"The universe...

is not only stranger than we imagine, it is stranger than we can imagine." (Borrowed loosely from Sir Arthur Eddington)

There's a strange moon whizzing around Saturn that's shaped, oddly, like a walnut.

Now astronomers find that Iapetus got its nutty shape from a super-fast spin that was frozen into place early in the solar system's formation.

When the Cassini spacecraft snapped close-ups of Saturn's moons in 2005, it revealed a bulging waistline of rock along the equator of the now slowly spinning Iapetus. Astronomers think this characteristic shape persists because Iapetus was cryogenically frozen in time about 3 billion years ago, during the moon's "teen" years. [More]

The data pouring into our knowledge base from space missions will slowly change our view of everything, I believe - but nothing more so than our place in the universe.

Sign me up...

Although I had essentially written off broadband-over-power-lines (BPL) technology, it will become reality in Dallas next year.

DirecTV said it would bundle broadband-over-powerline high-speed Internet and VoIP with its digital TV services to about 1.8 million homes in the Dallas-Forth Worth, Texas region by early 2008. Benefits of broadband-over-powerline include faster upload and download speeds compared to many cable and DSL broadband services: up to 10Mb versus 8Mb, according to Current. The broadband service is symmetric, which means upload speeds are as fast as download speeds. Moreover, broadband-over-powerline works via a go-anywhere, installation-free modem that's about the size of a regular power adapter and plugs into any electrical outlet. It is Ethernet and WiFi enabled, which means it can fill in wireless coverage gaps created by cable or DSL, said Current VP of corporate development and strategy Brendan Herron. [More]

Note the speeds mentioned above. Zoweee!! Also consider:

• No satellite dishes
• VoIP (Internet phone service)
• No TV dish
• No meter reader
• More reliable electric service.

It's a dream, I know. But BPL would be a godsend to rural America.

[Updated: link is now activated]

Connect these dots...

Item #1: John Deere announces handsome profits.

Net income climbed to $537.2 million, or $2.37 a share, from $436 million, or $1.85, a year earlier, topping analysts' estimates. Sales grew 5.9 percent to $6.63 billion, the Moline, Illinois-based company said today in a statement.

Overseas machinery revenue increased by 30 percent, and the company said U.S. and Canadian retail sales of agricultural equipment gained momentum. That growth countered lagging demand in the construction and forestry division, which has been hurt by the slump in the U.S. housing industry.

``Higher North and South American agricultural equipment demand expectations, driven by a resurgence in farmer cash flow'' boosted sales, Andrew Casey, an analyst with Wachovia Capital Markets LLC in Boston, wrote in an Aug. 7 note. He rates the stock ``outperform'' and raised his third-quarter profit estimate to $2.05 a share. [More]

Item#2: Ag employers warn of labor shortages crippling entire sectors:

The agricultural sector, which depends heavily on migrant labor, may be the hardest hit. "It's going to be crazy," says Eli Kantor, a Beverly Hills-based immigration attorney: "There will be major disruptions to the economy of Southern California, [which is] heavily dependent on immigrant labor. There will be crops rotting in the fields." Kantor says he expects some of his clients to lay staff off, while he expects others will "take their chances." [More]

What do these developments suggest to me? American agriculture may be gravitating to growing crops that lend themselves to machine harvesting, while many fruits and vegetables will be increasingly imported.

Just in time for country-of-origin-labeling.

This oughta be train-wreck fascinating.

Feel free to flame me...

But if I find something this funny with HRC or Speaker Pelosi, I will post it as well.



Another reason to not trust your eyes on YouTube. This is really well edited.

[via Presurfer]

Sure you're covered?...

Unlike subsidized crop insurance which doesn't have to make actuarial sense since the government throws in $4-5B per year, the home insurance industry has to turn a buck. And guess how they are doing it?

Tunnell joined thousands of people in the U.S. who already knew a secret about the insurance industry: When there's a disaster, the companies homeowners count on to protect them from financial ruin routinely pay less than what policies promise.

Insurers often pay 30-60 percent of the cost of rebuilding a damaged home -- even when carriers assure homeowners they're fully covered, thousands of complaints with state insurance departments and civil court cases show.

