Some people I know raz me any time there is an Ag aid package. Today was one of those days and I rose to the challenge. Mainly because we are getting the combine ready to go to the dealership for its pre-season preventative maintenance. Adding insult to injury he actually did spend some of his youth on a family farm. Here is a cleaned up version of said response.
You know, I always hear city dwellers dissing any farm package. They have no concept as to the amount of capital and skill required to “spin up” a farm. Kids aren’t going into farming. In certain states, the average age of a farmer is north of 60. This is the report a quick search found.
That’s the national average as calculated in 2014.
Despite the crop surpluses of the past couple years, every year, as harvest starts, America is under 2 months from starvation. A couple of years ago when everyone was wallering in mud trying to harvest, new crop barely came in fast enough to stem off wide scale shortages.
China wasn’t going to be buying that much grain from us this year anyway. They have been trying to bleed off 8+ years of government policy which paid farmers above international market price to keep them raising grain. Recently, long before the tariff wars, they mandated processors and livestock operations use up this grain. You can’t store grain much over 8 months no matter how well you dry it. Attempting longer storage involves an expensive grain monitoring and airflow control system. Either that or you dry it beyond reason and put it in a hermetically sealed container and pray really hard. I think it was 2014 when they started this policy, to support their new meat policy.
A Tariff doesn’t mean they won’t buy from us. It just means it costs more.
Brazil may be closer, but, much of Brazil’s crop is trapped inland. The country doesn’t have the infrastructure to get it to the docks. It doesn’t matter how much grain you have stock piled inland. If you can’t get it to a ship, the rest of the world can’t buy it.
Despite global surpluses of grain, there is the perpetual dance of quality + shipping cost + quantity. No legitimate country will let you buy them dry. The stockpile is always greater than the amount one allows to export. Brazil is already shipping as much as they can to international customers. If China becomes the biggest hog at the trough, others will have to buy elsewhere.
Yes, people who know absolutely nothing are running into the commodities markets and shorting. People who know even less than them are writing articles for newspapers and the fake-news networks. This is causing needless short term pain. I’ve heard they passed some kind of $12Billion stop gap for farmers. I have mixed emotions about it and don’t know any details. Many of America’s biggest farmers paying high cash rents shouldn’t be in farming. Mainly they survive by playing th insurance fraud game. When you take over a field/farm, you get the county average for yields as the basis for your policy for roughly 5 years. After that, they base your “loss” on your actual history. This is why you see those high cash rent farmers turning over land roughly every 5 years. It hides the fact they are shit farmers.
Somewhere, at some point, I heard someone proposed farm income limits testing for the policies. I’m all for that. Someone, somewhere proposed that only land operators could get any form of government payment. I’m all for that. I’m tired of reading about rich athletes and large corporations getting hundreds of thousands and sometimes millions in government subsidies which were supposed to help support family farms.
What the talking heads on fake-news channels fail to do is the real math.
- Every country has Y-million people with Y being different for each country.
Despite the fact there are militant vegans, each of those people need, at a minimum, so many eggs, so many gallon of milk and so much bread (which increases the egg requirement), not to mention various grains for breakfast cereals. - Most of those people don’t want to live on nothing but cheese and veggies. They want some form of animal protein which tastes good and is satisfying. This means every one of those persons need so many pounds of beef, pork, chicken, fish, lamb and shellfish. (Yes, certain groups won’t touch pork or shellfish, but let’s not go down that rabbit hole.)
- Each one of these animal protein groups (please forgive any I left off) which is “farm raised” have their own dietary needs for grains and roughage. Feedlot operations can change from corn to soybean to canola to sorgum to whatever, depending on price and availability __AND__ availability of enough supplements to balance the feed’s nutritional value, but the livestock has to be fed.
- While many people focus on cattle, chicken and other forms of poultry actually consume more corn and soybeans. There are more chickens than people on the face of the planet. Thankfully we found and domesticated chickens long ago because it takes an alarming number of chickens to get one human through the year. Not just with the fast food chicken and eggs a person consumes each year. It’s the breads and other baked goods. Even some forms of alcohol. Here’s a WebMD list.
So, it doesn’t matter who has what tariff in place. Ultimately you must grow or purchase all of these food stuffs. When you are purchasing all that matters is the combination of quality and price for every unit showing up on the dock.
Here’s another piece of information the fake-news channel overlooks. Soybeans aren’t all the same. Each country has different protein, fiber and oil content. I imagine the same is true for every grain due to both seed genetics and the soil it is grown in. These protein levels play a big role when calculating a feed mix for livestock. Humans will eat junk as long as it tastes good.
As China rushes to Brazil to buy whatever they can, the price per bushel goes up. Our prices have gone down some, but, eventually the price of whatever country China buys from will cross the price + tariff cost of buying American crops. Don’t forget, Brazil has an infrastructure problem and until someone with a great big army goes in there and wipes out all of the drug cartels, the infrastructure problem won’t get solved. By and large, construction crews don’t like being shot at.
