Contract Farming Versus Supply Management

Part of the logic of contract farming, as I understand it, is providing more stability to the industry.

That might be questioned, given a 30 percent drop in egg prices.

Contract farming means the farmer in the hen house doesn't determine how many hens to raise.  She forgoes the possibility of good egg prices and hefty profits for hopefully a more certain profit (assuming disease can be avoided etc.).  The company doing the contracting makes the decision to increase or decrease production. Because the company only has to track what the other companies are doing, a much easier job than reading the minds of thousands of small growers, the company can make better decisions.

What happened to the theory?  Cage-free eggs seems to be the answer.  As producers increase production of cage-free eggs, both because of state regulations and the premium prices for such eggs, they misjudged the effect on demand for eggs from caged hens, and didn't decrease production enough.  The article doesn't say, but I'd guess the contracts the companies had with their growers limited their ability to cut production quickly.  After all the farmers have a capital investment in their hen houses and their cages which they planned to amortize over the lifetime of the buildings and equipment.

I don't know how possible it would be for a cage grower to convert to cage-free operation.  If the change is simply providing more cage space per hen, the conversion might be doable, although the grower would need to add building(s) to maintain the same level of production. Going to entirely cage free would be harder.  And free-range would be even harder.

Canada has a supply management program for poultry and dairy.  I assume that Canadians are as intrested in cage-free egss as Americans, so it will be interesting to see if their plan will work better in handling the changes than our markets do.

On Columbus and Italians

Josh Marshall has thoughts on Columbus/

I'm old enough to remember when WASP's looked dubiously on Catholics (specifically and especially my mother)--they were subject to the rule of the pope, so weren't fully loyal to the US (somewhat as some even today see Jews and Israel), they were relatively recent immigrants and not fully Americanized. 

One Italian-American in my school for a while--don't remember whether Joe was set back or grade or whether  he was a grade ahead.--he didn't graduate with us I know that.  Pretty good athlete and ran with the jocks. Got teased about being a "wop".  At least in memory it was mostly teasing, as we had nicknames for others: "crotch", "piggy", and "spook" were others I remember.  The last one wasn't racial--he was very pale. 

Italian-Americans were climbing the ladder--Senator John Pastore was prominent as the first senator.

In memory at least JFK's election ended most that that prejudice--the Italians were honorary Irish by virtue of being Catholic, so when he won all the recent immigrant groups won.  ("Recent" referring to 30 years before).

Also on immigration--two of the three economics Nobelists announced today are immigrants, which isn't unusual--see this from 2017.

Top 25 Vertical Farms?

Here's a listing of the top 25 vertical farms, although it appears some are equipment providers for aeroponic or hydroponic setups.  There's some mention of LED's, particularly for marijuana. (Indoor farming of marijuana seems to make sense based on what's desirable for the plants, not just because it's easier to hide the plants from law enforcement.)  Mostly these farms are growing greens and herbs.

When I first blogged on vertical farms it was to mock the idea of sun-based vertical farms. That idea seems to have died a natural death; artificial lights are used, changing the economics.  The linked article talks of the possibility of a multi-billion dollar industry by 2022 or so.  Personally I expect there's a fair amount of froth and hype in its current state--at some point the market will sort out which designs and sets of technology can make money in which cities.

Contract Farming for Strawberries?

Contract farming made an early appearance with hens, putting the small farms like my mother's out of business.  It's spread to more and more areas of agriculture, but I wasn't aware that strawberries are now included.   See this Civil Eats story.

Trump's MFP Leads to WTO Violation?

That's the Congressional Research Service's tentative conclusion--US may be billions over its "amber box" limit in 2019.. Its conclusion:

According to the scenarios developed in this analysis, including a projected set of market conditions, the United States may potentially exceed its cumulative amber box spending limit of $19.1 billion in 2019. Excessive amber box payments in 2019 could result from the addition of large MFP payments to the traditional decoupled revenue support programs ARC and PLC.
However, this analysis found that U.S. compliance with WTO amber box spending limits was very sensitive to a change in market conditions and market valuations. Noncompliance hinges on many key market factors that are currently unknown but would have to occur in such a manner as to broadly depress commodity prices through the 2019 marketing year (which extends through August 31, 2020, for corn and soybeans). Another crucial uncertainty is how the U.S.-China trade dispute—with its deleterious effects on U.S. agricultural markets—will evolve.51 Resolution of the U.S.-China trade dispute and an improved demand outlook could lead to higher commodity prices and output values while lowering payments under countercyclical farm programs such as MAL, PLC, and ARC. Such a turn of events could help facilitate U.S. compliance with its WTO spending limits.

