The new face...  

Of the Plains. Hint: it doesn't look like me.

For generations, the story of the small rural town of the Great Plains, including the dusty tabletop landscape of western Kansas, has been one of exodus — of businesses closing, classrooms shrinking and, year after year, communities withering as fewer people arrive than leave and as fewer are born than are buried. That flight continues, but another demographic trend has breathed new life into the region.

Hispanics are arriving in numbers large enough to offset or even exceed the decline in the white population in many places. In the process, these new residents are reopening shuttered storefronts with Mexican groceries, filling the schools with children whose first language is Spanish and, for now at least, extending the lives of communities that seemed to be staggering toward the grave.

That demographic shift, seen in the findings of the 2010 census, has not been uniformly welcomed in places where steadiness and tradition are seen as central charms of rural life. Some longtime residents of Ulysses, where the population of 6,161 is now about half Hispanic, grumble over the cultural differences and say they feel like strangers in their hometown. But the alternative, community leaders warn, is unacceptable. [More]

As we have become expectant of instantaneous, radical changes in our world, we often miss the merely rapid social changes happening around us. My grandchildren will live in a different rural America, it seems. Nor do I think this demographic trend will stop at the Mississippi, although the economic structure variations will certainly revise its pattern. But it is hard to ignore the consequences of a shift like this:

[Click to enlarge][Same source]

 

The really big problem...  

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

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

The question for me is not when where will the consumers come from, but what will they do to earn a living?

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

The standard answer is education, but there are signs that solution isn't working like it used to as well. Demand for college graduates is slow, salaries are dropping, and meanwhile education costs spiral upwards.

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

Stanley Aronowitz and William DiFazio wrote a pretty gloomy book in 1994 with the striking title, The Jobless Future. Here is a Harvard Educational Review discussion of the book (link). What is most discomforting in reading the book today is the degree to which the factors they identify seem to be today's headlines. What does jobless mean here? In a word, it means that the US and other OECD countries will never recover the number and quality of jobs they need in order to regain the middle class affluence they had in the 1950s and 1960s. The future will involve work -- but not enough jobs to ensure a low unemployment rate. Here is their assessment in 1994:

For there is no doubt that we have yet to feel the long-term effects on American living standards that will result from the elimination of well-paid professional, technical, and production jobs. At the same time, nearly everyone admits that many of these jobs are gone forever. (xi)

The central structural factors they identified in 1994 are still key parts of our economic environment today: technology innovation replacing labor, rising productivity producing persistently flat labor demand, shifts in the structure of the economy towards finance and service sectors, and internationalization of production. [More gloomy pondering]

I cannot see why our profession will be exempt. In fact, only land ownership seems to be a guarantee against displacement: when your buy a farm, you buy the right to name the farmer.

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

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

Why I'm not talking much about...  

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

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

1. The proposals I have seen smell like Yellow Box payments WTO-wise.

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

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

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

3. The AFBF is not amused. I think the sprawling farm organization senses a whacking loss of clout should corn, soy and cotton advocates push the shallow-loss idea through.

The American Farm Bureau Federation also has sent a letter to members of the House and Senate agriculture committees questioning the development of any farm bill proposal that covers "shallow losses." Several proposals effectively involve gap coverage that would protect farmers' income up to 90% levels. Effectively, a farmer buys crop insurance at 75% protection levels, and the shallow plan would cover anywhere from 10-15%, depending on the proposal.
Farm Bureau said "a shallow loss program is a drastic departure from any previous farm policy design" and that "our biggest concern is that by reducing the risk of shallow losses, farmers may be encouraged to take on more risk than they would in response to market signals alone."
Farm Bureau said creating a shallow loss program would increase moral hazard because "insured individuals may engage in riskier behavior with only a $250 deductible, they may drive faster or in more extreme weather conditions than if they purchased a high deductible policy." See link below.
Farm Bureau's choice of a comparison led one commodity lobbyist to ask, "What are they drinking or smoking over there?" The letter puts Farm Bureau at odds with cotton, corn and soybean groups that have all proposed new crop programs. [More]

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

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

True mystery meat...  

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

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

The more unsettling accounts are how the umm, meat is processed.

Roger Mandigo is an emeritus University of Nebraska animal science professor credited with the technology that made the McRib possible. And here's its story, straight from the meat scientist's mouth.

Roger Mandigo earned induction into the Meat Industry Hall of Fame for his invention of "restructured meats."

Back in the 1970s, Mandigo tells The Salt, he was approached by the National Pork Producers Council (the folks who later brought you "the other white meat") to create a product with pork trimmings that could be sold to the fast food giant.
"The pork producers wanted to see more pork on the menu, and they were targeting McDonald's," Mandigo said.
Mandigo went to work in the lab and came up with a new take on an old-fashioned technology: sausage-making. Instead of just stuffing pork meat inside a casing, Mandigo used salt to extract proteins from the muscle. Those proteins become an emulsifier "to hold all the little pieces of meat together," he says.
"All we did was reuse the technology that had been around for hundreds of years and emphasize that we could shape products to shapes people wanted," he says.
And here is where our story takes an interesting twist: Seems the McRib was not born in the shape of its current pork patty. The original concoction Mandigo made was formed as a faux pork chop.
McChop? Maybe not.
"[McDonald's] chose the shape," Mandigo said. "They wanted it to look like the boneless part of a backrib."
That's why Mandigo is adamant that he was not the father of the McRib, despite getting the credit for it all these years. [More]

Still others use the McRib to bash modern hog production methods.

