The changing economics of global agriculture

[Cowperson]

An important round-up of the obvious in the New York Times on the weekend . . . . . global grain prices are soaring, leading to all sorts of positive and negative things.

A Times economist said about six months ago that globalization had created "600 million new Americans" in terms of consumptive habits, with many, many more on the way. Add in the demand for alternative fuels and a squeeze may be looming . . . . .

http://www.nytimes.com/2008/03/09/bu...&ex=1205294400

Cowperson

[Wookie]

Time to start pushing the Atkins diet on all those fat Chinese, Indians and... Well I can't remember the names of all those growing economies!

[HotHotHeat]

Sustainability and mindfulness.

From arrogance, pompousness, and from thinking ourselves more important than we are, may some saving sense of humor liberate us. For allowing ourselves to ridicule the faith of others, may be forgiven.

From making war and calling it peace, special privilege and calling it justice, indifference and calling it tolerance, pollution and calling it progress, may we be cured.

For telling ourselves and other that evil is inevitable while good is impossible, may we stand corrected.

God of our mixed up, tragic, aspiring, doubting, and insurgent lives, help us to be as good in our hearts as we have always wanted to be.

Amen.

Dr. Suess knew what he was talking about.

[return to the red]

and this would be why many of my investment strategies have changed towards agriculture

[HotHotHeat]

It's interesting to note that because of the actions taken by the wheat board, farmers in Manitoba and other places plant excessive amounts of some products. Their business decisions are not based off demand in the market place, but by what the wheat board sets prices at.

[jofillips]

well surely this is all great news for alberta??

i assume albertan beef producers are supplying the chinese market, and i know the increase price of a loaf here in britain means prairie farmers get more for their wheat.

[Cowperson]

Originally Posted by jofillips

well surely this is all great news for alberta??

i assume albertan beef producers are supplying the chinese market, and i know the increase price of a loaf here in britain means prairie farmers get more for their wheat.

For the most part, this is a grain boom, muted somewhat by higher fuel costs.

Cattle producers are suffering as grain is an input cost. With a par dollar, it's not a great time to be a cattle producer I believe.

It's interesting to note that because of the actions taken by the wheat board, farmers in Manitoba and other places plant excessive amounts of some products. Their business decisions are not based off demand in the market place, but by what the wheat board sets prices at.

I would assume the vast array of European subsidies are far more influential.

Cowperson

[Cowboy89]

Originally Posted by Cowperson

Add in the demand for alternative fuels and a squeeze may be looming . . . . .

That's really the problem right there. With this whole 'bio-fuel' thing going on we've started the snowball rolling downhill. It is completely irresponsible to plant fuel instead of food. Our food prices are only now significantly starting to increase as a result of this joke. Bio-fuel's pollute just as much as oil and are also extremely more inefficient in terms of energy output.

They are popular because of this romantic environmental notion of getting transportation fuels from plants. They make for good billboards and advertising and give people the perception that they are clean and efficient when the opposite is the case. Farmers love it because artificial support for bio-fuels incerase the prices of their products and farmland. Politicians love it because they can brand it as an innovative solution to environmental problems and enjoy support from farmers who benefit and the ignorant who buy into the propaganda. Oil and Gas companies love it because they can cheaply buy and build a Bio-fuel plant and brand themselves as 'green' while not changing a thing about their staple operations. It's hypocracy at it's worst.

[habernac]

Excellent post, cowboy. How much fun is it to be Mexican right now where their staple, corn, has tripled in price because of the whole ethanol debacle? Everyone's food is going up as a result.

[HotHotHeat]

Originally Posted by habernac

Excellent post, cowboy. How much fun is it to be Mexican right now where their staple, corn, has tripled in price because of the whole ethanol debacle? Everyone's food is going up as a result.

Orrrrr...Not.

The removal of tariffs, quotas and direct supports was accelerated with the signing of NAFTA and the opening of Mexico to international markets, says Carlsen. From 1994 to 2002, US exports of maize to Mexico nearly tripled, from 2.2 million tonnes annually to 6 million tonnes. Mexico also became the second-largest export market for US maize, accounting for 11 percent of all exports in 2000, or about US$550 million worth.

The effects in rural Mexico have been pronounced. As many of the larger farmers shifted from maize to other crops, smaller, poorer farmers actually increased the cultivated land under maize to offset their decreasing income and feed their families. The unfortunate irony is that these smaller farmers lost even more money on corn every year, and fell deeper into poverty.

http://www.cec.org/trio/stories/inde...h&ed=12&ID=143

NAFTA is a real bugger.

