Farm Catch Up

Spring has finally arrived! Well, sort of. At least according to the calendar if not the weather. It’s been too wet and too cold to be able to do much of anything outside except cleaning up the flower beds and yard. So let’s take a look at what’s going on in the ag industry since the last time I did one of these.

Dean Foods For Sale

If you’ve ever had a hankering to own one of the largest dairy processors in the world, now is your chance. Dean Foods, once the largest dairy processor in the U.S., is apparently trying to sell itself off. The company has been having a difficult time of it. It’s been forced to close processing facilities, it lost a major contract with Walmart, and its efforts to rebrand some of its products and buy into other businesses haven’t been successful, or at least not successful enough to prop up the company’s dwindling sales. It’s been missing its sales targets for something like two years in a row now, and there are no signs things are going to get any better. Supposedly Canadian based Saputo, the 8th largest dairy company in the world, is interested in acquiring Dean. If successful this would be just the latest in a wave of mega-mergers among agriculture related businesses in the last few years.

If you find these mega-mergers to be troubling, well, you should. Despite claims to the contrary, these mergers are resulting in the creation of huge, multinational companies that dominate their markets and often they have virtual monopolies on the product lines they sell.

Bayer Stockholders Angry

Speaking of mega-mergers, Bayer’s management is facing repercussions from stockholders over it’s acquisition of Monsanto. It was expected that a lot of large stockholders were going to disapprove of the board of directors’ and management’s acquisition of Monsanto at the annual general meeting of the company. While this doesn’t change what management has done, it does indicate that a lot of stockholders are very angry over the decision to buy Monsanto, and the subsequent legal problems over the lawsuits about the adverse health effects from RoundUp, and most importantly, Bayer’s plummeting stock value.

Frankly, buying Monsanto was a really bad idea from the beginning, and if the executives at Bayer didn’t realize it, the company’s lawyers sure as hell should have. Even back when the negotiations for the purchase started Monsanto was already facing thousands of lawsuits over the alleged cancer risks of glyphosate. Now there are about 13,000 lawsuits in the pipeline concerning the herbicide. No, that was not a typo. Thirteen thousand.

And that isn’t the end of Monsanto’s legal problems. There is the whole dicamba fiasco to be concerned about as well. The lawsuits over the damage the company’s dicamba based herbicide has done since it was released a couple of years ago, along with lawsuits over Monsanto’s marketing tactics for it’s dicamba resistant soybeans, are starting to pop up now and are only going to get worse. Basically Monsanto is a legal nightmare and it is dragging down Bayer with it.

Beef Industry Lawsuits

While I’m on the subject of legal problems, the beef industry has been hit with two separate but related lawsuits alleging the four biggest beef packing companies, Tyson, JBS, Cargill and United Beef Packing (together they control 80% of the US beef market) conspired together to manipulate the price they paid to cattle growers and the prices charged to consumers. Basically it’s another claim of monopolies using their lock on the market to manipulate prices. Just those four companies control about 80% of the beef market in the US. Anyway, I won’t go into depth on this one. I’ll leave it to you to follow the link and sort out the details if you’re interested.

Walmart Gets Into Beef

I mentioned Walmart briefly when I talked about Dean Foods. Dean lost a huge contract to make Walmart’s house brand liquid milk not long ago when the retailer decided to experiment with eliminating the middleman and become its own processor. It built a large milk processing facility, cut deals with dairy farms to supply milk, and cut Dean Foods out completely in one district.

Walmart is now trying to do the same thing with beef. It is developing its own end to end supply chain to supply beef to some 500 Walmart stores. This won’t take care of all of Walmart’s meat. Most of it will still be supplied by Tyson and Cargill. But it does indicate a troubling trend where these big companies are trying to develop a complete monopoly over not only sales, but supply as well. Costco is doing something similar with chicken, developing its own supply chain that will supply about 40% of its needs.

