Sunday, January 30, 2011

It's about food...

More than we think here in the US.  Here is what Egyptians are facing with their household finances.


In November, overall inflation in Egypt topped 8.58 percent for the year, its highest level in 19 months. But food inflation has been much more pronounced.
Fitch, in downgrading Egypt's outlook to negative today, specifically cited the high food inflation, which it said was running at about 17 percent a year. The main drivers of food inflation are meat and sugar. [More]
My guess is the food-fuel debate is about to get much hotter. And any hint of trouble during planting season will not be helpful to the current ethanol pseudo-business model.

Saturday, January 29, 2011

Consumption ideas...

Worth pondering. [It has nothing to do with her easy-to-look-at-ness]

I have been looking for indications of how we might start rebuilding trust to make our culture and economy work better. Perhaps, as the speaker suggests, it will be by bypassing many of our current institutions with peer-to-peer connections.
Wedding rings...

For engineers.

[Thanks, Dave]

When this map hit the blogosphere, it was widely cited as both amusing and trivial.

[Source] [Click to embiggen]

It prompted this comeback:

[Source] [Click know the drill]

Two points:
  1. There are some obvious value judgments in both.  Mobile homes are shameful? Meh.
  2. There are some curious coincidences as well.  Utah: porn usage and wellbeing, for example.
Add your own observations below.

[via sullivan]
The real fight over the Internet...

Several coincidental (or maybe not) developments underscore the growing importance and vulnerability of the Internet in virtually every aspect of modern life. 

First, from Egypt, note the usual pattern of capturing the TV and radio stations was preempted by a government shutdown of the nations ISP's. 
The domino-like takedown of the ISPs indicated the government didn't have a master shutoff switch, but ordered each company to flip their in-house switches.
"This sequencing looks like people getting phone calls, one at a time, telling them to take themselves off the air," James Cowie, chief technology officer for Renesys, said in the company's blog. "Not an automated system that takes all providers down at once; instead, the incumbent leads and other providers follow meekly one by one until Egypt is silenced."
Vodafone Egypt issued a statement saying all mobile phone operators had been ordered to suspend services in selected areas. "Under Egyptian legislation, the authorities have the right to issue such an order and we are obliged to comply with it," the company said.
The Egyptian government is not the first to shutdown the Internet during political unrest. The Burmese government ordered a takedown in September 2007, and Nepal severed all international Internet connections after the government declared martial law in February 2005.
The fewer the ISPs, the easier it is for governments to impose a blockade. Burma, for example, had only two ISPs in 2007. Shutting down the Internet in developed nations, such as the U.S., would be far more difficult, if not impossible, because of the many ISPs operating in the countries with networks linked to other networks inside and outside the borders, experts say. [More]
Now stay with me, as one commenter thinks this presages a new pattern for - of all things - the NFL.
Facebook and Twitter may get credit for changing the face of northern Africa and I'll go out on a limb and say they'll play a huge part in the dissolution of another global force: the NFL Players Union.
      No one wants to talk about a possible lock-out and the threat of a football-free autumn of 2011, especially not around here as the Packers are poised to take on the Steelers in Super Bowl XLV.   That's fine, because a trip to the Big Game is a rare and wonderful thing, something to be savored and not sullied with labor pains.
      But once the last piece of confetti hits the Cowboy Stadium field, the NFL will shift it's focus not to preparing for a new season but making sure there IS a new season.    Owners opted out of the current Collective Bargaining Agreement, claiming players salaries are cutting way too far into their profits.    Players defend the status quo, saying that there is no game without them and that they should be paid accordingly.    Owners will say that they can't go on like this, not when so many teams need new stadiums to compete.    Players will say all that they want to do    A lockout looms in early March.
      That's when the fun will begin, especially among the rank and file.
      More and more players are taking to Facebook and Twitter, supposedly to clue friends and followers in on how they feel about the events of the moment.    What some DON'T realize is how far their words reach in a digital word.  [More]
Our current hold-our-nose partnership with Mideast dictators to help counter terrorism suddenly is put in different light when juxtaposed next to the Obama administration position on Net Freedom.

Now comes the test. The Internet Freedom Agenda may have just undermined an ugly pillar of the U.S.’ Mideast strategy — supporting dictators — without doing much to aid the discontented millions that might replace it. While Obama tepidly calls on Mubarak to let people keep tweeting, Egyptian protesters may want the U.S. ”to completely get out of the picture,” as one told al-Jazeera. “Just cut aid to Mubarak immediately and withdraw backing from him, withdraw from all Middle Eastern bases, and stop supporting the state of Israel.”
That’s exactly what Mubarak never demanded — and why the U.S. fears what comes next. ”The traditional debate is that we’re willing to use these tyrants because they’re useful,” explains Marc Lynch, a George Washington University political scientist. “But if we continue to see developments like those we’ve seen over the last couple weeks, if they can’t hold on to power, it doesn’t matter if they’re useful in counterterrorism.”
Not that the U.S. did much to persuade Egyptian protesters it’s on their side. The Obama team “could have come a lot stronger, prevented the Egyptian government from the crackdown on Internet communication, but they didn’t,” says Sherif Mansour from the human-rights group Freedom House. That makes Obama look either impotent or callous.

