The slipshod, slapdash way Congress throws together legislation reared its ugly head once again on Friday, as it was necessary to pass the Farm Bill again and for President Bush to veto it again, all because they left out 32 PAGES in the initial passage. This gross incompetence and lack of attention to duty and detail is very costly to taxpayers, and keeps Congress from considering really important legislation, like athorizing more drilling for oil.
What was deleted was the foreign trade provisions for agricultural commodities, with the potential to grind all world ag trade negotiations to a halt. The bloated, massively expensive and expansive Farm Bill is a travesty and election year Christmas Tree, with goodies for all the special interests. It is at least $10 billion over budget, and President Bush was thoroughly justified in vetoing it.
Special interest campaign funds were at stake for Congressmen and Senators, with their eyes more on the November election than on the public interest. Campaign funds won out, as a disturbing number of Republicans voted to override Bush's veto, rather than support their party's president.
The Farm Bill is a massive shrine to arrogance and log rolling, and should be an embarassment for concientous legislators, but it's not. As with Obama dropping his pledge to accept federal funds for his campaign, in the face of record lucre, honor and consistency are cheap in Washington, and the Farm Bill showed it.
Saturday, June 21, 2008
Friday, June 20, 2008
USDA cattle-on-feed report bullish
Today's monthly U.S. Department of Agriculture cattle-on-feed (COF) report is considered quite bullish by most analysts. Fed cattle prices were up $1-$2 this week and cattle futures contracts on the Chicago Mercantile Exchange have been higher most of the week.
With the COFshowing smaller placements into the feedlots than expected, and higher marketings out of the feedlots than predicted, everything's coming up roses, right?
Undoubtedly wrong. You're dealing with two artificial items in the COF and the Merc, and as experience has proven, there is no substitute for the performance of the actual live breathing cattle, standing on the ground in the feedlot, and the dead ones, hanging on the rail at the packing plant.
The COF and the Merc are neither one of those things. The COF is an estimate, a guess, by economists sitting deep in the bowels of USDA's puzzle palaces in Washington D.C. There is no actual, physical count of the cattle in feedlots, either going in or coming out. The COF number is treated by the traders at the Merc as the holy grail, but its not. Its a guess, that frequently is wrong and changed up to two years after the fact.
By then, the damage has been done and the "correction" affects nothing. But it does show the fallacious nature of the cattle-on-feed report and its unreliability.
Which brings us to the Merc. It is an exchange of paper contracts that don't even represent actual cattle that reallly exist. They are bought and sold by commissioned salesmen, who could really care what happens to the cattle market, as long as it stays volatile, as they make commissions on both buying and selling. They are dead in the water when the market is steady and stable--the way cattle owners like it--because no contracts change hands.
For owners and producers of actual cattle, both the COF and the Merc are wildcards that make their job a lot harder. While touted by their proponents as curbing risk and stabilizing the market--in reality, they do just the opposite. They increase risk and create instability in cattle prices.
It's like the old shell game. They want to keep you guessing as to which shell has the money under it, as they shuffle them around. That's what the Merc and COF do for actual cattlemen, buying and selling real, existing cattle.
With the COFshowing smaller placements into the feedlots than expected, and higher marketings out of the feedlots than predicted, everything's coming up roses, right?
Undoubtedly wrong. You're dealing with two artificial items in the COF and the Merc, and as experience has proven, there is no substitute for the performance of the actual live breathing cattle, standing on the ground in the feedlot, and the dead ones, hanging on the rail at the packing plant.
The COF and the Merc are neither one of those things. The COF is an estimate, a guess, by economists sitting deep in the bowels of USDA's puzzle palaces in Washington D.C. There is no actual, physical count of the cattle in feedlots, either going in or coming out. The COF number is treated by the traders at the Merc as the holy grail, but its not. Its a guess, that frequently is wrong and changed up to two years after the fact.
By then, the damage has been done and the "correction" affects nothing. But it does show the fallacious nature of the cattle-on-feed report and its unreliability.
Which brings us to the Merc. It is an exchange of paper contracts that don't even represent actual cattle that reallly exist. They are bought and sold by commissioned salesmen, who could really care what happens to the cattle market, as long as it stays volatile, as they make commissions on both buying and selling. They are dead in the water when the market is steady and stable--the way cattle owners like it--because no contracts change hands.
For owners and producers of actual cattle, both the COF and the Merc are wildcards that make their job a lot harder. While touted by their proponents as curbing risk and stabilizing the market--in reality, they do just the opposite. They increase risk and create instability in cattle prices.
It's like the old shell game. They want to keep you guessing as to which shell has the money under it, as they shuffle them around. That's what the Merc and COF do for actual cattlemen, buying and selling real, existing cattle.
