DALHART, Texas – The giant feedlot Cargill operates near the top of the Texas Panhandle is almost full, 86,000 head of cattle milling about and chewing until they’re ready for a trip to the beef factory.
The operation in the heart of cattle country is part of one of Minnetonka-based Cargill’s largest U.S. businesses. But the crowded lot of steers and heifers betrays a deeper problem on the arid high plains.
Cargill is set to close another Texas feedlot, and last year it shuttered a mammoth beef packing plant in the state. The problem: not enough cattle to go around, a result of a long and punishing drought.
"This is our third straight year of drought in this area,” said Patrick Schwab, general manager of the Dalhart feedlot.
The parched conditions have driven up U.S. retail beef prices and created headaches for big producers like Cargill, which must pay more than usual for cattle.
As drought burned out pasture land, it has led ranchers to reduce the total U.S. cattle herd to its lowest point since 1951. The supply constriction in turn leads to higher cattle prices that work their way up the food chain.
“The packer and the retailer are going to pass that on to consumers,” Schwab said.
Ultimately, high cattle prices give ranchers an incentive to expand, and federal data indicates that might be happening. “The profitability is such that where they can expand the herd, they will,” said Duane Lenz, general manager at CattleFax, a Denver market researcher.
But rebuilding the herd takes a few years due to simple biology. A heifer can have only one calf a year, while a sow can give birth twice annually, delivering a litter of around 10 piglets each time. Plus, the cycle of birth to slaughter for cattle can be up to two years.
So, don’t expect any relief soon from record beef prices. “We are going to have continued pressure on retail prices through 2014, 2015 and probably 2016,” said Derrell Peel, a livestock marketing specialist at Oklahoma State University.
This is a crucial time of year in the U.S. cattle heartland, of which Texas is the capital. The state had 10.9 million cattle and calves in January; the next closest was Nebraska with 6.2 million, according to the U.S. Department of Agriculture. Minnesota had 2.3 million, ranking 12th among states.
Spring rains are essential to nourish pasture lands. The northern plains, including Nebraska — a big cattle state — have had adequate precipitation. That, too, goes for Minnesota, whose cattle business is dwarfed by giants like Texas but far from negligible.
Forage conditions have improved in Minnesota, and last year’s hay shortage has abated. “There is some expansion going on in the state, ” said Dar Geiss, a rancher near Pierz and president of the Minnesota State Cattlemen’s Association. “The prospects are really good for calves.”
But big swaths of Texas and California and parts of Oklahoma are still in “exceptional drought, ” as the U.S. Drought Monitor website puts it. Kansas is pretty dry, too.
“We’re within a couple of weeks of writing off that area for 2014,” Peel said of the Texas Panhandle and western Oklahoma. The dryness was palpable on a recent visit. A biting dust storm turned the sky beige for much of a day.
The nation’s biggest beef producers, JBS, Tyson Foods and Cargill, all have big operations in the Panhandle. Those three companies, along with National Beef Packing, account for about 85 percent of U.S. beef production, Peel said.
While privately held Cargill doesn’t break out financial data by segment, meat production is one of its most significant U.S. businesses.
The feedlot is an intermediate step between the early part of a beef cow’s life — grazing on pasture land — and the last part, a truck ride to a slaughterhouse. At Cargill’s Dalhart feedlot, steers stay for about 160 days, arriving about 800 pounds and leaving at 1,350.
Almost 90 percent of the cattle processed at Cargill’s four big U.S. beef plants comes from independent feedlots. But Cargill also owns lots, including the one in Dalhart, which covers 500 acres for cattle alone. The Dalhart lot is particularly populated with Black Angus cattle, grist for Cargill’s Sterling Silver premium meat line and other products.
Cargill’s feedlot in Lockney, south of Amarillo, is slated to close this year, a victim of the cattle crunch. A third Cargill feedlot in the Panhandle will remain open.
At a feedlot, the diet is heavy on corn, from kernels to silage. Corn prices are watched closely. “Everything is based off the price of corn,” Cargill’s Schwab said.
That price began rising from historical norms around 2007, a few years before the current drought kicked in. High corn prices stressed feedlots and put upward cost pressure on the entire beef industry.
Over the last six months or so — after corn prices fell below $5 a bushel from over $7 in 2012 — feedlots have finally had some relief from red ink. “We’ve had some short-term profitability in the feedlot industry,” Schwab said.
But a feedlot’s other main economic variable — low cattle volume — will be a big issue until the herd starts growing. When ranchers liquidate their herds because drought has dried up pasture, they temporarily increase the number of cattle they send to feedlots. But that’s only a short-term benefit to feedlots, masking a long-term problem.
