by Pops » Mon 01 Aug 2005, 19:51:13
$this->bbcode_second_pass_quote('MonteQuest', 'I') have to disagree with you here.
Girl, you ought to know that you can talk bad about someone’s wife and maybe dog but not their dirt!
--
Anyway I wanted to point out on this thread regarding what I think is a common misconception amongst the general population.
Most folks think that if fuel, fertilizer and other costs associated with oil rise to producers then food costs will simply rise as well. But it ain’t that simple.
The reason being, a farmer gets what the market pays, and the comoddity markets works just like the oil market and we are all familiar with those charts. When there is too much supply the price goes down, when there is not enough supply the price goes up.
The pricing process is controlled (or at lest driven) by traders out to make a buck sitting on their Asses – not by the cost of production. Of course the farmer gets a very little slice of the pie and this is an even bigger problem. Just as when you mistreat a well by pumping more than is prudent and it collapses, when a farmer must pay ever increasing costs for inputs but still receives no additional return he too will collapse – into bankruptcy.
As an example, here in this part of Missouri last year the weather was great and there was lots of feed for dairy cattle – so much hay you couldn’t give it away. At the same time milk prices were up because there had been a drought the preceding year plus other factors leading to too little milk production capacity.
Sounds great you say. But this year we’re in another drought, not much feed and way too many milkers from last year.
Of course energy, fertilizer and (due to hedge funds getting interested in grain so they can make a quick buck) feed is up by a third at least.
So dairy producers still have the same fixed costs, increased variable costs due to more milkers and a big increase in energy related costs.
And so the income is down by a third and costs are up by a third. Could your budget withstand that?
It’s great for the middlemen. Even though energy prices are up (they can charge through
their energy costs remember) they pay the lowered market rate for the farmers product, which again is way down.
Upshot is, as energy and all related costs rise, the farmer has absolutely no recourse except to raise production. In a world where every incremental increase in production carries a corresponding increase in variable costs – and the unit cost of energy is continually
increasing there is only one outcome.
If the more you produce, the more you lose; the only logical response is to quit producing.
The legitimate object of government, is to do for a community of people, whatever they need to have done, but can not do, at all, or can not, so well do, for themselves -- in their separate, and individual capacities.
-- Abraham Lincoln, Fragment on Government (July 1, 1854)