Tuesday, June 25, 2019

A little economics

Much of farming and ranching has to do with politics. It is a complex story, having to do with lobbyists, farm bills, industry related to it (Monsanto, food processing), subsidies, crop failure issues etc. The farmer in the prairie tends to be Republican. I'm not going to get into the details of that, other than to mention that their main intent is to keep state money in the state and to direct as much of federal tax collected as possible back to the state. They understand the need for some federal control and support, such as is flooding and river issues. But still, they have not found Democrats addressing their concerns.

Aside from a recent interest in the workings of politics (not so much politicians), I have gathered a few books on economics. Very few of them mention agriculture. In the US, only some 2-3% make a living producing our food at farms, ranches and orchards. The more broadly defined "farm industry," which includes the farmers and ranchers as well as some support networks, employs 11% of the work force. If economists look at food at all, it is a measure of poverty. If you cannot eat the quantity of starch, protein etc. one needs daily, you may be close to the poverty level. One of my books tells that Japan eats enough food that if they were to raise all their own food, they would need five times the land they have. Many Asian countries are in that situation. Whether rich or poor, they have to export goods to eat.

What we all do for work:

Some of that work is in fact in rural areas, but is not farming. For example, there are seed plants, chemical plants and ethanol plants. Some food processing takes place in rural towns. These are for example in Western Kansas, where there are slaughter houses.


I was out West bicycling with a group. We saw many trains with a few hundred coal cars. Many of the rocky mountain states have coal. It comes from Wyoming, Montana and states South of these. Much of your electricity is still made from coal. It is one of the cheap sources of fuel. For agriculture, the fuel is mostly oil or ethanol based.



Other trains bring containers from the West. A good part of them contains consumer goods from Asia. Much of the clothing and personal items of the farmer and rancher working on the prairie. Why do we need to haul it so far?






It has to do with wages. If you make Nike shoes at 3 dollars a hour in Asia, compared to 15 dollars an hour in the US, the shipping cost becomes clear. If a pair of Nikes costs 50 dollars, the labor is a small part of that (it does not take an hour to make shoes by machine or even partly manually.) But the shipping actually is a long process, and many hands are employed getting your shoes to the store. My guess is that the shipping is equal to the costs of labor to make the shoe, and not anywhere near the cost of making it here. The stores and distributors take their major cuts.

Another way of looking at the costs is to assume the 3 dollar worker in Asia (Vietnam) makes 10 pairs of shoes at 3 dollars an hour. The US worker makes the same 10 pairs of shoes at 15 dollars an hour. Therefore, it must cost less than 12 dollars to ship the 10 pairs across the ocean. The shipping within the US does not enter into the comparison, as you would have to ship it to distribution centers in any case.


How shoes are made: Video 1
A more traditional method: Video 2 

Big Things are still made in the USA. International Harvester used to make the combines for harvesting, but a series of mergers with heavy equipment makers has left the company with a product but all new names. The combine is explained here:
LINK: Combine

The harvester is now Case IH: https://tractors.fandom.com/wiki/Case_IH

Red tractors are no longer made in Iowa or Illinois, the plants have moved to Wisconsin:  News story


The cows were everywhere when we bicycled. Wheat was here and there, where irrigation was not needed. 






And corn was common where center pivot irrigation was used. Corn is another story. Corn and soybean are a major source of animal feed. To feed one American, about two acres of land is needed. Those Asian countries want to raise animals, but with the shortage of land in Asia, we export feed to them. Much of out food is made from the agricultural raw materials by a few giants such as Conagra.






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