Last week I mentioned the impact of Paul Ehrlich’s Population Bomb on popular thought.
He felt that exploding world population in the ‘70s and ’80s would outstrip any production increases that would come in the same period. In fact, the yield curve continued up and production increases brought about cheap prices in the 80’s.
Ehrlich says he is still right, just with poor timing. The bomb will explode later, or, as I put it, the fuse was longer than he thought.
Counterpoint
An opposing view is held by Dennis Avery of the Hudson Institute. He could be heard at grain conventions a few years ago, warning elevator operators that the population boom that was supposed to guarantee huge profits somewhere out in the future was not, in fact, going to happen.
He said that population was already starting to show signs of flattening out.
The Avery theory was that food production was related to the economic model of the emerging nations.
When they became more democratic, they produced more grain. On the other side of the consumption equation, they produced fewer children.
He said the trend was, that with greater food and greater prosperity, couples anticipate less infant mortality, so they have fewer children.
Maybe Avery was right
Current U.N. statistics are starting to tilt toward the Avery model. U.N. projections today are for a half-billion fewer people in 2050 than previously thought.
At the same time, the distribution in some parts of the world is changing dramatically. In 1950, Europe had 25 percent of the world’s population. By 2003, it was only 12 percent. The projection for 2300 is 7 percent, but that is a really long-term projection!
So, for the first time in history, the long-term trend may not be that we can continue to increase production for an increasing population.
For the most part it is interesting to speculate on this, but, as the old economist saw has it, in the long-term we are all dead.
Precision ag is green
A different Dennis Avery pet subject is that the greenies have it all wrong when it comes to modern agriculture.
The greenies say we are poisoning the land and stripping it bare. Avery says high-yield agriculture preserves all the marginal acres that would otherwise be needed if we were not efficiently using the current productive land.
We are saving the rain forests and not getting credit for it!
K-wave
Talking about long-term trends always gets me to my favorite subject, the Kondratiev wave. Nickolai Kondratiev wrote the landmark work The Major Economic Cycles, which was published in 1925. It was not popular in Russia, since it postulated an economic cycle of 50 years or so at a time that the government was claiming they could control the economy. Kondratiev died in the gulag in 1939 as a result.
His K-wave is still being talked about. Mostly today, the K-wave theory is a curiosity. It is said to be used to see patterns that aren’t really there. That may be, but when it fits, it gives me a good excuse for my small part in the economic history of the area.
In 1974, agriculture was on top of the world. By the middle 1990s, we were in a hole that it seemed we could never climb out of. Harvest corn was $1.45, soybeans were 4.35. In 2012, however, we had corn at the processors for over $8.00.
Juggle the dates a little, and you have a handy, dandy 50-year cycle, at least from low to low.
Modern markets
This was a critical week for grain. Prices dropped in corn and beans, came back, and slumped again on Tuesday.
September corn futures were 4.53 3/4 on the 13th, but 6.10 3/4 on the 19th. Today they are 4.88, down more than a nickel. December futures are now just under 4.80.
November soybeans are now 12.91 1/2, down 12 cents. The high was 13.05 1/4 on the 19th.
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