The cattle shortfall has been vexing beef processors as well over the past few years. “On the packing side, their margins have really been squeezed,” said David Anderson, a livestock specialist at Texas A&M University.
The price of live cattle has often risen faster than the price of boxed beef churned out by packing plants. “The wholesale market didn’t increase enough to keep up with fed cattle prices,” Anderson said.
The U.S. beef packing industry has had chronic overcapacity for years, and the situation has gotten critical as the cattle supply has dwindled. Cargill was the first to blink in January 2013, when it shut down its Plainview, Texas, plant.
Big beef plants, where cattle walk in and leave as boxed beef, are labor intensive. Cargill’s Plainview plant had about 2,000 workers, making it the town’s largest employer. When such plants go down, economic decimation can easily follow.
National Beef is slated to close a plant in Southern California this month, wiping out about 1,300 jobs. More casualties could follow if cattle conditions don’t improve.
“I think we are very vulnerable to losing another one or two of these big packing plants,” Peel said. “The real problem for packers is that there is just not enough cattle.”
Modern farming has a huge problem with food waste, stemming from the mismatch between specific food buyer requirements vs Mother Nature delivering an unsaleable overabundance and/or producing knobbly fruit and veg that gets devalued on aesthetic grounds. But what happens when you throw a bit of technology into the mix? Silicon Valley based startup Full Harvest is trying to find out, citing figures that suggest — with more than 15 per cent of that occurring at the farm level. Other startups are also looking for ways to address the problem, such as Oakland-based Imperfect Produce which delivers direct to consumers. But Full Harvest is going to the source — addressing the needs of large farms and food buyers. The bootstrapping startup has built a b2b tech platform with the aim of turning a profit out of “imperfect and surplus” fruit and veg. It’s doing this by aggregating less desirable produce from multiple farms in order to simplify the seconds selling and buying processes so that gluts and/or rejects can still have enough value to end up on the plate — rather than be thrown away at source as supply chain waste. The platform launched in January and is now being used by “several” farms and food buyers in the West Coast U.S., according to founder and CEO Christine Moseley. Buyers at this early stage are typically seeking cheaper ingredients to put into processed food products. And Full Harvest’s business model is to take a straightforward “traditional industry cut” of each sale made via the platform. “I’ve spent 10 years both in the food industry and the logistics industry, and throughout my experience I found major inefficiencies in our food chains,” says Moseley, who moved to San Francisco a year and a half ago to focus on trying to fix the food wastage problem, with the overarching ambition of doing something to give healthier eating a boost too. “My goal was to focus on bringing down the cost of healthy food products and this was a huge opportunity I saw in order to solve that — to figure out a way to capture this imperfect and surplus produce and aggregate it and bring it to food companies,” she tells TechCrunch. The agriculture industry was also, in her eyes, ripe for being disrupted by technology. “They currently pay with paper checks and use emails and text messages and phone calls, so I just saw a huge opportunity there,” she adds. “I found that the biggest problem was the fact that there wasn’t anybody really helping to create a market for and aggregate the supply of surplus produce for these institutional b2b food companies.” A huge part of the food wastage problem is down to the economics of the food industry, with farm produce falling broadly into two buckets: the perfect stuff that satisfies food buyers by checking all their boxes regarding quality and quantity and thus fetches a good price. And then everything else — whether it’s surplus or seconds — which is so devalued by the economics of large scale food buying it might only fetch “pennies on the dollar” and thus may not even be worth farmers’ while harvesting, says Moseley. So Full Harvest aims to incentivize farmers not to waste food by creating a better market for this type of second class produce — opening up low friction additional revenue streams for them. From the buyer side the platform also aims to remove some of the wrinkles that stand in the way of seconds being utilized. Consistency and quantity are key considerations here, according to Moseley, and it’s those factors a tech approach can help with, she argues. “Our technology is really focused on solving the problem that technology has yet to solve which is making it extremely simple and easy for the farm to make transparent what they have available at the touch of a few buttons. Right now the biggest challenge is incentivizing farms, who’re very busy, they have their core competencies of focusing on the farm. And right now on our platform it takes them literally two seconds to make these companies aware of what they have. “And in aggregate it allows enough supply to be available so that these food companies can make their weekly purchase orders — which has been one of the problems that hasn’t been solved. How do you allow these food companies, on a consistent basis, to order this lower cost surplus and imperfect produce?” But how is Full Harvest able to pay farmers enough for their seconds they are incentivized to sell them? In part because it’s utilizing technology to create economies of scale but also because food prices have been so squeezed within the industry that there’s an opportunity to create a middle pricing tier, according to Moseley. It is also offering flash sales via the platform for very perishable produce that has to be shifted very quickly. We are paying more than other people are because we can. We’re still making decent money and we’re still saving money because we’re taking something that was previously free. “Using technology helps — we’re co-ordinating everything on the technology, with transportation