their shoulders when no fiscal restraint is forthcoming and get back to the main business of lowering taxes, especially on the wealthy.

Since there is NO reason to expect any meaningful, even perhaps measurable change in government spending (I mean, the Republicans are worse than the Democrats!), ranting about taxation strikes me as single-minded self-interest. Supply-side think tanks need to get real about how they are going to raise revenues, since no effort to control spending has a prayer.

In short, I hate "tax and spend", but I really hate "borrow and spend". Take a look at our deficit growth, fer cryin' out loud! Promising to cut taxes is a political winner, I grant you, but who's gonna pay your farm subsidy? The preponderance of economic thought seems to me to side with Mankiw, especially with our economy mired in slow or even negative growth. We can watch tax revenues and prove this point or not pretty quickly.

Supply-siders happened to be in the right place at the right time with a faulty idea that got carried by good fortune. Expecting a second lottery ticket to win is not my idea of a prudent economic plan. Like energy, the obvious budget solution virtually all want to ignore is using less.

We are not over-taxed, we are under-restrained. Until even growth in public spending is brought under control, don't talk to me about tax cuts. Even my own.
Inner beauty...

Like pigs, and horses.

Hmm, looks like a perfect anniversary gift.

[via RGS]
This would explain my recent chicken salad disappointment...

Commodity price increases - whatever the cause - are having effects all over the food industry.
Kraft, one of America's biggest food firms, is struggling with the soaring prices of its ingredients. The cost of these jumped by 9% or $1.3 billion last year, taking a bite out of profits. The Illinois-based company says it is working hard to defray the extra expense by saving money elsewhere. But it believes its best defence against rising costs is to go on the attack, with products and marketing that are better suited to leaner times. For example, the company has changed the recipe and packaging of Miracle Whip, a salad dressing and sandwich spread that is advertised as having the taste of mayonnaise with half the fat. It now comes in a plastic jar instead of a glass one, and has a wider opening that allows buyers to scrape out the very last glob. It now contains less soya oil, which is both fattening and expensive, and more water, which is slimming and cheap. [More]
Yum! More pronounced are the shock waves rippling through the restaurant sector. McDonald's is doing well, "dollar" menus are now de rigeur, and folks are thinking a little harder before restaurant splurging.

This cost squeeze will test the nascent organic industry. The job cuts announced yesterday at places like Citicorp probably have more potential high-end food buyers than the typical plant closing. At least investors think so.

This could spell trouble for this growing sub-sector of agriculture. Key to the future of the agrarian farm future is the ability to command enough of a premium to justify the extra labor and handling costs of "hyphenated" products (free-range, grass-fed, etc.). Those dollars were most forthcoming from well-heeled consumers, for whom food represented far less than the fabled "10%" of disposable income. Meanwhile, the majority of Americans who pay more than 10% have their choices narrowed even more.

The move to better diets is also being re-examined for children. We forget there is a reason why milk is full of butterfat and rich in calories. Infants and small kids, unlike, say, 60 year old farmers, need lots of dense nutrition to grow. I think the mistake currently being made albeit for the best of motives is to equate small children as tiny adults.
'We expected the study to show nurseries were serving children food that was too high in calories, fat, saturated fat and salt, and low in vegetables and fruit. Instead, we found that the majority of nurseries had gone to the other extreme and appeared to be providing food that was too low in calories, fat and saturated fat and too high in fruit and vegetables.' This situation was putting children at the risk of developing nutritional deficiencies, she said.

The research also found that four out of five nurseries were giving children portions that were too small and only three in 10 provided them with meals containing enough calories. According to Almond, the under-five age group has different and specific nutritional requirements to those children of school age: pre-school children have a high energy and nutrient requirement. Because they have a small stomach and a relatively under-developed gut, they cannot consume large quantities of food at a time but need frequent small meals and snacks throughout the day.

In addition, too much fibre - such as that absorbed through over-consumption of fruit and vegetables - can result in insufficient intake of other food groups and inhibit the absorption of key minerals. 'Because a significant number of children attend nurseries from 7am until 7pm, the food and nutrition they receive there are key to their health,' said Almond. 'Nurseries are applying requirements of healthy eating for school-age children and adults to the one-to-four age group, who have entirely different requirements.' [More]
Eating habits in America leave much to be desired, I agree. But our emphasis on claories per dollar has left too many factors out of the value equation. We still choose like we might starve to death tomorrow.

It is a shame that difficult economic times, unfortunate immigration policy and free-market subversions are conspiring to make the easy choices the wrong choices.

Thursday, April 17, 2008

Share the love...

Hey - my Cargill rep forwarded a link to an Outlook 2008 Webcast [Full disclosure: sponsored by Cargill] by Steven Johnson. For an economist he gets pretty excited during the presentation.

For an economist.

Still, while there were no earth-shattering new pronouncements, I think it gives some sober, unbiased analysis to balance your own expectations. I appreciated the work, and once again kiss my computer for being able to get this info without traveling or using up prime working hours.

Here is the link.

[Thanks, Paul]