Bad news for fans of the infamous McRib: The Humane Society filed a legal complaint against Virginia-based Smithfield Foods, which supplies the pork for McDonald's sandwich. In an undercover operation from 2010, the animal rights group says it uncovered a number of disturbing farming practices, including the use of tightly confining gestation crates that cause sows to suffer "from open pressure sores and other ulcers and wounds," with nary a veterinarian in sight. Will these gross allegations sully the reputation of the barbecue-sauce-slathered sandwich?[More]

But the most curious element is the intermittent appearance of the McRib on the MacDonald's menu. There is even a theory for that.

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

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

This strange sandwich provokes strange reactions in consumers. But it's most lasting effect may be the piling on consequence of yets another restaurant/grocery offering that should not be examined in detail.

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

Reportless on the farm...  

Even as confidence in NASS reports falters, budget cuts could be adding to the woes of the agency. So much so that smaller commodities may have to count themselves, so to speak.

In light of funding reductions in fiscal year (FY) 2011 and the likelihood of additional reductions in FY 2012, NASS conducted deliberate reviews of all programs against mission- and user-based criteria, aimed at finding cost savings and forward-thinking business efficiencies so that key timely, accurate and useful data remains available in service to agriculture. As a result, the agency is discontinuing or reducing a wide range of agricultural survey programs. The decision to eliminate or reduce these reports was not made lightly, but it was nevertheless necessary, given the funding situation. Because of the timing of the agency’s survey work during the coming year, these decisions are necessary now. These programs are:

• Annual Reports on Farm Numbers, Land in Farms and Livestock Operations - Eliminate
• Catfish and Trout Reports – Eliminate all
• Annual Floriculture Report - Eliminate
• January Sheep and Goat Report - Eliminate
• Chemical Use Reports – Reduce frequency of commodity coverage
• July Cattle Report - Eliminate
• Distiller Co-Products for Feed Survey - Cancel
• Annual Bee and Honey Report - Eliminate
• Annual Hops Production Report - Eliminate
• Monthly Potato Stocks Report – Reduce from monthly to quarterly
• Annual Mink Report – Eliminate
• Fruit and Vegetable in-season forecast and estimates– Reduce from monthly and quarterly to annual report
• Nursery Report – Eliminate
• Rice Stocks June and September reports - Eliminate but continue January, March and August reports

Recognizing the importance of NASS’s data products and services to U.S. agriculture, NASS will make available similar data either less frequently or within the every 5-year Census of Agriculture. The next census will be conducted beginning January 2013 to reflect activities in the 2012 calendar year. [More]

The irony here is these may be the more accurate of all the reports the agency does. But it also presages what could happen to even major commodities.

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

Many of the reports being cut today, including those on mink, catfish, trout, flowers and honey, were eliminated during an earlier round of budget tightening in 1982. A year later, most of the reports were restored by Congress because of appeals from farm groups.

William E. Kibler, the administrator of the statistics service at the time, said the experience showed how hard it was to eliminate a government program, no matter how small the constituency.

“The commodity organizations out there are pretty strong,” he said. “These congressmen up on the Hill say, ‘$50,000 is not much, let’s give it to them.’ ”[More]

Coupling this with the apparent ineffectiveness of the AFBF influence during the "secret" farm bill debate, and one begins to wonder if the vaunted ag lobby isn't losing steam. At the least, it would appear commodity organizations like the NCGA have taken over the helm.

Button down the hatches...  

Alaska is about to be hit by a super-storm.

A ferocious, dangerous storm in the north Pacific is on a collision course with the west coast of Alaska. Referred to as the “Bering Sea Superstorm” by the National Weather Service Office in Fairbanks (NWS), damaging winds, severe beach erosion and major coastal flooding are expected. In some locations, heavy snow and blizzard conditions are also forecast.
“This will be one of the most severe Bering Sea storms on record,” the NWS wrote today.
The storm is predicted to deepen at an incredible rate, with its central pressure crashing from 973 mb this morning to 945-950 mb tonight.
“This storm has the potential to produce widespread damage,” the NWS in Fairbanks said.
Sustained winds of 80 mph (with gusts to 90 mph in some locations) may impact an area the size of Colorado with offshore waves to more than 40 feet according to the NWS Facebook page. A storm surge of 8 to 10 feet is predicted along the coast. The combination of wind, waves, and high sea levels will create many hazards as described by the NWS in a Special Weather Statement:
THE HIGH SEA LEVELS COMBINED WITH HIGH WAVES WILL PRODUCE SEVERE BEACH EROSION AND MAJOR COASTAL FLOODING ALONG THE NORTHERN AND EASTERN SHORES OF NORTON SOUND AND ALONG THE BERING STRAIT COAST. HIGH WATER LEVELS WILL PRODUCE COASTAL FLOODING ALONG THE SOUTHERN SHORE OF NORTON SOUND. STRONG WINDS AND WAVE ACTION MAY PUSH ICE IN NORTON BAY ON SHORE. [More]

Double Yikes!

