377 (10 July 2019)

Welcome to week 377!  The articles below caught my attention this week.  What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  Article titles preceded by [SR] require a subscription. 

(2 July 2019):Chobani Turns to Fair-Trade Program to Help Struggling Dairy IndustryThe New York Times

——–“The fair-trade label was created decades ago to help artisans in developing nations.  Now, there are fair-trade soccer balls, fair-trade soaps and fair-trade ice pops.  Next up for movement: the American dairy industry.  The yogurt maker Chobani is working with Fair Trade USA, a nonprofit group in Oakland, Calif., on creating a label that would signal that the milk in its products came from farms that treated their workers and cows humanely. . . . Chobani’s fair-trade initiative—and likely marketing push—could help the company continue to stand out in an increasingly competitive yogurt market.  Chobani says it believes the premium can help farmers hit by persistently low milk prices and highlight good practices in an industry that’s under enormous strain and scrutiny.  Environmentalists are concerned about carbon emissions from cows, critics question the health benefits of milk, and many small farmers are deep in debt and suffering from mental health issues as their livelihood is threatened.”

********As the article indicates, fair-trade designation is one way to differentiate one’s product from one’s competitors.  Additional costs are expected from the fair-trade program but, at present, Chobani is “not planning to pass the added cost on to consumers.”  Here is the link for Fair Trade USA.

********A related story appears in [SR]World’s Coffee Growers Seek to Set Minimum Price to Help Poor FarmersThe Wall Street Journal.  Although Chobani can seek to increase the economic status of some dairy farmers by product differentiation, countries (or groups of countries) can seek to increase the economic status of coffee farmers by remaking the market as a whole,  something that can be done by an effective cartel.  Inspired by the success of “the two biggest cocoa producers, Cote d’Ivoire and Ghana, in pushing buyers to agree to pay more for the key ingredient in chocolate,” growers from “Brazil, Colombia and more than two dozen other countries will meet in Brazil this week to talk about how to get more money to farmers suffering from the lowest prices on world markets in more than decade.”  It is much more difficult, however, to coordinate the activities of a cartel with dozens of producers than one with effectively two producers.  A coffee cartel is not a new idea.  Check out the 1993 article “World Markets; A New Coffee Cartel Tries Its HandThe New York Times.

(2 July 2019):Yes, You Can Buy HappinessBloomberg.com

********This seven-minute video uses humor to provide clear, research-based answers regarding how to use money “to buy” happiness.  Three points are made: (1) spend money on building social relationships: (2) spend money on experiences and less on things; and (3) know what makes you happy.  Early on in the video there is a slide that shows what might be referred to as the diminishing marginal utility of money.  Such behavior was once used as an argument for increasing marginal (income) tax rates.  If the goal is to maximize overall societal satisfaction and if all satisfactions can be measured on one scale, overall satisfaction can be increased by increasing the marginal tax rate on the very wealthy and distributing the proceeds to the very poor.  The sticky point, of course, is finding one scale on which all satisfactions can be measured.  Much has been written on the “interpersonal comparison of utility”—you can learn more here.

(4 July 2019):Beyond Meat fever turns the tiny pea into America’s hot new cropThe Los Angeles Times

——–Although there seems to be nothing but bleak news in U.S. agricultural markets, “there is one bright spot: the pea.  Long an afterthought for most farmers—largely just something plant to help with crop rotations—the tiny legume has suddenly gotten pulled into the alt-protein craze fueled by the likes of Beyond Meat Inc. and the Impossible Burger.  Prices are moving higher, buoyed as well by rising demand from pet-food makers, and growers in the U.S. and Canada are rushing to put more peas in the ground.”  Even meat-oriented farmers are taking note, planting peas as a possible growth market as the demand for traditional crops has been flat.  With peas “fetching close to $5 a bushel, up from about $2.80 a few years ago, which was roughly a break-even price,” farmers like Tony Fast of Montana, which is the top U.S. pea-growing state, is “excited for new markets for the peas.”  Government data shows that growers “in Canada and the U.S. are expected to seed about 20% more field peas this year . . . That’s happening even as U.S. farmers cut acres of principal crops including corn, soy and wheat by about 3%.”

********The article goes on to point out, “Plant-based companies have been around for decades, but products were aimed at vegans and vegetarians, a tiny market . . . Now that even meat-eating consumers are trying to get more of their protein from alternative sources, demand is taking off.”  All this provides an excellent example of how a change in the demand for a product can lead to significant increases in the (derived) demands of the inputs used to produce them.  In-depth knowledge of supply chains can yield significant opportunities for gain by the entrepreneurial minded.

********Soybeans is the main crop that has suffered from the current trade “war” with China.  A lengthy, historical look at how soybeans became dominant and how the U.S. Soybean Export Council is trying to maintain its Chinese customers is provided by [SR]Farmers Built a Soybean Empire Around China.  Now They’re Fighting to Save It.The Wall Street Journal.  As the article notes, “Seed companies, grain traders, railroads and other businesses have all been part of the soybean-industry buildup—investing heavily, rolling out new varieties and adding capacity to ferry crops to market.”  The value of those investments depends upon maintain the Chinese demand for U.S. soybeans.  The problem is, though, that “China is building alternatives for soybean imports so it will never again be so dependent on a single source.”  Brazil’s ambassador to China has indicated that “his country was working to become China’s most reliable supplier.”

(5 July 2019):The Midwest’s Record Wet Spring Is Interfering With The Corn De-Tasseling Job MarketNPR

********This is a four-minute broadcast, with transcript, of a story about a summer job held my many farm-country kids: de-tasseling seed corn.  Although machines “can now remove about 90% of corn tassels” seed companies need more.  “Kids help them get to near 100% . . . One detasseling company owner estimates an average worker will earn about $1,500 for a few weeks of work.  Beginner detasselers make less, usually around minimum wage.”  In my hometown of Watertown, Wisconsin, many high-school students “picked pickles.”  I’m sure that the pay was no where near as attractive, but I’m also sure, like detasseling, that the jobs were seen to build character.  Some interesting thoughts are expressed about compensation and working conditions.

(7 July 2019):All that online grocery shopping causing a cold storage shortageThe Los Angeles Times

——–Changes in the way people shop “have the ‘cold chain’ scrambling to keep up.  Consumers, particularly younger buyers, are turning more and more to online grocery shopping and prepared meal services, which means more refrigerated warehouses are needed to keep that stuff cold.  To keep pace, the country will need 100 million square feet of new cold storage warehouse space over the next five years . . . It’s a particularly hot corner in the mushrooming warehouse business, fed by demand from Amazon.com and other e-commerce operations.” 

********I was particularly struck by this statement: “Demand for cold storage is also being elevated by consumers’ growing aversion to chemical food preservatives.  Refrigeration  a highly effective food preservative that can keep crops such as apples fresh-tasting for months without chemicals slowing ripening and decay.”  As Spencer Levy of real estate brokerage CBRE notes, “Now, even hamburger buns need delivery through the cold chain . . . You are seeing there as demand for non-preservative food rises.”  Thus an increased desire for foods without preferences has led to an increased demand for refrigerated food, which leads to an increased demand for refrigeration services.  No doubt this increased demand will lead to an increase in the demand for energy, some of which will be CO2 emitting and contribute to climate change (global warming).  As ecologists have long said, you can’t do only one thing.

May you have a good week!

Bruce 

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