Paying out less to victims of catastrophes has helped produce record profits. In the past 12 years, insurance company net income has soared -- even in the wake of Hurricane Katrina, the worst natural disaster in U.S. history. [More of a long but unsettling article]

I think computer technology is enabling insurers to find ingenious ways to maximize profits. The "good hands" may catch you, but maybe not as gently as before the pressure to generate returns took over.

The entire insurance industry is finding clever ways to pass risk off to somebody else. But perversely, it also means standing the risk by yourself - self-insuring - has a huge return.

For instance, how many of the crop-revenue policies that looked like a slam dunk last spring will pay off this year? At $40+ per acre that is a significant profit increase if you did not buy in.

Anyhoo, I 'm asking my agent about how payouts are going for my company.

The new farming frontier...

The organic advantage - how big is it? Or does it exist at all? In this week's Time, the inescapable Dr. Sanjay Gupta offers some remarkably reasonable comments about eating organic.

The evidence of nutritional advantages is almost as thin. Never mind the idea that organically grown foods fairly burst with vitamins that modern farming techniques drain out of crops. To date most studies have either shown no difference between organic and conventional produce or found very small pluses in the organic column, such as slightly higher levels of vitamin C or other antioxidants. [More]

Such advice is now common, as scientists and science reporters adhere to the scientific method that has carried us to the level of abundance we now enjoy. Nonetheless, the organic sector is growing vigorously thanks to consumer preferences and I for one welcome it.

Organic production is part of a bustling agrarian sector of agriculture that delivers a process (free-range, organic, grass-fed, cage-free, etc.) with a product (meat, eggs, etc.) is a legitimate market response to consumer demand. Farmers have no inherent right to say what the eating public should have to buy.

The agrarian sector, like all emerging industries does have some regrettable baggage. Extravagant claims of non-existent nutritional advantages, for example:

On the question of grain- versus grass-fed cows, some suggest that pasture-fed cows may produce milk that contains more conjugated linoleic acid (CLA), a special type of fat that may protect against cancer and other health problems. But Michael Pariza, professor of food microbiology and toxicology at the University of Wisconsin, and a leading expert on CLA in dairy products, says grass feeding by itself does not assure increased CLA. He and Bauman both note that cows fed mixed grains with soybeans or other additions can produce milk that has higher CLA levels than milk from grass-fed cows. This may lead you to spend less on milk and more on fruits, vegetables, whole grains, fish and other healthful foods. [More]

Agrarians have also found a way to tap into the strong animal welfare feelings that I think are overlapping our enormous pet industry. One of the latest battles is for cage-free eggs.

The eggs, from chickens raised in large, open barns instead of stacks of small wire cages, have become the latest addition to menus at universities, hotel chains like Omni and cafeterias at companies like Google. The Whole Foods supermarket chain sells nothing else, and even Burger King is getting in on the trend.

All that demand has meant a rush on cage-free eggs and headaches in corporate kitchens as big buyers learn there may not be enough to go around. [More]

Industrial producers like myself have been trying to write off these developments as consumer fads, but I think they are woven into the cultural shifts made possible by abundance and the differences in values of Boomers and succeeding generations. We also have struggles with a larger issue: agrarians are boldly snatching our outdated "family farm" image which we flog in the halls of Congress to attract subsidy support.

The growing divide between agrarian and industrial producers no longer alarms me. In fact, heated opposition to the agrarian movement is the last thing industrial ag should be spending time on. The market is sorting this one out as we speak.

Besides, the agrarian sector is an appropriate answer for the handful of products that lend themselves to selling the process - seasonal fruit/vegetables, large-purchase (halves, for example) meats, etc. It is also a good answer for ag topography that does not lend itself to large scale production, such as rolling/wooded terrain or near urban areas.

We have seen new business models emerge over the last decade for dozens of industries including travel, advertising, and publishing—all relying heavily on technology-based improvements in productivity and changes in distribution associated with the Internet.

Now we may be seeing the emergence of a new business model for small farms, which have lagged the transformation of other industries and continued to rely heavily on commodity pricing and middlemen distributors.

