Paul MacNeill, in his various roles as newspaper editor, and CBC commentator on radio and TV, has spoken more forcefully about the crisis in rural PEI than anyone else. Like his late father Jim, Paul doesn't take any prisoners, but it isn't just raw criticism, he's got a good feel for what has to change for things to get better. This week he writes about a very innovative approach to giving primary producers a bigger stake in the food system.
http://peicanada.com/second_opinion_paul_macneill_publisher/columns_opinions/how_save_rural_pei_0
How to save RURAL PEI
Second Opinion by Paul MacNeill, publisher
It is an all too familiar scene. Farmers forced to sell their land to pay the bills, paving the way for once productive land to be replaced by cottage sub-divisions, or even worse left to simply grow over. Many other farmers barely eke out a meager living.
The flow of people and money from rural Canada is staggering. Our population is aging; our ability to produce products to sustain our nation in the long term is eroding. The vibrancy of rural Canada is hemorrhaging.
And our politicians are unable to grasp the crisis. Just read the Ghiz government’s glossy Rural Action Plan as a prime example of a simplistic non-solution to the real issues.
The real issues are simple. Our farmers are paid too little. Our population is aging and we are not creating jobs to attract new residents, let alone keep the youth we have.
It’s an issue that impacts all of Prince Edward Island and rural Canada, but one that has stymied politicians in search of a quick fix that will never work.
Our agricultural model is built around the reality that farmers produce commodities and are paid for commodities. How much it costs to produce has nothing to do with the price paid. That is entirely a product of supply and demand. In real terms it means potatoes selling for less than the cost of production or fishermen selling canners for $2.75.
It is a system that guarantees the most important cog – the farmer - receives the least. A loaf of bread costs in the neighbourhood of $3, of which the farmer receives only pennies and has no capacity to increase the price of the loaf. The final cost is defined only after everyone else - the bakers, millers, middlemen, storage providers, grocery store conglomerates and trucking companies – have taken their share.
It is here that farmers should target their focus, not out of frustration or envy but as the only place to significantly improve their own bottom line.
Collectively farmers have the capacity to pool resources to invest in all those other businesses that add value to the commodity they produce.
Each year farmers go cap in hand seeking bank financing for input costs, items such as fertilizer, fuel, and seed. This is this model that has largely created the massive struggle in Canadian agriculture. Farmers use their assets, such as land, to guarantee the costs of their inputs.
But what if the true value of farm land was utilized to create seed funding for an agriculture focused, professionally run and independently managed mutual fund that would invest on behalf of Island farmers into those companies adding value to farm commodities.
I can hear you now ... but the farmers are broke and barely able to pay their own bills, how in the hell can they afford to invest in other companies?
Surprisingly easily.
Most farmers do owe money. But most also own land unencumbered of debt. This property is key to the creation of the mutual fund. The sole requirement of government is to place a fair market value on that land, and then loan that amount to the farmer, payable to the mutual fund. Collectively this is the seed money for the fund.
Government then gets out of the way and lets private enterprise do the rest. The fund invests in the value added chain. The farmer uses his mutual fund asset to guarantee inputs. And dividends paid from the fund will allow the farmer to repay government and diversify. It’s good for the land and the bottom line.
The potential benefits to the farmer and rural communities are striking. As farmers prosper the value of land will increase which means greater tax revenue. Vibrant farms infuse communities with cash. New businesses will open that will require workers. The population decline seen in rural PEI will cease. Residential properties will increase in value.
The concept is the idea of New Zealand native Steve Nixon, who now calls Saskatchewan home. He has long ties with agriculture and communities and believes something dramatic must be done to protect our rural way of life. If we keep doing what we have always done, we will get the same disappointing results.
His idea turns the traditional farm business model on its head. It is exactly what PEI and rural Canada needs.
This is neither a co-operative nor a government managed program. It is simply a strategy to pool the collective assets of Canadian farmers to allow them to put more dollars in their pockets.
Perhaps the closest model is the Ontario Teachers’ Pension Fund, one of the largest investors in the country. It invests in companies, such as the parent company of the Toronto Maple Leafs, with the sole purpose of growing the wealth of teachers.
Take that model and transfer it to agriculture. Grow the wealth of farmers and we will grow rural Canada.
Simple.
Paul MacNeill is Publisher of Island Press Limited. He can be contacted at paul@peicanada.com
Wednesday, 11 May 2011
Climate Change Good??
I'm going through my first bout of blogger guilt. My partner and I been trying to get started on outdoor work, digging and shipping plants to awaiting customers across Canada, and I had deadlines for another publication, but I still felt an obligation to get something written in this little space. What was scary was that there seemed to be more visits to the blog when I wasn't writing. (see what guilt can do).
There are so many obvious things to say about the terrible weather. Farmers hope that days lost in the Spring can be added on in the Fall (frost and wet weather are the enemies then too). This uncertainty and the anxiety it can create is obviously one of the big differences between farming and most other occupations. Unsettled, unpredictable weather is certainly one of the characteristics predicted from climate change, maybe even more important, in the Northern Hemisphere anyway, than global warming.
You can always tell when you're reading the business section of the paper. A story this week headlined that global warming will be good for Canadian farmers. You're thinking that there will be longer seasons, opportunities to grow other crops, but no, it's that warming will decrease production of major crops like wheat and corn elsewhere, driving up the price of these important commodities. My head tells me that's what business does, separates the winners from the losers, but it still feels a little cynical.
http://www.theglobeandmail.com/globe-investor/investment-ideas/warming-trend-could-prove-boon-to-canadian-farming/article2015895/
Warming trend could prove boon to Canadian farming
by MARTIN MITTELSTAEDT • May 10, 2011 •
Investors in agricultural commodities have always had to keep an eye on the weather. But maybe they should keep a watch on the climate too.
That’s because global warming has the potential to be a boon for profit seekers. The reason: a hotter climate could undermine crops, leading to smaller harvests and higher prices.
Up until now, it’s been hard to prove that global warming could put a dent into agricultural output, but a U.S. research team says it has done just that. The findings are good news for those buying agricultural commodities and related investments, such as Canadian farmland. The biggest upside potential might be in wheat and corn.
By studying temperature and yield records from 1980 to 2008, the team of academics from Columbia University and Stanford University estimated that the global trend to warmer temperatures has led wheat yields to be 5.5 per cent lower than they would have been had the climate been stable, and corn yields to be 3.8 per cent lower. The reduction spread out over the world was the equivalent to losing the annual corn harvest from Mexico and the wheat harvest of France. Soybean and rice crops were also studied, but exhibited no overall trend change.
The smaller harvests of wheat and corn have helped push crop prices up an estimated 20 per cent, according to Wolfram Schlenker, one of the researchers and a professor in the economics department at Columbia.
The “20 per cent is a sizable amount,” Dr. Schlenker said, but he cautioned that it’s just part of the equation that explains the approximate tripling in prices of the key foodstuffs over the last four years. Other factors have played a part, including rising populations and government incentives to convert corn into gasoline additives.
Crop yields are one of the critical variables for determining agricultural prices. On a year-to-year basis, yields fluctuate sharply because of such factors as droughts and floods, but over the long term, they’ve risen because of the use of more fertilizers, better seeds, and other innovations. It’s the reason farmers have been able to feed the world’s burgeoning population.
The research team’s findings, which covered trends in the world’s four most important staple crops, appeared Thursday in the journal Science. The crops they studied–corn, wheat, rice and soybeans–directly and indirectly account for about 75 per cent of the calories people consume.
Dr. Schlenker said that diminished harvests for wheat and corn prompted consumers to buy the other two grains, forcing their prices up was well. The finding suggests that a changing climate has the potential to raise the prices of many crops, even some whose output isn’t actually sensitive to higher temperatures.
There was upside for Canadian farmers from the research. In their number crunching, the researchers noted no effect on yields in Canada and the U.S., because temperatures haven’t risen in those countries as they have elsewhere around the globe.
Negative impacts have been observed in other agricultural regions, such as those in Russia. For some crops, such as soybeans, warmer weather caused offsetting harvest pluses and minuses, depending on the extent of temperature changes. For instance, Dr. Schlenker said, yields rose in Argentina, but fell in Paraguay, which lies slightly further north of it in South America.
“Pretty much every climate model says that [North American farmers] will get warming too,” but it has not yet been affected by the trend, Dr. Schlenker said.
This has been “doubly good” because farmers have had larger crops and higher prices, he said.
While the research is some of the first to confirm that global warming affects crop levels, some agricultural-related investment vehicles have already been twigging to the theme.
This is “one of the reasons why when we looked around the world at agricultural investing, we just thought Canada is where you have got to be, and we’re seeing more and more people reach that conclusion,” said Tom Eisenhauer, president of Bonnefield Financial, a firm that invests in farmland.
Mr. Eisenhauer says most warming is likely to occur at latitudes to the south of Canada’s prime agricultural lands.
Warming damages crops because plants have a Goldilocks relationship to temperature, thriving when conditions are neither too hot or too cold. By studying crop results and temperature readings, the researchers determined that a one-degree rise lowered yields by up to 10 per cent.
Higher amounts of carbon dioxide, the main greenhouse gas, do stimulate plant growth, although this benefit has been outweighed by the crop damage from higher temperatures.
