[GJM] Fw: [globalnetnews-summary] Food for Thought

[mary rose]

What have I been saying?

mary rose

mary rose

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Sent: Thursday, June 05, 2008 1:01 PM
Subject: [globalnetnews-summary] Food for Thought



"Newer sustainable methods that reduce energy use just might be able to at 
least stabilize food costs over the very long term. The primary costs of 
conventional farming -- fuel and fertilizer -- are directly tied to oil and 
natural gas prices. The primary costs of organic growing -- labor and 
experience -- are not...  We simply need to put people we already have to 
work growing their own food. "


Food for Thought
May 28, 2008 8:30 am
http://www.minyanville.com/articles/wfmi-oil-Food-mergers-whole-foods/index/a/17319

Editor's Note: Minyan Dan Conine is a Prototype Engineer and Experimental 
Farmer. He has experience in military aircraft, motorcycle, and agricultural 
equipment development.

Food issues are starting to gain interest in the general investing 
community. What was once relegated to the commodity trading halls and public 
television shows like "Market to Market" is now actually important to Wall 
Street. Let's look at a couple reasons why and see where the story leads us:

First: Oil.

To understand how the cost of fuel has transformed the food business and 
will shape its future, let's turn to an iconic American story: the Beverly 
Hillbillies. Once upon a time, the majority of people in America lived in 
rural areas and grew most of their own necessities. If they were forunate 
enough to derive some extra income from selling an extra head of cattle, 
wool, or cotton, they purchased a few complementary items like flour 
grinding services, sugar, coffee, or guano for fertilizer.

As technology and urbanization increased, cities became more powerful in the 
eyes of business and government. Initially, cities grew through immigration 
from countries without available land to support comfortable living. Farm 
work wasn't performed by an unskilled -- and untrusted -- labor pool, so 
cities were the first refuge of both the unskilled laborers and the highly 
educated.

Eventually, the urban way of life became the norm and education, politics 
and business followed the middle of the popular and monetary Bell Curve, 
leading us to Homo Petroleumus: Cities need food delivered.

Second: Control.

The concentration of people in urban centers creates a need for food 
logistics. These networks function best when they're controllable. Even if 
the system isn't entirely stable, transportation, easy cash flow and 
regulations for safety and competition make it manageable. These input 
forces maintain the food train from field to fork.

However, just as modern fly-by-wire fighter jets are uncontrollable without 
computers and unflyable without fuel, the current food system is becoming 
harder and harder to maintain. Government support is wavering and fuel costs 
are exploding.

As any military general will tell you, an army is only sustainable if you 
can feed it and control it. Our food system has been neglected by assuming 
it's a 'free' market with endlessly available natural capital at its 
disposal.

Third: Knowledge.

The bottom end of the production chain is probably the most neglected, as 
farming industrialization has created fewer hands and eyes to maintain the 
complexity of local ecosystems. As old school farming generations die off, 
knowledge about the climate and soil of particular places disappears. This 
loss of rural population created the need for a Department of Natural 
Resources. Every state now pays for the maintenance of wild plants, flowers, 
birds, and game that formerly lived in fencerows and wetlands. The latter 
were not tillable prior to the development of sophisticated drainage 
equipment and tracked tractors.

As the bottom end of the system gets squeezed, the less cash-efficient farms 
are purchased -- mergers and acquisitions don't just happen on The Street --  
by the larger, cash-heavy operators or McMansion developers. As products 
became heavily specialized (corn, beans, wheat, dairy), the processors 
became more and more powerful to lobby for government programs to 'help' the 
'struggling' farmers.

The value-added sector is today's business of food. Organic certification of 
food grown naturally -- within certain parameters -- provides the customer 
with assurances about their food. This is simply an extension of an era when 
consumers knew their food source personally.