And it shows the Internet Freedom Agenda to be a dodge. The heart of the issue is whether the U.S. actually sides with the protests spreading around the Arab world — first Tunisia, now Egypt, and in Jordan and Yemen as well. Asking Mubarak to bring back the Internet pales in comparison to the annual $1.3 billion in U.S. military aid he receives. [More]
But even in the face of such demonstrations of the exploding power of the Internet, so-called Big Government haters can't wait to make it another arm of a domestic police state.
Thanks to the GOP takeover of the House, the odds of such legislation advancing have markedly increased. The new chairman of the House Judiciary committee is Lamar Smith of Texas, who previously introduced a data retention bill. Sensenbrenner, the new head of the Subcommittee on Crime, Terrorism, and Homeland Security, had similar plans but never introduced legislation. (It's not purely a partisan issue: Rep. Diana DeGette, a Colorado Democrat, was the first to announce such a proposal.)
Police and prosecutors are the biggest backers of data retention. FBI director Robert Mueller has saidsaid last year that Mueller supports storing Internet users' "origin and destination information," meaning logs of which Web sites are visited. that forcing companies to store those records about users would be "tremendously helpful in giving us a historic basis to make a case" in investigations, especially child porn cases. An FBI attorney
And the International Association of Chiefs of Police, which will be sending a representative to tomorrow's hearing, previously adopted a resolution (PDF) calling for a "uniform data retention mandate" for "customer subscriber information and source and destination information." The group said today in an e-mail exchange that it still supports that resolution.
Jim Harper, director of information policy studies at the free-market Cato Institute, says the push for legislation is an example of pro-regulatory Republicans. "Republicans were put in power to limit the size and scope of the federal government," Harper said. "And they're working to grow the federal government, increase its intrusiveness, and I fail to see where the Fourth Amendment permits the government to require dragnet surveillance of Internet users."[More]
It is curious to me that in the litmus test for socialist downsliding how a health insurance mandate is a hideous theft of our rights, but tapping my computer is prudent behavior enforcement.  This action, along with others will reveal that the Tea Party activists have been naive tools, IMHO. [Kudos to Cato for calling them out, BTW]

Back on topic, I think all of us, and especially the rural community where communication faces different hurdles, better pay more attention to seemingly abstruse Internet control debates and regs. We could find ourselves in a world where the most power tools for popular redress and opinion are dangerously at risk. It will involve homework we don't want to do and relationships with people very unlike us, but we have several dogs in this fight.

Friday, January 28, 2011

This looks like progress...

To me, anyway.  Consider two news items that did not stir much reaction.

First, the decision on RR alfalfa:
Roundup Ready (RR) alfalfa will be granted non-regulated status under a decision USDA announced Thursday. This follows weeks of debate in a host of areas over USDA's potential decision.

"After conducting a thorough and transparent examination of alfalfa through a multi-alternative environmental impact statement (EIS) and several public comment opportunities, APHIS has determined that Roundup Ready alfalfa is as safe as traditionally bred alfalfa," Agriculture Secretary Tom Vilsack said. "All of the alfalfa production stakeholders involved in this issue have stressed their willingness to work together to find solutions. We greatly appreciate and value the work they've done so far and will continue to provide support to the wide variety of sectors that make American agriculture successful."
But the decision won't end the legal issues for this matter. The Center for Food Safety has pledged to seek a court order to reverse and void USDA's decision. "We will be back in court representing the interest of farmers, preservation of the environment and consumer choice," said the group's Executive Director Andrew Kimbrell. [More]
OK, opposition will continue but it looks like the stuff will get planted, which has tended to be a fat-lady-singing sign of eventual debate closure.  In fact, deployment starts the building of a mountain of real world data. At the same time bad things aren't happening, public interest wanes.

This one could be trickier, however.
As carriers for diseases such as malaria, dengue fever and yellow fever, mosquitoes are the deadliest creatures on the planet, responsible for millions of human deaths every year. And as the planet warms, the insects are broadly expanding their turf and bringing their diseases with them; thousands of cases of dengue, a tropical disease, have appeared in the U.S. in the past five years. DDT was long used to control the mosquito population, but it is now widely banned, and in any case, many scientists believe that mosquitoes quickly build up a resistance to the insecticide. That, in part, is why the battle against mosquitoes has gone genetic.
Generally speaking, the goal of gene-based mosquito-control projects is either to kill the insects or make them benign. Researchers at Johns Hopkins University, for example, are studying mosquitoes that were made malaria-resistant through the activation of a gene responsible for a protein that blocks the infection. And the British company Oxitec has engineered a strain of mosquito that cannot survive without regular doses of tetracycline; in the wild, these mosquitoes would survive just long enough to mate and pass on their tetracycline-junkie genes to their doomed offspring. In a trial in the Cayman Islands last year, Oxitec-modified mosquitoes were able to cut the overall population by 80 percent in just six months. [More]
I'll agree it's a different puzzle dealing with fauna compared to flora, but the results are impressive. An 80% reduction isn't chicken feed.

There will be some risks, and some too great to face, but I have growing confidence researchers themselves will issue the vetoes on such new ideas when necessary. We now know more weaknesses to look for and possible problems from previous efforts.

I simply have yet to see the killer prob among the growing list of GM projects that are pushing the acceptance of this technology forward.

Monday, January 24, 2011


I'm already at the age I don't trust my memory. Is my whole body a traitor?

[via sullivan]

Saturday, January 22, 2011

It doesn't get better...

At least in the near-term IMHO for the dairy industry.  I was stunned and dismayed by the comment below from an ag lender:
Your comments about dairy hit home way too hard. As an ag lender with some 150 dairy accounts in our portfolio. We have the 800 numbers for all suicide hotlines in the counties we serve next to EVERY phone, and on every corkboard. We have taken calls from borrowers who are standing on top of the 80' silos and asking why they should not jump. A husband went to the barn recently to milk the cows and when he came back to the house the wife had removed all her clothing from the house and all the children and their pillows were gone. Can you say STRESS! As loan officers were are not trained in these areas of expertiese, but that is our calling at the moment. Trying to get on the learning fast track.
Now I read this morning about collateral damage farther up the value chain.
Companies disappear all the time. Sure, it may be news when large corporations with well-known brands go belly-up. But think about it: Businesses like Circuit City, Northwest Airlines and Countrywide are gone now.

24/7 Wall St.
recently looked at a number of large American companies, some of which are owned by foreign companies, to see which will disappear in 2011. A vanishing firm may go bankrupt and its assets sold off, it may be closed after being bought by another company or it may cease to exist due to a merger.

The website looked at a variety of companies: those that are in deep trouble, the merger and acquisitions targets, firms in industries that have too many competitors for any to become highly profitable or corporations that Wall Street believes are worth more in parts than as a whole. The 19 companies below were picked from this universe, because odds they are they won't exist a year from now:


Dean Foods

The maker of dairy products like Land O'Lakes and Silk has struggled as much as any other large public company this year. The costs of raw milk, butterfat, soybeans and sugar have risen sharply. Dean Foods has also been crippled by debt. The firm's shares were down as much as 60% at one point during the last 12 months.

