“Traders Sow Bets on Higher Wheat” – Wall Street Journal, 15 January 2013

Like our previous post on rising milk prices, wheat prices, too, are on the rise; and this past summer’s drought is to blame.

Pricing on corn and soybean skyrocketed to new records after this past summer, as the drought devastated massive amounts of both crops. Due to continued low rain- and snow-fall, many traders are betting that major increases on wheat prices will, again, occur during the next wheat harvest.

Last week, the NOAA confirmed that 2012 was indeed the hottest year on record. Kansas, the largest producer of wheat, and the southern area of the US called The Great Plains, are still plagued with drought conditions; since summer, soil moisture has greatly diminished, which is a necessity for healthy wheat-crop growth. And recent weather forecasts are not raising hopes.

Wheat prices have increased by 5.1% since the USDA reported that quantities of wheat are less than expected. Traders trust that wheat prices have reached the bottom of the well; however, a continued poor harvest for the US, the largest manufacturer of wheat in the world, could further constrict supplies. A recent survey by the USDA shows that 26% of this year’s wheat crops are “poor” or “very poor”, suggesting that much cannot be reaped from these crops.

The drought has been disheartening for farmers, causing some to plant less wheat this past fall. Additionally, due to low supplies of corn, a main ingredient in animal feed, farmers are going to use more wheat in their animal feed this year. Both of these issues could very well cause a further tightening on an already dwindling wheat supply.

Russia and Australia, two main producers of wheat, have also been undergoing harsh droughts and yielding damaged crops. If record-high springtime temperatures continue, then rain will be a large necessity come March. Major wheat-producing countries are in dire need of some favorable weather this harvest season.

Nobody can control weather and drought, but we can influence factors which affect  weather and climate, especially if they are effected by human actions. It takes a long time to influence climate; therefore, we need to start now on meaningful climate change policy initiatives. It’s not about ideology, it’s about dollars, cents and wheat prices.

Conceived, Developed and Written by Dr. Subodh Das and Tara Mahadevan

January 17, 2013

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www.fluidmanagementsystem.com     subodh@fluidmanagementsystem.com

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“Food Waste: From Farm to Fork and Landfill” – CNN, 21 December 2012

CNN recently published a chart, mapping global food waste from origination to disposal. Gleaned from this chart are the great food losses amassed by both developed and developing countries, and the improper management and conservation of energy and food sources. Though the world is eager to discuss sustainability, green culture and climate change, it seems that food waste is an often untouched topic; yet, one cannot turn a blind eye to CNN’s statistics.

According to CNN, one-third of food produced is lost or wasted globally, a total of 1.3 billion tons per year. Also according to CNN’s chart, food waste in industrialized countries — 222 million tons — is almost equal to the net food production — 230 million tons — in sub-Saharan Africa. That statistic sheds light on how the world unknowingly wastes vast amounts of food because there are no proper management systems in place. Many of these countries don’t blink twice over food losses; developed countries, like the US, take its food access for granted, while developing countries have continually diminished access.

One would think that since the US is experiencing an economic recession and increased food inflation, it would try to gain control of any food loss; however, that is surely not the case. According to the original source for CNN’s chart, 10% of the US energy budget is used to transport food from farms to households, using 50% of US land and consuming 80% of US freshwater resources. However, 40% of food in the US remains uneaten, which is over 20 pounds of food per person, per month. Americans are unnecessarily wasting $165 billion per year, just on food and water losses alone.

Although we are a world obsessed with green culture and recycling, 3% of food waste is currently recycled. Additionally, 40% of landfill content comes from food waste — uneaten food is going straight into the garbage.

As discussed in previous entries – “Milk Price Fight Boils Over” and “Time Is Running Out to Pass a Farm Bill in 2012″  — US food prices may very well skyrocket due to our country’s indecisive lawmakers. If we are able to properly manage and conserve our food supply, and increase efficiency in our food system and use of natural resources, then we might be able to save ourselves money and food, while also meeting the growing food demand.

Additionally, eating less and eating locally grown food (and thereby wasting less and lowering transportation carbon foot print) promotes a happier and healthier lifestyle, while also lowering personal and societal medical costs.

(source)

Conceived, Developed and Written by Dr. Subodh Das and Tara Mahadevan

January 3, 2013

Fluid Management Systems

Copyright 2013   All rights Reserved by Fluid Management Systems, Inc.

www.fluidmanagementsystem.com     subodh@fluidmanagementsystem.com

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Time is Running Out to Pass a Farm Bill in 2012

In the US, we have something called a Farm Bill, which is the main agricultural and food policy for the federal government. The bill is renewed every 5 years by Congress, and manages agricultural activities under the periphery of the Department of Agriculture.