[habernac]

I stand corrected.

[burn_baby_burn]

Originally Posted by HotHotHeat

It's interesting to note that because of the actions taken by the wheat board, farmers in Manitoba and other places plant excessive amounts of some products. Their business decisions are not based off demand in the market place, but by what the wheat board sets prices at.

So your saying a producer bases his planting decisions based on commodity prices, or in your explaination Wheat Board price? Whats wrong with that? How is that differant than any other business?

[Cowboy89]

Well the taboo there is that even though there's NAFTA in place the US and Canada continue to subsidize farmers for political gain (Much like Europe does except to a lesser extent). In a truly free market, the Mexican's should be laughing because they're marginal cost of labor should be cheaper. I'm always in favor of free trade agreements, however the sword should always cut both ways. In NAFTAs case farm products is one instance where it doesn't have enough teeth or enforcement to override governments from subsidizing their farmers.

[Lanny_MacDonald]

Originally Posted by Cowboy89

That's really the problem right there. With this whole 'bio-fuel' thing going on we've started the snowball rolling downhill. It is completely irresponsible to plant fuel instead of food. Our food prices are only now significantly starting to increase as a result of this joke. Bio-fuel's pollute just as much as oil and are also extremely more inefficient in terms of energy output.

They are popular because of this romantic environmental notion of getting transportation fuels from plants. They make for good billboards and advertising and give people the perception that they are clean and efficient when the opposite is the case. Farmers love it because artificial support for bio-fuels incerase the prices of their products and farmland. Politicians love it because they can brand it as an innovative solution to environmental problems and enjoy support from farmers who benefit and the ignorant who buy into the propaganda. Oil and Gas companies love it because they can cheaply buy and build a Bio-fuel plant and brand themselves as 'green' while not changing a thing about their staple operations. It's hypocracy at it's worst.

This mindset is what makes me shake my head. You can do both from one single crop. You can grow food AND produce fuel. The food stuffs come from the fruit of the plant, and the fuel comes from the stalks and waste portion of the plant. The vast majority of the energy of a plant is in those stalks, but it is easier to get at the fuel through the fruit. With the developments in microbiology and genetic engineering of bacteria that produce the ethanol, the ability to produce higher returns from the stocks is now possible. Now its a matter of changing a farming practice and collect the watse materials and not just the fruit of the plant. One that takes place, we can do both, but it takes a change in business practices.

BTW... the problem is not that we are producing bio-fuels, the problem is that we are using them in systems that are extremely inefficient at using them. The fuel produced is burned in a system that only using ~6% of the energy released to move the vehicle in question. Therein lies the problem. Develop a more efficient machine and you save energy. Conversely, you also burn less fuel and you lessen the requirement on the fuel source itself. Alternatively, you could burn the fuel in a more efficient system, recovering the waste products and using them to produce more fuels, and you dramatically decrease the demand on fuels.

[HotHotHeat]

Originally Posted by Cowboy89

That's really the problem right there. With this whole 'bio-fuel' thing going on we've started the snowball rolling downhill. It is completely irresponsible to plant fuel instead of food. Our food prices are only now significantly starting to increase as a result of this joke. Bio-fuel's pollute just as much as oil and are also extremely more inefficient in terms of energy output.

They are popular because of this romantic environmental notion of getting transportation fuels from plants. They make for good billboards and advertising and give people the perception that they are clean and efficient when the opposite is the case. Farmers love it because artificial support for bio-fuels incerase the prices of their products and farmland. Politicians love it because they can brand it as an innovative solution to environmental problems and enjoy support from farmers who benefit and the ignorant who buy into the propaganda. Oil and Gas companies love it because they can cheaply buy and build a Bio-fuel plant and brand themselves as 'green' while not changing a thing about their staple operations. It's hypocracy at it's worst.

Great points. There's been a series airing on CNN the past couple weeks called 'scorched earth'. It's shed some light on what's pushing a lot of this bio fuel movement. A lot of it has to do with public opinion, especially in the election cycle, but there are some ubber determined lobbyists pushing this forward too.

This link talks about the CNN special: http://envirowonk.com/content/view/57/1/

[HotHotHeat]

Originally Posted by burn_baby_burn

So your saying a producer bases his planting decisions based on commodity prices, or in your explaination Wheat Board price? Whats wrong with that? How is that differant than any other business?

Basically they don't plant the crops that are in demand, instead plant what will yield the highest profit. It's a good business decision, and I certainly don't blame them for doing it. The problem is that excess amount of some crops are being produced, while there are shortages in others.