as well. Our goal is to have on-demand transportation. We don’t take inventory, we don’t own the trucks,” she says, adding: “We are paying more than other people are because we can. We’re still making decent money and we’re still saving money because we’re taking something that was previously free.” Moseley says she is drawing on specific experience working on the buy side of the food industry to help shrink the gap between expectations on both sides via the design of the platform. The buyer’s incentive to pick up seconds is what she describes as “significant savings on their input costs” — so if you make the buying process simple enough the economic incentive kicks in. “One of the biggest problems in the industry is a translation problem between what the farm deals with what the buyers deal with on an institutional level. So that’s another thing that our technology handles — anything from the fact that with harvest dates that’s something that the farm deals with, but the buyer only cares about delivery dates. Or the fact that farms deal with cartons and buyers only really want to care about pounds,” she notes. “There’s a lot of user experience that we’ve done with the technology to make sure that it’s solving the sales process but catering to the user needs on each end. And doing it in a very fast, seamless process.” Working towards more consistent pricing for organic produce is another element she says she hopes the platform will be able to help with in future. “With organics right now buyers are very frustrated with both the fluctuating pricing and the high cost, and how they can’t really control it… I can’t say this 100 per cent with certainty but one thing we are working towards is more consistent pricing so that the buyers can have a better forecast and ability to predict what their input costs are going to be.” In terms of how it works, farmers log into Full Harvest’s website when they have surplus produce to sell — with the platform normalizing aspects of the data so that, for instance, the buyer gets to see quantities in the form they prefer making it no extra work for them to made an order. Although Full Harvest’s site is mobile-responsive there’s no native apps yet, but Moseley says that’s because it’s an industry where — “for the most part” — b2b buyers will be sitting at a desk when placing orders so there’s less imperative to develop for mobile from the get go. Full Harvest is targeting both conventional and organic farms, and Moseley reckons it can make money from both, although organics have been an obvious early focus because of the higher per unit value for this type of produce. “We’re focused on both,” she adds, when asked whether the startup believes it can turn a profit from conventional as well as organic produce. “We’ve launched with organic but there’s also a lot larger opportunity with conventional as well [in terms of volume]. So that’s why, for the most part, our farms have both — so it’s easy to just scale up.” Full Harvest has also been focusing on “large farms” (of 1,000 acres or above, with talks to onboard some 30,000 acre farms) to help the platform deliver on its promise of being able to fulfill food buyer orders. So there’s an element of needing a critical mass of supply for the platform to function as promised, but Moseley claims it’s been able to achieve this with its initial clutch of farms. (She won’t disclose any actual numbers on the buyer or farmer side at this early stage.) “[Large farms] have the most consistent supply of seconds, either because they leave a lot on the field or inefficient harvesting practices or they just have these large customers who are retailers who don’t pick up their produce or reject it for a silly reason. And so that’s how we’re able to create the mass right now to launch the platform, and then we’re adding more and more farms and more and more products,” she says. “Our focus is really to be the institutional b2b farm surplus sales platform. And be the go-to platform for that just because one of the biggest problems in the food waste space is it’s been really hard to prove out this model — and create scale and to prove that you can do good and make money. That’s what we’re really trying to prove with the large, consistent flow of orders and purchases,” she adds. While currently selling to “value add” food produce buyers (i.e. companies looking to buy produce as ingredients for other food products they make), down the line the hope is to also expand to target other types of food companies as well — on this Moseley says it’s “in talks with several types of food and beverage companies”. “We’re talking to food services, and eventually large restaurant chains as well. But for now our focus is on the value added product side just because they don’t really need to care the most out of anyone what the produce actually looks like before it’s processed,” she adds. “We have some pretty big buyers in the pipeline — strong brand names I can’t really reveal right now but we’re talking to some pretty big players and they’re all really interested because it’s a win-win on both sides.” While Full Harvest has started in the West Coast US, where the majority of the country’s greens are grown, Moseley says the aim is to expand the platform nationwide — to take in the likes of Florida and its many fruit and tomato growers, and the North East too in time. The plan is also to start fundraising in the next couple of weeks as it looks to grow its business. “We have interested investors, we’ve been talking to investors for months and months. I finished Village Capital‘s incubator as well — and have lots of connections there,” she adds. 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Transfinancial Economics (TFE) is an evolving project nearing basic completion. It should be said that there has been a degree of interest in it from a number of people with economic backgrounds such as Warren Mosler, Andy Dennis, Stephen Monrad, David Axelrod, Trond Andresen (cybernetics expert), Prem Sikka, and the noted autodidact, and futurist Hazel Henderson. In April 2010, TFE was also a subject discussed at a major scientific conference (the ICEME, or International Conference of Engineering, and Meta-Engineering, Florida, USA).