Despite all the bad news, hedge fund investor David Tepper bought a 7.35% stake in the company. Dean Foods shares rose 9% after the announcement. Dean has already sold its yogurt business to Schreiber Foods. And Tepper, one of the cleverest investors on Wall Street, has probably bet the balance of Dean Foods will be sold off in parts. Probably the Fresh Dairy Direct-Morningstar and WhiteWave/Alpro business units would draw the most bidders. Watch for Dean to be broken up, to satisfy debtholders and large investors.[More]

The casual references to "demand destruction" floating around the grain pits really masks the reality of the process. We're talking about wiping out an entire level and lifestyle of dairy production. I understand the economics and the fact this process may have artificially delayed by policy for too long - making it even more painful than it might have been. But I still wonder if we are repeating the buildup into too-big-to-fail dairy units.  

I know some lenders are sitting on dubious dairy loans, and not just smaller producers mentioned above. I have heard that they are pressuring regulators to not force them to mark-to-market just like housing lenders struggled with.

But even a slightly-less-than-huge corn crop coupled with the insane drive by the ethanol industry to further skew the corn market by mandate has to be a threat to dairies of every size and consequently lenders of every size. (While it is attracting more bipartisan opponents, the ethanol lobby has been a bad one to bet against.) Plus the resurgence of cotton apparently has dampened optimism about new acres to produce corn. The growing supply-demand balance will not serve corn farmers well in the long run either, as missing customers and consumer resentment will linger for decades.
My great fear is these pressures will not simply downsize the dairy industry but eviscerate it by cascading failures. Consider what cow prices will do when liquidation starts and how that sucks down the little remaining equity in many herds, in turn pressuring more lenders.

I imagine voices in the heads of many producers are screaming "Get out now!" but their hearts cannot embrace the idea. And as the wrenching words of the ag lender above display, I fear small banks especially will suffer with their customers in a valiant, but ultimately futile effort to out-wait this downturn. This market can stay irrational longer than producers can stay solvent - to use the old adage.

This chapter will not end well. And my sector (grain) will not look back with pride on our role.

Friday, January 21, 2011

Meanwhile, back at the ibex ranch...

From the most-emailed article ever in the NYT:
The Catskills ibex farm is owned by an unlikely pair of friends: Steven Jones, an African-American former police officer from Camden, New Jersey, and Marco Levin, a rabbi from Buenos Aires. Jones is one of the thousands of Americans who have turned to alternate investments after losing his savings in the financial crisis. Rabbi Levin is the founder of the Deuteronomy Diet, which recommends eating only foods available to the Jews of the Old Testament.
Levin believes that the ibex, a wild goat defined as kosher in the Book of Deuteronomy, is one of the healthiest foods in the world. “In Biblical times, men and women regularly lived for hundreds of years,” says Levin. “If we ate as our ancestors did, there’s no reason why modern man cannot do the same.”
Anna Williams first came to Yael Farms (yael is Hebrew for “Nubian ibex”) after her mother read an article by Dr. Walter Andersen, a clinical physician who specializes in adolescent health. Andersen thinks teenagers today are too focused on their minds, often at the expense of their physical well-being. “Their brains are getting plenty of exercise,” Dr. Andersen says. “It’s the rest of their bodies I’m worried about.”
At Yael Farms, Anna gets plenty of exercise. She spends the day herding ibex, drawing water from a well, and moving heavy stones. After a Deuteronomy-friendly dinner of figs, unleavened bread and honey-drizzled ibex, she practices her Mandarin. Like many of the ibex farms sprouting up across the northeastern United States, Yael offers an intensive Chinese-language immersion course. [More]
Could my life get any more mundane in comparison?
Another thing...

I'm doing wrong: my titles.
Two pieces of advice follow from these observations. First, find the simplest title not yet taken for your papers. One word titles are the best. Second, before you get started on a paper, think about the title. If you can’t come up with a short title for it then its probably not worth writing.

The absolute worst thing you can do with your title is to insert a colon into it. (quiet down beavis!) As in, Torture: A Model of Dynamic Commitment Problems. Or Kludged: Asymptotically Inefficient Evolution. In the first case you have just ruined a seminal-signaling one-word title by adding spurious specificity. In the second, you just took an intriguing one-world title and turned it into a yawner.

The second worst kind of title is the question mark title. ”Is the Folk Theorem Robust?” This says to the reader: ”You picked this up because you want to know if the folk theorem is robust. Well, if I knew the answer to that I would have told you right away in the title. But look, all I could do is repeat the question, so you can safely assume that you won’t find the answer in this paper.” [More]
Oh, and I'm a habitual two-spacer, too.
What galls me about two-spacers isn't just their numbers. It's their certainty that they're right. Over Thanksgiving dinner last year, I asked people what they considered to be the "correct" number of spaces between sentences. The diners included doctors, computer programmers, and other highly accomplished professionals. Everyone—everyone!—said it was proper to use two spaces. Some people admitted to slipping sometimes and using a single space—but when writing something formal, they were always careful to use two. Others explained they mostly used a single space but felt guilty for violating the two-space "rule." Still others said they used two spaces all the time, and they were thrilled to be so proper. When I pointed out that they were doing it wrong—that, in fact, the correct way to end a sentence is with a period followed by a single, proud, beautiful space—the table balked. "Who says two spaces is wrong?" they wanted to know.  [More of magnificent rant]
In following this tempest in a typewriter, I also found out I'm dashing in an un-American fashion.
I couldn’t agree more – though I’d be even more impressed if he allowed his long dashes a little breathing space on either side. But then Americans never do. And, come to think of it, Americans are far more likely to double-space than Britons (unless they’re British concert pianists who lived for 20 years in New York, where double-spacing is endemic). [More]
In fact - if you're still with me - it's amazing you can read this post at all.

Wednesday, January 19, 2011

This is not really why...

I want an iPhone.

 OK, it is.

[via sullivan]
Junkbox, Episode XXXIYIYI...

I think I'm spending too much time with dairy people. I started to cheer when the corn market dropped today.

Monday, January 17, 2011

The real reason for our farm policy...