This was something my econ prof was talking about, I don't have a full handle on it, but the jest of it is that the wheat board is bad for the market and good for the farmers...In his opinion.

[Azure]

Originally Posted by HotHotHeat

This was something my econ prof was talking about, I don't have a full handle on it, but the jest of it is that the wheat board is bad for the market and good for the farmers...In his opinion.

I don't agree.

Without the wheat board Canadian farmers could send canola to the US where they would receive higher market value.

How is it good for the Canadian farmer when they're forced to sell their product at a price lower than market value?

[HotHotHeat]

Originally Posted by Cowboy89

Well the taboo there is that even though there's NAFTA in place the US and Canada continue to subsidize farmers for political gain (Much like Europe does except to a lesser extent). In a truly free market, the Mexican's should be laughing because they're marginal cost of labor should be cheaper. I'm always in favor of free trade agreements, however the sword should always cut both ways. In NAFTAs case farm products is one instance where it doesn't have enough teeth or enforcement to override governments from subsidizing their farmers.

Haha, good ol' Chapter 11.

Why corporations control governments:

The North American Free Trade Agreement (NAFTA) includes an array of new corporate investment rights and protections that are unprecedented in scope and power. NAFTA allows corporations to sue the national government of a NAFTA country in secret arbitration tribunals if they feel that a regulation or government decision affects their investment in conflict with these new NAFTA rights. If a corporation wins, the taxpayers of the "losing" NAFTA nation must foot the bill. This extraordinary attack on governments' ability to regulate in the public interest is a key element of the proposed NAFTA expansion called the Central American Free Trade Agreement (CAFTA).

http://www.citizen.org/trade/nafta/CH__11/

Here's a documented list of the cases involving TNC's going after governments who they feel are infringing on their ability to make a higher profit.

My personal favorite is UPS/USPS going after Canada Post.

The alarming part of Ch.11 dispute settlements are not the legalities, it's clear that the NAFTA agreement allows for this, it's the massive settlement amounts. Tens of billions of dollars in some cases.

http://www.policyalternatives.ca/doc...anuary2005.pdf

These cases are becoming more and more common, and it's going to bankrupt our governments.

Then enters the commodifying of water.

Recent proposals to export Canadian water, and an investor-state suit under NAFTA concerning BC’s water export control measures, have revived Canadian concerns about the loss of public control over this vital resource. In response, the federal government has announced several initiatives including the negotiation of a federal provincial accord to ban bulk water exports, and strengthening the Boundary Waters Treaty Act. However, its strategy appears to have been determined by a reluctance to confront the reality that under NAFTA and WTO rules, water export controls are prohibited. Moreover, under NAFTA, Canada is also precluded from denying US investors and service providers the same access to Canadian water it allows Canadian companies, communities, and residents.

Furthermore, by focusing attention on water as a tradeable commodity, the federal government is ignoring the fact that under NAFTA, water is both an investment and service even if it is not considered to be a "good". Indeed Canada’s most onerous trade obligations are found in NAFTA’s investment chapter, not in the trade- in-goods provisions of either NAFTA or the WTO. Moreover, by putting its powerful enforcement machinery at the disposal of countless foreign investors, NAFTA leaves Canadian water resources, and measures established to protect them, entirely vulnerable to foreign investor claims.

http://www.wcel.org/wcelpub/1999/12926.html

I can see it now, "The price of a barrel of water today reached $100!"

Ugh.

[HotHotHeat]

Originally Posted by Azure

I don't agree.

Without the wheat board Canadian farmers could send canola to the US where they would receive higher market value.

How is it good for the Canadian farmer when they're forced to sell their product at a price lower than market value?

That's just the point. If they could sell on the open market, like farmers in Ontario, they'd grow and sell what they feel would yield the highest profit. The wheat board is designed to 'protect' the farmers, and guarantee a bottom line, but it doesn't truly reflect what the open market prices offer.

EDIT: Azure, I screwed up the last part of my post about what my prof said. I meant it was good for the market and bad for the farmers. I think, it was confusing, lol.

[burn_baby_burn]

Originally Posted by Azure

I don't agree.

Without the wheat board Canadian farmers could send canola to the US where they would receive higher market value.

How is it good for the Canadian farmer when they're forced to sell their product at a price lower than market value?

Canola is not controlled by the Canada Wheat Board. You are right, allthough farmers are currently getting record payments for wheat and barley throught the Wheat Board. It is still lower than the price wheat is trading for on the open market.