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

Kerry Emanuel, the lead author of the new study, wrote a paper in 2005 reporting an apparent link between a warming climate and an increase in hurricane intensity. That paper attracted worldwide attention because it was published in Nature just three weeks before Hurricane Katrina slammed into New Orleans.
Emanuel, a professor of atmospheric science in MIT's Department of Earth, Atmospheric and Planetary Sciences, says the new research provides an independent validation of the earlier results, using a completely different approach. The paper was co-authored by postdoctoral fellow Ragoth Sundararajan and graduate student John Williams and recently appeared in the Bulletin of the American Meteorological Society.
While the earlier study was based entirely on historical records of past hurricanes, showing nearly a doubling in the intensity of Atlantic storms over the last 30 years, the new work is purely theoretical. It made use of a new technique to add finer-scale detail to computer simulations called Global Circulation Models, which are the basis for most projections of future climate change.
"It strongly confirms, independently, the results in the Nature paper," Emanuel said. "This is a completely independent analysis and comes up with very consistent results."
Worldwide, both methods show an increase in the intensity and duration of tropical cyclones, the generic name for what are known as hurricanes in the North Atlantic. But the new work shows no clear change in the overall numbers of such storms when run on future climates predicted using global climate models. [More]

The combination of more energy from hotter air and more water vapor leads me to prepare for a wider range of weather possibilities. Luckily, I'm not quite as close to an ocean or Arctic air as those guys hunkering down in AK.

You'll never guess...  

Who said this:

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

Nope - not Ron Paul.

College doesn't pay...  

For some - it just costs.  College is no longer the guarantee of a good or even adequate job. Especially considering the enormous increase in the cost.

Yes, the college grad will spend years paying off her loans. But eventually her earnings net of loan payments will pull ahead of the high school graduate's. So, case closed. It may hurt to write the checks, or borrow, but college pays.
Well, maybe not.
According to the College Board, it takes 14 long years before the four-year college grad's income, net of loan payments, starts to beat what the high school grad earns. During all those 14 years, college doesn't pay. High school pays. [More]

Recently there has been a vigorous debate about the how much choosing the wrong degree is contributing to this problem. Ryan Avent has the best answer to this criticism, I think.

Personally, I think this kind of blog post—Mr Cowen's—goes a long way toward explaining the current job market malaise for the young. It is remarkable to me how readily old, successful professionals dismiss the labour-market difficulties of young adults as the product of their poorly-chosen majors and general lack of ambition, and on what flimsy evidence they're prepared to base these views. There are now 3.3m unemployed workers between the ages of 25 and 34. That's more than twice the level in 2007. There are over 2m unemployed college graduates of all ages; nearly three times the level of 2007. There are many millions more that are underemployed—unwillingly working less than full-time or unwillingly working in a job outside their field which pays less than jobs in their field. As far as I know, the distribution of college majors didn't swing dramatically from quantitative fields to art history over the past half decade.
Meanwhile, the Wall Street Journal provides us with a handy interactive graphic examining unemployment rates by major according to the 2010 Census. Coming in toward the top of the list and ahead of "art history and criticism" are the sorts of degrees you'd expect, like those falling into "miscellaneous fine arts", but also "computer administration management and security", "engineering and industrial management", "international business", "electrical and mechanic repairs and technologies", "materials engineering and materials science", "genetics", "neuroscience", "biochemical sciences", and "computer engineering". I bet those graduates are all trying to break into puppetry!
I am sure that many young graduates feel entitled to better work than they've managed to find, and some of them probably chose poorly when it came time to matriculate. But I see little evidence that high unemployment is due to the shiftlessness of youths and far more evidence that high youth unemployment is due to systematic weakness in labour markets associated with a shortfall in aggregate demand. [More worth reading]

While I agree there seems to be no evidence students are flocking to dubious majors more so than before, it seems obvious the demands of a thin job market accentuates discriminates against them more. Now add in the the decline in public employment (teachers, administrators, government workers, etc.) which was often the employer of last resort for such degrees and you have the "Dustin" phenomenon.

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

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

Politicians and educators have been wringing their hands for years over test scores showing American students falling behind their counterparts in Slovenia and Singapore. How will the United States stack up against global rivals in innovation? The president and industry groups have called on colleges to graduate 10,000 more engineers a year and 100,000 new teachers with majors in STEM — science, technology, engineering and math. All the Sputnik-like urgency has put classrooms from kindergarten through 12th grade — the pipeline, as they call it — under a microscope. And there are encouraging signs, with surveys showing the number of college freshmen interested in majoring in a STEM field on the rise.

But, it turns out, middle and high school students are having most of the fun, building their erector sets and dropping eggs into water to test the first law of motion. The excitement quickly fades as students brush up against the reality of what David E. Goldberg, an emeritus engineering professor, calls “the math-science death march.” Freshmen in college wade through a blizzard of calculus, physics and chemistry in lecture halls with hundreds of other students. And then many wash out.

Studies have found that roughly 40 percent of students planning engineering and science majors end up switching to other subjects or failing to get any degree. That increases to as much as 60 percent when pre-medical students, who typically have the strongest SAT scores and high school science preparation, are included, according to new data from the University of California at Los Angeles. That is twice the combined attrition rate of all other majors.

