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Veteran Advisor

Marketing, won't it be nice if ....

Won't it be nice if all we had to do to market grain was monitor crop weather, here and around the world and estimate supply, demand, and stocks with an occasional hurricane thrown in?

    But unfortunately, we have to consider as well government policy (both foreign and domestic) and add on top of that, politics, just plain old power politics and political influence buying.

  Some government policy is pretty rational.  When Russia stopped wheat exports last month, they did it to preserve wheat stocks for domestic consumption.  It's hard to argue they shouldn't do that,  after all, they have a duty to their own people.

  And some government policy actually made sense at the time but the justification has long since vanished and even become counterproductive.  Take the Oil Depletion Allowance, for instance.  When Congress established an entirely new kind of tax cut back in 1927, when it eliminated any tax on 27.5% of every dollar earned on every barrel of oil, pumped,  it was with the idea to encourage the expansion of the automobile & truck transportation system in direct response to the railroad monopoly.  Unfortunately, it was so successful that the passenger railroad has almost totally vanished.  In the meantime, the petroleum industry has become a monopoly itself.

   In fact, Congress established the RFS, not only with the idea of US energy independence but to provide some competition against the overwhelming monopoly power of the petroleum industry.  Not that there weren't other more important reasons like climate change as well.  But just look at the effect that government policy has had on corn farming, 40-50% of the corn produced in this country today goes to fuel ethanol production.  So you see, policy was/is, by far more important

     Furthermore, the inescapable fact is, the newly elected government's decision to pursue an openly aggressive trade war policy with China slashed $3 per bushel off the price of every bushel of soybeans produced in this country the past three years and threatens to do the same for bushel of beans in the foreseeable future. You can argue about the reasons for it, the wisdom of it but you can't deny the fact of it.  Policy has a pretty darn important influence on marketing.

  And finally, that brings us to the influence of plain old fashioned politics on marketing.  By now the evidence is overwhelming, in fact, more evidence is emerging every day, that the government's much-delayed response to the pandemic was determined by nothing more than presidential election politics.   The evidence in the form of emails and other documents that despite frantic warnings from multiple sources, the government response was stalled by election politics at the very highest level.   We've learned just this week that manufacturers and suppliers of PPE were warning the administration in January that supplies of PPE were being sucked out of the country by any number of foreign governments in anticipation of the pandemic.  It wasn't just China that was stockpiling PPE, it was everybody but the US government.  And we now know the whole sorry story about how that worked out.

  So when you say, "let's keep policy and politics out of marketing" remember when fuel ethanol is barely 60% of expected, the new crop carryout is projected to be 4 billion bushel, not 1.8 billion bushel,  and with the current new crop futures price (which includes this year's weather risk) at $3.30 (translates into a harvest price of what, $2.70, $3.00 at most) it was due to series of partisan political decisions that were entirely avoidable.

  That, in a nutshell, my friends is why policy and politics are important considerations to marketing.

  Respect this virus, wear that mask, use common sense (six feet isn't enough), and stay safe.

2 Replies
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Senior Advisor

Re: Marketing, won't it be nice if ....

There are speculations to make here, I'm not sure there's any marketing do be done.

Grains are a mess, which isn't news. They've been political hostages for more than two years.

Cattle basis has been insane- huge winners and losers.

Nobody knows who gets hog kill slots or what they get paid.

This is a post-capitalism market.

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Honored Advisor

Re: Marketing, won't it be nice if ....

This is NOT a "2-step".  I`m just saying, ethanol`s problem is cheap oil...period, end of discussion.   If oil was 100 bucks, ethanol plants would be making smoke 24/7, but when oil is $20....or negative $30/barrel and regular unleaded is $1.30 and E-85 is $1.30....less MPG and more hassle, who in their right mind is going to fill up with E-85?  

I am pro-ethanol however when the Baakens came in and "peak oil" myth died, the whole bio-fuel economics changed, I carried water up hill for that industry probably a year or 2 too long.  I loved the $4 gas and $7 corn, we bitched about $4 gas but we had the money to buy it and go on trips, now gas is $1.30 and we`re too busy and broke to enjoy the bargain. 

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