silverback,
you are absolutely right. Many of us are in a position where fixed costs for machinery payments, land loan payments, and just putting groceries on the table dictate that "x" number of dollars are required each year. Given that commodity prices are such as they are that results in the need that every acre they own be producing.
What I am saying is that this cycle will never end (higher production accompanied by higher input costs, and leading to lower commodity prices). It is a game of musical chairs and each year more farmers will fall by the wayside.
An old saying goes that you are either part of the problem or part of the solution.
To me the solution is not finding more markets for this "commodity". The solution is to reduce the supply of this valuable food product and get fairly paid for it.
It is a tough nut to crack. How do you get farmers to voluntarily reduce production. As long as individual farmers cannot find a path to reduce food production while maintaining their cash flow it will not happen. In fact higher commodity prices are counterproductive as this only leads to increased production.
What we need is alternative use. The only solution that I see is energy crops. I am very skeptical about ethanol, but bio-diesel seems to have a lot of potential. I do not hear the debate about energy in versus energy out when it comes to bio-diesel. You don't have to distill the product and drive off every pound of water using a lot of the valuable energy that you are producing. When you crush canola you get oil, and the little bit of water separates on its own.
How many acres of canola would each of us have to grow to supply our own fuel for all of our machinery. Would it take 20% of our acres? What if we had to supply all of the fuel for the trucks, trains and ships that move our products. Would that take another 20% of our acres? Freight and fuel and two of our biggest costs. It would be better if we had a revenue stream to offset these expenses.
Now you don't have to summerfallow 25% of your ground to remove that food production from the system. What would that do to grain prices?
It will all hinge on the price of a barrel of crude oil. What happens when I can produce a barrel of bio-diesel for less than what a barrel of crude is trading for? If you are an oil company and you see that an alternate energy source could be more competitive, can you get your banker to finance the drilling of another oil well, or the expansion of a very costly tar sands project?
Today's cost of oil whether it be $70.00 or $60.00 includes a lot of profiteering since the cost of production has not changed substantially from a year or so ago when oil was at $40.00 per barrel. I am not sure if this means that oil could be driven back down to the $40.00 level since that would ignore the supply and demand issues. I do know that as time goes on the cost of exploration for ever more elusive "new" oil resevoirs does get more costly and that the energy efficiency of recovering tar sands and oil shales will also result in ever higher energy costs. At some point in time we should be competitive as energy producers.
When that day comes I want farmers to be in an equity owners in the bio-diesel production and distribution facilities, rather than just suppliers of the raw material.
If we start now perhaps we can devise a plan where farmers transition some of their acres out of food production while maintaining the vital cash flow to service their debt and provide a living.
you are absolutely right. Many of us are in a position where fixed costs for machinery payments, land loan payments, and just putting groceries on the table dictate that "x" number of dollars are required each year. Given that commodity prices are such as they are that results in the need that every acre they own be producing.
What I am saying is that this cycle will never end (higher production accompanied by higher input costs, and leading to lower commodity prices). It is a game of musical chairs and each year more farmers will fall by the wayside.
An old saying goes that you are either part of the problem or part of the solution.
To me the solution is not finding more markets for this "commodity". The solution is to reduce the supply of this valuable food product and get fairly paid for it.
It is a tough nut to crack. How do you get farmers to voluntarily reduce production. As long as individual farmers cannot find a path to reduce food production while maintaining their cash flow it will not happen. In fact higher commodity prices are counterproductive as this only leads to increased production.
What we need is alternative use. The only solution that I see is energy crops. I am very skeptical about ethanol, but bio-diesel seems to have a lot of potential. I do not hear the debate about energy in versus energy out when it comes to bio-diesel. You don't have to distill the product and drive off every pound of water using a lot of the valuable energy that you are producing. When you crush canola you get oil, and the little bit of water separates on its own.
How many acres of canola would each of us have to grow to supply our own fuel for all of our machinery. Would it take 20% of our acres? What if we had to supply all of the fuel for the trucks, trains and ships that move our products. Would that take another 20% of our acres? Freight and fuel and two of our biggest costs. It would be better if we had a revenue stream to offset these expenses.
Now you don't have to summerfallow 25% of your ground to remove that food production from the system. What would that do to grain prices?
It will all hinge on the price of a barrel of crude oil. What happens when I can produce a barrel of bio-diesel for less than what a barrel of crude is trading for? If you are an oil company and you see that an alternate energy source could be more competitive, can you get your banker to finance the drilling of another oil well, or the expansion of a very costly tar sands project?
Today's cost of oil whether it be $70.00 or $60.00 includes a lot of profiteering since the cost of production has not changed substantially from a year or so ago when oil was at $40.00 per barrel. I am not sure if this means that oil could be driven back down to the $40.00 level since that would ignore the supply and demand issues. I do know that as time goes on the cost of exploration for ever more elusive "new" oil resevoirs does get more costly and that the energy efficiency of recovering tar sands and oil shales will also result in ever higher energy costs. At some point in time we should be competitive as energy producers.
When that day comes I want farmers to be in an equity owners in the bio-diesel production and distribution facilities, rather than just suppliers of the raw material.
If we start now perhaps we can devise a plan where farmers transition some of their acres out of food production while maintaining the vital cash flow to service their debt and provide a living.
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