At the forefront of this revolution is the 10-employee, $700,000-a-year Polyface Farm, a 550-acre producer of beef, chickens, and pork in Virginia's Shenandoah Valley. A family farm run by its second generation owner, Joel Salatin, Polyface is thriving thanks to a combination of innovative use of technology to encourage livestock mobility, and streamlined distribution to bypass middlemen and instead sell products directly to consumers. [More]

This new business model also is labor intensive while industrial ag is shedding jobs via technology. For young people aspiring to a rural lifestyle the agrarian model seems more realistic than hoping to rent 1100 acres someday away from guys like me.

And as for the concern that agrarian producers could hijack our farm payments - I think industrial ag has put that idea to rest. When agrarians can't get Reps. Pelosi or Sen. Feinstein to support them, it indicates they got nothin'.

The scary part is agrarians may learn to succeed despite government, not because of it. Now those will be competitors!

The eye of the beholder...

When scientists get tattoos.

More - slideshow

[via The Loom]

The way of things...

I have seen some curiously disingenuous justifications for the barrage of input cost increases now being aimed at producers - especially corn farmers. I recently received an impressively glossy and doubtless expensive sales packet from Beck's Seed outlining how research costs, increased demand, new technology, yadda yadda were making price increases "necessary".

The implication was clear - we just have to raise prices.

Unsurprisingly, the fertilizer industry is singing from the same public relations hymnal.

High prices of natural gas have curtailed ammonia production, reducing the supply and increasing the cost of nitrogen fertilizer. The Caribbean is a potential source for increased imports, but with increasing dependency on imported nitrogen comes a chance for a volatile supply and a volatile price. [More]

While I agree there is a relationship to supplier input costs (research, natural gas) and farm input (seed, fertilizer) prices, it is minor compared to pricing power.

Input prices are going up because suppliers can raise prices and increase their profits secure in the knowledge that farmers can afford to and will pay higher prices, and hence demand will not drop. The pricing power also is strengthened by virtual monopolies or at least oligopolies in these industries.

I do not mean to imply gouging or unfair practices, just a sense of embarrassment that our suppliers think we will swallow these transparently misleading excuses when the same companies are reassuring investors how wide their margins are.

"Agrium's record second-quarter earnings were due to excellent results from all three of our strategic business units," said Wilson. "Results from our retail operations reflect the synergies we captured from our 2006 Royster-Clark acquisition, as well as the strong agricultural fundamentals."

The company said wholesale operations had its best-ever quarter, with record or near record margins across all product lines. Advanced technologies results doubled on the strength of sales of "environmentally smart nitrogen," combined with recent growth initiatives. [More]

I mean, how dumb do they think we are?

(Don't actually want to know the answer to that one)

Input prices will skyrocket up until a) competitive pressure forces companies to shrink margins to compete for market share (watch the Monsanto/Syngenta/Pioneer strategies in 2008 and beyond) or b) corn becomes less profitable than soybeans/wheat/cotton/retirement.

It is easy to get your BVD's in a bind when you have little leverage in the market, but farmers need to remember this is exactly the mindset - price as high as the market will bear - we have for our own marketing plans. Just because you know your production costs doesn't mean that is where you sell - you shoot for as much profit as possible.

The doubled gross margins "out-of-the-field" that I am seeing today will undoubtedly be invested first in inputs (variable costs) and residually in land (rent/purchase). All the players know this and with few choices (something poultry growers are loudly pointing out) customers pay until they can't.

Better order seed and NH3 today.

And hold for $4.50.

Maybe it's because they live their lives upside down...

Some wonderfully odd photos from New Zealand.


Not sure that would work too well here.

However, their road crews look just as efficient as ours!

[More]

[via Neatorama]

The walls are falling and the pace is quickening...

It looks like the firewall on the New York Times could drop as well as the Wall Street Journal.

Citing anonymous sources, the New York Post has reported that rival Manhattan paper The New York Times is planning to do away with TimesSelect, the subscription-only content on its NYTimes.com Web site. According to the article by Holly M. Sanders, the main obstacle at the moment is reconfiguring the site's software. [More]

This is the power of the Internet, and millions of tiny little blogs like this made it happen. When we link to articles we drive traffic to newspaper websites and offer them at least the hope of selling advertising they are NOT selling in print additions.

Now explain to me how DTNag.com is going to pull off subscription-based blogs in our tiny sector when the NYT can't sell Pulitzer-winning columnists.

Even more curious, the more people use the Internet, the less they trust MSM (mainstream media), both print and broadcast.