Thursday, June 19, 2008
South Korea strikes out on beef renege try
South Korea found out that a "deal is still a deal" in the good ol' US of A this week, as emissaries it sent to the U.S. Department of Agriculture in Washington refused to change the terms of a beef trade pact opening South Korea to U.S. beef, that it signed a month ago.
U.S. vegetarian and animal rights groups interceded via the internet with Korean radicals opposed to the current government, fomenting huge street demonstations against U.S. beef and putting politrical heat on the new government. That's why they came to Washington D.C. hat-in-hand this week to try to cut a new deal.
Other South Korean pols are at the State Department and other government agencies to try to undo the deal, but so far President Bush and Congress have been insistent that any broad trade deal include opening the South Korean market to U.S. beef as a precondition to anything else.
South Korea was a major consumer of U.S. beef before cutting it off in the phony BSE scare, where a couple of dairy cows imported into the U.S. from Canada turned up with BSE. This was a trumped up, crass attempt by Asian nations, including Japan, to kick sand in the face of the Big U.S. and seek a public relations thumbs up. It has been costly to both nations, in lost trade in other products and in lost tourist and convention business, because of the inferior beef served in the Asian countrie's major hotels.
It is especially hypocritical, because both countries have a far worse BSE problem in their domestic cattle herds than anything ever seen in the U.S. They should clean up their own houses, before they attack the safe, wholesome U.S. beef industry.
I applaud the President, Congress and government officials who are hanging tough with South Korea, as well they should. South Korea signed the new trade pact 30 days ago with their eyes wide open, fully aware of what they agreed to. It's now time for them to live up to their part of the bargain.
U.S. vegetarian and animal rights groups interceded via the internet with Korean radicals opposed to the current government, fomenting huge street demonstations against U.S. beef and putting politrical heat on the new government. That's why they came to Washington D.C. hat-in-hand this week to try to cut a new deal.
Other South Korean pols are at the State Department and other government agencies to try to undo the deal, but so far President Bush and Congress have been insistent that any broad trade deal include opening the South Korean market to U.S. beef as a precondition to anything else.
South Korea was a major consumer of U.S. beef before cutting it off in the phony BSE scare, where a couple of dairy cows imported into the U.S. from Canada turned up with BSE. This was a trumped up, crass attempt by Asian nations, including Japan, to kick sand in the face of the Big U.S. and seek a public relations thumbs up. It has been costly to both nations, in lost trade in other products and in lost tourist and convention business, because of the inferior beef served in the Asian countrie's major hotels.
It is especially hypocritical, because both countries have a far worse BSE problem in their domestic cattle herds than anything ever seen in the U.S. They should clean up their own houses, before they attack the safe, wholesome U.S. beef industry.
I applaud the President, Congress and government officials who are hanging tough with South Korea, as well they should. South Korea signed the new trade pact 30 days ago with their eyes wide open, fully aware of what they agreed to. It's now time for them to live up to their part of the bargain.
Wednesday, June 18, 2008
Conservation Easement abuse two-edged sword
There are big federal and state tax breaks available to farmers, ranchers and other rural landowners who place covenants on their land that it will never be developed--it will remain rural, or in production agriculture, forever.
As a lover of agriculture and rural America, I can identify with that sentiment. It might well be a worthy goal worth foregoing tax revenue for.
But needless to say, no good deed goes unpunished. Wealthy non-agriculture types have bought up rural land, taken the tax breaks for signing a Conservation Easement, and still own the land that can be used for hunting and fishing, hiking or agricultural production. Abuses have turned up where they bought the land cheap, obtained inflated appraisals for the land, and taken tax breaks that nearly recouped their initial investment--in essence, obtaining the land for free.
Tax breaks do no good if you don't have enough income to take advantage of them. Farmers and ranchers are frequently in that situation, so have little incentive to sign a Conservation Easement. Wealthy speculators are not.
You can hardly blame a farmer or rancher, who after a lifetime of toil on the land and facing a bleak retirement, cashes in the only asset he has, the land. When a wealthy investor comes calling, the temptation and lure of cashing in is almost too good to pass up. The investor, in order to get a return on his money, is either looking at developing the land, or recouping the investment with a Conservation Easement.
This creates a real dilemma for the career farmer or rancher. It's a Hobson's choice--take the money and run, or wince at the likely outcome of his life's work.
As a lover of agriculture and rural America, I can identify with that sentiment. It might well be a worthy goal worth foregoing tax revenue for.
