Home / Family / Ties That Bind

Ties That Bind

CHERYL TEVIS 02/12/2013 @ 11:42am Geopolitical Skirmishes Trigger Supply Chain Concerns As the markets opened on March 3, and the world realized that Russia had annexed Crimea, equity markets plummeted on forecasts of macroeconomic problems and falling demand. Meanwhile in Chicago, commodity prices rose, implying supply problems. Six weeks later, no one knows which reaction was justified. However, the vulnerability of the agriculture and energy sectors to emerging geopolitical events is rapidly overshadowing the impact of weather as a growing topic of concern. “In agriculture, we’re used to a lot of turmoil,” Brian Oleson, University of Manitoba professor of economics told participants at a recent Washington, D.C. Farm Foundation Forum. “We have to live with a lot of price fluctuations. Every day when we wake up, the market has gone somewhere and is doing something. It’s a lot of noise to sort out. Yet we always have the constant question of global food security.” What’s the likely impact of current world conflicts on global energy and agriculture markets? “Energy and agriculture are absolutely inseparable,” Oleson says. “Regarding Russia, we ask the question: Is this just noise? Or is it an opportunity for pricing? Is it something that requires us to look beyond the next crop year, and start buying inputs? In the post war world period we’ve seen two big price waves: the Great Russian Grain Robbery and the ethanol boom. Is it possible that this is going to be one of those?” He adds, “We saw OPEC and the great Russian grain robbery march hand in hand almost in terms of the price effects that happened. But in terms of the second big price wave, in my point of view, the great farm prices of the last seven years were driven by ethanol. Energy and agriculture have become inseparable.” What significant trends in these two markets should producers recognize? “Big power politics is back,” says Charles Doran, Johns Hopkins School of Advanced International Studies. “None of the great powers have used force to annex territories since 1995. That’s being challenged now in Crimea. The Chinese also have expansionist views of their role in the Pacific. As a result, the U.S. is finding a need to reorient its presence.” Mideastern politics also remains a major factor. “The Middle East has 70% of the world’s exportable oil and natural gas,” Doran says. “There are civil wars between the Sunni and Shia Islamists in lots of places in the Arab world. There’s a transition going on in the leadership of Saudi Arabia, a key country in terms of oil and natural gas production worldwide. There are 2,000 armed, ideological Sunni fighting in Syria. What happens when they come home? The upshot is the probability of a major oil supply interruption is higher now than in quite awhile.” Doran contrasts the declining production of older oil fields in the U.S., the Alaskan North Slope, the North Sea, and Mexico with the “incredible revolution” in fracking and the output of shale gas and tight oil. “Two million barrels of oil a day now, as well as a lot of natural gas, are coming from places like Eagle Ford, Texas, and the Bakken formation in North Dakota,” he says. “In the short term, the Saudis have pegged the price around $100 per barrel. But things could change. Will increased production drive price down? Will the decline in old fields offset this? How fast will the worldwide movement of fracking technology develop? The Chinese lack water and pipelines, but they’ve already increased their output. Almost every country has access to this shale. It’s not always as easy to develop as it is here in the U.S.” He adds, “There’s a great marketing contest going on between the decline of old fields and the increased export production of natural gas and oil,” Doran says. “I wouldn’t want to predict how this will come out. I think on balance it’s not bad for those in agriculture who are worried about the price of petroleum and gasoline.” Despite predictions of U.S. energy dependence in the near future, Doran is cautious. “The oil industry has a saying, ‘All oil comes from a single barrel,’ “ he says. “It means that all countries are interdependent. The amount of oil and natural gas being consumed by the developing countries like India and China is expanding very rapidly, so we can’t escape the drag of what may take place there.” Outlook for Global Agricultural Production What’s the impact of civil unrest