Full employment for economists.

Tyler Cowen counts econo-noses in the federal government.
1. Department of Labor, 1262 economists, 30.5 percent of the total, 1208 of those are at the Bureau of Labor Statistics.
2. Agriculture, 533 economists
3. Treasury, 473
4. Commerce, 462
5. Defense, 225
6. Energy, 168
7. EPA, 163 (is that enough?)
8. HHS, 137
9. Transportation, 88
10. Interior, 86
11. FTC, 74
12. HUD, 62
13. Justice, 61
14. FDIC, 61 (do bank examiners produce the real value there?)
15. All others, 275.  The total is 4130 economists in the Federal government, as of 2008, and I believe those numbers are not counting consultants.
I was surprised by the comparatively large contingent in the USDA - more than the Treasury or Commerce, for crying out loud!  Partly I think agriculture is ideal for economists to study with thousands of producers or commodities and mountains of relatively good data.

But it doesn't seem to result in good policy, just more of it.
Nuclear finance...

About time. Forensic financial experts are finally adapting some of the lessons learned in nuclear engineering to the hazards of global finance.

Perhaps the most profound and worrying parallel between preventing industrial catastrophes and financial ones emerges from Perrow’s pessimistic theory of “normal accidents”. For him, any sufficiently complex, tightly coupled system will fail sooner or later. The answers are to simplify the system, decouple it, or reduce the consequences of failure.
What might decoupling the banking system mean? Consider the slightly obsessive pastime of domino-toppling. One of the first domino-toppling record attempts – 8,000 stones – came to a premature and farcical end because a pen dropped out of the pocket of the television cameraman who had come to film the occasion. Other record attempts have been disrupted by moths and grasshoppers. It’s the quintessential tightly coupled system.
Professional domino-topplers now use safety gates, removed at the last moment, to ensure that when accidents happen they are contained. In 2005, a hundred volunteers had spent two months setting up 4,155,476 stones in a Dutch exhibition hall when a sparrow flew in and knocked one over. Because of safety gates, only 23,000 dominoes fell. It could have been much worse. (Though not for the hapless sparrow, which an enraged domino enthusiast shot with an air rifle.)
Given the propensity of finance to suffer frequent meltdowns, Perrow’s normal accident theory almost certainly describes the banking system. The financial system will never eliminate its sparrows (perhaps black swans would be a more appropriate bird) so it needs the equivalent of those safety gates. Rather than making a particular bank less likely to fail, it might be safer to focus on ensuring that one falling bank doesn’t topple other companies.
But few financial commentators have considered the implications of that. One notable exception is John Kay, a British economist and FT columnist, who argues for a system of “narrow banking” which, he asserts, would lead to “a far more robust industry structure, with simpler institutions, less interconnectedness, and greater diversity of industry structure”. Another is Laurence Kotlikoff, an economist at Boston university, who has a proposal for “limited purpose banking”. Both Kay and Kotlikoff have taken the view that it is worth pursuing a simpler and less tightly coupled financial system for its own sake – in sharp contrast to the prevailing regulatory approach, which unwittingly encouraged banks to become larger and more complicated, and actively encouraged off-balance sheet financial engineering. I do not know whether Kay or Kotlikoff have the right answer. Normal accident theory suggests that they are certainly asking the right question. [More]
I fear we have not addressed the intrinsic problems of "too big to fail", and the moral hazard of having the government prevent total collapse because of one firms' poor risk decisions.  This is the gloomy conclusion of some economists, and the now sacrosanct status of Wall Street.  They will spend billions to insure that protected position. There is no legislative will to do the obvious and what safety engineering commands: decouple and downsize critical components.

As stated above, we will almost certainly be back here, and perhaps sooner than we think.
To start your week...

A call to greater imagination and faith in ourselves.

For all the "billions" of jokes, Carl Sagan still echoes in my mind as the voice that lifts us to thoughts of a astounding future.

[via sullivan]

Sunday, January 16, 2011

This is why...

The politically mendacious use of the term "death tax" for the estate tax is badly misguided.

There are real death taxes, and this is what a real death tax looks like.  

Everybody pays it.
Inside the box...

Mike Wilson speculates about "10 Trends That Could Revolutionize Farming" in the Jan 11 issue of Farm Futures and I pored over it as I am a fan of his writing and thinking. But the carefully boxed predictions were remarkably mundane.

