Glimpse of Industry Destroyed

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Listen and Watch

Glimpse of Industry Destroyed

Black Swans are Flying

By Stephen L. Wilmeth

 

 

            There are only nine meals between mankind and anarchy.

                                                                ~   Alfred Henry Lewis

 

            An interesting observation is being observed in our rotation this spring.

            When we have moved into a new pasture that has not been grazed since before the monsoon of 2021, protein use has essentially dropped to nothing. That nothing is noted in the consumption of the free choice tubs of protein supplement that are offered to the herd.

            As time passes and the standing grass availability advances from easy pickings to courser stems, the protein consumption has steadily increased to a point that nearly equates to prior year, heavy drought impacted ranges. The subsequent pasture movement has then started the whole process over once again.

            Perhaps therein is a lesson that applies to more than just … cows.

            Listen and Watch

            The pulse of the commodity world is racing.

            The most recent trigger discussions relate to the war and for good reason. The immensity of the world markets that rely on cereal grains from Black Sea ports is monstrous. That greater region the true breadbasket of Europe if not central Asia as well. Continued calamity there will have immense impact. Reductions of production from the area, though, will hit those countries that can least afford any diminishment of supplies the hardest.

            For example, Ethiopia, Kenya, and Somalia can ill afford that war. Their reliance on Ukrainian grains constitutes from 40 to 90% of their annual consumption. They are the central core of countries that David Beasley of the World Food Bank recently surmised he will have to feed by taking from the hungry to feed the starving as this year unfolds.

            This war is disruptive in all ways.

            The Ukraine planted some 37,065,000 acres of grain in 2021. Less than half of that will be planted in 2022. Their big two, corn and wheat, are expected to be down a combined, whopping 11,500,000 acres. Fully expecting the pending shortfalls, that is why China slipped into American markets recently and bought 1,084,000 tons of corn.

            The truth of the matter, though, may constitute even more concern.  Is a biblical catastrophe in the offing?

            Black Swans are Flying

            For those of us from the Gila River country that learned to swim neither upstream nor down, another reminder of a black swan event is in order. Simply, it is an event that is beyond what is normally expected and has potentially severe consequences.

It is akin to the (un)successful outcome of checking your tire pressure while traveling down the road.

            The conditional antagonists in this war, the Vatniks, produce around 20% of the exported fertilizer in the world. Since their jefe primero, Putin, has declared he ain’t gonna’ ship anything to his enemies, it must be assumed his fertilizer shipments to grainfields (including those in the Ukraine) will experience real world shortfalls in normal uses. That is made worse by the current meteoric rise in costs associated with these vital nutrients. If those costs are comparable to the American counterparts, essentials like anhydrous ammonia have gone from $226 per ton a year ago to $1492 per ton in some areas.

            That makes the outcome of the 2022 world grain crop only more confusing.

            South America is trying to get their harvest done only to be interrupted with wet fields (in the north) and a surprise freeze (in the south). The effect on crops is still not measured.

            American grain farmers are in the process of planting and or starting to plant and the specter of fertility costs is being weighed against the increase in bean acreage as a matter of production cost savings. Then, there is the cost of diesel, the increased costs of herbicides, the increased costs of most seed, and, for most of the West, drought related and limited water supplies.

            Labor is even a bigger bugaboo. Those poor guys in California are being mandated to pay $15 per hour and reduce hours worked per week from 60 hours to 40.

            The combined outcome equates to not only dealing with the fighting and killing war, but to the inflationary, economic war being waged across all segments of society by government(s). Both have potential to give worldwide pandemics a whole new character.

            Every category is expected to experience results not kind to the citizenry.

            Our industry, beef, has seen a 16.2% increase in prices over the past year and another 3.5% is expected by the look backward boys. Cooking oils are up nearly 12% and the Russian shortfall is expected to boost that another 7%. Cereals are expected to top a combined 12%, and, even without the foreboding avian flu expansion, eggs are going to be up 15%.

            Glimpse of Industry Destroyed

            There is a huge lump in my heart for the plight of the California tree fruit industry.

            There is no secret why. It was there I spent so much of the best years with resources, people, and industry imagination that set world standards. It may well be that it is also the apex of industries that, along with the combinations of the foregoing, government will destroy.

            Consider the metrics over a three-year period.

            The industry has experienced a 100% increase in shipping costs. Pallet costs are up 50%. Packaging costs are up 20%. Growing costs are up 45%, and, central to that the state has legislated a $15 minimum wage while reducing the workweek a net 20 hours. In summary, their costs have gone up $.42/fruit pound (land costs not included) while their revenue streams have experienced only a $.16/fruit pound increase. Those are killing metrices, and, unless there is universal collapse, the first individual food segment terminated by government may be identified.

            Try to figure out how this administration’s verbal magnates’ reference of all this as …  transitory.

 

            Stephen L. Wilmeth is a rancher from southern New Mexico. “We are all incredulous by what we are witnessing. Let’s unite in prayer.”