Economy

[farmers_son]

I was in town today and see the price of gas is 93.9 cents a liter. When oil was sky high in the 80s people were worried about the economy. This time around there doesn't seem to be any worries. Are we oblivious to the economic problems or do they just not exist. How high can oil go before the wheels of industry stop turning.

[WoolyBear]

The oil companies are trying to determine exactly how high the price of gas can go before we stop buying.

With harvest fast approaching, most of us will simply filler up and figure out how we will pay for it with $6 canola, and $3 wheat and $1.50 for barley later.

As long as there is the preceived insecurity of the AMERICAN oil supplies, the price of crude will only go up.

[grassfarmer]

Point is we won't stop buying fuel - at any price. We have created a society dependant on it and it is a finite supply. By definition it will get dearer and dearer.
UK gas prices are currently @ $1.96 litre. Barley is around $130 Cdn per metric tonne of the combine (about $2.85 bu)
We are all trapped in our systems by the corporations who control both input and output prices of agriculture.

[grassfarmer]

We live in an age where transportation is our master ! We need to drive to work, get supplies, use our farm equipment etc., so we are literally at the mercy of multinational corporations and the perceived possibility of an oil shortage !!!

[farmers_son]

We seem very comfortable right now that the economy is in great shape. Suf***ating oil/gas prices are shrugged off as an inconvenience and nuisance. People seem confident that the G8 countries can manage their economies well enough to stem off any fears of economic disruption even though we have seen annual year over year increases in the price of oil exceeding 30% for the last six years. Yet we are led to believe that inflation in this country is around 2% in 2004. I think Canadians have their heads in the clouds if they think that oil prices exceeding $60 a barrel will have no effect on the economy. The question for me is just what will the effect be. $60 a barrel oil causes more than just pain at pumps. We are talking about a significant shift of wealth in the economies of the world.

[cowman]

Well if fuel costs too much I guess the peasants will have to be squeezed a bit more? During the BSE crisis and the continual crisis in grain it is very apparent farmers won't stop producing more and more, no matter how much you kick them in the teeth!
Maybe $1.50/liter gasoline can be offset with cheaper bread, meat, and milk? Oh sorry don't include milk!
After all it wouldn't be helpful to ask people to downgrade the RV or something? We just have to get our priorities straight?
And fear not! If you can't make a go of it farming the oil and gas companies will soon be knocking, asking you if they can put a dozen wells on your land! We'll all be "farming" pumpjacks and well heads and living the life of Riley.

[farmers_son]

We have recently seen very significant price increases not only in oil and gas but steel too. These are basic primary resource commodities. But food commodities continue to decline when adjusted for inflation.

[kpb]

farmers_son, the only commodity producers who can ever make a price increase stick are those where the production of most of the commodity is in very few, very strong hands.

Examples of this are oil, uranium, diamonds, etc. Some are cartels but, in any event, are ruled by a few strong companies. Steel prices have taken a long time to rise--many years--but the steel sector has been rationalized to the point where it too has a chance to make price increases stick.

In the food production area the opposite is true--there are many producers who do not have strong financial resoures. Hence any increase in price, short-term, is met by increased production by the majority of producers the following year which drives down prices. With many small producers and with no significant barriers to entry in the agricultural business, there is no chance for price increases to ever stick.

Ironically, the only way that agricultural industries will ever see price increases that stick--short of the dreaded marketing boards that is--is through a consolidation on a massive scale into large, well-funded agricultural enterprises that can control the means of production and, hence, the price.

kpb

[farmers_son]

I would point out that agri food production is already rationalized and is in the hands of a few very strong hands. Cargill, Conagra, Tyson are names that come to mind. These players control the important production, the packing plants and other infrastructure. These players control the price. There are already examples of these players integrating backwards into primary production. Basically the question now is whether there is a role for the small producer and what does society want that role to be.

Keeping the topic on the economy, the iconic image of the struggling depression era farmer is certainly part of the publics perception of that difficult time. There is a question whether the Canadian farmer still a cornerstone of the economy anymore and if they are then how is the public interest served by seeing they survive this year and into the future.

[kpb]

absolutely right on both points, farmers_son. I mistakenly said food production in my last post was spread among many farmers. In fact, as you point out, food production is concentrated in very strong hands that control both the price they get from consumers and the price they pay for the raw commodity. Farmers, of course, do not produce food--they produce the raw commodity that other businesses refine into food packaged for the consumer.

kpb