[FF doesn't post mags very fast, so, with apologies, I'll list his "revolutionary trends" and my initial responses. Please read his work for yourself.]
  1. Documenting sustainable practices. Given the fact our every move is currently logged and located on a memory chip of some kind when we move into a field, I found this one curiously trivial. Big whoop.
  2. Growth despite higher costs. And this would different from the last few decades how?
  3. Decoding ag's role in the bioeconomy. OK, this is a trend (it reads like the the old pharmaceutical/nutritional idea), but judging from the explanation, it is trend that will likely NOT have much effect.
  4. Managing increased volatility and risk. Duh.
  5. Operator as ag-advocate. This tiresomely false adversarial choice is already too widespread and hasn't made much difference other than the obligatory "storytelling"altar call at every farm meeting now. Let's face it, we're talking about defending subsidies and closed markets and ignoring medical/nutritional advice we privately take ourselves. And mostly advocating to ourselves.
  6. Everyone into the pool. Not immediately obvious, even after you've read it. The prognostication is we'll team up to buy expert advice. The old peer group idea from years ago.  It happens now, but without the expert advice Mike's experts sell.  This is asking a barber if you need a haircut.
  7. Successor selection and development. Again, this is revolutionary?
  8. More technology ahead.  And I had thought we had discovered everything.
  9. Global influence on marketing. You have to go back a long ways to find a time when this wasn't the case. Telling us to watch out for the unexpected is hardly illuminating.
  10. Working with more regulations. I think this is spot on, but certainly not revolutionary.  Anybody in our industry who doesn't see this coming is looking backwards.
OK - I've taken my shots at his list, so in fairness I should at least come up with my own to give my idea of "revolutionary", along with some blue-sky predictions. So here goes. [No particular order]
  1. Climate change. Maybe Mike just didn't want to wander into this swamp, but this is THE big one IMHO. Not only are we moving our production north, we will change how we farm here in the Midwest. With larger and more frequent rain events, we'll have to work harder on drainage. We'll "machine up" to plant in 72-hour windows around the clock. Ditto for harvest, which means massive investments in grain-swallowing facilities.  Also an ice-free Arctic will enable Canada to really expand production and compete for trade. It will change our grain flow as well.
  2. Africa.  There is a reason land funds (and China) are all over the big continent. And the great secret of our time is the belated beginning of per capita income growth in many developing African countries, much like we saw a decade ago in India.
  3. No more Mr. Good Government.  What little subsidy we get will be chump change. The regulations, however, will be a massive opportunity for those who can process information and keep their cool.
  4. Natural gas. Electric cars. And hybrids. And super efficient diesels. Plug-ins don't even register on most farmer horizons because we mostly live too far from anywhere. But for the tens of millions with a 12 mile commute this will be huge. The upshot will be that we have likely seen our peak gasoline usage which has serious ramifications for biofuels just as they fall from political favor. We have a short corn crop this year and states will be flogging the EPA for mandate relief, like Texas did.  Weirdly the politics of the right (which farmers love) will be the undoing of socialist ethanol. It's going to have to compete on even grounds with say, our own dairy farmers. Radical! Now add in unexpected NG finds, a growing LNG infrastructure and demand curve for oil in the US will even decline, as it has been doing for gasoline.
  5. Diabetes/obesity/foodies.  Just to control health care costs, which will soon be seen as imperative to make our economy work, we will move toward vastly different attitudes aboutleading diets. Meat consumption, especially the reds, will continue to slide, making exports crucial. Which means we're going to have to play nice with others here and abroad to protect "free-ish" trade. International belligerence will be a luxury good we can't afford. Meanwhile, rising consumer nutrition awareness coupled with the cultural change induced by 47 cooking channels will shift consumer attitudes from "cheap is good" to "good is good". The protein sector will be able to adapt to both food preferences and animal welfare concerns via a new consumer tolerance for mildly more expensive food - if it fits the new ideas of good eating. In a simultaneous advance cancer vaccines will shift the leading causes of death more toward food/obesity/lifestyle causes and away from perceived environmental causes. Less attention will be paid to traces of all manner of pollutants in air, water and food as cancers become less lethal.
  6. The emergence of localized farming firms. Rather than the multi-county BTO's, contiguous competitors will realize a 20,000 acre operation in a10-mile radius is stunningly more efficient as well as much more defensible. All it takes is for 3-4 guys to get along.  And their wives, of course. Farm names will read like law firms: Plunkett, Wilton, and Schroeder.
  7. Captive suppliers. Grain buyers will devise programs like Walmart to tie suppliers to them. Farms will sport signs like "Proud to be a Cargill grower". In exchange for your own elevator hours, separate dumps, private basis, and frequent-grower perks, you will send everything from every acre every year to one buyer. These arrangements will all be unique, just like your affairs at the bank. And like beef contracts, open-market producers who want to auction their grain to the highest bidder at any given moment will cry foul.
  8. The end of Extension as we know it. Somewhere between budget crises and the realization that public farm advice is worthless from a competitive viewpoint (if everybody know it, it has little actual value), farm firms will seek private info with the help of land-investing behemoths to know what others don't.  This is already being done with crop reports and weather, I suspect.  Why attend a field day when you have the applicable Pioneer researcher on speed-dial?
  9. Rapid response.  I have already posted about the "first-mover" premium. The reaction time for the handful of farmers producing the output will be blistering. Already, we see texted plan changes on the fly. Add in more info "inputters" in farm firms and trusting relationships between partners and the pace of business will make today seem plodding.
  10. Longer planning horizons. With larger, more nearly "immortal" farm firms, the individual lifetime will not be the scheduling boundary it now is. Efforts to add contiguous ground - either rent or buy - will begin a generation or more before. More economic "forests" that take 100 years to payoff will be begun.
  11. Lower profiles. Successful farmers - mimicking other top business leaders - will be submariners. As we overplay Facebook, discretion and anonymity will be the trademarks of having "arrived". They will not populate grower associations or farm organizations. Their social groupings will resemble other professions, and increasingly include other professions. They will golf with VPs of finance and venture capitalists. They will have dinner with political aides and scientists. They won't gossip as much with neighbors, but will communicate often with friends in South Africa or Ukraine.  This is another trend in progress that goes widely unacknowledged. We already have an "Elite", folks.
  12. The withering of "farmer" lobbying. Who in political office will take seriously a group that is shrinking and predictable? Heck, buy your own Congresshuman, like other guys do. Seriously, if you want to be heard in Congress, try kicking $25,000 in his/her campaign fund.  The Supreme Court decision just fixed our political system as a battle of dollars, as political campaigns become the growth industry for the next decade. In addition, with fewer subsidies, why slog off to DC every winter, when  you could be doing something useful? Regulatory battles will be decided more often in courts, not legislatures.
  13. The obsolescence  of "safety nets". Farmers overwhelmingly despise safety nets for others. We will outgrow ours. Already several disgruntled insurance customers are asking what they are getting for their dollars, and Washington has realized they are actually subsidizing insurance sellers. Farm firms will self-insure.
  14. In-house expertise. Accountants, attorneys, and technology people will become relatively cheap as we train too many young people for these careers. An attractive lifestyle and real responsibilities will attach more of them to a farm, or, more likely, back to a farm firm. Advisory services will struggle to offer anything farm firms need, and will see serious pricing power erosion.
  15. Adulthood. Farmers a generation from now will realize it is not about them. They will not corner you to "tell their story" or "advocate" your arm off. They will listen and suggest ways they can supply, advise, help, or partner with you to help you reach your goal.

Saturday, January 15, 2011

Maybe this blog is broken...

On purpose.

Good watching for a Saturday afternoon.

Seth Godin at Gel 2006 from Gel Conference on Vimeo.

Wednesday, January 12, 2011

Junkbox, Episode XXXIII½...

"Strange" seems to have new limits these days.
If you want to know...

