Calamity cowboys: On Iowa, obesity, and earthquakes
Living directly on top of the Hayward Fault, which seismologists claim is overdue for a major earthquake, I'm pretty familiar with the idea that there are losers (of which I may be one) and winners in moments of human tragedy. Here, the winner category is largely comprised of developers, who must feel a strange, guilty glee when those million-dollar homes come sliding down the hillside. Destruction begets construction.
Last night's edition of the NPR show Marketplace featured a different sort of devastation diva, as Nancy Marshall Genzer reported that drug behemoth Pfizer is set to win big from the rise in obesity rates among young people. The American Academy of Pediatrics disclosed yesterday that overweight children as young as eight could benefit from taking cholesterol-lowering medications. Pfizer's drug Lipitor, which reportedly lowers cholesterol levels, is already the best-selling drug in the world, scarfing up some $13 billion in annual revenue. Add even a portion of the over 9 million obese children in the United States to Liptor's coffer, and you're looking at one jolly drug company.
All this talk of catastrophe cash has also had me thinking about Iowa. In a post a few weeks back, I mentioned that one of our original writer-members, the lovely Corn Maven, hails from a farm near Cedar Rapids where her father continues to farm 1,000 acres of corn and soybeans. She spoke with him shortly after the floods about how things were looking on the farm. He reported that he'd planted a little over 900 acres earlier in the spring, many of which were now a sodden mess (though luckily, he anticipated that all but about 30 acres would dry out enough to be workable). He'd also sprayed two-thirds of the fields with herbicide only a few weeks before the rains came. He was lucky to have held off applying costly fertilizer -- nitrogen prices have risen about 75% in the last year -- so he didn't lose it in the flood. But many farmers hadn't.
And when the floods came, they, like Corn Maven's dad, saw many of those expenses -- seed, fertilizer, herbicides, tractor fuel, labor time -- wash down the Mississippi. Fruit and vegetable producers, a definite minority in the region, have also suffered losses. Regardless of their scale or crop, farmers in Iowa and elsewhere will now have to decide whether, and how much, they want to try to replant. So who benefits most if they do?
Getting back in the saddle
Produce farmers must now weigh the cost of recruiting scarce labor, buying new seed, and getting the tractor going again on $5/gallon diesel. The conventional corn and soybean farmers that dominate Iowa's landscape have fewer labor expenses, but must consider the price of replacing their lost fertilizer, pesticides, and patented GM seeds. Commodity prices, which have ridden the flood effect to nearly $8/bushel for corn and $15/bushel for soybeans, are a major incentive to try again, particularly when compared to the known financial suicide of throwing in the towel for the season.
Crop advisers are already recommending that producers shift to fast-maturing (but lower-yield) corn varieties that have a chance of reaching harvest stage before the cold sets in. That means shelling out for new seed and other inputs and starting the whole process over again.
Needless to say, even a successful late harvest probably won't bring financial stability to the farm. It's a slightly-better-than-worse situation for many flood-affected Iowans. Environmentally speaking, too, replanting is a mess. More fertilizers and pesticides will leach into drinking water and aquatic ecosystems, more greenhouse gases spew from the tailpipes of tractors. And of course, replanting all that land in corn (and, even more worrisome, opening up conservation land to corn production) just perpetuates some of the problems that made the floods so bad in the first place: Dramatic changes to the natural water flows on cropland, planting on floodplains or too close to waterways, and a plowing-up of virtually all vegetative cover.
Putting the co. in cowboy
There's one group of folks that isn't grumbling about the mess Iowa has to contend with from here on out. Monsanto, purveyor of all things toxic and genetically-modified (or at least many of them) has seen its stock surge 95% in the last year. Gross profits -- sales revenue minus the cost of producing the goods -- are up 133%, suggesting that the company is taking full advantage of demand for its pesticides and GM seeds to raise prices. Collud -- I mean, competitor firms Dow Chemical, DuPont, and Syngenta have all seen significant sales growth. And that's before farmers reach back into their pockets to purchase a second round of inputs this season. On the bucking bronco that is the Iowa flood disaster, input companies are riding high.
Alone on the range?
The media loves to focus on high commodity prices and the farm rush to cash in. But let's not let it distract us from the fact that many farm families -- not unlike many urban consumers -- are teetering on the financial edge. We've seen this combination of factors before: In the late 1970s, record-high corn prices and federal policies that encouraged production prompted farmers to take out massive loans to invest in new farm equipment, land, and inputs. When demand dropped, farms did too -- into bankruptcy. The 1980s farm crisis brought a rash of farmer suicides and farm closures in the Midwest.
That storm may be brewing again. Demand is high and farm policies, including that opening of CRP land mentioned above, are driving farmers to produce as much as possible. But despite high crop prices, the cost of land and inputs is raining on the parade. The USDA reports that farm debt is expected to hit a new record for the fourth consecutive year, rising to $228 billion from $220 billion last year. Since 2003, farm debt has risen by 30 percent.
An AP report in the Sioux City Journal earlier this month featured Danny Klinefelter and Neil Harl, two ag economists, tolling the doomsday bell:
"Land prices are increasing dramatically, and prices of grains are high just like the '70s," said [Klinefelter]. "It concerns me. It concerns me a lot." Harl, who has written extensively on the 1980s farm crisis, said the key is how much debt farmers take on, and it appears that amount is increasing significantly. "The longer these higher commodity prices go, the more it will draw people in to borrow heavily to buy the land and that's when things get dicey," Harl said.
Dicey for almost everyone -- consumers and farmers, conventional and unconventional, urban and rural -- but tremendously profitable for a select few. Just like obesity and earthquakes.
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