The internet news audience – roughly a quarter of all Americans – tends to be younger and better educated than the public as a whole. People who rely on the internet as their main news source express relatively unfavorable opinions of mainstream news sources and are among the most critical of press performance. As many as 38% of those who rely mostly on the internet for news say they have an unfavorable opinion of cable news networks such as CNN, Fox News Channel and MSNBC, compared with 25% of the public overall, and just 17% of television news viewers. [More]

To my surprise, this distrust if fueled largely by the right, not the left, and perhaps has its roots in the often caustic output of staunchly right-wing blogs and websites.

And speaking of bloggers, check out how the first NYTimes blog column by Freakonomics author Steven Levitt was a doozy:

Hearing about these rules got me thinking about what I would do to maximize terror if I were a terrorist with limited resources. I’d start by thinking about what really inspires fear. One thing that scares people is the thought that they could be a victim of an attack. With that in mind, I’d want to do something that everybody thinks might be directed at them, even if the individual probability of harm is very low. Humans tend to overestimate small probabilities, so the fear generated by an act of terrorism is greatly disproportionate to the actual risk. [More]

Notice the hundreds of comments - many of them outraged, in agreement, or (like me) just astonished by somebody actually saying out loud stuff we had been thinking privately.

His defense of the first article is here (also with hundreds of comments) and contains this rational passage:

One view is the following: the main reason we aren’t currently being decimated by terrorists is that the government’s anti-terror efforts have been successful.

The alternative interpretation is that the terror risk just isn’t that high and we are greatly overspending on fighting it, or at least appearing to fight it. For most government officials, there is much more pressure to look like you are trying to stop terrorism than there is to actually stop it. The head of the TSA can’t be blamed if a plane gets shot down by a shoulder-launched missile, but he is in serious trouble if a tube of explosive toothpaste takes down a plane. Consequently, we put much more effort into the toothpaste even though it is probably a much less important threat.

Likewise, an individual at the CIA isn’t in trouble if a terrorist attack happens; he or she is only in trouble if there is no written report that details the possibility of such an attack, which someone else should have followed up on, but never did because there are so many such reports written.

My guess is that the second scenario — the terrorism threat just isn’t that great — is the more likely one. Which, if you think about it, is the optimistic view of the world. But that probably still makes me a moron, a traitor, or both.

It is hard not to see this type of interaction between media and readers and fail to reach some implications for the future. For example, it is now clear to me we are inventing the dominant communication channels of the future. And judging by what we're planning at FJ Media - you ain't seen nothing yet.

The ticket should go to the reporter...

In a totally inappropriate display of unnecessary puns, reporter Kevin Pang shames himself while covering a perfectly straightforward law and order (hold the onions) issue:

About 15 minutes later, as curious passersby snapped pictures with their camera phones, the driver and passenger of the vehicle returned before tow trucks could arrive. "The situation was resolved without the use of ketchup, which in Chicago is a big thing," Smith said. The entourage got a grilling from the officer. "You can't just park here," the officer said. One of the passengers, who declined to be identified, said they were visiting a Wienermobile alumnus who worked nearby, but were unaware that one could not park a giant sausage in the middle of the city's busiest thoroughfare. Sydney Lindner, a spokeswoman for Kraft Foods, said the Wienermobile is on a nationwide tour promoting a contest to sing the Oscar Mayer jingle in an upcoming commercial. She said "regardless of the reason" the driver had for parking there, the company neither condones nor relishes such actions. [More - parental discretion advised]

And they wonder why newspapers are in trouble.

Don't believe me?

Isn't Darth Murdoch is going to offer the WSJ online for free? (My prediction, too)

How to ruin a good day...

Got this message from my friend Steve.

This afternoon I spoke with Illinois Natural History Survey Scientist and Aphid Expert, David Voetglin. He told me that there has been a very sharp increase in the abundance of aphids in suction traps placed in east-central Illinois (populations have been high in N. Illinois for some time and the populations have been moving south). He also reported that he was in an Iroquois County field on Monday that had over threshold (threshold is 250 per plant with 80% or more of plants infested) numbers of soybean aphid on every plant. He mentioned the oft-stated wisdom that the hot weather is supposed to slow the aphid reproduction down does not appear to be holding now, it has been hot and the suction trap numbers keep going up so he doesn't know what to expect.