For educators, the big question is how to keep the momentum being built in the lower grades from dissipating once the students get to college. [More]

I also wonder that an oversupply of engineers, etc. might not soon remove these last "safe" degrees, reducing job searches to more a matter of luck and connections than merit.

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

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

Back in the saddle again...  

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

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






[Here for the interactive source]

Look, I know...  

Youse guys are all done, but we about 75% (500 acres of corn left). Between that and some complicating personal matters and the multiple deadlines for FJ, TP, and USFR I find myself short on enthusiasm/energy to post. Plus the GSS needs to be done (interior) in time for Thanksgiving - which is a home game.

I do miss the contact, and this week should see us way down the road.

Hope yours was a safe and surprisingly good harvest.

Thanks for reading.

Kiss a half-hour goodbye...

My latest comic find: Savage Chickens

 [BTW, I was right. Full-season hybrids are worse.]

The best words...  

Written about Steve Jobs:

As always there are those who reveal their asininity (as they did throughout his career) with ascriptions like “salesman”, “showman” or the giveaway blunder “triumph of style over substance”.  The use of that last phrase, “style over substance” has always been, as Oscar Wilde observed, a marvellous and instant indicator of a fool. For those who perceive a separation between the two have either not lived, thought, read or experienced the world with any degree of insight, imagination or connective intelligence. It may have been Leclerc Buffon who first said “le style c’est l’homme – the style is the man” but it is an observation that anyone with sense had understood centuries before, Only dullards crippled into cretinism by a fear of being thought pretentious could be so dumb as to believe that there is a distinction between design and use, between form and function, between style and substance. If the unprecedented and phenomenal success of Steve Jobs at Apple proves anything it is that those commentators and tech-bloggers and “experts” who sneered at him for producing sleek, shiny, well-designed products or who denigrated the man because he was not an inventor or originator of technology himself missed the point in such a fantastically stupid way that any employer would surely question the purpose of having such people on their payroll, writing for their magazines or indeed making any decisions on which lives, destinies or fortunes depended. [More]

Even though I have grown to love Apple products, I have never really felt totally on-board like other fans. I did have a respect for Jobs simply because he was a class act in a world full of few.

Fry's point above about style and substance I found intriguing. Engineers are skeptical of style, even while we suffer for our convictions that substance will win out in the end.

It's kinda like all of us farmers who think fundamentals will eventually decide the market.


Yeah - that's working well...

The case for volatility...  

It's not fun to watch the market these days, but there is a growing awareness in the economics community that wild price swings may actually be necessary with very complex financial systems in order to make them fully transparent on risk.

The argument is akin to ideas about forest management—when governments suppress the natural fires that periodically clear away forest underbrush, they create a build-up of flammable material sufficient to power a massive conflagration. I certainly think an equivalent truth applies to financial markets. The longer it has been since a painful collapse, the greater the willingness to pile on leverage and complexity, such that the next crisis becomes unmanagably awful. I think it's important to be careful in applying this idea, however. A few caveats are in order.
...

Macroeconomic stabilisation is consistent with healthy volatility; real shocks can be perfectly good at trimming back over-aggressive financial actors. It's a mistake to think that a deep, demand-side recession is the only thing that will do where financial-market discipline is concerned.
And that brings us to the third point: suppression of macroeconomic volatility isn't as big a problem for financial markets as is moral hazard. I'm not sure that the relatively smooth macroeconomic performance of the last 30 years was as big a contributor to financial-market vulnerability as was the practice of stepping in to bail-out key creditors at various points over that period, while simultaneously facilitating a big increase in leverage. Governments that develop a habit of bailing out institutions when crisis strikes, and which don't go on to reform regulatory rules to ensure that next time the system is robust to individual failures, well, they're begging to suffer a build-up of financial-market excess. [More]

For agriculture the volatility we are seeing now has been greeted by some of us as an endurable exercise, since it allows our demand base at least the opportunity to lock in some less expensive feed/feedstocks and lowers the massive overhead pressure of outside funds being long.

What this also calls into question is the value of technical analysis. I like to think of lines on price charts as "elephant tracks" - the evidence of the fearful, vain elephant in our emotional "old" brain. Alarming price moves soon wear out comparisons with price history upon which technical analysis is supposedly based.


Investors may be feeling the same way, and are "not going to the ball park", as Yogi Berra would say, in droves.

Last week’s record volatility in U.S. stocks ended after four days. The anxiety it instilled among mutual-fund investors may linger for years.

Investors pulled a net $23.5 billion from U.S. equity funds in the week ended Aug. 10, the most since October 2008, when markets were reeling from the collapse a month earlier of Lehman Brothers Holdings Inc., the Investment Company Institute said yesterday. The period tracked by the Washington-based trade group included three of the unprecedented four consecutive days in which the Standard & Poor’s 500 Index rose or fell by at least 4 percent.
The roller-coaster ride was unnerving for fund investors who have already endured the bursting of the Internet bubble in 2000, a 57 percent collapse in the S&P 500 Index (SPX) from October 2007 to March 2009 and the one-day plunge in May 2010 that briefly erased $862 billion in value from U.S. shares. The debacles, combined with falling home prices, unemployment above 9 percent and a lack of trust in government to bring down spending, may sour individual investors on domestic stock funds for an additional three to five years, according to Andrew Goldberg, a market strategist at JPMorgan Funds in New York. [More]

In our own industry, think about the cash rent negotiations in progress that just took a different turn. I am in the middle of new leases, and rethinking some of my bids. There is suddenly more justification for lower offers, and those offers will look pretty good compared to prices today. My thinking is this atmosphere offers a good chance to secure a reasonable rent along with a promise/mechanism to share any future windfalls for those owners who find that important.