Trade Wars Continue: Updated 5/6/19

I had this section all wrapped up and ready to go when the you-know-what hit the fan and… Okay, here’s what’s going on.

I really want to talk about the China situation, but let’s deal with something closer to home first, the new NAFTA treaty, USMCA, the US-Mexic0-Canada-Agreement. The USMCA negotiations finished some time ago, a treaty was agreed to, and all is well and good now, right? (Side note: Am I the only one who thinks USMCA is the title of a Village People song?)

Well, no. Yes, the treaty was negotiated, but everything is most definitely not good because not only are we still operating under the old NAFTA treaty, the administration has still left the punitive tariffs in place that have been causing disruptions of the economies of all three countries.

So what the hell is going on? We have the new treaty, so why are we still operating under the old NAFTA and why are the tariffs in place yet? Because before a treaty can go into effect it has to be ratified by the US Senate, and the US Senate has been doing what it does best, acting like a bunch of petulant, spoiled brats who are more interested in back stabbing each other and playing at politics and dabbling in personal attacks than they are in actually doing their bloody jobs. Supposedly one of the reasons why the tariffs are still in place is because the administration is trying to use that to goad the Senate into doing something. And since that hasn’t worked, the administration has threatened to cancel the existing NAFTA treaty, which would cause utter chaos, if the Senate doesn’t get off its ass and actually do its job for a change.

Now let’s move on to China. Now if you haven’t really been following what’s been going on there, you can be excused for thinking that all is sweetness and goodness and we’re all well on the way to being best buddies and all of this trade war nonsense will be over soon and, well, no. Sorry, but no.

As you’ve probably found out in the last couple of days, despite all of the positive PR fluff that’s been released by both sides over the last few months, things have most definitely not been going well with the negotiations. While both sides have been putting out positive sounding press releases, there have been issues, as they say. Behind the scenes things have been more than a bit testy.

Yes, China did a soybean purchase, but that was more PR than anything else. While the amount they purchased sounds quite large to the average person, in actual fact it was little more than a token purchase to indicate good faith on their part.

Things did sound positive for a while, though. Both sides were stating that things were going well and that they were on the verge of coming to an agreement. But then something happened. I’m not sure what, exactly, but whatever it was put a definite chill on the whole thing. There are a lot of rumors flying around. One is that the Chinese are very much aware of the legal and ethics issues the administration is involved with here in the US and as a result they just don’t trust anything the White House says.

Anyway, we suddenly had the administration muttering vague threats that it was considering pulling out of the negotiations entirely. Then the administration started threatening to ramp up the trade war to new heights, doubling the cost of the tariffs and including even more Chinese products in the tariff war. Then the Chinese started threatening to pull out of the negotiations… Oh, brother…

As I write this (May 7, 2019) things look tense, and the effects from this little tiff are rippling through the economy. The stock market is down. Commodities prices have fallen. Corn is down to 3.55, soybeans are down to 8.20… Sigh…

Even more disturbing is the fact that statements being made by the administration indicate that the administration doesn’t really know how tariffs work in the first place. One statement implied that the administration believes that China is paying the tariffs and that they are actually good for our economy. If the administration really believes that, it shows a fundamental ignorance about what tariffs are. Let me explain.

A tariff is intended to discourage the importing of a particular product into the US by increasing it’s cost to the importer. Let me emphasize that by repeating it: “increasing it’s cost to the importer.” Not the country of origin, but to the person or company that is importing the product. So for the most part, China doesn’t pay anything extra on products it exports to the US (except indirectly through lost sales). The people who pay the tariff are the US companies that are importing the products. And that cost is passed along directly or indirectly to us, the consumers.

Let me emphasize that: China doesn’t pay the tariffs, we do.

This is one of the reasons why tariffs are generally a bad idea except under extreme circumstances. It causes as much economic pain or more to the country importing the products as it does to the country exporting them.

It also makes the stock and commodities markets very, very nervous, especially in this situation because they don’t know what the hell this administration is going to do next. The markets like stability. They like predictability. And this administration is providing neither of those things at the moment.