What a joke farm subsidies have become check out this announcement from Facebook about buying the domain name from Farm Bureau for a cool $8.5M.
Today Reuters is reporting that the  domain acquisition, which moved the 6 Million member Farm Bureau over to, cost Facebook $8.5 million.
“At their annual meeting in Atlanta, Farm Bureau officials on Tuesday said the organization earned $8.5 million by selling a couple of domain names but is barred from identifying the buyer.”
We of course are still chuckling over how Zuckerberg announced the sale “The farm bureau has agreed to give us and we in return have agreed to not sell Farm subsidies.”
Hmm … Not even virtual ones? [More]
Yeah - we've become even more of a national joke as farm income increases on farms receiving unneeded payments.  I pretty sure tweeting about it won't stop the snickering, either.

Tuesday, January 11, 2011

For Jan...

Who once skated down our roadside ditches.  A remembrance of her Dutch heritage.

Dutch Winter from Kasper Bak on Vimeo.

Cool music too. (Ice Dance by Paul Reeves)
Unadulterated genius...

I've been enjoying fiddling around in the shop - something I haven't done much of the last few winters. We have also been hauling out from the bins. We only go about 7 miles, so you end up loading several trucks a day.

Which means about you climb out of the cab and up the corner of the bed to see how full the truck is so you can pull it forward just at the optimum time. This happens about 15 times per truckload. (Well, 14.7 was the three truck average.)

So I had a brainstorm. 

Swiping my cheap wireless cameras from the combine and grain cart, I built a tower jig from PVC pipe and some wood that fastens easily to our 10' stepladder.  The camera uses an AC adapter. Height is adjustable, and you can aim the camera after you see what the view is like.

Then the wireless monitors went in the trucks.  Amazingly two different Chinese cheapos picked up the same camera, so in both trucks can see as if you are standing to side up above the bed.

Test run tomorrow.  Please send licensing/tech fees to my home address when you build your own.

Monday, January 10, 2011

Unintended consequences...

Opponents of "Obamacare"* may not be thinking repeal (of pieces) all the way through. In fact, it dawned on me (vaguely) that ending the mandate would necessarily mean ending all the things people really like: better choices, guaranteed insurability, ending recission, ending lifetime limits, and more becuase the income stream to pay for them would not be there.

So instead, the public option emerges as a way to keep those promises.
Conservatives argue that for Congress to require all Americans to buy private health insurance exceeds its regulatory powers under the Constitution's Commerce Clause. Before Judge Hudson, they distinguished the health care law's individual mandate from government programs like Social Security. The Social Security program is designed so that Americans pay taxes directly to the government, which pools the money and disburses future Social Security benefits. In contrast, the novelty of the health care law is that it requires Americans not to pay a tax, but rather to buy their health care insurance privately. The government's involvement is a step removed, and this is what Judge Hudson found to be constitutionally defective.
But here's the catch: If the part of the health care law that's unconstitutional is the part telling people to buy private insurance, an obvious solution is to pass a health care law including a public health plan, which would operate like Social Security and Medicare. In other words, the public option. With a public option as part of the law, people who don't want to buy insurance from a private health care company would pay into a government fund in exchange for an insurance benefit, just as they do with Social Security and Medicare. 
Opponents could still argue that any law requiring universal coverage is beyond Congress' reach. But they'd run into a big wall: Supreme Court decisions that place Social Security and Medicare, along with a list of other entitlements, squarely within the constitutional ambit of Congress. Like we said, the public option and Social Security and other entitlements are structurally quite similar—indeed, the public option is essentially a form of Medicare. So to strike down the public option would require reversing a lot of well-established precedent. Courts would have to return to the laissez-faire ideology of a century ago, epitomized by the 1905 Supreme Court case Lochner v. New York. That ruling infamously limited the extent to which the government could intervene in the private sphere, leaving legislatures unable even to set minimum-wage laws, for example. And courts long ago repudiated it.
Now suppose that conservatives succeed with their current, safer legal strategy, and knock out the individual mandate. Because the private-only mandate had been the middle, compromise position, Congress would be left with the two more extreme options on health care—either a plan that includes something like the public option, or the status quo. As costs rise and more Americans go uninsured, will the public really want to roll back reform? When Americans are asked about the current health care law, a majority say they either favor it or wish it were even stronger. Making the public option the only option would fulfill the wish of those wanting a stronger bill. [More]
As we see Republicans already backtracking even on the minuscule $100B budget cuts, it becomes obvious they are intent primarily on regaining political power, and only secondarily creating policy. Getting rid of the popular (and expensive) policies of Obamacare would not further that priority, just as budget cuts, especially in their district.

Should the public option reappear, game over.  I think insurance companies will be pondering what could go wrong with repeal as much as they did passage and choose the devil they know slightly better. 

All in all, I remain hopeful that for individuals and self-employed people like farmers, some relief will be gained from our total lack of leverage in the medical insurance market regardless of both efforts.

*I've given up using other more accurate labels, since the effort to attach the President's name to this legislation is indeed intense by detractors. This too, I predict, could be a mistake as whatever survives of reform policy will have their fingerprints and his name. If it is mildly successful in achieving its many goals [insert your odds here] I'll bet it becomes as widely embraced as Medicare, and the major part of his legacy.
For readers of a certain age...

Why do so many of our medications read like science fiction planets? I mean, what up with all the Z's and X's?
Here are the figures for medications starting with those letters:

More likely, though, is that use of these letters relates to the imperative to make a brand name highly visible in a crowd. Reflecting their infrequent occurrence in English words, x and z count for 8 and 10 points in Scrabble, the highest values (along with j and q) in the game. So names that contain them are likely to seem special and be memorable. “If you meet them in running text, they stand out,” is the way one industry insider explained. Generally, they are also easy to pronounce.
That is an old insight in the wider field of marketing. But in pharmaceuticals z did not really take off as a brand initial until after 1996, with the number of drugs beginning with the letter rising steeply from 29 to 51 in 2000 (figure). And the widespread use of x (often also pronounced as “zuh”) is later still. Something additional started the bandwagon rolling. 
That said, the use of x and z in drug brands suddenly became extraordinarily prevalent. I suggest that this phenomenon arose because of the fast rate at which new products were being introduced, the fact that the difference between many “me too” drugs was more apparent than real, the immense rewards that were seen to accrue from innovative marketing, and the fact that the ploys available for use in the naming of drugs are so restricted.   [More] 
Thought you might want to know.