The farm bill can actually be a contentious issue, and can affect international trade, environmental conservation, food safety and rural communities. The most current farm bill, which was passed in 2007, expired this September; however, no new legislation has been passed by Congress since then. Many decisions involved in a new farm bill are directly related, and affected by, our recession and the fiscal package.

The White House and Congress are at a political standoff, which is further worrying farmers. It is farmers’ hope that a new bill will be included in the fiscal package before year’s end — if legislation isn’t renewed, then milk and cheese prices will soar, affecting farmers and consumers alike. Extension of current law would be a relief for now, but would only be a band-aid for the existing problem. However, if neither current law is renewed nor new legislation passed, milk pricing would regress to the old system — the Agricultural Act of 1949 — where milk was set at $6 a gallon. The old system of milk pricing is out-of-date and unaligned with our current economy and market conditions.

The Agricultural Act of 1949 delineates how to set milk prices; the act is overridden when a new farm bill is passed, but will be effective if no new bill or extension is passed. The act includes a component that assures that minimum milk prices will cover producers’ costs. The government also assures producers that it will buy milk products at that price point; however, producers typically profit more through the consumer market. Given the existing market conditions, the government-set price could double, which could persuade farmers to sell their products to the government rather than through the private market. Because of this, store prices for consumers could skyrocket. If the government keeps accumulating milk, then it will subsequently have an excess of dairy products in storage. Eventually, prices could decline as the government sells its dairy stockpiles.

Increased milk prices could put American dairy farmers and cheese-makers out of line with the international market; instead of buying American-made dairy products, consumers could be looking at alternatives, such as foreign-made cheeses, and soy and almond milk.

What stands between the White House and Congress passing new legislation in 2012 are disputes over the food stamps program — three quarters of the farm bill goes into funding food stamps. The Senate bill, spearheaded by conservative lawmakers, would cut food stamps by $4 billion.
At this point, farm lobbyists are pushing to have any legislation passed before the new year so that dairy farmers will not have to revert to old legislation. This is an obscure issue that isn’t given much limelight, and many Americans don’t even know of this bill’s existence; yet, deep cuts into the farm bill could greatly affect everyone.
Like most issues facing our country today, the public expects lawmakers and lobbyists to work together and let the country move froward to a market-based system. We think that this is very reasonable expectation; however, it isn’t as reasonable as we think.

Conceived, Developed and Written by Dr. Subodh Das and Tara Mahadevan

December 19, 2012

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“Milk Price Fight Boils Over” — Wall Street Journal, 13 November 2012

With the drought and soaring feed costs, farmers have had a tough break this year. California’s dairy farmers, however, are experiencing more bad fortune: separate from the federal laws that regulate milk pricing, California has also implemented its own system of pricing. The state sets minimum milk pricing for buyers every month.

California has one of the biggest dairy industries in the US; but growing feed prices and slow economic growth has produced smaller milk production, which has ultimately increased milk prices.

While federal law sets milk prices at $2.50 per 100 pounds of milk, California has lowered its prices in order to benefit cheese-makers. As seen in the chart, California’s prices have never exceeded $2.00; and though prices are slowly increasing, they aren’t increasing quickly enough to save dairy farmers’ businesses.

This year, at least 100 California dairy farmers are closing down; and much of the state’s 1,600 dairy farmers are experiencing financial woes. Though there isn’t a maximum-set milk price, many dairy farmers stay close to the minimum so as to remain competitive. Cheese-makers contest raising the minimum price, since that would persuade cheese-makers to move out of state.

Many think that changing state pricing wouldn’t be enough to prevent dairy farmers from going out of business — most California dairy farmers face additional costs, such as paying higher prices for animal feed since they don’t grow it. This, in turn affects milk production, where milk per cow is decreasing because feed costs have sharply increased.

Some dairy farmers and cheese-makers propose that the market should decide pricing; however, because it takes several years for a cow to develop to full production, it’s difficult for dairy farms to match production to the marketplace.

This situation presents a Catch 22: if California keeps its current milk pricing, then dairy farms go out of business and cheese-makers stay in business; if the state increases milk pricing, then more dairy farms will likely stay open and cheese-makers will leave the state.

How can California save dairies, but also keep cheese-makers in state? Can, or should, the “market” decide the winner and loser, or — based on tax revenue, job creation and retention criteria – is it the state’s decision?

Conceived, Developed and Written by Dr. Subodh Das and Tara Mahadevan

November 30, 2012

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Copyright 2012   All rights Reserved by Fluid Management Systems, Inc.

www.fluidmanagementsystem.com     subodh@fluidmanagementsystem.com

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