Agribusiness Freedom Foundation  
Home arrow Sentinel e-Newsletter arrow January 2007 arrow Lessons in Supply & Demand
Main Menu
About AFF
Latest Op/Ed Release
Sentinel e-Newsletter
Newsletter Signup
Staff Bios
Make A Contribution
Contact Us
Lessons in Supply & Demand PDF Print E-mail
Written by Steve Dittmer   
Saturday, 24 February 2007
AFF Sentinel Vol.4 #1

Old Man Winter has been giving consumers supply chain lessons. Dubious economic information has floated around the national news with the snow flakes. The blizzards have generated talk show debate about farming, ranching, animal care and farm financial conditions.

With the first blizzard, it was the empty dairy cases. Days after produce and soft drink shelves were restocked, shoppers confronted dairy coolers empty, except for fat-free water-milk or maybe double-priced organic. The supply chain from distributors to each grocery store had allowed re- stocking everything else. But the fluid milk supply, dependent on getting trucks in to sometimes remote dairy farms and employees in to processing plants every day, was still snowed in. Consumers had bewildered looks, surveying empty cases. Yes, milk really comes from cows not in the rear of the supermarket. Even with modern roads and snow removal equipment, that taken-for-granted daily supply chain can break.

The second blizzard completed socking in ranchers and cattle. Yes, those picturesque, scenic bovines really require water and feed (NOT FOOD) on a pretty regular basis. And yes, that is where our eventual supply of beef comes from - albeit on a much longer time frame than the newscasters implied.

The national news further seemed to mislead consumers into thinking that ranchers will be able to "charge" more for their cattle and the blizzard would automatically translate to higher beef prices.

Such implications do not reveal much understanding of a true supply and demand system or the numbers involved:

  • In a true supply and demand system, the overall supply is the first, though not only, factor governing price. Producers offer their production (calves or yearlings) to the market (or to an alliance supply chain) and accept or reject offers.
  • Individual producers could be hard hit by such a storm, because they will have fewer animals to sell at any price. They may have also lost their production units (cows), which would mean no calf to sell plus the large capital cost of replacing the production unit.
  • While locally devastating for individual ranchers and some rural communities, the affect on the overall calf supply will be negligible. Even if all 300,000 cattle some estimate to be at risk were calves and all were lost, that is still less than one percent of the annual calf crop. The actual losses will be a fraction of that and negligible to the overall picture.

But the constant footage of choppers dropping hay and photos of snowmobiles crossing the countryside delivering medicine and food to stranded ranchers and hunting for lost cattle generated depressing discussions on talk radio. The questions ran the gamut:

  • Why were the cattle not brought in closer to feed, shelter and water before the storm?
  • Why should taxpayers have to pay for chopper hay delivery?
  • Are ranchers or farmers rich or poor?
  • Are farmers and ranchers well off because we pay them subsidies?

All this illustrates the widening gap in understanding and experience between rural America and urban and suburban America. Almost no city folks can pinpoint the difference between a farmer and a rancher and who gets what subsidies. Never did the implications of the drought surface, with cattle scattered far and wide picking for sustenance and hay shortages. No one mentioned the difficulty for ranchers in deciphering if the newest sure-thing blizzard is going to materialize or blow by like eight of the last ten sure things.

As agriculture concentrates and becomes a smaller percentage of a growing American population, our communication job intensifies. Political policy with direct impact on the economics of agriculture will increasing require the approval of citizens with fewer ties - but ironically more firmly held opinions -- about agriculture. Whether it's stranded cattle on the news, empty produce bins and dairy coolers, jumps in cattle futures due to blizzards, E. coli food safety scares, ethanol, "natural," "organic" and "sustainable agriculture" debates carried out in ads and news stories, many of the things that trigger agriculture in consumers' minds tend to be negative or confusing. Old Man Winter is just one aspect of agriculture's continual battle with Mother Nature that we need to keep explaining to America's consumers and politicians.

Email your comments to the author


Last Updated ( Saturday, 24 February 2007 )
< Previous   Next >
designed by