I had just visited with a neighbor who was looking at his soybeans and we decided it was too hot for an aphid explosion.

Wrong.

The Joystick Revolution...

We just had a story this weekend on a tractor designed by Purdue students using joystick steering. To show you how in tune USFR is with the Trends of the Future, witness this:


The motorized pool lounger. Admit it - you can't live without one now.

(Pool not included)

[via Neatorama]

Internet promises coming true...

One of the much-ballyhooed forecasts for our on-line future was access to all the libraries and books in the Known Universe. We may be making some progress in that direction. Looky here:

It also published a series called Prairie Farmer's Reliable Directory of Farmers and Breeders including this one for Champaign County from 1917. We'll be digitizing many of these directories for counties all over Illinois from the collection of the Illinois Historical Survey and Lincoln Room. These are great genealogy resources as they provide a complete listing of all members of a farmer's family and the exact location of their farm. [More]

[Note: click on pages to turn after selecting "Flip Book" - it wasn't immediately obvious to me.]

Of course, it had to be Champaign County first. I suppose every state has its favorite son.

Still, it's way cool and only a taste of what's coming.

[via MeFi]

Let's see how tough works...

The failure of the immigration reform effort has snowballed into a truly vigorous enforcement alternative. Employers especially will be struggling with much stricter record-keeping and compliance issues.

Critics of the proposal -- ranging from farmers to restaurant owners to immigrant advocates -- predict the tougher approach will lead to massive layoffs of both legal and illegal workers, potentially crippling some industries that rely heavily on that low-paid workforce.

Supporters say it will cut into rampant illegal hiring that has been highlighted in recent workplace raids across the country, another step in a federal strategy to show a tougher face to the nation's estimated 12 million undocumented immigrants.

"The rule will be very specific and very hard on employers who choose not to comply," said Laura Keehner, a spokeswoman for the Department of Homeland Security who declined to say when the new regulations would go into effect. "If they choose not to follow the law, there will be consequences." [More]

The press is just starting to cover these developments, and quite frankly I have no idea how successful these efforts will be. I do know readers and viewers get really worked up about immigration and like the presidential candidates, seem to feel arguing for stern policing as the easiest answer.

Senator John McCain, trying to keep his presidential hopes aloft by jettisoning his courage and good sense, has leapt to the enforcement barricades, joining Senators Jon Kyl and Lindsey Graham in sponsoring a bill that is essentially a Minuteman’s to-do list of fence-building and punishments. He has shamefully repudiated his commitment to giving illegal immigrants a way to get right with the country. Senator Arlen Specter, meanwhile, wrote an op-ed article in The Washington Post titled “A Less Ambitious Approach to Immigration,” in which he endorsed the creation of a permanent noncitizen immigrant underclass, saying it is the best we can hope for until “a more hospitable America” emerges. [More]

But as I argued about RW corn refuges in the latest issue of Top Producer, America doesn't work because we're really good at apprehending bad guys. America works because the overwhelming majority of citizens choose to obey the law because they find the rules reasonable and no big sacrifice to comply with.

But more than the effectiveness is the likelihood we shall find out something similar to what we have discovered to our despair in Iraq: we can't muscle the world or even our own country to meet arbitrary standards of conduct just because a handful of people in Washington or some state capital say so. This delusion of enforcement ability flies in the face of power flowing downward via better information and technology.

Even the vituperative defense of English as our national language shows a lack of cultural confidence. Enforcement will not ensure its supremacy in the US - it is the unique communication superiority of English, especially in science, that makes it the language of choice around the world. Also the fact that English speakers control so much of the world's wealth. You don't need language cops to make that point.

My point of view lost. I freely admit this and will do everything required of me to comply without carping (much). But I am also preparing for consequences as any prudent observer should. Some of the fallout may kneecap high-value agriculture and further cripple construction. But the larger effect will be to create, I believe, an even more subterranean underclass of workers for an economy that is barely able to supply labor now.

We will also likely create some serious headaches for people who think they will not be touched by this issue.

The consequences will be severe. Industries dependent on immigrant workers, like restaurants, construction and farms, may face labor shortages. Fired workers will be driven into the underground economy. Companies worried about being potentially liable for firings based on bad information may shy away from hiring even legal immigrants.