But needless to say, no good deed goes unpunished. Wealthy non-agriculture types have bought up rural land, taken the tax breaks for signing a Conservation Easement, and still own the land that can be used for hunting and fishing, hiking or agricultural production. Abuses have turned up where they bought the land cheap, obtained inflated appraisals for the land, and taken tax breaks that nearly recouped their initial investment--in essence, obtaining the land for free.
Tax breaks do no good if you don't have enough income to take advantage of them. Farmers and ranchers are frequently in that situation, so have little incentive to sign a Conservation Easement. Wealthy speculators are not.
You can hardly blame a farmer or rancher, who after a lifetime of toil on the land and facing a bleak retirement, cashes in the only asset he has, the land. When a wealthy investor comes calling, the temptation and lure of cashing in is almost too good to pass up. The investor, in order to get a return on his money, is either looking at developing the land, or recouping the investment with a Conservation Easement.
This creates a real dilemma for the career farmer or rancher. It's a Hobson's choice--take the money and run, or wince at the likely outcome of his life's work.
Tuesday, June 17, 2008
Obama taps Al Gore--disaster written all over it
Today was the big environmentalist love feast in Michigan, so Barack Obama could receive Al Gore's blessing in his camapign for the presidency. Gore has been nominally neutral to this point, although his disdain for the Clintons is well known, so his endorsement of Obama comes as a big yawm to objective observers.
This hasn't stopped the liberal mass media from fawning over Obama like he'd just heard from heaven. The truth is, the world is starting to catch on to Al Gore, who refuses to appear in public with, or debate, anyone who questions his scientifically-dubious global warming dogma. As the earth cools, and it becomes more evident everyday that the earth decides what it will do, not man, Gore's credibility sinks.
In truth, Obama is in bad shape in Michigan, and this is the second big media hoorah he's thrown there in recent weeks, to try and turn things around. He pulled his name off the Democratic primary ballot there and Hillary Clinton won the primary by default. She ran especially strong among older women and the blue collar white males there, making Michigan one of the major swing states, along with Pennsylvania, New Jersey and New Hampshire, where McCain is running strong.
If there is any common sense--which is very uncommon, actually--in Michigan, among the unemployed auto workers and closed rust belt auto parts and auto factories, it is that Al Gore and his hoax is responsible for their plight. Gore should be the least popular man in Michigan, and a major Obama faux pas to announce his endorsement there.
Of course, the media uncritically swallows all the hype, and doesn't breath a word of the truth, so Obama and Gore will probably get away with their little charade.
But they may not get away with it in November, and if McCain carries Michigan, it might seal Obama's doom.
This hasn't stopped the liberal mass media from fawning over Obama like he'd just heard from heaven. The truth is, the world is starting to catch on to Al Gore, who refuses to appear in public with, or debate, anyone who questions his scientifically-dubious global warming dogma. As the earth cools, and it becomes more evident everyday that the earth decides what it will do, not man, Gore's credibility sinks.
In truth, Obama is in bad shape in Michigan, and this is the second big media hoorah he's thrown there in recent weeks, to try and turn things around. He pulled his name off the Democratic primary ballot there and Hillary Clinton won the primary by default. She ran especially strong among older women and the blue collar white males there, making Michigan one of the major swing states, along with Pennsylvania, New Jersey and New Hampshire, where McCain is running strong.
If there is any common sense--which is very uncommon, actually--in Michigan, among the unemployed auto workers and closed rust belt auto parts and auto factories, it is that Al Gore and his hoax is responsible for their plight. Gore should be the least popular man in Michigan, and a major Obama faux pas to announce his endorsement there.
Of course, the media uncritically swallows all the hype, and doesn't breath a word of the truth, so Obama and Gore will probably get away with their little charade.
But they may not get away with it in November, and if McCain carries Michigan, it might seal Obama's doom.
Monday, June 16, 2008
Iowa floods not necessarily a corn disaster
While there is some corn lost in the Iowa floods, certainly, the early indications are that it is not enough to create massive shortages of the commodity. Some is lost every year between the pre-crop predictions and the grain bin, due to drought, hail and pestilence. A loss factor is figured in to the early estimates, and counted on by the commodity futures traders.
A disaster such as the Iowa floods may be used as an excuse for a day or two by futures traders seeking market volatility to generate a few more commissions, but over the whole season, it will just be another blip on the radar.
Some corn hadn't been planted yet, some can be replanted and other corn benefitted from the rains but missed the floods, so most observers think it will average out for the season. The real serious damage is in the cities, such as Cedar Rapids and Des Moines, where some 38,000 people have been displaced, and rivers haven't fully crested yet. The muck and disease-spreading filth will take a while to clean up in the cities, and will gather all the publicity.