TAMPA, Fla. (DTN) -- The current situation in the phosphorous market could be described as a slow burn.
Weaker fundamentals and cautious sentiment have come together to cloud the current state of industry, said Michael Rahm, vice president of market and strategic analysis for The Mosaic Company. He recently gave a phosphorous outlook presentation at The Fertilizer Institute (TFI) Fertilizer Outlook and Technology Conference in Tampa, Fla.
"There are several factors at work here with the collapse of the Indian import demand, additional supplies, lower agricultural commodity prices and even spillover from high-profile events in Russian and Belarus," Rahm said.
Phosphorous prices have fallen nearly 47%, close to $350 per ton, since the wholesale price peaked at $656 per ton in 2011.
A major factor for this decrease is the collapse of Indian import demand, according to Rahm.
In April 2010, the Indian government changed its subsidy program. This caused phosphorous and potassium prices to rise dramatically (P up 250% and K up 160%) while the urea price did not move. These high prices led P imports to collapse in India and the country's farmers to forgo P applications.
While last year was gloomy, next year's outlook has some positive demand drivers, Rahm said. There were 63 million to 64 million metric tons of P product in the global market in 2013. In 2014 the forecast is 64 mmt to 66 mmt.
Phosphorous shipments should "increase nicely" in the next year, mainly on continuing strong demand from North and South America. Rahm said North America has outstanding demand prospects with expected 2014 use near 10.5 million tons of product.
"You would have to go back to the early 1980s to find higher shipment levels of P," he said.
South America, mainly Brazil, is also a strong P import market. In 2014, Brazil is forecast to import nearly 5 million metric tons of P. Brazil is a stable import situation as well, he added.
In other parts of the world, demand for P is beginning to recover, and nowhere is that more evident than in India. India is expected to import 5.7 million metric tons for 2014-15; this is not near its peak, but better than in some years.
On the supply side, uncertainties abound mainly because no one knows for sure how much phosphate countries like China and Saudi Arabia will export. China is forecast to export just under 5 mmt of phosphates, while Saudi Arabia should export just over 2 mmt of product.
Rahm said key issues in China include a 2014 export tax that would be less restrictive, production economics, domestic use and Indian import demand. Saudi Arabia bears watching as the country grapples with issues on mine and plant ramp-up and the all-important Indian import demand.
Longer term, the outlook Rahm sees is a balanced and positive future for P. He sees solid demand drivers in terms of world grain and oilseed needs in order to feed a growing world population.
"There are key assumptions we are making, like commodity prices continuing to trade at elevated levels, farm economics remaining profitable, more moderate and less volatile phosphate prices, more balanced nutrient use in China and India, and continued strong growth of phosphate-intensive crops," Rahm said.
Philip K. Dick’s “The Man in the High Castle” is about what the title character calls the “terribly, terribly disruptive” nature of reality, so it is awesome that the terribly, terribly disruptive Amazon has now filmed this classic science fiction tale. The pilot will appear early next year from Amazon Studios. Any member of the Amazon Prime perks club can watch it free.
Nothing in life is truly free, of course, even from Internet companies that proclaim their generosity. As Amazon loads the benefits on top of Prime — including costly original programming like “High Castle,” older movies, a streaming music service and an e-book lending library — the conventional wisdom is that these customers will return the favor by ordering much more from Amazon. Come for the movie, stay for the vacuum cleaner, diapers and marmalade.
But there is another, more hidden group paying for “High Castle”: people who buy physical books on Amazon. The retailer’s expansion of Prime benefits, as well as its myriad other projects, appears to be fueled in part by fattened margins on all sorts of books beyond the top best sellers.
Say, for instance, “High Castle” is terrific and you wanted to read something else by Mr. Dick. There are quite a few novels to choose from and Amazon has them all. But the deals are often less than compelling.
“Dr. Bloodmoney,” “Confessions of a Crap Artist,” “In Milton Lumky Territory,” “The Penultimate Truth,” “Time Out of Joint,” “A Scanner Darkly” and 15 other Dick novels were all discounted 10 to 17 percent late last week. A collection of short stories, “The Best of Philip K. Dick,” was discounted all of 1 percent. The standard biography of Mr. Dick was discounted 15 percent. Another collection of stories was only 6 percent off.