It may not work as planned, but this window of sharply lower prices may be the grain farmer's equivalent of today's feed buyer opportunity to control lower priced inputs.

Weekend Update...  

We've only done about 80 acres, but the early (105 day) corn was better than expected (185-200). The later planted, fuller season drops off, judging by some end rows and half-ears.

Guys around me are getting very good beans, however, 60-65. Our early beans were less, but still better than we imagined. For the first time in four years we at least had some plants on the heavy black parts instead of holes, so those areas handled the dryness better.

Lighter soils and c-o-c are 30-50 bpa less reportedly.

Meanwhile, the cold temps last night have me scrambling to get the heaters in the greenhouse and GSS going.

This what summer...  

Should be like for kids.



As opposed to split-second over-scheduling.

It's not just crop reports...  

That suck.  Even the BEA is having a hard time generating good macroeconomic stats.

There’s one big reason why the current economic weakness in the US has come as such a shock. It’s not the only reason, but it’s an important one, and it hasn’t gotten nearly the attention it deserves: the state of macroeconomic data-gathering in the US is pretty weak.
In particular, the data coming out of the Bureau of Economic Analysis at the beginning of 2009 was way off. Here’s Cardiff Garcia, introducing an interview with Fed economist Jeremy Nalewaik:

The initial GDP estimate for the fourth quarter of 2008 showed that the economy contracted by 3.8 per cent. It was released on January 30, 2009 — about three weeks before Obama’s first stimulus bill passed. That number was continually adjust down in later revisions, and in July of this year the BEA revised it all the way down to a contraction of 8.9 per cent.

The BEA is happy to try to explain what happened here — but whatever the explanation, the original 3.8% figure was a massive and extremely expensive fail. It was bad enough to be able to get a $700 billion stimulus plan through Congress, but if Congress and the Obama Administration had known the gruesome truth — that the economy was contracting at a rate of well over $1 trillion per year — then more could and would have been done, both at the time and over subsequent months and years. Larry Summers warned at the time that the risks of doing too little were much greater than the risks of doing too much; only now do we know just how right he was on that front. (And even he didn’t push for a stimulus of more than $700 billion.)
So what’s being done to beef up the state of America’s macroeconomic statistics so that this kind of monster error doesn’t happen again? The BEA is doing the best it can, but it’s constrained both in terms of its budget and in terms of the quality of economists it can attract. [More]

Of course, the widely touted failure of the stimulus is anything but. It stopped the freefall and until it ran out, sustained our emergence from recession even while states were massively cutting back. But had we but known the real magnitude of the plunge in the 2008 Q4, a larger and more effective stimulus would likely have helped even conservative economists to accept a larger stimulus.

Conservative economist Douglas Holtz-Eakin has a chart he's fond of that demonstrates just how ineffective the 2009 stimulus was. Basically, it shows that the stimulus cost $260 billion and produced only an extra $268 billion in GDP. Personally, I'd take even that, but his point is that the stimulus produced no Keynesian multiplier effect at all. It was just a 1:1 replacement of revenue from one source to another.
But as you may recall, the US Bureau of Economic Analysis recently revised its GDP estimates from late 2008 and 2009, and it turns out the economy was doing much worse than we thought. And if you don't recall this, Michael Linden wants to remind you about it today. He also wants to remind Douglas Holtz-Eakin about it. Because it turns out that when you redo Holtz-Eakin's favorite chart using the corrected data, it suggests that the stimulus bill produced about $544 billion in extra GDP. In other words, a multiplier effect of about 2x. [More]

Bringing an economy from rapid deceleration to sluggish growth is an accomplishment, but anything less than a roaring boom strikes most of us as unsatisfactory. Unless we focus more on short term responses coupled with long term commitments, we will continue to muddle along in the the gray days of stagnation for far too long.

But it should be clear we really dodged a deadly bullet in 2009. Things could be much, much worse right now.

Junkbox, Episode II.7...  

The least I can do is share some stuff I've found curious.

• Saving the Post Office
• Everybody who is NOT running line up to the left.
• Can we "Ireland" our way to prosperity?
• Negotiating cash rent? How to make the decision.
• The end of jobs
• The best description of peak oil I've read. Bonus question: What does this mean for ethanol in the future?

If you had any doubts...  

About the attitude of at least some financial traders, this should dispel them.

[Yeah - the posting is really slow, but I sliced my thumb open on some electrical tubing and my whole hand is useless. It will pick up after harvest and construction completion. Honest.]

Fuel for thought...  

I have never really followed the argument that higher fuel costs were a big deal for my budget. To be sure, they rippled through input costs (especially fertilizer), but otherwise never moved my needle for cropping decisions. 

Hence my puzzlement at statements like this:

Agricultural production is sensitive to changes in energy prices, and higher energy prices could cause acreage shifts.