Corn prices have gone through the roof, well over $7 a bushel, but are already starting to back off, as panic subsides and traders realizie they may well have overdone it.
Of course the floods are a natural disaster, the magnitude of which we wouldn't want to minimize. But perspective teaches us that a lot of the grief had already been built into the system. The grain market will adjust.
A disaster such as the Iowa floods may be used as an excuse for a day or two by futures traders seeking market volatility to generate a few more commissions, but over the whole season, it will just be another blip on the radar.
Some corn hadn't been planted yet, some can be replanted and other corn benefitted from the rains but missed the floods, so most observers think it will average out for the season. The real serious damage is in the cities, such as Cedar Rapids and Des Moines, where some 38,000 people have been displaced, and rivers haven't fully crested yet. The muck and disease-spreading filth will take a while to clean up in the cities, and will gather all the publicity.
Corn prices have gone through the roof, well over $7 a bushel, but are already starting to back off, as panic subsides and traders realizie they may well have overdone it.
Of course the floods are a natural disaster, the magnitude of which we wouldn't want to minimize. But perspective teaches us that a lot of the grief had already been built into the system. The grain market will adjust.
Sunday, June 15, 2008
Watch out--cattle prices in hands of futures traders
This blogger is not a big fan of cattle futures contracts traded on the Chicago Mercantile Exchange. This is where the Big Boys play, and the poor average wretch trying to eke out a living in the cattle business doesn't stand a chance.
You see, any of the Big Three meat packers, or a couple of the huge cattle feeding firms in the Texas Panhandle can afford to buy enough cattle contracts on the Merc at any one time to virtually corner the market. Traders on the Merc are more than happy to accomodate them, because they make commissions on each contract they trade for a customer. They don't care if the market goes up or down, but its the volatility that makes contracts buy and sell--so that's what they're after.
So it is today, and June live cattle contracts on the Merc are trading at a higher price than fed cattle currently are in the cash market. Either the so-called "fund" buyers will buy enough contracts to drive cash prices up to meet the current June futures price. Or, of course, they can sell enough to drive futures down to the current cash price--or lower.
It is really out of the hands of the average Joe who owns cattle. He only stands to make or lose money, based on what other people decide to do between now and the June contract expiration on June 30. Undoubtedly, there are many cattle owners, with cattle in a feedyard, in various stages of being ready to sell to a packer, wringing their hands, waiting for the Big Boys to decide their fate.
Congress is nibbling around the edges of the Commodity Futures Trading Commission, the toothless "regulatory body" of futures trading, primarily due to high food prices and the role futures trading in corn at the Chicago Board of Trade has had in jacking up corn to almost $7 a bushel.
Most people can tell them without an expensive study: it's ethanol, the energy-wasting, non-solution to our nation's energy crisis. It takes more fuel and water to raise the corn and then process it into ethanol, than the resulting fuel that comes out--and it gets poorer mileage than straight gasoline to boot. Even worse, it's the competition between the heavily federally subsidized ethanol producers and livestock feeders for the corn--that's why its $7 a bushel.
Question answered. No charge.
You see, any of the Big Three meat packers, or a couple of the huge cattle feeding firms in the Texas Panhandle can afford to buy enough cattle contracts on the Merc at any one time to virtually corner the market. Traders on the Merc are more than happy to accomodate them, because they make commissions on each contract they trade for a customer. They don't care if the market goes up or down, but its the volatility that makes contracts buy and sell--so that's what they're after.
So it is today, and June live cattle contracts on the Merc are trading at a higher price than fed cattle currently are in the cash market. Either the so-called "fund" buyers will buy enough contracts to drive cash prices up to meet the current June futures price. Or, of course, they can sell enough to drive futures down to the current cash price--or lower.
It is really out of the hands of the average Joe who owns cattle. He only stands to make or lose money, based on what other people decide to do between now and the June contract expiration on June 30. Undoubtedly, there are many cattle owners, with cattle in a feedyard, in various stages of being ready to sell to a packer, wringing their hands, waiting for the Big Boys to decide their fate.
Congress is nibbling around the edges of the Commodity Futures Trading Commission, the toothless "regulatory body" of futures trading, primarily due to high food prices and the role futures trading in corn at the Chicago Board of Trade has had in jacking up corn to almost $7 a bushel.
Most people can tell them without an expensive study: it's ethanol, the energy-wasting, non-solution to our nation's energy crisis. It takes more fuel and water to raise the corn and then process it into ethanol, than the resulting fuel that comes out--and it gets poorer mileage than straight gasoline to boot. Even worse, it's the competition between the heavily federally subsidized ethanol producers and livestock feeders for the corn--that's why its $7 a bushel.
Question answered. No charge.
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