And it's not just undocumented workers who will be dragged into the maw. Social Security estimates that there are inconsistencies with the records of 13 million American citizens, due to clerical errors, name changes and spelling mistakes. They too may face dismissal if they can't straighten out their records. [More]

Or maybe we'll choose to enjoy a recession instead. Or simply cede entire industries to off-shore.

The pace of recent U.S. economic growth would have been impossible without immigration. Since 1990, immigrants have contributed to job growth in three main ways: They fill an increasing share of jobs overall, they take jobs in labor-scarce regions, and they fill the types of jobs native workers often shun. The foreign-born make up only 11.3 percent of the U.S. population and 14 percent of the labor force. But amazingly, the flow of foreign-born is so large that immigrants currently account for a larger share of labor force growth than natives [More]

One outcome seems very probable to me. Our country takes one more step toward an admittedly distant target of a police state. (Congress just hastened this process) This effort will require more police-types, jails, attorneys, etc. It will clog our criminal justice system and foster an enormous and hideously expensive and permanently entrenched bureaucracy. It will corrode trust and further contempt for the rule of law by placing too many people in the wretched position of keeping their business afloat and helping wretchedly poor employees they have befriended.

And in the end, I believe we will gain little or nothing. Our economy is far too wealthy and amoral not to invest heavily in enforcement avoidance efforts, and those despised illegal immigrants are far more tenacious than many suspect. Many of us have simply forgotten how incredibly resourceful truly desperate humans can be. In the worst case, we could set back economic growth and fuel serious inflation for years. (And don't even ponder about how much oil we get from Mexico and how that future problem will complicate this issue.)

Nor will we un-diversify our population and preserve our Anglo-European majority. That battle has not only been lost, it is slipping away faster than ever thanks to simple demographics.

It strikes me as breathtakingly inefficient. But then, I lost the debate.

Meet your competition...

Another Chinese entrant for the "I Built the Best" competition:

Note the attitude of the wife.

Typical, typical...

[via BoingBoing]

The history inside us...

The widespread technology allowing researchers to use mitochondrial DNA to follow genetic groups through history is rewriting some historical theories.

The Black Death continues to cast a shadow across England. Although the modern English population is more cosmopolitan than ever, the plagues known as the Black Death killed so many people in the Middle Ages that, to this day, genetic diversity is lower in England than it was in the 11th century, according to a new analysis. Rus Hoelzel at the University of Durham, UK and his colleagues looked at the mitochondrial DNA from human remains at 4th and 11th century archaeological sites in England, and compared them to samples from the modern population stored on DNA databases such as GenBank. They found there was more variation in the ancient mitochondrial DNA sequences than in modern sequences. [More]

I can imagine the hysteria in the halls of history departments as chemists in a lab overthrow their neat doctoral thesis with a computer readout. Historians delight in inventing neatly plausible stories about what happened long ago and far away based on fragmentary and often implied evidence. These wonderful conjectures are suddenly being tested with history written in our cells.

This could be a bad omen...

Perennially dour German farmers are bursting with enthusiasm and optimism.

“The trend all over Europe shows returning confidence. Whilst this is also true in the UK, the recovery is not as marked as in Poland and France or as in Germany which comes out on top. From a low point in late 2005 and early 2006, German and Polish farmers have become much more confident. German farmers expect significantly higher prices for key products. Polish farmers have the confidence which springs from relatively recent entry into the EU”, says Dr. Jochen Köckler, Managing Director of the DLG Exhibitions Department.

A staggering 88 % of German farmers view the economic future for the industry from “very good” to “normal” compared with 81% in Poland, 58% in France and 54% in the UK. When farmers were asked how they see the state of their own business at present, just 16% of UK farmers judged current performance to be “good” or “very good”. This compares with 27% in France, 37% in Poland and 38% in Germany. [More]

So what's up with our Teutonic colleagues? Several things I would guess.

• The EU in general is optimistic.

The outlook for economic growth in Europe is running at
its highest level for years, according to a Commission
survey, which shows a strong improvement in economic
confidence in the biggest EU economies, particularly
in Britain, followed by France and Germany.

Better-than-expected consumer confidence is the main
driving force behind the improved outlook, reports the
Economic Sentiment Indicator, which also shows
improvements in services confidence in the EU and
retail trade confidence in the eurozone.