With higher energy related expenses from 2012 to 2018 (fuel up an average of 2.6% to 5.3% and fertilizer up 4% to 10%), total acreage for corn, sorghum, barley, oats, wheat, rice and upland cotton would decrease by an average of 0.2% (under the lower energy price change scenario) to 0.4% (higher price change scenario). [More]

Really? In my world, those figures show almost complete INsensitivity to energy prices. In fact, 0.2% strikes me as outside the error band for projections five years out.

Now add in the increased efficiency of Tier 4 engines that will start populating our farms.

But give tractor manufacturers credit. They met the EPA's January 2011 deadline for Tier 4A compliance. (Final Tier 4 compliance is due by January 2014.) Not only that, they created engines that are more powerful and more efficient than what came before. Trials at the Nebraska Tractor Test Lab confirm that.

A few months ago, CNH proudly announced that some of its Tier 4A tractors had set records for fuel efficiency during preliminary trials at the Nebraska Tractor Test Lab. [More]

I will note in passing that this boost - while expensive upfront - also demonstrates the possibility that environmental protection can prompt regulation that nudges us in a better direction.

I am not now actually using less fuel per acre the longer I farm. It's down below 4 gpa, where it has been for years.  

The more interesting energy question for me is why propane isn't dirt cheap like natural gas. The reason is the production process.

Propane is produced as a by-product of two other processes, natural gas processing and petroleum refining. The processing of natural gas involves removal of butane, propane and large amounts of ethane from the raw gas, in order to prevent condensation of these volatiles in natural gas pipelines. Additionally, oil refineries produce some propane as a by-product of cracking petroleum into gasoline or heating oil. The supply of propane cannot easily be adjusted to meet increased demand, because of the by-product nature of propane production. About 90% of U.S. propane is domestically produced.^{[citation needed]} The United States imports about 10% of the propane consumed each year, with about 70% of that coming from Canada via pipeline and rail. The remaining 30% of imported propane comes to the United States from other sources via ocean transport.
After it is produced, North American propane is stored in huge salt caverns located in Fort Saskatchewan, Alberta; Mont Belvieu, Texas and Conway, Kansas. These salt caverns were hollowed out in the 1940s,^[9] and they can store 80 million or more barrels of propane. When the propane is needed, most of it is shipped by pipelines to other areas of the Midwest, the North and the South, for use by customers. Propane is also shipped by barge and railway to selected U.S. areas.^{[citation needed]}

[More]

So instead of propane being made from NG on purpose, it is more what you have left over after extracting the NG. This makes the economics of production a little more complicated that I thought.

Increased liquids prices can lower gas producers’ breakeven costs by $2 per million Btu, which may boost U.S. output by more than 8 percent through 2014, according to Sriram Vasudevan, a New York-based director at Macquarie Energy Markets.
Propane at the Mont Belvieu hub in Texas gained 3 cents, or 2.3 percent, to $1.36 a gallon on Jan. 10, the highest price since Feb. 3, according to DTN, a unit of Telvent GIT SA, a Madrid-based information provider. Ethane at Mont Belvieu was unchanged at 60.75 cents a gallon. Ethane fell to 43.5 cents on June 23. Butane climbed 31 percent since early July to $1.70 a gallon. [More]

(The "liquids" refer to propane, butane and ethane.)

I also think the no-till claims of drastic fuel usage decreases to be less useful than at first glance. "Rolling" fuel is a $10-15 expense, which today isn't a real biggy or subject to major savings by shifting production methods.

Another reason I think no-till will probably continue its stagnant or diminishing share of acres.

All things considered, this may be all I think about fuel for this year. There are way bigger fish to fry, economically.

This Bud's for you...  

Not me. I can't stand the stuff. But my feelings pale in comparison to this critic:

I don’t drink Budweiser and never have. I’ve tasted it three times (a total of about 3 ounces), first while at the University of Maryland, once again in Myrtle Beach, SC, in 1984, and then again in Seattle, in 2005, at the urging of their distributor’s rep, who - correctly - observed that tasting a thing  21 years ago wasn’t giving it a fair shake. It tasted exactly the same: like a wet piece of the cardboard that comes in new dress shirts – and that’s not an original observation. I first read it on the website of the world’s foremost beer critic, Britain’s Michael Jackson. He had almost nothing positive to say about Bud. I don’t either.
Budweiser has always been far more about marketing than beer. The founder of Anheuser Busch, Adolphus Busch, refused to drink his own brew, calling it “that slop” (he was German, of course, so it came out “dot schlop”) and stuck to wine. AB first made its massive incursion into every American beer market not because Americans were clamoring for the fantastic beer but because the uber-financed new St. Louis brewery actually paid the rent for tavern owners who agreed to sell Bud and kick out all their competitors. (The source for all this – principally, along with a ton of my own research – is an article from Chicago journalist and author Edward McCleland, writing in Salon.com, which you can read here.) When AB was just  moving into its ascendance, there were over 100 small breweries making virtually the same beer as Bud, the mild, aggressively-inoffensive, watery Pilsner, a style that originated in Czechoslavakia as a ladies’ beer; a wimpy alternative for the delicate palates of proper Czech ladies who couldn’t stand the big German Alts and Lagers or the muscular Belgian ales. [More fun reading for Bud-haters]

While I do not stand with the "Over-regulation Hysterics" (more on this in my next TP column), I will grudgingly grant that beer distribution laws have to stand as one the absolute examples of bad, awful, economically perverse regulation. And it's hurting our beer choices just when things are looking up for suds-fans.