Well, I’ve been babbling along for far too long already here, so let’s wrap this up.

Hopefully in the very near future I’ll have some new radio equipment to talk about. I’m seriously considering going QRP and I’ve been looking at mag loop antennas and the Yaesu FT-818ND QRP transceiver. We’ll see how that goes.

Farm Catch Up

Ah, it’s about that time again, so here’s some of the agricultural news for the past week

 

Budget Pain

Well, I think we all knew that the new administration’s budget was going to be painful, and it is. Well, unless you’re a defense contractor, run a private prison, etc. You people will do pretty good. The rest of us? Not so much.

If you’re a farmer or involved in agriculture in any way, the budget is indeed going to be painful. There are huge cuts to USDA, cuts in the crop insurance program, new fees for inspectors, cuts in research… The list is too long to put here.

In addition to that, there would be massive cuts to the SNAP food assistance program, cuts to the WIC program, cuts to the school lunch program and school nutrition services, all of which would have long term consequences for the agricultural sector.  And even worse consequences for the people who depend on those programs. Even the venerable and highly praised meals on wheels system would be hit hard.

You can read a brief article about the agricultural implications of this over at AgWeb here, and if you spend a couple of minutes on Google you can find out more quite quickly.

Hay Crop almost Total Loss

Here in Calumet County, in neighboring Manitowoc and in other counties nearby we’ve seen nearly a total loss of the hay crop. Inadequate snow cover, coupled with February temperatures that spiked as high as 70 degrees during the day, then plunging into the 20s at night, coupled with extremely wet and cold weather this spring, have decimated the hay crop around here.

To make things worse, the almost nonstop rains we’ve had this spring are making it difficult to get into the fields and do anything. A lot of farmers will try to put in peas and oats to try to get some kind of forage crop off the fields, but it’s going to be a rough year.

Pigs Take Over World

Feral pigs are becoming a major problem in the US and even in Europe. It isn’t a huge problem here in Wisconsin, but the population is growing and becoming a concern. The DNR is putting bulletins into it’s hunting publications about what to do if you find one (basically shoot it). In other parts of the country it’s such a big problem that it’s become a public health issue and they are causing massive amounts of damage to farms.

Feral pigs are very aggressive, smart, reproduce quickly with the average sow producing two litters per year with 6-12 piglets per litter, and they’ll eat anything. If it has any kind of nutritional value at all, and they can eat it, they will. They cause huge amounts of damage to crops and property, kill and eat small animals, and yes, they are physically dangerous towards people. Boars can get to be several hundred pounds, with tusks like razors. And they carry a host of diseases and parasites and spread them over a wide area. Most states have adopted an aggressive policy towards pigs in the wild. A lot of states advise hunters to shoot them on sight.

Ah, well, yummy free pork, then? I wouldn’t eat one. Some states are advising hunters that if they do shoot one, let it lay there. They can carry some very nasty diseases and parasites, many of which can be transmitted to people.

New Herbicide Mix Not So Hot

There was a lot of hype surrounding Monsanto’s introduction of seed varieties that were resistant to both Roundup and dicamba in an effort to control weeds that were becoming resistant to Roundup alone. The biggest problem is pigweed, where a Roundup resistant variety has been spreading widely.

But the new systems don’t seem to be working all that well according to early reports. Early indications are that multiple sprayings are going to be required, and perhaps even resorting to additional types of chemicals. The manufacturer recommends pigweed be no more than 4 inches tall, but since pigweed grows at up to 3 inches per day, trying to time things right is almost completely impossible.

I’m not going to get into debates about the health safety of GM crops. But I will point out that GM plants seem to be, ultimately, a complete failure. At least in their current form. The only commercially successful GM plants right now are those that have been engineered to resist herbicides or insects. And that resistance is rapidly becoming worthless as weeds and insects become resistant to the herbicides or the traits that resisted the corn root worm. These GM plants really have no other desirable traits except that. They do not increase yield, aren’t nutritionally superior. So in the long run, these commercially available GM plants are a failure.