Urban customers are losing faith in Food and Drug Administration safety 
regulations at the same time they're losing buying power to inflation. This 
is one more reason the system is becoming unstable. This increase in anxiety 
puts additional demands on governments. The media is hammering on the 
government to do something about tainted food while also complaining about 
the rising costs of food.

Higher costs for televisions or cars simply force consumers to delay 
purchases or forego the latest styles. Higher costs for food leads to 
political upheaval, every time.

Political upheavals are unprofitable over the long term. In the short term, 
high profits can be made speculating on disasters, droughts, or the next 
Farm Bill. Investors need to consider their personal goals in this 
situation, as well as the moral implications of where they invest.

Those seeking high returns often look to food processors, ethanol producers, 
transporters or advertisers. Growth in these industries, however, has its 
costs. If the government doubles its support payments to keep corn flowing 
to the ethanol plants, it will either raise taxes or take away programs that 
maintain stability somewhere else. The military, social security, police and 
other services are the usual suspects for budget cuts.

Investment in regional food systems that minimize the use of petroleum, 
repopulate rural areas and re-establish the value of sustainable systems may 
be a better moral investment, but also garners a lower rate of return. Not 
to mention the intangible return of avoiding the Mogambo raiding your house 
when you aren't home!

Long-term profitability of every economy depends on how its people are kept 
comfortable enough to remain calm and unarmed. That means food must be 
available to everyone. The policies of cheap food in the past are reflected 
in a recent Bizarro comic wherein a bum on the sidewalk is holding a sign 
that says, "Will vote against own interests for food, again."

Promoting cheap food is another policy resulting in low wages for workers. 
People will put up with paltry pay, wars, lies, and no air conditioning if 
they can buy the 'moochy' stuff they want and enough Cheetos to keep the 
rugrats sticky. Once the price of food exceeds wages, the government will 
have to do something. It doesn't have a choice.

One option is raising the minimum wage to match inflationary policies and 
fuel costs. Higher labor costs drag on the bottom lines of all the other 
businesses.

Since food calories produced in the current petroleum-based system take 10 
times as many calories of energy to reach the table, chances are the 
government won't be able to lower food costs. Newer sustainable methods that 
reduce energy use just might be able to at least stabilize food costs over 
the very long term. The primary costs of conventional farming -- fuel and 
fertilizer -- are directly tied to oil and natural gas prices. The primary 
costs of organic growing -- labor and experience -- are not.

The United Nations recently released a study arguing organic farming can 
feed the world.

"My hope is that we can finally put a nail in the coffin of the idea that 
you can't produce enough food through organic agriculture," Perfecto said. 
In addition to equal or greater yields, the authors found that those yields 
could be accomplished using existing quantities of organic fertilizers, 
without putting more farmland into production."

Farming methods that reduce the use of petroleum for mass production of food 
will take time, but it can be done. Most farmers are applying those 
techniques as quickly as they can now that diesel is over 4 bucks a gallon. 
Natural growing, community supported agriculture, cooperatives, minimum 
till, composting, permaculture, and soil testing labs will all become key 
words to search for if you choose to invest in New Farming. I don't think 
Big Processing will survive the oil crisis untouched - once you're addicted 
to diet cola is tough to shake the habit.

In summation: investors can try to squeeze profits from advantageously 
positioned entrenched food corporations or strive for long-term 
profitability across a portfolio by contributing to stable, relocalized food 
webs. One company that does both is Whole Foods (WFMI). Just think of the 
money we could save on biology education if every child had a goat to raise 
and dissect.

Finally, there are all kinds of people on the 'net and in politics saying we 
need a Manhattan Project for 'x' - whether it's efficient cars, windmills, 
nuclear fusion, zero point energy, or to find the bodies of aliens at Los 
Alamos. We don't need such a policy for food. We simply need to put people 
we already have to work growing their own food. A Manhattan Project implies 
centralization, which is exactly what the world doesn't need right now.

Don't take my word for it. Mother Nature and lack of fuel will set the 
agenda, regardless of what we choose to do.