There are so many obvious things to say about the terrible weather. Farmers hope that days lost in the Spring can be added on in the Fall (frost and wet weather are the enemies then too). This uncertainty and the anxiety it can create is obviously one of the big differences between farming and most other occupations. Unsettled, unpredictable weather is certainly one of the characteristics predicted from climate change, maybe even more important, in the Northern Hemisphere anyway, than global warming.
You can always tell when you're reading the business section of the paper. A story this week headlined that global warming will be good for Canadian farmers. You're thinking that there will be longer seasons, opportunities to grow other crops, but no, it's that warming will decrease production of major crops like wheat and corn elsewhere, driving up the price of these important commodities. My head tells me that's what business does, separates the winners from the losers, but it still feels a little cynical.
http://www.theglobeandmail.com/globe-investor/investment-ideas/warming-trend-could-prove-boon-to-canadian-farming/article2015895/
Warming trend could prove boon to Canadian farming
by MARTIN MITTELSTAEDT • May 10, 2011 •
Investors in agricultural commodities have always had to keep an eye on the weather. But maybe they should keep a watch on the climate too.
That’s because global warming has the potential to be a boon for profit seekers. The reason: a hotter climate could undermine crops, leading to smaller harvests and higher prices.
Up until now, it’s been hard to prove that global warming could put a dent into agricultural output, but a U.S. research team says it has done just that. The findings are good news for those buying agricultural commodities and related investments, such as Canadian farmland. The biggest upside potential might be in wheat and corn.
By studying temperature and yield records from 1980 to 2008, the team of academics from Columbia University and Stanford University estimated that the global trend to warmer temperatures has led wheat yields to be 5.5 per cent lower than they would have been had the climate been stable, and corn yields to be 3.8 per cent lower. The reduction spread out over the world was the equivalent to losing the annual corn harvest from Mexico and the wheat harvest of France. Soybean and rice crops were also studied, but exhibited no overall trend change.
The smaller harvests of wheat and corn have helped push crop prices up an estimated 20 per cent, according to Wolfram Schlenker, one of the researchers and a professor in the economics department at Columbia.
The “20 per cent is a sizable amount,” Dr. Schlenker said, but he cautioned that it’s just part of the equation that explains the approximate tripling in prices of the key foodstuffs over the last four years. Other factors have played a part, including rising populations and government incentives to convert corn into gasoline additives.
Crop yields are one of the critical variables for determining agricultural prices. On a year-to-year basis, yields fluctuate sharply because of such factors as droughts and floods, but over the long term, they’ve risen because of the use of more fertilizers, better seeds, and other innovations. It’s the reason farmers have been able to feed the world’s burgeoning population.
The research team’s findings, which covered trends in the world’s four most important staple crops, appeared Thursday in the journal Science. The crops they studied–corn, wheat, rice and soybeans–directly and indirectly account for about 75 per cent of the calories people consume.
Dr. Schlenker said that diminished harvests for wheat and corn prompted consumers to buy the other two grains, forcing their prices up was well. The finding suggests that a changing climate has the potential to raise the prices of many crops, even some whose output isn’t actually sensitive to higher temperatures.
There was upside for Canadian farmers from the research. In their number crunching, the researchers noted no effect on yields in Canada and the U.S., because temperatures haven’t risen in those countries as they have elsewhere around the globe.
Negative impacts have been observed in other agricultural regions, such as those in Russia. For some crops, such as soybeans, warmer weather caused offsetting harvest pluses and minuses, depending on the extent of temperature changes. For instance, Dr. Schlenker said, yields rose in Argentina, but fell in Paraguay, which lies slightly further north of it in South America.
“Pretty much every climate model says that [North American farmers] will get warming too,” but it has not yet been affected by the trend, Dr. Schlenker said.
This has been “doubly good” because farmers have had larger crops and higher prices, he said.
While the research is some of the first to confirm that global warming affects crop levels, some agricultural-related investment vehicles have already been twigging to the theme.
This is “one of the reasons why when we looked around the world at agricultural investing, we just thought Canada is where you have got to be, and we’re seeing more and more people reach that conclusion,” said Tom Eisenhauer, president of Bonnefield Financial, a firm that invests in farmland.
Mr. Eisenhauer says most warming is likely to occur at latitudes to the south of Canada’s prime agricultural lands.
Warming damages crops because plants have a Goldilocks relationship to temperature, thriving when conditions are neither too hot or too cold. By studying crop results and temperature readings, the researchers determined that a one-degree rise lowered yields by up to 10 per cent.
Higher amounts of carbon dioxide, the main greenhouse gas, do stimulate plant growth, although this benefit has been outweighed by the crop damage from higher temperatures.
Friday, 6 May 2011
This Could Change Things
I've often written about the huge subsidies enjoyed by American farmers. Combined with other large incentives underpinning the production of biofuels, U.S. producers have enjoyed almost a decade of record incomes. This money that comes through the mailbox has a perverse impact on commodity prices. Farmers grow not what the market wants, but what the government will pay for, and even worse for Canadian farmers competing in a North American marketplace, the subsidies allow food processors and consumers to pay less, because tax dollars make up the difference.
The effort now to contain the massive U.S. debt and deficits has these farm subsidies in its sights. This is an interesting part of the story: " The most controversial of these programs are the $5 billion in annual so-called direct payments to farmers of corn, soybeans and other crops, awarded simply for owning tillable farm land, even if they do not plant on it."
Here's the whole story: http://www.nytimes.com/2011/05/07/us/politics/07farm.html?hp
Farm Subsidies Become Target Amid Spending Cuts
by JENNIFER STEINHAUER • May 6, 2011 •
WASHINGTON — When it comes to spending cuts, members of Congress like to say that “everything is on the table.” Except, generally, food. But now federal farm subsidies, long decried by policy makers as wasteful and antiquated but protected by powerful political interests, appear to be in serious danger.
This week, Representative Paul D. Ryan1, Republican of Wisconsin and the chairman of the House Budget Committee2, told reporters, “We shouldn’t be giving corporate farms, these large agribusiness companies, subsidies. I strongly believe that.”
His budget proposal would take $30 billion out of the farm program over the next decade.
Representative Eric Cantor3, Republican of Virginia and the majority leader, attended the first session of debt-limit negotiations on Thursday with a list of areas where he saw a potential agreement between Republicans and the White House, including farm subsidies.
A confluence of factors have lined up against the farm programs. While the rest of the economy remains largely stagnant, commodities prices and farm incomes have remained at a protracted high. The House Agriculture Committee4, while still dominated by farm state members, is now peppered with freshmen who view cuts to these programs as an essential part of the broader attack on the federal deficit, the centerpiece of their campaigns.
Further, after taking a beating from constituents concerning their Medicare5 proposal last month, Republicans are eager to find an area of common ground with Democrats. Farm subsidies seem to fit the bill; conservatives condemn them as intrusions into the free market, liberals denounce them for encouraging environmentally harmful overfarming, and both sides see them as a form of corporate welfare.
What is more, some subsidies have placed the nation in violation of trade agreements, and members from both sides of the aisle have questioned why, with biofuel mandates creating such demand for ethanol, the government needs to subsidize it.
Powerful interests and political traditions continue to constrain efforts to cut subsidies. While all the free-market Republicans back reducing subsidies in general, some continue to support targeted aid like the subsidies long enjoyed by ethanol. Newt Gingrich6, the former Republican House speaker and likely presidential candidate, has been assertively arguing in favor of maintaining ethanol subsidies in the face of intense criticism from backers of market reforms like the editorial page of The Wall Street Journal.
But in both parties there is a sense that support for subsidies is waning. This year, Senator Richard J. Durbin7, Democrat of Illinois, one of the nation’s biggest farming states, told the state’s farm bureau to expect cuts. Senator Debbie Stabenow8, Democrat of Michigan and chairwoman of the Senate Committee on Agriculture, Nutrition and Forestry9, told reporters at a state agriculture conference that “making sure that we’re doing our part in being fiscally responsible” would be the biggest challenge in the next farm bill10.
Others are thinking in a similar vein.
“I have been telling folks that the pie is getting smaller,” said Representative Reid Ribble, a Republican freshman from Wisconsin who sits on the House Agriculture Committee. “I am hearing from constituents back home that they want to see the government have less involvement in the pricing. There is a kind of a tenor right now that will allow us to have a significant change.”
Farm advocates say they hope they can stave off the worst.
“The scrutiny of farm programs is stronger than ever,” said Chuck Conner, president of the National Council of Farmer Cooperatives11. “It’s not that farmers don’t want to participate in deficit reduction, but at the same time, we hope people appreciate that all other federal programs have skyrocketed, which is why we are in this mess, and farm subsidies have not.”
Historically, federal farm subsidies have operated like piles of laundry: there are constant efforts to make them go away, but they always rise right up again.
The program is rooted in the response to the Great Depression12, when the nation enjoyed a largely agrarian economy and the federal government recognized that farmers lacked a safety net.
The program has evolved over the years into a series of direct payments, insurance programs, low-cost loans and other benefits. The programs come up for reauthorization every five years, and farm advocates lobby hard against efforts to meaningfully reduce them, though some have been reformed over the years.
“Substantial cuts to agriculture have already been made,” Ms. Stabenow said in an e-mail. “And we’ll continue measuring the performance of every program to reduce the deficit and maximize effectiveness.”