on global agriculture? “Production surprisingly isn’t affected big time by geopolitics in most cases,” Oleson says. “Farmers tend to just keep going. They may react in terms of delivery, or they may be affected in terms of inputs. Look at Argentina. I remember being there in the early 2000s, and farmers were just shoving grain into plastic storage bags as fast as they could. They didn’t trust the currency or the government, and would rather have their bank account in plastic grain storage on the farm than a bank. Argentine farmers, despite the fact they were getting one-half the price of U.S. corn, just kept on producing” Oleson refers to Russia, Ukraine, and Tajikistan as “the accidental exporters.” “Early in my career, this was the biggest importing region in the world,” he says. “The U.S. and Canada were fighting to see who would get the larger share of the USSR grain market. The interesting thing now is those three countries are vying to become top exporting region in the world. It’s absolutely astounding that they moved from being one of the biggest importing regions of the world to one of the biggest exporting regions of the world. And their grain production today is less than it was then.” He adds, “One question is whether the Baltic region is adding to world food supply issues and price instability, or is it part of the solution to world food price and food security?” Wheat Production as a Barometer Gary Blumenthal, CEO of World Perspectives, Inc., argues that geopolitical events exert a greater impact on oil supply than food supply. He has studied the impact of political instability on wheat production. “Of the food insecure countries in crisis, according to the FAO, 60% are due in part or entirely to poor governance and civil strife,” he says. “In the early 20th century, Argentina was the 10th richest country, and today it ranks at #55,” he says. “We know it’s because of poor governance. But what has happened to its wheat production? Through all the political turmoil, we basically don’t see a lot of impact.” Looking at a more volatile region of the world, wheat production actually rose during the 2011 Arab Spring, he says. Syria experienced a modest production decline of 3.8% in 2012 -13 during its civil war. “But generally wheat production not affected,’ he says. He points out that in countries like Iraq, wheat production is more often impacted by drought than civil conflict. “The long term trend in Iraq, despite 30 year of strife, is that wheat production has increased,” he says. Ukraine is just the latest example in the news. “The 2005 crop, the year of The Orange Revolution, was a very good crop, and wheat production bounced along fairly stable through the strife,” Blumenthal says. “The USDA Foreign Service attaché report fully expects a regular harvest of winter wheat crop this spring and planting of the spring crop, with no adverse impact on supply. “But it’s the complete opposite in energy markets,” he says. “Iraq oil production fell dramatically during the Iran/Iraq War, and it plummeted during the Gulf War, and then recovered. Libyan oil production dropped off during the conflict with Chad, and during the intervention in 2012, again there was a great drop off in oil production.” He points out, “Fossil fuel not only has not concentrated energy, it’s concentrated in a region where production is more subject to disruption. So energy markets should be watched more than food.” He adds, ‘What hurts agriculture is macroeconomic decline, a drop in demand and falling prices as a result.” He offers the rule of four as “a great metric.” (1) CPI inflation rate (2) Budget deficit (3) Current account deficit (4) Combination of those four in any given country. “This metric predicted the Asian financial crisis of 1997, and the Russian default in 1998,” Blumenthal says. “In each of those instances, the price of corn fell.” He suggests the following countries are poised at a threshold that indicates considerable trouble if the Federal Reserve starts to raise interest rates: India, South Africa, Argentina, Turkey, and Indonesia. “These countries need to take action, not so much individually, but collectively they could have a certain adverse impact on grain markets,” he says. But he concludes, “Geopolitical problems can depress economic growth, and therefore depress food demand. The increased economic capacity for people to buy better food is suppressed if the economy is hurt by geopolitical conflicts.”