Count Me a Pollyanna

I know President Trump has support for his China policy from many Democratic politicians and in academia and the chattering classes.  The conventional wisdom today seems to be we need to be tough on China on intellectual property issues and other non-tariff issues.  That's not an endorsement of Trump's specific decisions on tariffs.

I may be naive, I think in the long run, maybe the long long run, that policy is ill-advised.  That feeling isn't based on much knowledge, but these are pointers:

• Theft of intellectual property might be bad, but it seems also true that it's not always easy to exploit stolen ideas.  Ideas rely on a network, a specific environment for their implementation and and further development.
• "theft" of ideas is applying a concept which applies to personal or real property to intellectual things.  Another way to look at it is that the "theft" means additional minds working on scientific and technical issues, coming up with new property which, if shared with the world, can help all of us.
• In the bad old days of the cold war it was reasonable to worry about theft of weapons designs. These days there's no country with an ideology of world domination.
• We used to dream of the US as a model for the world (see the Gettysburg Address).  We're losing that dream.

Fact--China has 7 times more African students than the US.

Note on Marijuana

Among the things I didn't know about marijuana is that it needs a Mediterranean type of climate--hot and dry and sunny, not the sort of climate we have in the East.  This Post story informed me.

How To Do Big IT Projects

FCW has a post on how to do big IT projects, referring back to a study of 5 years ago.    There are four keys listed, but I can boil it down to one:

• Get the right bigshot personally involved from start to finish and be sure she has skin in the game, as in will lose her job if the project fails.

Early on I was involved in a project to bring computers to county administrative actions (payroll and related services).  The big shot then was the deputy administrator, management (Felber) who brought people together from DASCO and DAM to do the project.

In the middle of my career I was involved with implementing the Payment-in-Kind program in 1983.  The big shot then was Seeley Lodwick, who was the Under Secretary (following service in a previous administration as exec assistant to the Administrator, ASCS)  He pulled together lawyers and program people and kept on us until it was off the ground.  

By contrast other projects failed because either they lacked bigshot involvement and/or the bigshots moved on with a change of administration.

The Obama administration did one thing right--put Biden in charge of the stimulus package implementation and one thing wrong--ineffective leadership in rollout of Obamacare.

Hemp and Tobacco (and Taxis) III

Reverting back to tobacco, in contrast to the article quoted in my first quote, there was at least some evidence that the benefits of the tobacco allotment/quota programs eventually benefited the owners of the quotas more than the actual farmers.  This article from the 1981 Washington Post discusses the issue, tied to the fact that Sen. Helms, a man for whom I had about as little respect as possible, was pushing the tobacco program while his wife was an owner of tobacco quota.

Note: IIRC over the years, maybe in the 1990's, the law was changed so that absentee owners of quota had to either sell the quota or become more actively engaged in farming.

Hemp and Tobacco (and Taxis) II

I never did get to the "taxis" part of my post yesterday.

The NYTimes yesterday had a piece on how New Yorkers had made inroads on the Chicago taxi industry.

To recapitulate the Times' previous articles on taxis in NYC:

• to operate a cab you need a medallion, issued by the city.  IMO medallions are a way to limit entry, by restricting entry you're able to manage the prices/rates charged and limit turmoil.  That's very similar to supply management for tobacco in the US and dairy and eggs in Canada; also it's similar to the marketing co-ops for things like cranberries
• NYC had a bidding war for the medallions,  which savvy investors used to manipulate prices and make exploitative loans to individual drivers hoping to gain an asset for their retirement..  With Uber and Lyft hitting, medallion prices have plunged, and drivers are unable to repay the loans, forcing them into bankruptcy.
• in yesterday's article the same pattern was followed in Chicago by wised-up guys from NYC.

I've noted the parallel with agricultural supply management already.  While the medallion program likely worked reasonably well for many years, as did the tobacco program, with time smart people with money found a way to exploit the rules and make money, gaining their returns at the expense of those with fewer smarts and/or less money.