In 2011, taxpayers are projected to pay roughly $16 billion in aid to farmers through various programs, according to figures from the Congressional Budget Office13.
The most controversial of these programs are the $5 billion in annual so-called direct payments to farmers of corn, soybeans and other crops, awarded simply for owning tillable farm land, even if they do not plant on it.
“If we can’t figure out a way at this point to trim these payments,” said Representative Ron Kind, Democrat of Wisconsin, who has long fought against farm subsidies, “then it is just embarrassing.”
Large cuts to the agriculture subsidies will not go far in taming federal spending.
“Cutting farm subsidies doesn’t bring that kind of ongoing savings,” said Tyler Cowen, a professor of economics at George Mason University, comparing cuts to farm programs with longer term restructuring to entitlement programs like Medicare. “Still, it is a great one-time gain, and it means lower prices for consumers and is a good idea all around.”
Farmers and their advocates insist that the subsidies have been demonized and overstated.
“Every time you read an article saying Congress better be looking at farm programs I am scratching my head,” Mr. Conner said. “When people think of the U.S.D.A. budget they think of farm programs, but it is really more a rounding error.”
But Mr. Kind and others say the push for broad budget cuts is working in their favor.
“The political dynamics have shifted in light of deficit reduction,” he said. “I am cautiously optimistic.”
The effort now to contain the massive U.S. debt and deficits has these farm subsidies in its sights. This is an interesting part of the story: " The most controversial of these programs are the $5 billion in annual so-called direct payments to farmers of corn, soybeans and other crops, awarded simply for owning tillable farm land, even if they do not plant on it."
Here's the whole story: http://www.nytimes.com/2011/05/07/us/politics/07farm.html?hp
Farm Subsidies Become Target Amid Spending Cuts
by JENNIFER STEINHAUER • May 6, 2011 •
WASHINGTON — When it comes to spending cuts, members of Congress like to say that “everything is on the table.” Except, generally, food. But now federal farm subsidies, long decried by policy makers as wasteful and antiquated but protected by powerful political interests, appear to be in serious danger.
This week, Representative Paul D. Ryan1, Republican of Wisconsin and the chairman of the House Budget Committee2, told reporters, “We shouldn’t be giving corporate farms, these large agribusiness companies, subsidies. I strongly believe that.”
His budget proposal would take $30 billion out of the farm program over the next decade.
Representative Eric Cantor3, Republican of Virginia and the majority leader, attended the first session of debt-limit negotiations on Thursday with a list of areas where he saw a potential agreement between Republicans and the White House, including farm subsidies.
A confluence of factors have lined up against the farm programs. While the rest of the economy remains largely stagnant, commodities prices and farm incomes have remained at a protracted high. The House Agriculture Committee4, while still dominated by farm state members, is now peppered with freshmen who view cuts to these programs as an essential part of the broader attack on the federal deficit, the centerpiece of their campaigns.
Further, after taking a beating from constituents concerning their Medicare5 proposal last month, Republicans are eager to find an area of common ground with Democrats. Farm subsidies seem to fit the bill; conservatives condemn them as intrusions into the free market, liberals denounce them for encouraging environmentally harmful overfarming, and both sides see them as a form of corporate welfare.
What is more, some subsidies have placed the nation in violation of trade agreements, and members from both sides of the aisle have questioned why, with biofuel mandates creating such demand for ethanol, the government needs to subsidize it.
Powerful interests and political traditions continue to constrain efforts to cut subsidies. While all the free-market Republicans back reducing subsidies in general, some continue to support targeted aid like the subsidies long enjoyed by ethanol. Newt Gingrich6, the former Republican House speaker and likely presidential candidate, has been assertively arguing in favor of maintaining ethanol subsidies in the face of intense criticism from backers of market reforms like the editorial page of The Wall Street Journal.
But in both parties there is a sense that support for subsidies is waning. This year, Senator Richard J. Durbin7, Democrat of Illinois, one of the nation’s biggest farming states, told the state’s farm bureau to expect cuts. Senator Debbie Stabenow8, Democrat of Michigan and chairwoman of the Senate Committee on Agriculture, Nutrition and Forestry9, told reporters at a state agriculture conference that “making sure that we’re doing our part in being fiscally responsible” would be the biggest challenge in the next farm bill10.
Others are thinking in a similar vein.
“I have been telling folks that the pie is getting smaller,” said Representative Reid Ribble, a Republican freshman from Wisconsin who sits on the House Agriculture Committee. “I am hearing from constituents back home that they want to see the government have less involvement in the pricing. There is a kind of a tenor right now that will allow us to have a significant change.”
Farm advocates say they hope they can stave off the worst.
“The scrutiny of farm programs is stronger than ever,” said Chuck Conner, president of the National Council of Farmer Cooperatives11. “It’s not that farmers don’t want to participate in deficit reduction, but at the same time, we hope people appreciate that all other federal programs have skyrocketed, which is why we are in this mess, and farm subsidies have not.”
Historically, federal farm subsidies have operated like piles of laundry: there are constant efforts to make them go away, but they always rise right up again.
The program is rooted in the response to the Great Depression12, when the nation enjoyed a largely agrarian economy and the federal government recognized that farmers lacked a safety net.
The program has evolved over the years into a series of direct payments, insurance programs, low-cost loans and other benefits. The programs come up for reauthorization every five years, and farm advocates lobby hard against efforts to meaningfully reduce them, though some have been reformed over the years.
“Substantial cuts to agriculture have already been made,” Ms. Stabenow said in an e-mail. “And we’ll continue measuring the performance of every program to reduce the deficit and maximize effectiveness.”
In 2011, taxpayers are projected to pay roughly $16 billion in aid to farmers through various programs, according to figures from the Congressional Budget Office13.
The most controversial of these programs are the $5 billion in annual so-called direct payments to farmers of corn, soybeans and other crops, awarded simply for owning tillable farm land, even if they do not plant on it.
“If we can’t figure out a way at this point to trim these payments,” said Representative Ron Kind, Democrat of Wisconsin, who has long fought against farm subsidies, “then it is just embarrassing.”
Large cuts to the agriculture subsidies will not go far in taming federal spending.
“Cutting farm subsidies doesn’t bring that kind of ongoing savings,” said Tyler Cowen, a professor of economics at George Mason University, comparing cuts to farm programs with longer term restructuring to entitlement programs like Medicare. “Still, it is a great one-time gain, and it means lower prices for consumers and is a good idea all around.”
Farmers and their advocates insist that the subsidies have been demonized and overstated.
“Every time you read an article saying Congress better be looking at farm programs I am scratching my head,” Mr. Conner said. “When people think of the U.S.D.A. budget they think of farm programs, but it is really more a rounding error.”
But Mr. Kind and others say the push for broad budget cuts is working in their favor.
“The political dynamics have shifted in light of deficit reduction,” he said. “I am cautiously optimistic.”
Difficult Choices for the Future
There's an interesting columnist with the British Guardian newspaper called George Monbiot. He writes (I think) very intelligently about some of the most important economic/environmental issues we face. He's green at heart, but he insists on hard-nosed analysis too, and he certainly doesn't shy away from asking tough, difficult questions. For example he's been in an on-going war of words with Helen Caldicott over the risks of radiation. Caldicott is one of the saints of the green movement, and challenging her reminds me of Christopher Hitchens writing critically about Mother Teresa. So from the "nothing is easy file" a column from George Monbiot.
From: http://www.guardian.co.uk/commentisfree/2011/may/02/environmental-fixes-all-greens-lost
Let's face it: none of our environmental fixes break the planet-wrecking project
May 2, 2011 •
You think you're discussing technologies, and you quickly discover that you're discussing belief systems. The battle among environmentalists over how or whether our future energy is supplied is a cipher for something much bigger: who we are, who we want to be, how we want society to evolve. Beside these concerns, technical matters – parts per million, costs per megawatt hour, cancers per sievert1 – carry little weight. We choose our technology – or absence of technology – according to a set of deep beliefs: beliefs that in some cases remain unexamined.
The case against abandoning nuclear power, for example, is a simple one: it will be replaced either by fossil fuels or by renewables that would otherwise have replaced fossil fuels. In either circumstance, greenhouse gases, other forms of destruction and human deaths and injuries all rise.
The case against reducing electricity supplies is just as clear. For example, the Zero Carbon Britain report2 published by the Centre for Alternative Technology urges a 55% cut in overall energy demand by 2030 – a goal I strongly support. It also envisages a near-doubling of electricity production. The reason is that the most viable means of decarbonising both transport and heating is to replace the fuels they use with low-carbon electricity. Cut the electricity supply and we're stuck with oil and gas. If we close down nuclear plants, we must accept an even greater expansion of renewables than currently proposed. Given the tremendous public resistance to even a modest increase in windfarms and new power lines, that's going to be tough.
What the nuclear question does is to concentrate the mind about the electricity question. Decarbonising the economy involves an increase in infrastructure. Infrastructure is ugly, destructive and controlled by remote governments and corporations. These questions are so divisive because the same world-view tells us that we must reduce emissions, defend our landscapes and resist both the state and big business. The four objectives are at odds.