The measure is intended to limit the ability of brewers to own wholesale distributorships and restaurants. As explained by Open Market, its primary backer is MillerCoors, which claims to be trying to ward off an attempt by their main competitor, AB/InBev (Anheuser-Busch), to buy up beer distributors and squeeze out other companies’ products. But the state’s microbreweries may be the real victims of the provision.
“Wisconsin’s craft brewers are getting caught in some cross fire between MillerCoors and Anheuser Busch,” the Blue Cheddar Blog explains. If this thing goes forward, it will be much more difficult to start a new small beer brewing business with room to grow in one of the states that loves beer the most.”
“This motion was sold to the legislators by Miller/Coors and the Wisconsin Beer Distributors Association on the premise that it would protect Wisconsin from a hostile AB/InBev take over of many current Wisconsin wholesalers,” the blog continues. “This is simply a farce. Since InBev took over AB, they have had 16 opportunities to buy wholesalers and have passed 16 times. Here is the real truth….Miller/Coors and the WBDA are threatened by the growth that is happening in the craft beer industry. Craft is the only segment of beer that is growing, and it is growing by double digits.”
Wisconsin’s craft brewers, who were not consulted while the measure was being framed, account for only about 5% of sales, but their share is increasing. “Everything in this bill is designed to make it harder for small craft brewers to grow,” complained Deb Carey, a co-owner of New Glarus Brewing. “It is a slimy piece of legislation.”
“We are losing assets and we are losing control over our products,” Carey added. “This debate boils down to the fact that the wholesalers do not want a drop of beer going to market in Wisconsin without them making their 30 percent profit from it. That’s it.” [More]

You read that right - the largest chunk of profit in the lager-chain is distribution! Really makes sense, doesn't it?

Can't even imagine...

What being this coordinated would feel like...

 

[via sullivan]

Another hopeful discovery...  

Watered down.  My belief that fracking had uncovered a legitimate "bridge fuel" to replace coal is still solid, but diminished. As always there are some detail problems.

But if natural gas is, in fact, cleaner than coal, why would it accelerate climate change in the near-term? The key fact here is that burning coal emits two different types of pollutants. First, there’s carbon dioxide, which traps heat. But dirty coal plants also emit aerosol pollution — sulfates and other particles that stay in the air for a shorter amount of time and cool the planet by reflecting incoming sunlight back into space. These particles are bad for human health and cause problems like acid rain, but they do have a short-term cooling effect. (Since aerosols linger in the atmosphere for a shorter period than carbon dioxide, the warming effect eventually prevails.)
Since natural gas is cleaner and emits fewer sulfates, you’d actually get more warming in the short term. Now, since natural gas emits less carbon dioxide, you would get relatively less warming over a longer timeframe, although even then the net climate impact is fairly small. Ultimately, that’s not an argument against natural gas — after all, a slight improvement is still an improvement. Plus, reducing that sulfate pollution would lead to large public-health benefits. But the climate upside, at least, may not be as sweeping as advertised. [More]

Still, it is cheaper and easier to transport, much easier to build plants to burn, and capable of coming online remotely almost instantaneously. These advantages seem sufficient to use NG to replace coal to the maximum extent possible.

But we better still work on adapting to warmer temps and weird rainfall patterns.

Rural schools...  

Won't fit in any of the answers for America's education system. Consider this otherwise good idea for our economy and school system from Kim Manzi:

1. Deregulate schools. A publicly-funded private school is a contradiction in terms; with predominantly public funding comes the inevitable and appropriate demand for public accountability. But we need public schools to have greater flexibility in how they do their work—both in order to discover improved methods and also to tailor approaches to different kinds of students—while simultaneously exposing them to the kind of unsentimental feedback loop for school performance that markets can provide. Education is an industry representing about 4 percent of GDP that is badly in need of deregulation. 
School deregulation is much broader than “school choice,” and should have two key components. First, the federal government should establish a comprehensive national exam by grade level to be administered by all schools that are materially publicly funded. We should require each school to publish all results, along with detailed data about school budgets, performance, and so on, each year. Second, continued federal funding should be contingent on states’ passing model-schools legislation that creates simple, uniform rules for establishing new charter schools, and establishes the absolute requirement that funding follows students. 
The primary role of the federal government would be to ensure consistent, high-quality information, provide normal market regulation to allow education providers to achieve efficient scale, and sponsor rigorous basic research on educational practices. The role of education providers would be to compete entrepreneurially within this framework.
This is not a panacea. In a nation in which about 40 percent of all births occur out of wedlock, many children will be left behind. But better schools will create material improvement. And this method is not theoretical: Versions have already been implemented successfully in Sweden and the Netherlands, and a similar program is being implemented in Britain now. [More]

As always, vouchers and choice mean little when the only school for miles is the one you already have. But the teeny number of students and lack of political clout hint at even further degradation for small schools.

Nor is the idea of spending massive amounts to keep them up to the pace of city schools a good one either. Like much of our rural culture (churches, recreation, retail, etc.) demographics is the obstacle you can't finesse. As long as we continue to lose people, I see no alternative to losing local services, and Australian-like outback lifestyles.