Sunday, January 09, 2011

About the dead air...

Last week was a really long travel/speaking week.  Coupled with tax prep, my prayer meeting with my banker, and long hours in transit, I just couldn't get up the energy.  I will offer some miscellaneous observations:
  • My new 2011 Chevrolet Equinox is really great. Much quieter and smoother than Zippy (Vibe).  Mileage around 27-28 all told.
  • Just when you thought you couldn't possibly pay any more for a cup of coffee, you fall in love with one of these contraptions. I had one in my hotel room at AgConnect, and I actually used it.
  • The dairy industry is defying financial gravity, it seems to me.  One producer told be he still has a backlog of bills, but is at least staying current with new ones. I think we are on the verge of decimating the midsized herds, and even collapse a few very large operations.
  • WI farmland prices may be the most spectacularly umm, enthusiastic of all.
  • On at least three occasions, my remarks about ending direct payments did NOT meet with hissing and open animosity.  Of course, maybe nobody was paying attention.
  • American Airlines is flying more regional jets instead of real 3x3-across jets. Many of them used to be Brazilian Embraers.  But the new ones are Bombardier's CRJ-700. The cramped spacing is the same on both, but the CRJ seats really kill my back - something I've never experienced.  The seat seems harder and curved differently. Maybe it's a good thing it's harder to book flights on AA.
  • I am the last person in any major airport without an iPad.
Another reason...

I'm not into Facebook.  Seriously, I just don't get it.

Anyhoo, I'm not totally alone.
Indeed, 11 years ago this week, when AOL announced its $350 billion merger with Time Warner, I was asked to write an OpEd for the New York Times explaining what the deal between old and new media companies really meant. I said that AOL was cashing in its over-valued dotcom stock in order to purchase a stake in a "real" media company with movie studios, theme parks and even cable. In short, the deal meant AOL knew their reign was over.
The Times didn't run the piece. Of course, the merger turned out to be a disaster: AOL's revenue stream was reduced to a trickle as net users ventured out onto the Web directly.
Likewise, Rupert Murdoch's 2005 purchase of MySpace for $580 million coincided pretty much exactly with the website's peak of popularity. People blamed corporate ownership for the social network's demise, but the cycle had already begun.
Now, it's Facebook's turn. This week's news that Goldman Sachs has chosen to invest in Facebook while entreating others to do the same should inspire about as much confidence as their investment in mortgage securities did in 2008. For those who weren't watching, that's when Goldman got rich betting against the investments it was selling.
This time, Goldman is putting up some millions of its own -- as if this skin in the game means they couldn't be up to their old tricks. But the commissions and underwriting fees Goldman is earning for selling that other $1.5 billion of private Facebook shares could be enough to offset the cost of their own investment. And bets against Facebook could be leveraged any number of times. [More]
The permanence of formerly personal information now broadcast abroad will rank up there with tattoos as OMG-What-Was-I-Thinking Regrets a couple of decades from now.

Energy from heaven...

Confounding most projections, natural gas seems to be showing up more often and in surprising amounts.  I mean Israel could become an energy exporter, for Pete's sake!

A massive offshore natural gas reserve is poised to give Israel energy security, freeing the desert nation from the threat of boycotts and reshaping the political dynamics of the Middle East.
Estimated to contain 16 trillion cubic feet of gas – equivalent to more than a quarter of Canada’s proven reserves and enough to meet Israel’s domestic demand for 100 years – the Leviathan field is believed to be the largest such deepwater gas discovery in a decade.
Observers say the windfall, whose size was confirmed this week, could also affect Israel’s relationships not only with its traditional enemies but also with its allies – and free the energy-poor country in an oil-rich region from the often prohibitively high prices of heat.
But the country’s ability to exploit the field will be fraught with difficulties: It must contend with the challenge of drilling far beneath the earth in deep waters as well as with building infrastructure to transport the gas and sorting out clashes with energy companies over its royalty regime. The field is not expected to start producing for at least six years.
The Leviathan find is believed to cover roughly 325 square kilometres off the country’s north coast – an area about twice the size of the city of Vancouver or half the size of Toronto – in an area called the Levant basin that has already yielded smaller fields. The lease is operated by Houston-based Noble Energy, plus Israeli companies Ratio Oil Exploration and Delek Drilling, which said they plan to drill two more exploratory wells in the coming months to confirm the findings.
If exploited, the gas will mean Israel won’t have to buy on the open market any more and could also lessen its dependence on subsidies from the U.S. government, which has sought to use its clout to push its ally to curb settlements in the West Bank and to try to reach a peace agreement with the Palestinians. [More]
While I will pass over the idea that this discovery could increase their drift toward fundamentalist bellicosity  - which is disconcerting enough, it reinforces my recent suspicion that NG seems to be the BTU of the moment.

Coupled with our own new finds in the US I wonder if we have built our last coal-fired plant for a [long] while.  The easiest replacement is for electricity generation, retiring first oil, then coal factilties.

Coal has already been losing market share over the last fifteen years. In that period, the amount of electricity generated using natural gas has nearly doubled, while the amount using coal (and nuclear) has remained the same. The other beneficiary has been renewable energy, but rapid growth in that segment only began in the last few years, during the relatively high natural gas price environment. We anticipate that concerns over increased regulation, including potential carbon caps, will accelerate the coal to gas transition. Planned generating capacity additions are dominated by natural gas, with many utilities vocal in their intentions to use more natural gas-fired power plants to generate electricity going forward. [More, also graph source]

Let's assume this happens, and it lowers the demand growth for oil. This is not good news for ethanol, IMHO. If we buy into ravening appetites for corn keeping prices trending upward (and I think we've all sipped that intoxicating beverage) the reluctance of the oil industry to roll over in the face of new mandates seems unlikely. And the reaction of consumers could also be more vigorous than we think.

The EIA apparently agrees with rosy price outlook.