But even if we can accept an expansion of infrastructure, the technocentric, carbon-counting vision I've favoured runs into trouble. The problem is that it seeks to accommodate a system that cannot be accommodated: a system that demands perpetual economic growth. We could, as Zero Carbon Britain envisages, become carbon-free by 2030. Growth then ensures that we have to address the problem all over again by 2050, 2070 and thereon after.
Accommodation makes sense only if the economy is reaching a steady state. But the clearer the vision becomes, the further away it seems. A steady state economy will be politically possible only if we can be persuaded to stop grabbing. This in turn will be feasible only if we feel more secure. But the global race to the bottom and its destruction of pensions, welfare, public services and stable employment make people less secure, encouraging us to grasp as much for ourselves as we can.
If this vision looks implausible, consider the alternatives. In the latest edition of his excellent magazine The Land, Simon Fairlie responds furiously to my suggestion that we should take industry into account when choosing our energy sources. His article exposes a remarkable but seldom noticed problem: that most of those who advocate an off-grid, land-based economy have made no provision for manufactures. I'm not talking about the pointless rubbish in the FT's How To Spend It supplement. I'm talking about the energy required to make bricks, glass, metal tools and utensils, textiles (except the hand-loomed tweed Fairlie suggests we wear), ceramics and soap: commodities that almost everyone sees as the barest possible requirements.
Are people like Fairlie really proposing that we do without them altogether? If not, what energy sources do they suggest we use? Charcoal would once again throw industry into direct competition with agriculture, spreading starvation and ensuring that manufactured products became the preserve of the very rich. (Remember, as EA Wrigley5 points out, that half the land surface of Britain could produce enough charcoal to make 1.25m tonnes of bar iron – a fraction of current demand – and nothing else.) An honest environmentalism needs to explain which products should continue to be manufactured and which should not, and what the energy sources for these manufactures should be.
There's a still bigger problem here: even if we make provision for some manufacturing but, like Fairlie, envisage a massive downsizing and a return to a land-based economy, how do we take people with us? Where is the public appetite for this transition?
A third group tries to avoid such conflicts by predicting that the problem will be solved by collapse: doom is our salvation. Economic collapse, these people argue, is imminent and expiatory. I believe this is wrong on both counts.
Last week something astonishing happened: Fatih Birol, the chief economist of the International Energy Agency, revealed that peak oil has already happened. "We think that the crude oil production has already peaked, in 2006."6 If this is true, we should be extremely angry with the IEA. In 2005 its executive director mocked those who predicted peak oil as "doomsayers". Until 2008 (two years after the IEA now says it happened) the agency continued to dismiss the possibility that peak oil would occur.
But this also raises an awkward question for us greens: why hasn't the global economy collapsed as we predicted? Yes, it wobbled, though largely for other reasons. Now global growth is back with a vengeance: it reached 4.6% last year7, and the IMF predicts roughly the same for 2011 and 2012. The reason, as Birol went on to explain, is that natural gas liquids and tar sands are already filling the gap. Not only does the economy appear to be more resistant to resource shocks than we assumed, but the result of those shocks is an increase, not a decline, in environmental destruction.
The problem we face is not that we have too little fossil fuel, but too much. As oil declines, economies will switch to tar sands, shale gas and coal; as accessible coal declines, they'll switch to ultra-deep reserves (using underground gasification8 to exploit them) and methane clathrates9. The same probably applies to almost all minerals: we will find them, but exploiting them will mean trashing an ever greater proportion of the world's surface. We have enough non-renewable resources of all kinds to complete our wreckage of renewable resources: forests, soil, fish, freshwater, benign weather. Collapse will come one day, but not before we have pulled everything down with us.
And even if there were an immediate economic cataclysm, it's not clear that the result would be a decline in our capacity for destruction. In east Africa, for example, I've seen how, when supplies of paraffin or kerosene are disrupted, people don't give up cooking; they cut down more trees. History shows us that wherever large-scale collapse has occurred, psychopaths take over. This is hardly conducive to the rational use of natural assets.
All of us in the environment movement, in other words – whether we propose accommodation, radical downsizing or collapse – are lost. None of us yet has a convincing account of how humanity can get out of this mess. None of our chosen solutions break the atomising, planet-wrecking project. I hope that by laying out the problem I can encourage us to address it more logically, to abandon magical thinking and to recognize the contradictions we confront. But even that could be a tall order.
From: http://www.guardian.co.uk/commentisfree/2011/may/02/environmental-fixes-all-greens-lost
Let's face it: none of our environmental fixes break the planet-wrecking project
May 2, 2011 •
You think you're discussing technologies, and you quickly discover that you're discussing belief systems. The battle among environmentalists over how or whether our future energy is supplied is a cipher for something much bigger: who we are, who we want to be, how we want society to evolve. Beside these concerns, technical matters – parts per million, costs per megawatt hour, cancers per sievert1 – carry little weight. We choose our technology – or absence of technology – according to a set of deep beliefs: beliefs that in some cases remain unexamined.
The case against abandoning nuclear power, for example, is a simple one: it will be replaced either by fossil fuels or by renewables that would otherwise have replaced fossil fuels. In either circumstance, greenhouse gases, other forms of destruction and human deaths and injuries all rise.
The case against reducing electricity supplies is just as clear. For example, the Zero Carbon Britain report2 published by the Centre for Alternative Technology urges a 55% cut in overall energy demand by 2030 – a goal I strongly support. It also envisages a near-doubling of electricity production. The reason is that the most viable means of decarbonising both transport and heating is to replace the fuels they use with low-carbon electricity. Cut the electricity supply and we're stuck with oil and gas. If we close down nuclear plants, we must accept an even greater expansion of renewables than currently proposed. Given the tremendous public resistance to even a modest increase in windfarms and new power lines, that's going to be tough.
What the nuclear question does is to concentrate the mind about the electricity question. Decarbonising the economy involves an increase in infrastructure. Infrastructure is ugly, destructive and controlled by remote governments and corporations. These questions are so divisive because the same world-view tells us that we must reduce emissions, defend our landscapes and resist both the state and big business. The four objectives are at odds.
But even if we can accept an expansion of infrastructure, the technocentric, carbon-counting vision I've favoured runs into trouble. The problem is that it seeks to accommodate a system that cannot be accommodated: a system that demands perpetual economic growth. We could, as Zero Carbon Britain envisages, become carbon-free by 2030. Growth then ensures that we have to address the problem all over again by 2050, 2070 and thereon after.
Accommodation makes sense only if the economy is reaching a steady state. But the clearer the vision becomes, the further away it seems. A steady state economy will be politically possible only if we can be persuaded to stop grabbing. This in turn will be feasible only if we feel more secure. But the global race to the bottom and its destruction of pensions, welfare, public services and stable employment make people less secure, encouraging us to grasp as much for ourselves as we can.
If this vision looks implausible, consider the alternatives. In the latest edition of his excellent magazine The Land, Simon Fairlie responds furiously to my suggestion that we should take industry into account when choosing our energy sources. His article exposes a remarkable but seldom noticed problem: that most of those who advocate an off-grid, land-based economy have made no provision for manufactures. I'm not talking about the pointless rubbish in the FT's How To Spend It supplement. I'm talking about the energy required to make bricks, glass, metal tools and utensils, textiles (except the hand-loomed tweed Fairlie suggests we wear), ceramics and soap: commodities that almost everyone sees as the barest possible requirements.
Are people like Fairlie really proposing that we do without them altogether? If not, what energy sources do they suggest we use? Charcoal would once again throw industry into direct competition with agriculture, spreading starvation and ensuring that manufactured products became the preserve of the very rich. (Remember, as EA Wrigley5 points out, that half the land surface of Britain could produce enough charcoal to make 1.25m tonnes of bar iron – a fraction of current demand – and nothing else.) An honest environmentalism needs to explain which products should continue to be manufactured and which should not, and what the energy sources for these manufactures should be.
There's a still bigger problem here: even if we make provision for some manufacturing but, like Fairlie, envisage a massive downsizing and a return to a land-based economy, how do we take people with us? Where is the public appetite for this transition?
A third group tries to avoid such conflicts by predicting that the problem will be solved by collapse: doom is our salvation. Economic collapse, these people argue, is imminent and expiatory. I believe this is wrong on both counts.
Last week something astonishing happened: Fatih Birol, the chief economist of the International Energy Agency, revealed that peak oil has already happened. "We think that the crude oil production has already peaked, in 2006."6 If this is true, we should be extremely angry with the IEA. In 2005 its executive director mocked those who predicted peak oil as "doomsayers". Until 2008 (two years after the IEA now says it happened) the agency continued to dismiss the possibility that peak oil would occur.
But this also raises an awkward question for us greens: why hasn't the global economy collapsed as we predicted? Yes, it wobbled, though largely for other reasons. Now global growth is back with a vengeance: it reached 4.6% last year7, and the IMF predicts roughly the same for 2011 and 2012. The reason, as Birol went on to explain, is that natural gas liquids and tar sands are already filling the gap. Not only does the economy appear to be more resistant to resource shocks than we assumed, but the result of those shocks is an increase, not a decline, in environmental destruction.
The problem we face is not that we have too little fossil fuel, but too much. As oil declines, economies will switch to tar sands, shale gas and coal; as accessible coal declines, they'll switch to ultra-deep reserves (using underground gasification8 to exploit them) and methane clathrates9. The same probably applies to almost all minerals: we will find them, but exploiting them will mean trashing an ever greater proportion of the world's surface. We have enough non-renewable resources of all kinds to complete our wreckage of renewable resources: forests, soil, fish, freshwater, benign weather. Collapse will come one day, but not before we have pulled everything down with us.