China has realized this. They are investing heavily in the infrastructure of other countries so they have more buying and shipping options. Even Panama is making the canal bigger.
India is going to be the next country to become “colonized.” They have a massive amount of arable land which remains largely untapped and they have shit infrastructure. Nobody is going to fix that problem without a guaranteed return on investment.
Most estimates have the world population hitting close to 9.8 billion by 2050. We can’t right now feed that many.
Yes, fake-news and stupidity have caused commodity prices to fall. Some short term help may be required to keep family farms in business, but large corporate operations should be allowed to go under, however, they most likely won’t be barred from feeding at the trough. Our current corn and soybean harvests have yet to start. Brazil’s current harvest should be over, but I haven’t checked.
Let us keep in mind Germany and much of Europe is in a drought. While their harvest may not amount to a complete failure, there can be little disagreement that this year’s harvest will be way short. Guess what? They are now going to have to buy agriculture products abroad. A big chunk of those sales will probably come America’s way. Will it be the same amount China currently purchases from us? No. Will China’s purchases go to zero like talking heads on the fake-news networks insinuate? Absolutely not.
Guess what?
That weather map has most in the ag world wringing their hands. According to the European model we are on track to have an August just as hot and dry as it was in 2010. Adding insult to injury much of Illinois (and probably other states) missed the big rains of July. Corn and soybeans are already showing signs of drought stress. If this weather model proves true, we won’t have to worry about how much grain China may not be buying, because we won’t have it to sell.
Assuming you didn’t click it, that German drought link talks about how the drought has so devastated the potato harvest french frie production is shutting down. I expect Oregon and Idaho (Ore-Ida) will be getting some frantic calls and emails.
I get so tired of talking heads and fake-news channels pushing fraudulent information on the public in order to serve an agenda instead of a nation or the field of journalism they claim to operate in. This little tariff spat has caused many fools to rush into commodity shorting without any real concept of how agriculture works. It is true that historically low harvest prices will hurt many farmers. Those with on-farm storage who manage cash flow well will be able to ride much of it out.
How come none of these talking heads ever talk about the fact shipping costs are a major component of the purchase decision. You have to be able to get whatever commodity purchased from one shore to the other in a timely manner at a reasonable cost. Given how fuel prices tend to spike when fuel is needed most, shipping companies are moving to Mega Ships. There are quite a few ports which cannot handle these ships.
Bigger and bigger container ships will be required to handle international shipping of food and merchandise. According to this site, Chicago to Shanghia is $1880 and takes 61 days.
Even the New York Times has gotten off their fake-news horse when it comes to the Chinese soybean tariff. Odd to see them publish something which isn’t pro-Clinton-Trump-bashing.
Here is what happens in the international shipping game.
The Clinton’s take a bribe to allow the sale of Uranium to Russian companies but say it cannot ship to Russia. The Uranium gets packed into a container and loaded onto a ship bound for a politically acceptable port. Once at that port (or in the middle of the ocean) it gets loaded onto a different ship (or that ship changes its registration) and it goes to Russia.
When the price in Brazil (or where ever China ultimately buys) gets high enough and Brazil’s infrastructure can’t keep up, the same thing will happen with soybeans. Either China pays the tariff and buys it here or middlemen in some other country buy a container of grain where it gets shipped to Brazil then loaded on a ship for China.
Why do you think Jimmy Carter’s grain embargo of Russia failed so spectacularly? We were the only ones refusing to sell to Russia. Fools knowing nothing about Ag rushed in shorting commodities devastating the prices. The news media talked about the embargo continually, keeping commodity prices down. What they didn’t talk about were the middlemen buying grain for some non-embargoed port, then routing it to Russia.
Remember what I said about 8 months being the normal maximum time for grain storage without intense monitoring? I was a kid, but I don’t remember seeing news reports about millions of bushels of rotted grain being piled and burned. There should have been such reports.
When you bulk store grain there is always a small amount of spoilage or other damage. It’s the nature of bulk storage and the augers used to move the grain. If you don’t get grain out of a storage facility when it first starts to spoil, the entire bin/silo will spoil with it. There should have been all kinds of stories on the news about massive cleanup efforts. I never saw or heard of them. That means all of the grain found a market. Most likely much of it went to Russia via alternate routes.
Last I heard China put a 25% tariff on soybeans. They are a communist country. If they didn’t want American soybeans they would have made buying them from America a death penalty offense. If they wanted to use just money to stop the purchase it would have been a 500% or higher tariff. It wasn’t. Why? Because there are only so many places they can get the quantity they need.
Eventually, the people jumping into commodities and shorting soybeans to drive the price down will have their eggs fried. We are looking at what could be a seriously short crop given current weather patterns, at least in my area. Germany and the E.U. need to buy more than normal from us and China isn’t going to stop, they will simply slow down for a short time.
Here are some chicken stats for you. Be sure to search for soybean.
Here are some pork stats for you from Perdue University. Be sure to note China is the world’s largest pork producer and just how much feed it takes to bring a hog to market weight.
