Don’t know much about ag econ?

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Had I known my professional life would center on chronicling the takeover of global ag business by global ag business, I would have listened more closely to Professor Lyle P. Fettig, my University of Illinois Ag Econ 100 instructor.
Nearly everything in that Mumford Hall classroom, however, conspired against it.
Snooze city. First was Fettig, a University of Chicago-trained economist whose voice was a velvet fog and whose words arrived on cat’s feet.
Then there was the killer, 1 p.m. meeting time made worse by spring’s suggestive, enchanted breezes and 50 minutes of back-of-the-room snores from fellow farm boys. (Most were Alpha Hoe a Row-types who never put pen to paper because their fraternity, AGR, held entire file cabinets labeled “Fettig.”)
But I struggled onward, a near-forlorn hope, to discover the exciting world of demand elasticity, points of diminishing returns and market equilibriums.
Final exam. What Fettig didn’t teach us, however, was the role we would play today to ensure agbiz’s economic success so it could trickle down to ensure our economic success.
If he had, I might not be so confused – or repetitive – today.
Who knew? For example, we were never taught that it was farmers’, ranchers’ or taxpayers’ fiduciary duty to fund, then almost-blindly accept, narrowly defined economic studies that slant the personal interests of giant processors or giant grain exporters over the broad interests and well-being of the market.
Today, however, such work is not only commonplace, it is nearly universally acceptable.
Moreover, a pox on all who question its tilted gospel.
Need a couple or $5 billion to upgrade the nation’s inland waterways?
Underwrite a study to show how this massive public investment will speed grain to export markets and mention only in passing that future exports likely will not support such an investment nor will the direct beneficiaries, grain processors and exporters, pass their new efficiencies and new profits back to the public.
The market is water. Once, while yet awake, I remember Fettig comparing the sacred market to water.
Left to itself, the market – here, the competition between rail, truck and barge transportation – would find holes in the market’s levees to deliver efficiency without “rent,” a ghastly sin earned at the expense of other market players.
Another study. Want to apply pressure to Congress and USDA to reopen the U.S. border to Canadian cattle imports?
Underwrite a study like the one completed in December by two Kansas State University ag economists and funded by U.S. and Canadian meatpackers and cattle groups with deep financial ties to both.
Not surprisingly, it shows that since the May 2003 border shut-down on live cattle imports, U.S. beef packers “lost $1.7 to $1.8 billion in gross sales revenue of boxed beef and byproducts” and suffered increased slaughtering costs due to “underutilization of U.S. packing facilities.”
Each, in turn, “has contributed” – not “caused” because that can’t be proven – “to three U.S. cattle slaughter plant closures” and “the development of plans and investment strategies” by U.S. packers to relocate to Canada.
Can you say ‘overcapacity?’ Not addressed, however, is the real possibility that packers may have overbuilt capacity and are now paying the inevitable economic price for that market error.
Yet if the situation is as dire as the study suggests, Fettig’s teaching informs us we have two responsibilities.
First, we must travel to the U.S.-Canadian border and wave good-bye to the packers because no economic force in an open and competitive market will keep them from moving. That’s how markets work.
Second, we must go to bed and sleep soundly because market players who rely on “rent-seeking” favors – like the lowering of safety standards or the welfare of government – will be replaced by others who can survive without them.
Think Honda and General Motors; United Airlines and Southwest Airlines; Brazilian soybean growers

About the Author

Alan Guebert was raised on an 800-acre, 100-cow southern Illinois dairy farm. After graduation from the University of Illinois in 1980, he served as a writer and editor at Professional Farmers of America, Successful Farming magazine and Farm Journal magazine. His syndicated agricultural column, The Farm and Food File, began in June, 1993, and now appears weekly in more than 70 publications throughout the U.S. and Canada. He and spouse Catherine, a social worker, have two adult children. farmandfoodfile.com More Stories by Alan Guebert

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