And even if there were an immediate economic cataclysm, it's not clear that the result would be a decline in our capacity for destruction. In east Africa, for example, I've seen how, when supplies of paraffin or kerosene are disrupted, people don't give up cooking; they cut down more trees. History shows us that wherever large-scale collapse has occurred, psychopaths take over. This is hardly conducive to the rational use of natural assets.
All of us in the environment movement, in other words – whether we propose accommodation, radical downsizing or collapse – are lost. None of us yet has a convincing account of how humanity can get out of this mess. None of our chosen solutions break the atomising, planet-wrecking project. I hope that by laying out the problem I can encourage us to address it more logically, to abandon magical thinking and to recognize the contradictions we confront. But even that could be a tall order.
Thursday, 5 May 2011
Election Hangover
Everyone else is having their say on what Monday's election results mean, so why not, and I am trying to be analytical, not partisan. .
For those who care about developing a more rational "food system", based not simply on who can produce it the cheapest, Monday night's results are a crushing disappointment. The Liberals and the NDP (and the Greens) had spent a lot of time and effort developing national food strategies that would have put more emphasis on regional food networks, stepping up inspection of imported food, food labeling, and making that important link between the food we eat and our health. The Liberals, with all the soul searching they'll be doing, will probably put their food strategy in the same filing cabinet as the Green Shift, and that's unfortunate. The NDP put more emphasis on what they call fair trade, looking into international trade deals to see if Canadian farmers are being treated fairly. That's a noble exercise, but will be a hard sell in a majority Conservative parliament.
When it comes to agriculture and food, the Conservatives promised (much like in every other area) more of the same: export oriented, more free trade, Canadian farmers who are competitive on a world scale will be successful, those that can't, will fail. The challenge here in the Maritimes (see earlier posts) is that production costs are higher here, and that "North American" price for livestock and grains (kept lower by those large U.S. subsidies that come in the mailbox to American farmers) makes farming here marginal or money losing.
Just before coming PEI in 1980, I spent time working for CBC radio in Calgary. I caught a glimpse of what drives the current Conservative party on resource issues, and what makes up Stephen Harper's mindset. We have to remember that Stephen Harper (much like George Bush who was born into privilege in the U.S. North-east, but then re-created himself as hard nosed Texan) made a similar passage. Harper grew up in Toronto, the son of an accountant with Imperial Oil. He dropped out of the University of Toronto, and ended up working in the mailroom of Imperial Oil in Calgary, and then decided to go back to school. That's when he came under the influence of the The University of Calgary's renowned economics department, and it's well know head Tom Flannigan. Flannigan, and the U. of C., are entrenched in free market economics (Milton Friedman, low taxes, small government, decentralization, property rights, etc. etc.), and Harper took all that on, and became one of its most skillful promoters. Now he's the Prime Minster with a majority government.
(He still looks pretty goofy in a cowboy hat, but, like Bush, has transformed himself, in his own mind anyway, into a frontiersman).
What will be telling for the Maritimes (and we saw this clearly in December of 2008 when Harper steadfastly refused to take the global financial collapse as a time for Government intervention) is that he will (in my opinion) diminish the role of ACOA, equalization, transfer payments, and so on, arguing the budget has to be balanced, but there's more at play. He simply doesn't believe government has a central role in economic development. It's not that he'll refuse, it's that he doesn't believe it should happen. There's a difference.
When it comes to Agriculture policy and resource issues, Western Canada, and Alberta in particular, has always been tempted by that huge, rich (used to be anyway) market just south across the border. That's why Westerners see export markets as the best way to prosperity, and any government intervention to help Canadian producers in the East that could jeopardize these export markets (through a trade fight) is to be refused. It's why Trudeau's National Energy Program which kept oil and gas at a lower domestic price, was so viscerally hated in the West.
There's one more impression I came away with that's harder to justify, but I think is very important. Gaining enormous wealth by punching a hole in the ground, collecting and marketing the oil and gas, creates a mindset that anyone can make it if they have enough guts and determination. In other words there's no excuse for people not to succeed, and the government shouldn't coddle those that don't. I remember arguing with someone in Calgary that it was Peter Lougheed who guaranteed Imperial Oil a profit if it would start developing the oil sands. The government never had to pay of course, but surely that's government intervention in a big way, and takes away from the swagger of the so-called risk takers in the oil industry (we agreed to disagree).
All this means people in the Maritimes are going to have to work harder at finding local solutions to problems, think a little more about their neighbours, and where they spend their consumer dollars (that's not a bad thing). Harper will be under tremendous pressure from the business media, his supporters in Alberta, Tom Flannigan, to use these four or five years to show Canadians what a true Conservative government really looks like. My biggest worry is what's called the Dutch Disease. Holland gained enormous wealth form North Sea oil, driving up the value of the guilder, and making anyone outside the oil and gas business uncompetitive in export markets. I think Canada will go through the same thing, putting tourism, and the important export markets for food, lumber, and so on at risk. Harper and others will be proud of a "strong, confident Canada" but not all Canadians will feel the joy.
For those who care about developing a more rational "food system", based not simply on who can produce it the cheapest, Monday night's results are a crushing disappointment. The Liberals and the NDP (and the Greens) had spent a lot of time and effort developing national food strategies that would have put more emphasis on regional food networks, stepping up inspection of imported food, food labeling, and making that important link between the food we eat and our health. The Liberals, with all the soul searching they'll be doing, will probably put their food strategy in the same filing cabinet as the Green Shift, and that's unfortunate. The NDP put more emphasis on what they call fair trade, looking into international trade deals to see if Canadian farmers are being treated fairly. That's a noble exercise, but will be a hard sell in a majority Conservative parliament.
When it comes to agriculture and food, the Conservatives promised (much like in every other area) more of the same: export oriented, more free trade, Canadian farmers who are competitive on a world scale will be successful, those that can't, will fail. The challenge here in the Maritimes (see earlier posts) is that production costs are higher here, and that "North American" price for livestock and grains (kept lower by those large U.S. subsidies that come in the mailbox to American farmers) makes farming here marginal or money losing.
Just before coming PEI in 1980, I spent time working for CBC radio in Calgary. I caught a glimpse of what drives the current Conservative party on resource issues, and what makes up Stephen Harper's mindset. We have to remember that Stephen Harper (much like George Bush who was born into privilege in the U.S. North-east, but then re-created himself as hard nosed Texan) made a similar passage. Harper grew up in Toronto, the son of an accountant with Imperial Oil. He dropped out of the University of Toronto, and ended up working in the mailroom of Imperial Oil in Calgary, and then decided to go back to school. That's when he came under the influence of the The University of Calgary's renowned economics department, and it's well know head Tom Flannigan. Flannigan, and the U. of C., are entrenched in free market economics (Milton Friedman, low taxes, small government, decentralization, property rights, etc. etc.), and Harper took all that on, and became one of its most skillful promoters. Now he's the Prime Minster with a majority government.
(He still looks pretty goofy in a cowboy hat, but, like Bush, has transformed himself, in his own mind anyway, into a frontiersman).
What will be telling for the Maritimes (and we saw this clearly in December of 2008 when Harper steadfastly refused to take the global financial collapse as a time for Government intervention) is that he will (in my opinion) diminish the role of ACOA, equalization, transfer payments, and so on, arguing the budget has to be balanced, but there's more at play. He simply doesn't believe government has a central role in economic development. It's not that he'll refuse, it's that he doesn't believe it should happen. There's a difference.
When it comes to Agriculture policy and resource issues, Western Canada, and Alberta in particular, has always been tempted by that huge, rich (used to be anyway) market just south across the border. That's why Westerners see export markets as the best way to prosperity, and any government intervention to help Canadian producers in the East that could jeopardize these export markets (through a trade fight) is to be refused. It's why Trudeau's National Energy Program which kept oil and gas at a lower domestic price, was so viscerally hated in the West.
There's one more impression I came away with that's harder to justify, but I think is very important. Gaining enormous wealth by punching a hole in the ground, collecting and marketing the oil and gas, creates a mindset that anyone can make it if they have enough guts and determination. In other words there's no excuse for people not to succeed, and the government shouldn't coddle those that don't. I remember arguing with someone in Calgary that it was Peter Lougheed who guaranteed Imperial Oil a profit if it would start developing the oil sands. The government never had to pay of course, but surely that's government intervention in a big way, and takes away from the swagger of the so-called risk takers in the oil industry (we agreed to disagree).
All this means people in the Maritimes are going to have to work harder at finding local solutions to problems, think a little more about their neighbours, and where they spend their consumer dollars (that's not a bad thing). Harper will be under tremendous pressure from the business media, his supporters in Alberta, Tom Flannigan, to use these four or five years to show Canadians what a true Conservative government really looks like. My biggest worry is what's called the Dutch Disease. Holland gained enormous wealth form North Sea oil, driving up the value of the guilder, and making anyone outside the oil and gas business uncompetitive in export markets. I think Canada will go through the same thing, putting tourism, and the important export markets for food, lumber, and so on at risk. Harper and others will be proud of a "strong, confident Canada" but not all Canadians will feel the joy.