Time travel is a popular topic of best-selling books and blockbuster movies, from Star Trek, to Back to the Future, to the more recent Time Traveler’s Wife.

Characters go to great lengths, transported by advanced technology, to visit the past or to gain a glimpse of the future. I’m a big fan of time travel, too, but my mode is more energy-efficient than a spaceship or time machine, and almost anyone can ride along.

My time travel is fueled by family photos, newspaper clippings, letters, and other memoirs. My mission – and yours, if you choose to accept it – is figuring out a way to bring this history to life – along with the family members who made it – for future generations. Technology, like time travel, offers a launch vehicle to send a message to the future.

CancelPost Comment

Enjoyed your article on "Ties that Bind" really re 03/31/2013 @ 4:36am I have enjoyed your story “Ties That Bind.” I’ve been on my own quest since February of 2012. It was 2 days after my dad’s 88th birthday that went to his house to find out about what the first tractor my grandfather had owned and what other tractors he owned. I already knew all the tractors my dad had owned because he had always kept the owner’s manuals for all his equipment and about 10 years ago he gave them all to me. What I had wanted to do was make a history of tractors starting with my grandfather, through my dad and then all the tractors I had owned when I had farmed. Not only did he remember this but he remembered the tractors that his 5 brothers and 3 of the 5 brother-in-laws who farmed. When they switched from horses to tractors, what year they bought the tractors and make and model of the tractors for all of them starting with my grandfather’s 1929 Farmall 15-30 when my dad was just 5 years old. When the oldest of the family of 12 started to buy their own tractors, my dad was the youngest of the family of twelve and only around 10 or 12 years old. Still he was able to remember everyone’s tractors almost up to 1950. When I had this much information I sent out the story I wrote up from what my dad had told me and then worked up a Family Tree of Tractors as if went from my grandfather down to his sons. When I sent out this information I included information sheets for the rest of 28 members of the Eberspacher Family still tied to farming and asked them to bring me up to current date so we would have 83 years of tractor history. Then in another 17 years we will have 100 years of tractor history starting with one man and one tractor back in 1929. As of the day I’m writing this I need to hear from only 5 more relatives in 2013 and I will have 84 years of tractor history. I marveled at my dad’s memory and how he was able to recall all the makes, models and dates for everyone. I knew I would never be able to do that because back in 1994 I received brain damage from sinus infection that had gone through the bone and into the brain. It left me with memory lapses and non-typical migraine headaches 15 to 25 days a month at a 7 to 8 on a 0 to 10 scale. I finally had to take disability in November of 1999. By then the doctors had me 40 to 45 pills a day and just my copay was costing over $2,000.00 per month. It just wasn’t safe for me to be pushing myself anymore. Then in 2010 I was diagnosed with early stages of Alzheimer’s so I knew I would not be able to remember like my dad had. After I started to have seizures last March and could no longer drive to pass the time at home I started to write down my life’s history and all the different experiences I have had over the years. It has been a slow process because I suffer from what my doctor calls “Word Searching” due to the brain damage. I’ll be typing along and all of a sudden the word I want isn’t there. I’m not talking big words they can be as simple as: while and where. Other times I just forget how to spell a word. The worst case of this happened in January of 2013. I wanted to type the word “of” and all I could think of was “ov.” It took me 20 minutes to figure that one out. But even with the slow progress I have come up with 21 stories. Some are only 2 or 3 pages long, most are 21 to 29 pages long and the longest is 65 pages for a total of over 350 pages of text. I have then went through all our pictures and pulled out around 300 of them and had them blown up to 8.5 x 11 inches and then put labels on then that corresponds to the stories. This has kept me busy for 9 months while waiting to get the seizures under control. My last one was June 23, 2012 and then I had to go 6 months without one before I could drive again. That meant December 23, 2012 was when the doctor gave me a clean bill of health to drive again. Looking back on it I’m really glad that I had the time to stay at home so I could document my life’s history for future generation. I’m 6’9” tall and thanks to all the medication I am on I weigh 400 pounds so that alone is something that will attract the great grandchildren. Let alone the fact that as my son is doing the proof reading for me on all my stories, he keeps telling her “I can’t believe my dad did that!” Again thank you for the good article this month. It was one that really hit home with me. Gerald (Gary) Eberspacher 402 North F Street P.O. Box F Milford, NE 68405 402-761-2712 geberspacher@gmail.com

Report Abuse Reply

Geopolitical Skirmishes Trigger Energy/Ag… By: 04/18/2014 @ 5:45pm Geopolitical Skirmishes Trigger Supply Chain Concerns  As the markets opened on March 3…

Use Soft Science to Manage By: 03/24/2014 @ 9:52am Fifth-generation farmers John and Nettie Rosenow met as college students. After graduating in 1972…

Gain a Healthy Aptitude By: 03/16/2014 @ 10:04pm Steve Licht tries to maintain a healthy lifestyle. He gets regular, year-round exercise in his…

This container should display a .swf file. If not, you may need to upgrade your Flash player.
Big Picture: CME Trading Weather