“You come to us and tell us that the great cities are in favor of a gold standard; we reply that the great cities rest upon our broad and fertile prairies. Burn down your cities and leave our farms and your cities will spring up again as if by magic; but destroy our farms and the grass will grow in every city in the country.”
If you spent any time in 4-H or FFA, that's probably where you first heard this impassioned snippet from William Jennings Bryan's Gold Cross speech. What you probably never learned then and may not know today is that Bryan was an avowed populist.
There are more definitions than agreement on exactly what a populist is. However, it does always seem to revolve around one group wanting to take rights from another group because they believe they are at a disadvantage. Such circular reasoning often leads to failure of the pseudo-logic presented. At its worst, when successful, there are too many historical examples of populism sowing the seeds for fascism.
At the time of his speech, Bryan was stumping to eliminate the gold standard, which would have increased inflation and thus agricultural prices at the time — an event that he and his followers believed would be good for agriculture. Bryan was also arguing in favor of a mandated federal income tax at the time.
Bryan's prediction has yet to come to fruition, thankfully. However, recent populist-leaning federal policy will serve up the harshest test yet, especially where the cattle industry is concerned.
Limiting the opportunity
Congress convened a conference committee to hash out the 2007 farm bill last month. Under consideration is an amendment prohibiting packers from owning cattle more than 14 days ahead of slaughter, unless you're among the smallest packers.
Speaking to the proposed packer ownership ban earlier in the Senate debate, representatives from the National Cattlemen's Beef Association (NCBA) pointed out, “The larger impact this could have on the cattle industry is that it could ban all marketing alliances that we currently participate in… Since most of these alliances are partnered with a packer at some point in the process, this could be interpreted as being covered by the ban. The alliances that we participate in, as cattle producers, are led by us and are at the demand of the consumer. We should be rewarded for creating a product that our consumers want, not hindered by it.”
Relative to demand, consumers today are paying the most money for the most beef they ever have. It's more than coincidence that the consumer demand curve has shifted to the right when there are more branded beef and value-added programs than ever before.
The greatest progress in business and society always seems to come when competition and opportunity to succeed are most prevalent, and vice versa.
Food for oil
Then there's the simplistic and myopic mantra about reducing American dependence on foreign oil and Big Oil companies. In late December, President Bush signed into law the Energy Independence and Security Act of 2007. It doubles the amount of mandated, subsidized grain-based ethanol production from the 7.5 billion gals. by 2012 (mandated in 2005 legislation) to 15 billion gals. by 2022.
That's certainly been a win-win situation for the nation so far, as subsidies have increased for fuel production. Yet the price of fuel continues to escalate, with crude-oil futures hitting $100/barrel for the first time last month. All the while, feed costs for livestock producers and finished costs of grain-based foodstuffs rocket ahead.
According to the National Agricultural Statistics Service, farm real-estate values — a measure of the value of all land and buildings on farms — averaged $2,160/acre on Jan. 1, 2007, up 14% from 2006. That's a record high, and $260 more than a year earlier. Cropland and pasture values rose by 13% and 16%, respectively.
In Iowa, the epicenter of corn-based ethanol production, farmland values grew a whopping 22% ($700/acre) last year to a record high $3,908/acre, according to Iowa State University economists. The average value in 2000 was $1,857/acre.
It's difficult to square such policy decisions and their impact with hopes that agriculture is still regarded by society as a vital, essential pillar of this nation's security. It's even more difficult to believe there's any realization that beef cattle have been the single strongest economic mortar within that foundation.
Mother Nature has done plenty to stall the cattle cycle, but lack of economic incentive is doing as much, if not more, even though cattle prices are historically high.
Presumably the populist logic for these developments is that such failure doesn't matter as long as everyone fails equally.