Monday, 2 May 2011
Watch the Size of that Cereal Box
Three stories that tell us a little more not just about who's wining and losing as food prices go up, but the ability of various parts of the food industry to adjust. The fallout from 9-11 (still with us even though Bin Laden has been dispatched) ramped up production of biofuels in the United States, and the heavy subsidies continue to enrich corn and soybean producers there. This in turn has increased the price of livestock feed. When that's combined with drought in western U.S. ranching country, the U.S. beef herd is at its lowest numbers in decades, so prices have reached record levels. Canadian farmers will see some benefits too (Western Canadian farmers in particular where grain and livestock prevail, with much easier access to the U.S. markets) but as one PEI beef producer told me when I suggested things must be getting better, he said while cattle prices are back to where they were six years ago when mad-cow was first discovered, the cost of everything from fertilizer to farm equipment is much higher. Throw in hundreds of thousands of dollars of loans used to survive through the lean years, and the picture while better, still isn't good. I was going to argue that farmers just never seem to be happy, but I realized he was right.
Consumers will see the fallout by paying a little more money, but also getting a little bit less in the box or bag. Food retailers and processors have so much invested in providing "the lowest price", that they're cleverly trying to protect their bottom line in a different way.
From: http://www.theglobeandmail.com/report-on-business/grocers-scramble-to-offset-higher-food-fuel-costs/article2006101/
Grocers scramble to offset higher food, fuel costs
by MARINA STRAUSS — RETAILING REPORTER • May 2, 2011 •
Call it the incredible shrinking package. Loblaw Cos. Ltd. (L-T139.880.521.32%) recently scaled back to 750 grams from 800 grams the amount of cereal in a box of one of its President’s Choice granolas, but has also raised the price to $5.79 from $4.99 since last year.
Loblaw is far from alone in downsizing packages and upsizing prices. It is a common practice in the grocery industry, underscoring how supermarkets today are racing to find ways to ease the pain of higher food and fuel costs while shoring up profit margins.
After having prospered last year from a strong loonie despite food deflation and escalating competition, grocers are preparing for an era of food inflation.
Even as profit margins improve – helped by a rising Canadian dollar that lowers many purchasing expenses – Loblaw and its rivals are struggling to make sales gains in a the cutthroat environment that has seen discounter Wal-Mart Canada Corp. rapidly expand into food. On Wednesday, when Loblaw reports its first-quarter results, the country’s largest grocer is expected to shed more light on how it’s grappling with limited growth opportunity in the food aisles in a period of soaring costs.
While moderate inflation is an ally to the food retailer, price increases of more than 2 to 3 per cent can spell trouble, Loblaw president Allan Leighton has warned. Recession-shaken consumers are sensitive to dramatic price hikes, and simply switch to cheaper alternatives rather than shell out more.
When prices jump beyond 2 to 3 per cent “then it really starts to whack the market,” Mr. Leighton said in February. “I’d rather be in a place of deflation than a place of high inflation.”
In March, the tab for food bought in stores jumped 3.7 per cent, marking the biggest year-over-year increase in 19 months, according to Statistics Canada. Surges in global commodity prices, spiralling fuel prices and bad weather in the southern U.S. are continuing to drive up prices. And higher rates at the gas pump threaten to curb consumer spending.
Grocers have reported lower prices than Statscan because their customers trade down, opting for cheaper alternatives than the items included in the federal agency’s sample of groceries. But the retailers acknowledge that they’re starting to raise prices. Already this year, Loblaw hiked prices of vegetables, fruits and meats. Other price adjustments are more subtle, such as shrinking packages or launching new products.
In the case of its PC Blue Menu Raisin & Almond granola, Loblaw last week was still touting an 800 gram box on its website even though its stores carried a shrunken 750-gram package – 6 per cent smaller but almost 16 per cent more expensive than last year at its conventional supermarkets.
At the same time, the retailer stocks a new Blue Menu almond-vanilla Omega-3 granola in the same size box as the raisin-and-almond version but with just 600 grams of cereal – at the same $5.79 price.
In response to a cautious consumer, grocers try to camouflage price increases by downsizing packaging, rolling out new products or adding healthy-for-you components to justify higher rates, said Michael Mulvey, marketing professor at the University of Ottawa Telfer School of Management.
Consumers often don’t readily notice a different package or content size, Prof. Mulvey said. “So potato chips all of a sudden contain 15 per cent less chips but the bag won’t change much, in terms of its size.”
And grocers can get away with higher prices if they’re providing a more convenient or healthy product, he said. He cited the example of Pepperidge Farm’s Goldfish cheddar snacks which, at Loblaw, cost $3.29 for both a 200-gram and a 168-gram package. Because the latter consists of six 28-gram snack packs, “they’re providing consumer value, in the sense that it’s more portable, easier to pack,” he said. “It is a very effective way of selling less food for the same price and helping the bottom line.”
Another grocer strategy to deflect attention from inflation is running “last-blast” promotions before jacking up prices, retail analyst Perry Caicco at CIBC World Markets said in a recent report. Or, as Loblaw did when it unveiled its new almond-vanilla granola, the retailer initially featured it at a lower price of $3.49 before raising it to its current $5.79.
And as grocers focus on dealing with spiralling food costs, they feel strains on another front: higher prices at the pump. In a report in March, market researcher Nielsen Co. predicted that the double whammy of rising gas and commodity prices will prompt consumers to follow historic patterns: make fewer trips to the grocer, eat out less, switch to cheaper shopping alternatives and use more coupons.
“The impact on household budgets can be significant,” it said. A 10-cent-a-litre increase in gas prices slices consumer spending by $30 a month, while a 50-cent hike translates into a $124 monthly cut.
Still, higher gas prices can have a silver lining for grocers, Prof. Mulvey said. Consumers stay home more, rather than dine out or travel, forcing them to buy more groceries because they still have to eat.
http://www.farmmarketer.com/home/news/?storyid=3230
Recession-free agriculture
April 29, 2011
By DAVID MERCER
Since 2007, much of the American economy has stumbled through a difficult period, but agriculture-related firms have enjoyed four profitable years thanks to heavy demand for corn and other crops.
A new index of 21 agriculture-related companies, called Agindex, shows their market value increased 8.6 percent a year from the beginning of 2007 through the end of March 2011. During that same period the value of companies in the S&P 500 dropped on average 2.7 percent per year.
The Agindex includes household names such as equipment-maker Deere & Company and seed-and-chemical firm Monsanto along with lesser-known companies such as fertilizer producer Agrium.
Gary Schnitkey, a University of Illinois agricultural economist, created the index with graduate student Clay Kramer to measure the strength of the agricultural sector. What they found was evidence of the strength of the rural economy the past few years, when crop prices sheltered farm country from much of the worst of the recession.
"Farmers are buying equipment and everything so it does filter out into the general rural sector," Schnitkey said. "The rural economy did fare pretty well."
Even with uncertainties about whether the government will reduce or eliminate programs that subsidize ethanol producers and growers of corn, soybeans and other commodities, Schnitkey said it's doubtful his index or the farm economy could decline any time soon.
"You're going to see pretty high (farmer) incomes for this year and probably next year," he said. "It's hard to see a situation where that moderates a lot."
Prices for corn, soybeans and other crops have soared for several reasons, including a surge in overseas purchases from developing economies in China and India as well as continued demand from U.S. livestock and ethanol producers.
The demand has caused stockpiles to decline and in part been to blame for increased food prices.
As farmers have earned more in recent years, they have bought new tractors, combines and other equipment from companies such as John Deere and Kubota Tractor Corp.
The equipment makers in the index saw their market value increase a total of 51 percent.
Higher prices, coupled with plentiful crops in recent years, have enabled farmers such as Leon Corzine of Assumption, Ill., to buy new equipment. Corzine bought two new tractors last year for use on his 3,000 acres of corn and soybeans.
"You're talking about getting upwards of 250,000 or 300,000 dollars apiece," he said.
But the sector that's had the best four-year run, Schnitkey found, is fertilizer makers such as Agrium, based in Calgary, Canada, and Potash Corp. of Saskatchewan, based in Saskatoon, Canada. Those companies' market values more than doubled.
Most Americans probably have never heard of the fertilizer makers, but the demand for more corn and soybeans has allowed the companies to put a premium on their products.
Not every company on the index did so well. The index's processors, which had to pay high prices for corn, soybeans and other crops, actually lost 4 percent of their value. Those companies include Archer Daniels Midland Company, Bunge Limited and Corn Products International.
Schnitkey noted that most of those companies had very strong first quarters this year.
Despite concerns about reductions in government subsidies for ethanol and some crops, Morningstar analyst Jeffrey Stafford expects the current trend to continue. Farmers can't keep up with the demand for corn, for instance, meaning that stockpiles will remain low.
"It could take multiple growing seasons to return those stocks-to-use levels to kind of a more sustainable average," he said. "You could see elevated crop prices remain for quite some time."
http://www.farmmarketer.com/home/news/?storyid=3217
Beef prices at all-time high
April 25, 2011
Source: Reed Fujii
They say happy cows come from California. With all-time record beef prices and plentiful pastures these days, happy cowboys also come from California and other U.S. cattle-raising regions.