[Source and below]

 Many aren't buying it, however.
It is understandable that the EIA, as a branch of government, must produce an annual report that is politically expedient and that supports a view that meets public policy expectations. The EIA approach takes a long-term economic view and is, therefore, not concerned with the fluctuations that characterize the real world of petroleum supply, demand and price. At the same time, it is not useful that this report is in conflict with industry best practices and opinion as well as trend data available to the public.
The EIA’s resource estimate of technically recoverable gas from shale is interesting but not relevant to future price or production volume forecasts. The Potential Gas Committee’s 2009 report is the benchmark of credibility, and we hope that the full EIA report in March will explain why we should accept unwarranted and insupportable upward revisions to PGC resource estimates and how these might translate to energy reserves and price. The EIA treats shale gas just like conventional gas in its forecasting and does not acknowledge the much higher decline rates and, therefore, great number of wells required to maintain supply.
Exploration and production companies involved in shale gas production have presented a position that emphasizes production and reserve growth over earnings or profit. It is confusing that the EIA has assumed that market forces and improving efficiencies will save the day for oil and gas prices. It would be more appropriate to frame the problem in the context of reasonable expectations that would be useful to public understanding of the shale gas phenomenon and its potential contribution to natural gas volumes and price. It is unsettling that the EIA has not acknowledged the belief by the U.S. military and other credible sources of an impending liquid fuel shortage that confronts the United States and the world (e.g. Hirsch, Benzdek and Wendling, 2010; JOE Report) . Instead, the EIA has provided an unrealistic view of future oil and gas supply and price that will inevitably not serve public understanding or promote reasonable planning for resource availability or price.
I take this critique with a grain of NaCl, since the author is among peak-oil enthusiasts who were gob-smacked by the recession-aided plummet in demand, and subsequent revisions of energy outlook to "slightly less apocalyptic". Nor do I believe the EIA to be as sensitive to politics as other observers.

So I'm watching for more NG finds in improbable places, increased agitation by the coal industry against GHG regulation, and the sales of the Volt, et al. Ethanol may have less of a supply hole to fill that we imagine.

Tuesday, January 04, 2011

Still working on it...

I have been struggling to a) grasp the implications of the asset and income inequality in the US, b) decide if it really is a bad thing and if so how bad and c) find some mitigation for it, if needed.  This same effort is being duplicated by much better brains than mine and one who sheds a great deal of light is Tyler Cowen:
There’s a second reason why the financial sector abets income inequality: the “moving first” issue. Let’s say that some news hits the market and that traders interpret this news at different speeds. One trader figures out what the news means in a second, while the other traders require five seconds. Still other traders require an entire day or maybe even a month to figure things out. The early traders earn the extra money. They buy the proper assets early, at the lower prices, and reap most of the gains when the other, later traders pile on. Similarly, if you buy into a successful tech company in the early stages, you are “moving first” in a very effective manner, and you will capture most of the gains if that company hits it big.
The moving-first phenomenon sums to a “winner-take-all” market. Only some relatively small number of traders, sometimes just one trader, can be first. Those who are first will make far more than those who are fourth or fifth. This difference will persist, even if those who are fourth come pretty close to competing with those who are first. In this context, first is first and it doesn’t matter much whether those who come in fourth pile on a month, a minute or a fraction of a second later. Those who bought (or sold, as the case may be) first have captured and locked in most of the available gains. Since gains are concentrated among the early winners, and the closeness of the runner-ups doesn’t so much matter for income distribution, asset-market trading thus encourages the ongoing concentration of wealth. Many investors make lots of mistakes and lose their money, but each year brings a new bunch of projects that can turn the early investors and traders into very wealthy individuals.
These two features of the problem—“going short on volatility” and “getting there first”—are related. Let’s say that Goldman Sachs regularly secures a lot of the best and quickest trades, whether because of its quality analysis, inside connections or high-frequency trading apparatus (it has all three). It builds up a treasure chest of profits and continues to hire very sharp traders and to receive valuable information. Those profits allow it to make “short on volatility” bets faster than anyone else, because if it messes up, it still has a large enough buffer to pad losses. This increases the odds that Goldman will repeatedly pull in spectacular profits.
Still, every now and then Goldman will go bust, or would go bust if not for government bailouts. But the odds are in any given year that it won’t because of the advantages it and other big banks have. It’s as if the major banks have tapped a hole in the social till and they are drinking from it with a straw. In any given year, this practice may seem tolerable—didn’t the bank earn the money fair and square by a series of fairly normal looking trades? Yet over time this situation will corrode productivity, because what the banks do bears almost no resemblance to a process of getting capital into the hands of those who can make most efficient use of it. And it leads to periodic financial explosions. That, in short, is the real problem of income inequality we face today. It’s what causes the inequality at the very top of the earning pyramid that has dangerous implications for the economy as a whole. [More]
The whole essay is a must-read for farmers, but the section I excerpted is rapidly forming the backbone of my outlook. "First movers" will reap disproportionate rewards and grain farming is heading for even greater levels of inequality partly as a result.

In fact, I expect "winner-take-all" to characterize my corner of the economy just like it does finance.  I'll outline my reasoning later after this weeks travel.

But the close of Cowen's essay was pretty dispiriting.

A third view is perhaps most likely. We probably don’t have any solution to the hazards created by our financial sector, not because plutocrats are preventing our political system from adopting appropriate remedies, but because we don’t know what those remedies are. Yet neither is another crisis immediately upon us. The underlying dynamic favors excess risk-taking, but banks at the current moment fear the scrutiny of regulators and the public and so are playing it fairly safe. They are sitting on money rather than lending it out. The biggest risk today is how few parties will take risks, and, in part, the caution of banks is driving our current protracted economic slowdown. According to this view, the long run will bring another financial crisis once moods pick up and external scrutiny weakens, but that day of reckoning is still some ways off.
Is the overall picture a shame? Yes. Is it distorting resource distribution and productivity in the meantime? Yes. Will it again bring our economy to its knees? Probably. Maybe that’s simply the price of modern society. Income inequality will likely continue to rise and we will search in vain for the appropriate political remedies for our underlying problems.  
And I can't find any arguments against it.  Other opinions here and here.