This optimism comes at a time of firm oil prices and a
strong euro, with every prospect of higher interest rates.
Analysts now believe that there is increasing hope that
Europe will be able to sustain its recent economic revival.

• The Australian drought has decreased competition for lamb, wheat and dairy.
• The massive effort to reunify Germany is beginning to pay off.
• The Brits are unhappy - which tends to make Germans smile just a little.
• Germans can also smugly say "I told you so" to the US about Iraq.

All in all, Germans may have to put up with uplifted attitudes for the foreseeable future.

Thank goodness the euro is too strong for me to afford to visit.

Food vs. fuel vs. economics...

One of my favorite economists, Bruce Babcock, again sheds some dispassionate light on the food price/ethanol debate.

In the case of farm programs, it is easy to demonstrate that feed grain and oilseed prices are largely unaffected by U.S. farm subsidies, particularly since 1996 when Congress removed USDA's authority to increase commodity prices through acreage set-asides and subsidized storage. It is also easy to demonstrate that the small share of the final consumer food dollar that goes to the farmer means that even a doubling of feed grain and oilseed prices from expanded biofuels production will lead to relatively modest increases in the prices of meat and dairy products. Food prices are largely determined by costs and profits after commodities leave the farm. [More]

The recent clamor from corn growers that high corn prices don't really affect food prices clearly undermines justification for some forms of subsidies as consumer benefits. Subsidies are too rapidly folded into fixed costs to affect output levels, especially now we have a generation trained for decades in subsidy gaming.

Coupled with the global demand surge, we may simply outgrow our farm programs.

Another reason land prices may not be out of line...

According to Mike Walsten at Landowner newsletter (subscription required) land prices show no signs of backing off.

The highest-selling tract, totaling 165.44 acres, sold for $9,500 an acre and the lowest-selling tract, 62.31 acres, brought $4,950 an acre. That 62.31-acre-tract was only 70% tillable, says Dave Klein, vice president and managing broker, Soy Capital Ag Services, Bloomington, 309-665-0961, whose firm handled the sale. [More]

The driving force, I believe is clearly ethanol. Even though its immediate impact is on corn prices, the competition for land to grow corn forces other commodities higher. Interestingly, this is occurring just when global demand is ramping up, fed by economic growth in the less developed countries of the world.

For the first time, dairy farmers could threaten to sell their products elsewhere since the global dairy market is suddenly thirsty for German milk. And there's particular interest in powered whey. Prices for the yellowy stuff, which is the foundation for many packaged food products, have more than doubled within a year. Globalization has finally reached a sector that for a long time was organized regionally. While the dairy sector in Germany is still connected with the image of the quaint Bavarian farmer and his bell-wearing cows, in reality it's become an industry of multinational corporations, stock prices and commodities markets.

Milk is in demand. The inventories of food producers have dried up. So too has Europe's proverbial sea of surplus milk. The much-maligned mountain of extra butter is also gone. Such positive developments have even encouraged the European Commission to consider reforming Europe's bloated agricultural policies further.

EU Agriculture Commissioner Mariann Fischer Boel wants to increase the bloc's milk quotas, which have been frozen in place for years. The intention is to push along the decision made by EU agriculture ministers to do away with the convoluted quota system that regulates Europe's milk production. But the quotas will only be completely eliminated in 2015. While that might not seem very ambitious, at least the basic laws of supply and demand have been reestablished for the first time since the regulations for the milk market were implemented in 1968. [More]

Meanwhile, one dairy subsector is challenged by rising raw milk prices: organic. It seems consumers may be more price sensitive than originally thought, or that the organic buying public is smaller that forecast.

Dean sells organic milk and soy products through its WhiteWave Foods division. The organic milk is specifically sold under its Horizon brand, a segment battling the industry-wide oversupply of raw organic milk.

Organic milk costs more than regular, making retail competition aggressive as companies use lower pricing, marketing and expanded distribution to try to sell off excess supply. [More]

My goodness - supply and demand! Are they still teaching that stuff? If the EU takes this opportunity to even mildly reform its dairy quota system, it will add significant pressure to WTO calls for US reform as well.

We are only beginning to measure the fallout from ethanol mandates. The results may surprise us.