"I can't call and complain about anything," said Darrell Sweet, a Livermore cattle rancher and past president of the California Cattlemen's Association.
That's quite a change as the industry has emerged from California's three-year drought and a period of depressed beef prices as costs for grains and other feed soared.
As recently as June 2009, beef cattle being sold for slaughter went for an average 82 cents a pound live weight, the U.S. Economic Research Service reported. In March, the average was rose to nearly $1.16 a pound, a jump of more than 40 percent in less than two years.
Both gross farm and retail beef prices set records in February and then again in March, not accounting for inflation. The agency reported the average retail price of fresh beef was nearly $4.35 a pound in February and ticked up to $4.48 a pound last month.
Backing off buying
The high prices are affecting beef buyers. Consumers are seeking cheaper grades and cuts of beef. Restaurants are watching their profits shrink or must raise their prices even while the economy remains weak. Fast-food giant McDonald's Corp. announced Thursday it planned small price increases as the price of beef rises.
Still, it's a boon for cattle producers.
"Prices are good. They've never been this good before," said Duane Martin Jr., a Galt-based rancher and past president of the San Joaquin-Stanislaus Cattlemen's Association. "This year, we'll make big profits."
He attributed the rise to short supply of beef, as the drought in California and other areas of the nation and low market prices compelled ranchers to sell off their herds. Export demand for U.S. beef is also strong, and there may be a bit of a price bubble in commodity markets.
Martin said the gain is not pure profit, as production costs are also increasing. He said fuel and transportation costs may jump by one-third this year.
"When you're talking about shipping cattle 1,200 miles to Colorado, it adds up pretty fast," he said.
Feed and grain prices, as well as pasture rents, are also rising. And Martin, who has 30 employees in his operation, worries about labor costs, including health care coverage.
"Over the next few years, I expect a big percentage of it to get eaten up," he said. "If not, the prices of cattle falling back, because, like I said, I think they're overinflated."
Daniel Sumner, director of the Agricultural Issues Center at the University of California, Davis, said the primary price driver is the short beef supply.
"One of the things that happened a few years ago: We had these incredibly high grain prices, and beef prices didn't go up, so that meant guys were selling," he said.
"This isn't that you and I and everybody else make so much money we eat steak everyday," Sumner said. "The economy has come back a little bit, but it's not a strong economy."
And it's not that easy to increase beef production. Ranchers need to build up the number of heifers - young cows - to do so.
"Cattle make cattle; the only way you make marketable animals is to have breeding stock," Sumner said.
To do so, however, will further reduce beef supplies in the short run as heifers are held off the market.
Ranchers get more
Sweet said he's seen heifers selling for about $1,900 apiece, roughly twice what they might have brought during the drought, when ranchers were reducing their herds.
He also said foreign demand is also contributing to higher prices.
"The export market is what is really driving this thing," Sweet said. "The export market and the fact that we have a continuing decline in beef cattle numbers."
The U.S. Meat Export Federation, a trade group promoting beef, pork and lamb, recently reported there was strong growth of U.S. beef shipments in the first two months of the year.
Beef exports in that period were 179,460 metric tons valued at $727.3 million, representing gains of 24 percent in volume and 45 percent in price from the same period a year ago. Mexico, South Korea, Canada, the Middle East and Japan are the top five export markets.
Officials at Save Mart Supermarkets said they hadn't received any surge in complaints about meat pricing, but consumers are picking lower-priced cuts.
"A developing trend is the increased popularity in short ribs, stew meat and thin cuts like stir fry strips or carné asada, which are economical and very quick and easy to prepare," said Marty Stephanic, Save Mart's meat director.
All sorts of economic factors play into consumer buying decisions, said Dave Heylen, vice president of the California Grocers Association.
"With the recession we've gone through or are in, we saw considerable change in consumer buying habits in all areas, not just meats," he said.
"Any time there are increases in prices, it's going to impact how consumers purchase," Heylen said. "So sure, it'll have an impact. How much, I can't say."
At the El Rancho Inn-Steak & Lobster House in Stockton, rising costs have hit the bottom line, owner Ray Lecondeguy said.
"I've absorbed everything for the last year or so on beef," he said. He quickly added, "What's even worse is the record lobster prices. I'm paying $44.50 per pound."
Plate prices rising
That's forced him to raise the price for a lobster dinner, but he's holding steady on his rib eye and New York steaks.
"Everything is going up. Everything that's related to agriculture is going up," Lecondeguy said.
Martin thinks the beef market will remain strong for the next several years.
"I've been growing my herd at a rapid pace, and this year I expanded it 40 percent," he said.
He's purchased a few thousand head of cattle being pastured in Wyoming and Colorado and added staff to manage the expansion.
Still, he admits being a bit surprised by the gains.
"I was very bullish on the cattle industry; just not to this degree," Martin said
Consumers will see the fallout by paying a little more money, but also getting a little bit less in the box or bag. Food retailers and processors have so much invested in providing "the lowest price", that they're cleverly trying to protect their bottom line in a different way.
From: http://www.theglobeandmail.com/report-on-business/grocers-scramble-to-offset-higher-food-fuel-costs/article2006101/
Grocers scramble to offset higher food, fuel costs
by MARINA STRAUSS — RETAILING REPORTER • May 2, 2011 •
Call it the incredible shrinking package. Loblaw Cos. Ltd. (L-T139.880.521.32%) recently scaled back to 750 grams from 800 grams the amount of cereal in a box of one of its President’s Choice granolas, but has also raised the price to $5.79 from $4.99 since last year.
Loblaw is far from alone in downsizing packages and upsizing prices. It is a common practice in the grocery industry, underscoring how supermarkets today are racing to find ways to ease the pain of higher food and fuel costs while shoring up profit margins.
After having prospered last year from a strong loonie despite food deflation and escalating competition, grocers are preparing for an era of food inflation.
Even as profit margins improve – helped by a rising Canadian dollar that lowers many purchasing expenses – Loblaw and its rivals are struggling to make sales gains in a the cutthroat environment that has seen discounter Wal-Mart Canada Corp. rapidly expand into food. On Wednesday, when Loblaw reports its first-quarter results, the country’s largest grocer is expected to shed more light on how it’s grappling with limited growth opportunity in the food aisles in a period of soaring costs.
While moderate inflation is an ally to the food retailer, price increases of more than 2 to 3 per cent can spell trouble, Loblaw president Allan Leighton has warned. Recession-shaken consumers are sensitive to dramatic price hikes, and simply switch to cheaper alternatives rather than shell out more.
When prices jump beyond 2 to 3 per cent “then it really starts to whack the market,” Mr. Leighton said in February. “I’d rather be in a place of deflation than a place of high inflation.”
In March, the tab for food bought in stores jumped 3.7 per cent, marking the biggest year-over-year increase in 19 months, according to Statistics Canada. Surges in global commodity prices, spiralling fuel prices and bad weather in the southern U.S. are continuing to drive up prices. And higher rates at the gas pump threaten to curb consumer spending.
Grocers have reported lower prices than Statscan because their customers trade down, opting for cheaper alternatives than the items included in the federal agency’s sample of groceries. But the retailers acknowledge that they’re starting to raise prices. Already this year, Loblaw hiked prices of vegetables, fruits and meats. Other price adjustments are more subtle, such as shrinking packages or launching new products.
In the case of its PC Blue Menu Raisin & Almond granola, Loblaw last week was still touting an 800 gram box on its website even though its stores carried a shrunken 750-gram package – 6 per cent smaller but almost 16 per cent more expensive than last year at its conventional supermarkets.
At the same time, the retailer stocks a new Blue Menu almond-vanilla Omega-3 granola in the same size box as the raisin-and-almond version but with just 600 grams of cereal – at the same $5.79 price.
In response to a cautious consumer, grocers try to camouflage price increases by downsizing packaging, rolling out new products or adding healthy-for-you components to justify higher rates, said Michael Mulvey, marketing professor at the University of Ottawa Telfer School of Management.
Consumers often don’t readily notice a different package or content size, Prof. Mulvey said. “So potato chips all of a sudden contain 15 per cent less chips but the bag won’t change much, in terms of its size.”
And grocers can get away with higher prices if they’re providing a more convenient or healthy product, he said. He cited the example of Pepperidge Farm’s Goldfish cheddar snacks which, at Loblaw, cost $3.29 for both a 200-gram and a 168-gram package. Because the latter consists of six 28-gram snack packs, “they’re providing consumer value, in the sense that it’s more portable, easier to pack,” he said. “It is a very effective way of selling less food for the same price and helping the bottom line.”
Another grocer strategy to deflect attention from inflation is running “last-blast” promotions before jacking up prices, retail analyst Perry Caicco at CIBC World Markets said in a recent report. Or, as Loblaw did when it unveiled its new almond-vanilla granola, the retailer initially featured it at a lower price of $3.49 before raising it to its current $5.79.
And as grocers focus on dealing with spiralling food costs, they feel strains on another front: higher prices at the pump. In a report in March, market researcher Nielsen Co. predicted that the double whammy of rising gas and commodity prices will prompt consumers to follow historic patterns: make fewer trips to the grocer, eat out less, switch to cheaper shopping alternatives and use more coupons.
“The impact on household budgets can be significant,” it said. A 10-cent-a-litre increase in gas prices slices consumer spending by $30 a month, while a 50-cent hike translates into a $124 monthly cut.