Next up might be rural mail delivery.

I'm not opposed to small towns having a post office. I am not opposed to small, low-population counties continuing to exist as they were drawn at statehood. I am opposed to government spending money to maintain something that is inefficient and obsolete only because it is politically too painful to change it. The reality of rural America is that we've had a great deal for a long time and it's become an entitlement in our minds.
Rural Free Delivery started in 1902 across most of the United States. It cut the number of post offices by two thirds but added a lot of jobs for rural letter carriers, and a valuable service for farm families. The system worked so well that it endeared the "mail carrier" to those who saw the car or truck stop at their mail box each day. What most people don't see is the massive infrastructure behind the letter carrier and the incredible cost of transferring mail across the country so that each of us gets ours in our box, six days a week. [More]

I think Ken is right. From roads to RFD to schools, many of the elements of our wonderful way of life were heavily subsidized by urban taxpayers. That's going to stop, IMHO, regardless of who is president or Speaker.

On the outside chance...  

That House Republicans will actually consider the Obama jobs bill, there are some good things for farmers I didn't realize.

Mr Obama proposed not only extending a 2% payroll-tax cut scheduled to expire in December, but increasing it to 3.1%—half the employee’s normal contribution to Social Security. He also called for an equivalent 3.1% cut in the employer’s payroll tax for the first $5m of payroll, and elimination of the entire 6.2% tax on the wages of new hires or on pay raises for current employees. At $240 billion, those provisions account for more than half the plan’s price tag. [More]

I am assuming that self-employed would get the same breaks which would be worth a few thou to most of us who are maxed out on the SE tax. Even more valuable in the days of high farm income is the expensing continuation (although that merely postpones taxes, as many of us are being reminded).

But because it looks like it may actually help the economy, it could interfere with the GOP goal: defeat Obama. This is a tricky calculation, and if they are correct - keep the economy faltering to win the White House - I wonder that Washington will ever be able to act reasonably on economic matters in the future.

As one senior House Republican aide told Politico, “Obama is on the ropes; why do we appear ready to hand him a win?" That's a cynical question, obviously. But it's also the right question for understanding what is likely to happen next.
An ideal political process would work something like this: Congressional Republicans would take a look at the American Jobs Act and the forthcoming offsets. If they had specific concerns about some of the jobs proposals, they would propose alternatives. If they worried the offsets weren't sufficient, they would ask for more options. As the two parties agree on both the need to create jobs and reduce the deficit, this should be fertile ground for a compromise.
And maybe it will be. But that can only happen if the question is, "what's the best jobs package?" Unfortunately, as that senior House aide suggests, the question is likelier to be, "what's the best strategy for winning the White House in 2012?" And the answer to that question is to further the impression that Obama is a tax-and-borrow liberal who can't get things done in Washington and doesn't have a sound plan for the economy. Working with the president on a bipartisan jobs-and-deficit-reduction plan makes him look like, well, a good president. And good presidents often get reelected. [More]

It's not like the right has ideas that economists think will help either - tax and spending cuts are not the answer to every economic ill. But it looks like we may find that out in the next few years.

Wait - he was a cheerleader???...  

Rick Perry has done little to attract my admiration. But I may be giving him too much credit.

State and federal taxpayers financed his college education at Texas A&M, even giving him the extracurricular opportunity to be a cheerleader. Upon graduation, he spent four years on the federal payroll as an Air Force transport pilot who never did any combat duty.

Then, in 1984, Perry hit the mother lode of government pay by moving into elected office -- squatting there for 27 years and counting. In addition to getting regular paychecks from taxpayers for nearly three decades as a state representative, agriculture commissioner, lieutenant governor and governor, he also receives platinum-level health care coverage and a generous pension from the state, plus $10,000 a month for renting a luxury suburban home, a covey of political and personal aides and even a publicly paid subscription to Food & Wine magazine. [More]

This Bozo could well walk away with the nomination, as it stands today. And I will watch with interest as the only governor to request an ethanol waiver gets corn farmers to vote for him by not being Obama.

Junkbox, Episode CMON...  

So I started surfing while supper was cooking...

• An excellent summary of this summer's weather
• More on the Arctic ice phenomenon
• What my school was supposed to be like
• Is there any convergence between developing and developed economies?
• Another GOP defector
• How to make baseball games shorter. (I agree)
• The day of the Cheap Wine Guy has come!

Priorities...  

As I spend almost all available time in my new workshop getting the power and water systems running and moving tools, etc., I have found I feel less guilty about posting. As if I had the time anyway.

I think Jan and I may be moving to another phase of our lives, and I'm finally letting go of a lot of the pressures to speak and write above and beyond my FJ obligations. I having more time to farm and already have my growing list of projects (furniture, mostly) for family members.

I'll probably post more this winter, as I am not speaking nearly as much. But I frankly don't know what my goals for Incoming are.

I'm keeping it open, and may surprise you and me both.

As always, thanks for reading. See you whenever...

Three engineers...  

With five degrees, and it took all we had to get this up this weekend.

It should be clear why a 64' x 30' workshop was needed to support this structure.

Name the world's largest...  

Oil producer.

Nope.

Conflict of interest...  

Dan Ariely at his best.

 

Helpful harvest troubleshooting aid...