Politics Rears Its Ugly Head

The administrations proposed budget could have widespread and devastating effects on the entire agricultural sector, and cause ripples through the whole economy. There would be big changes to the crop insurance program which could hit some farmers pretty hard. Everyone has probably heard about the cuts to the funding for the Meals on Wheels programs that serve the elderly and disabled. It looks like USDA itself would be hit hard. If I’m reading things right USDA would be looking at losing about a full third of it’s funding.

There would be huge changes to the SNAP program, i.e. “food stamps”. In addition to large cuts in funding, states would have to contribute more money to the program themselves, and would be given more control over how the programs work, who gets help, etc. It would also allow states to institute work requirements.

I don’t really understand the work requirement thing. The vast majority of people in the SNAP program can’t work. They are disabled, the elderly, or children. About two thirds of the people who get assistance through the program fall into one of those three categories. Of the remainder, most of them already do work, but make so little money they qualify for help through the program.

It’s Hard To Be Small If You Raise Meat

The big trend these days is the whole “farm to table” thing where people try to connect directly to farmers to buy food rather than rely on the big commercial processors and distributers. I’m very much in favor of these ideas. Connecting with your local farmers to buy food is generally a good thing for many reasons.

But it isn’t easy to be a small farmer. Agriculture in general doesn’t seem to like small farmers. At all. It’s hard to buy equipment designed for small farms, difficult to find ways to market your products. And if you raise meat animals, well, it’s even more difficult because it’s almost impossible to find a government inspected, licensed slaughter facility to deal with the animals. Bloomberg has an interesting article on the issue, and it’s one that’s turning up all over the country. (Warning, Bloomberg has one of the most bloody awful websites around, loaded with auto-play videos you can’t get rid of that have nothing to do with the story you’re trying to read, along with other annoyances.)

The US market has become such a monopoly that only four companies supply 90% of the meat sold in the country, and the independent meat processors that used to dot the countryside are long gone.

So while the demand for organic, free range and local meat has increased dramatically over the last few years, places where farmers can get that meat processed have become almost impossible to find in many areas of the country. Some are forced to truck their cattle for three, four hours or even more to get them to a processor.

And the government doesn’t want to make things easier. Inspection rules, processor rules and regulations are all geared to the huge meat packing facilities, not the small processors.

Some people in congress are trying to get the rules changed to make it easier for small farmers to deal with this situation, but it’s being fought hard by the big processors, as you might expect.

A Nice Gesture But…

An organization called Dairy Pricing Association put out a PR piece the other day about how they bought and donated 42,000 pounds of cheese to the Hunger Task Force. It’s a nice, feel good kind of item. DPA makes itself sound like it’s doing farmers a favor and that the buy will help push up milk prices. And certainly the Hunger Task Force can use the help. They have over 85,000 people using it’s food pantries and other forms of assistance in Milwaukee county every month.

I hate to sit here and frown at people who are trying to do something, but it’s PR fluff, really. The people at DPA are helping people who badly need food, yes. And that is a good thing. But claiming this is somehow going to help the milk price as some of the statements imply is just silly. It won’t.

That 42,000 pounds sounds impressive until you learn that is half of a single truck load of cheese. Go down to the Sargento plant about 20 miles from here and they crank out dozens of truckloads of product every single day. From one plant.

They removed “23 tanker loads of milk from the market” in 2016. That sounds like a lot until you do the math. Let’s say a tanker holds, oh, 8,000 gallons of milk. That’s 184,000 gallons of milk. A lot, right? Well, no. A 5,000 cow mega-farm puts out up to 30,000 or more gallons a day. So that 23 tankers of milk is only 6 days of production from a single farm.

It’s a nice PR piece, sounds good, and certainly it helps feed people. But boost milk prices? No. Not even a blip.