Still, higher gas prices can have a silver lining for grocers, Prof. Mulvey said. Consumers stay home more, rather than dine out or travel, forcing them to buy more groceries because they still have to eat.
http://www.farmmarketer.com/home/news/?storyid=3230
Recession-free agriculture
April 29, 2011
By DAVID MERCER
Since 2007, much of the American economy has stumbled through a difficult period, but agriculture-related firms have enjoyed four profitable years thanks to heavy demand for corn and other crops.
A new index of 21 agriculture-related companies, called Agindex, shows their market value increased 8.6 percent a year from the beginning of 2007 through the end of March 2011. During that same period the value of companies in the S&P 500 dropped on average 2.7 percent per year.
The Agindex includes household names such as equipment-maker Deere & Company and seed-and-chemical firm Monsanto along with lesser-known companies such as fertilizer producer Agrium.
Gary Schnitkey, a University of Illinois agricultural economist, created the index with graduate student Clay Kramer to measure the strength of the agricultural sector. What they found was evidence of the strength of the rural economy the past few years, when crop prices sheltered farm country from much of the worst of the recession.
"Farmers are buying equipment and everything so it does filter out into the general rural sector," Schnitkey said. "The rural economy did fare pretty well."
Even with uncertainties about whether the government will reduce or eliminate programs that subsidize ethanol producers and growers of corn, soybeans and other commodities, Schnitkey said it's doubtful his index or the farm economy could decline any time soon.
"You're going to see pretty high (farmer) incomes for this year and probably next year," he said. "It's hard to see a situation where that moderates a lot."
Prices for corn, soybeans and other crops have soared for several reasons, including a surge in overseas purchases from developing economies in China and India as well as continued demand from U.S. livestock and ethanol producers.
The demand has caused stockpiles to decline and in part been to blame for increased food prices.
As farmers have earned more in recent years, they have bought new tractors, combines and other equipment from companies such as John Deere and Kubota Tractor Corp.
The equipment makers in the index saw their market value increase a total of 51 percent.
Higher prices, coupled with plentiful crops in recent years, have enabled farmers such as Leon Corzine of Assumption, Ill., to buy new equipment. Corzine bought two new tractors last year for use on his 3,000 acres of corn and soybeans.
"You're talking about getting upwards of 250,000 or 300,000 dollars apiece," he said.
But the sector that's had the best four-year run, Schnitkey found, is fertilizer makers such as Agrium, based in Calgary, Canada, and Potash Corp. of Saskatchewan, based in Saskatoon, Canada. Those companies' market values more than doubled.
Most Americans probably have never heard of the fertilizer makers, but the demand for more corn and soybeans has allowed the companies to put a premium on their products.
Not every company on the index did so well. The index's processors, which had to pay high prices for corn, soybeans and other crops, actually lost 4 percent of their value. Those companies include Archer Daniels Midland Company, Bunge Limited and Corn Products International.
Schnitkey noted that most of those companies had very strong first quarters this year.
Despite concerns about reductions in government subsidies for ethanol and some crops, Morningstar analyst Jeffrey Stafford expects the current trend to continue. Farmers can't keep up with the demand for corn, for instance, meaning that stockpiles will remain low.
"It could take multiple growing seasons to return those stocks-to-use levels to kind of a more sustainable average," he said. "You could see elevated crop prices remain for quite some time."
http://www.farmmarketer.com/home/news/?storyid=3217
Beef prices at all-time high
April 25, 2011
Source: Reed Fujii
They say happy cows come from California. With all-time record beef prices and plentiful pastures these days, happy cowboys also come from California and other U.S. cattle-raising regions.
"I can't call and complain about anything," said Darrell Sweet, a Livermore cattle rancher and past president of the California Cattlemen's Association.
That's quite a change as the industry has emerged from California's three-year drought and a period of depressed beef prices as costs for grains and other feed soared.
As recently as June 2009, beef cattle being sold for slaughter went for an average 82 cents a pound live weight, the U.S. Economic Research Service reported. In March, the average was rose to nearly $1.16 a pound, a jump of more than 40 percent in less than two years.
Both gross farm and retail beef prices set records in February and then again in March, not accounting for inflation. The agency reported the average retail price of fresh beef was nearly $4.35 a pound in February and ticked up to $4.48 a pound last month.
Backing off buying
The high prices are affecting beef buyers. Consumers are seeking cheaper grades and cuts of beef. Restaurants are watching their profits shrink or must raise their prices even while the economy remains weak. Fast-food giant McDonald's Corp. announced Thursday it planned small price increases as the price of beef rises.
Still, it's a boon for cattle producers.
"Prices are good. They've never been this good before," said Duane Martin Jr., a Galt-based rancher and past president of the San Joaquin-Stanislaus Cattlemen's Association. "This year, we'll make big profits."
He attributed the rise to short supply of beef, as the drought in California and other areas of the nation and low market prices compelled ranchers to sell off their herds. Export demand for U.S. beef is also strong, and there may be a bit of a price bubble in commodity markets.
Martin said the gain is not pure profit, as production costs are also increasing. He said fuel and transportation costs may jump by one-third this year.
"When you're talking about shipping cattle 1,200 miles to Colorado, it adds up pretty fast," he said.
Feed and grain prices, as well as pasture rents, are also rising. And Martin, who has 30 employees in his operation, worries about labor costs, including health care coverage.
"Over the next few years, I expect a big percentage of it to get eaten up," he said. "If not, the prices of cattle falling back, because, like I said, I think they're overinflated."
Daniel Sumner, director of the Agricultural Issues Center at the University of California, Davis, said the primary price driver is the short beef supply.
"One of the things that happened a few years ago: We had these incredibly high grain prices, and beef prices didn't go up, so that meant guys were selling," he said.
"This isn't that you and I and everybody else make so much money we eat steak everyday," Sumner said. "The economy has come back a little bit, but it's not a strong economy."
And it's not that easy to increase beef production. Ranchers need to build up the number of heifers - young cows - to do so.
"Cattle make cattle; the only way you make marketable animals is to have breeding stock," Sumner said.
To do so, however, will further reduce beef supplies in the short run as heifers are held off the market.
Ranchers get more
Sweet said he's seen heifers selling for about $1,900 apiece, roughly twice what they might have brought during the drought, when ranchers were reducing their herds.
He also said foreign demand is also contributing to higher prices.
"The export market is what is really driving this thing," Sweet said. "The export market and the fact that we have a continuing decline in beef cattle numbers."
The U.S. Meat Export Federation, a trade group promoting beef, pork and lamb, recently reported there was strong growth of U.S. beef shipments in the first two months of the year.
Beef exports in that period were 179,460 metric tons valued at $727.3 million, representing gains of 24 percent in volume and 45 percent in price from the same period a year ago. Mexico, South Korea, Canada, the Middle East and Japan are the top five export markets.
Officials at Save Mart Supermarkets said they hadn't received any surge in complaints about meat pricing, but consumers are picking lower-priced cuts.
"A developing trend is the increased popularity in short ribs, stew meat and thin cuts like stir fry strips or carné asada, which are economical and very quick and easy to prepare," said Marty Stephanic, Save Mart's meat director.
All sorts of economic factors play into consumer buying decisions, said Dave Heylen, vice president of the California Grocers Association.
"With the recession we've gone through or are in, we saw considerable change in consumer buying habits in all areas, not just meats," he said.
"Any time there are increases in prices, it's going to impact how consumers purchase," Heylen said. "So sure, it'll have an impact. How much, I can't say."
At the El Rancho Inn-Steak & Lobster House in Stockton, rising costs have hit the bottom line, owner Ray Lecondeguy said.
"I've absorbed everything for the last year or so on beef," he said. He quickly added, "What's even worse is the record lobster prices. I'm paying $44.50 per pound."
Plate prices rising
That's forced him to raise the price for a lobster dinner, but he's holding steady on his rib eye and New York steaks.
"Everything is going up. Everything that's related to agriculture is going up," Lecondeguy said.
Martin thinks the beef market will remain strong for the next several years.
"I've been growing my herd at a rapid pace, and this year I expanded it 40 percent," he said.
He's purchased a few thousand head of cattle being pastured in Wyoming and Colorado and added staff to manage the expansion.
Still, he admits being a bit surprised by the gains.
"I was very bullish on the cattle industry; just not to this degree," Martin said
Sunday, 1 May 2011
Skeptical of Climate Skeptics
"Climate change" is another one of those issues that generates a lot of heat in the media, and depending on your point of view, you can get lots of opinion, and even some scientific proof to support your views. There's an excellent site in Britain that looks at the allegations made by climate skeptics, and rather than simply dismissing them, looks hard to find the science that proves them wrong. There's some especially good material on some of the allegations that came out of climategate, where words like "trick" were used in emails, and gave climate skeptics a whole new round of material to argue their case. The site is here:
http://www.skepticalscience.com/
and at least take a look at a very clever video that certainly answered some questions I had:
http://www.youtube.com/watch?v=tz8Ve6KE-Us&feature=player_embedded#at=28
http://www.skepticalscience.com/
and at least take a look at a very clever video that certainly answered some questions I had:
http://www.youtube.com/watch?v=tz8Ve6KE-Us&feature=player_embedded#at=28
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