These are not the sort of bargains that made Amazon into the biggest bookseller in the world. In 2001, the retailer announced with much fanfare that it would discount by 30 percent books selling for $20 or more.
An Amazon warehouse in Brieselang, Germany. A decade ago, Amazon was offering 30 percent discounts on some books.Credit Sean Gallup/Getty Images Sales boomed. “It’s Adam Smith economics that volume will go up when prices go down,” Amazon’s chief executive, Jeff Bezos, explained to The New York Times in January 2002.
Mr. Bezos added that Amazon, which was then offering free shipping on orders over $99, would continue to cut prices as its efficiency increased. That year, Amazon lowered the bar for a 30 percent discount to $15. Shipping soon became an even better deal. Traditional bookstores, which had to charge sales tax while Amazon did not, simply could not compete. Borders went out of business.
Then the process went into reverse. Although Amazon does not reveal its pricing strategy, that blanket 30 percent discount seems a thing of the past. Customers today also pay sales tax in much of the United States, which equates to a price increase of as much as 9 percent.
Mr. Bezos is apparently now using a different measuring stick than Adam Smith economics. Books are helping pay for the company’s expansion, he suggested in an interview this month at a conference hosted by Business Insider, a website he has invested in.
“It’s like we built this lemonade stand 20 years ago,” he said. “It’s become very profitable over time, but we also decided to use our skills to open a hamburger stand and a hot-dog stand and so on.”
“Very profitable”? That does not sound good for the customers. An Amazon spokesman did not return requests for comment.
Shmuli Goldberg of Feedvisor, a start-up that helps third-party sellers on Amazon price their goods competitively, said ever-cheaper books were too much to expect.
“The promise of the Internet was never that you can get everything available for cheap,” he said. “The promise of the Internet was that you could find what you were looking for. Anything that has a limited supply and a limited distribution is going to be more expensive than something that could be bought anywhere.”
That would explain why the more obscure the books are, the more the discount seems to disappear. “A Publisher’s Paradise: Expatriate Literary Culture in Paris, 1890-1960” is discounted 5 percent. “The Fate of Rural Hell: Asceticism and Desire in Buddhist Thailand” is discounted 7 percent.
If Amazon seems to have changed its business practices, its message is still the same. It talks the way it did a decade ago, when it was still relentlessly driving down prices. In the confrontation with the publisher Hachette over e-books last summer, the retailer made the crowd-pleasing point that it was on the side of readers against the fat-cat publishers that wanted to line their pockets.
In the Business Insider interview, Mr. Bezos repeated this argument. “Books don’t just compete against books,” he said. “Books compete against people reading blogs and news articles and playing video games and watching TV and going to see movies.” He added, “Books, in my view, are too expensive. Thirty dollars for a book is too expensive.”
Then why, for instance, is Gene Wolfe’s ghost story “Peace,” which the writer Neil Gaiman calls “a tricky, evil, deep, and remarkable novel by one of America’s finest writers,” $14.16 — a mere 11 percent discount? Amazon usually gets a 50 percent discount from big publishers, which means it paid about $8 for each copy. Wouldn’t it move more copies out the door (Amazon says it has 7 on hand) with a leaner margin?
The publishers are not blameless here. List prices of books seem to have been going up more than the rate of inflation. Perhaps one reason is that publishers knew Amazon would heavily discount them. Now that those deep discounts are less ubiquitous, books are expensive indeed.
Mr. Goldberg of Feedvisor said he believed that Amazon may have higher prices than other retailers overall. “Their goal is, and always has been, to deliver a superior shopping experience to their customers by providing both an excellent customer experience and highly competitive pricing,” he said. “They are not always looking to be the cheapest, but to maximize the complete value.”
A recent study from Wells Fargo found that Walmart’s online prices were 10 percent lower than Amazon’s in four big categories: clothing, electronics, housewares and health and cosmetics. This brought a furious denial from Amazon. Wells says it is reviewing the data.
One way for book buyers to receive higher value on Amazon is to buy what Amazon wants to sell you instead of what you thought you wanted. Among all those Philip K. Dick novels, I saw two that were heavily discounted: “The Man in the High Castle,” which serves as a promotional tool for the coming film, and “Ubik,” which asks the question, What happens when technology begins working against you? The hero cannot leave his apartment because he has no money to pay off the front door, so it refuses to open for him.
Amazon is clearly the best system ever devised for having physical texts delivered efficiently. But it looks as if the less mainstream your selection, the more you will have to pay. That seems unfortunate in all sorts of ways.
The dollar gained against most major and emerging-market currencies Tuesday, driving the U.S. unit to the strongest level in more than 13 years as investors remained worried about global economic growth.
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