November 2008 Archive for On the Udder Hand

In the early 1990s, I was working for fellow AgWeb blogger John Block, who was head of the National American Wholesale Grocers at the time.  One thing I would do is help prepare a monthly column for the NAWGA member magazine. 

One month, I chose to reflect on how the shift in the U.S. from a manufacturing-based, smokestack economy to an information-based, service economy was playing out in Detroit.  I mentioned how interesting it was that two of the leading progenitors of the service economy were started in Detroit:  Dominos Pizza, and Little Caesars.  I thought it ironic that while the Motor City was (and still is) defined by its long history as the hub of the automotive industry, in fact it also spawned two of the leading carryout and delivery pizza brands.  I closed the article by mentioning that when such pizzas are increasingly delivered in a Honda, not a Chevy, you know times are changing, and not for the better if you’re a car maker. Back in 1993, GM’s share of the U.S. market was more than 33%.  Today, it’s less than 20%.

That column brought a harsh response from one of the other staff executives at NAWGA.  He called my comparison between the automakers and the pizza makers “odious,” and said he had every confidence that General Motors and its cousins would one day reassert themselves in the market and recapture their glory days of the mid-20^th century.  He owned stock in GM, and thought it would prove to be a good long-term investment (right now, of course, the company’s share price is practically zilch). 

Well, who’s to say what will happen in the coming days and years for the Motown crowd.  Congress is probably going to do something big to help them, although greasing the skids for bankruptcy is at least as likely as an option as funneling more cash into them to prevent insolvency.  Regardless of whether they avoid bankruptcy or not, it’s a safe bet that GM’s, Ford’s, and Chrysler’s collective market share is not likely to be in the future even what GM’s share was by itself after WWII, when its brands represented more than half of all U.S. auto sales.  The world is too competitive, the auto market too diverse, and the economic structure of the U.S. auto sector too troubled to keep pizzas only in American-branded cars. 

This is relevant to the AgWeb world in that, apart from who makes the pickup trucks driven by farmers and ranchers, the food that our farmers and ranchers produce is also in a global market today.  That’s good when global demand surges and prices rise; not so good when we are really competing with Brazil, China, Poland, and other new players.  But there’s no turning back to when Michigan-made motors were the only ones running.

Two disclosures:  I have strong ties to Michigan.  My Mom was born in Detroit, and two of her brothers still live there.  One of them worked his whole life for Chrysler, while another brother has lived nearly 30 years in Tennessee, where he works for Nissan.  My family resembles the heterogeneity of the U.S. auto sector today.

Second, my family currently owns two Fords.  In the past we have owned Japanese and German cars, and a U.S.-branded car made in America identical to a Japanese-branded car made in the same U.S. plant but sold by the world’s now-largest auto maker.   That Japanese company makes the dough now, and its U.S. partner does not. 

The biggest crises always produce the biggest changes, especially politically. Such was the case with the presidential election yesterday.

Although Barack Obama was widely expected to win, the margin of his victory was remarkable.  States that hadn’t voted for a Democrat since LBJ’s 1964 landslide (when Obama was literally still in diapers), like my Virginia, turned blue.  Upper Midwest states that were thought to be at least competitive, including Michigan, Iowa, Minnesota, and Wisconsin, were lopsided.  Nevada and New Mexico, places where you’d think an Arizonan would run strong, were also easy wins.  And so it went all last night.

I’m not going to do any more parsing of the meaning of the election, other than to again reiterate the obvious:  when the margin of victory is this big, the degree of change from the status quo is likely to also be big.  The economy was up for election Tuesday; it got a resounding thumbs down, creating a big mandate for President-elect Obama to make things right.  Something like 80% of the voters said the country is on the wrong track.  It may not be a mandate for everything the Democrats want to do, but it’s a mandate to do something else, with someone else. 

Let me also highlight another obvious fact:  the agriculture sector got spanked in the Proposition 2 vote in California Tuesday.  Prop 2, which will hang a for-sale sign on the egg laying business in our nation’s largest state, won handily, with upwards of 63% of the vote.  Even though the Governator, and many of the state’s newspapers, opined against the ballot initiative, the Humane Society poured enough resources into the fight to win.  They had emotions; the opponents mostly tried to use economic facts.  Guess which was more effective?

I draw your attention to what one of those many newspapers – and perhaps the most important, the LA Times, said about the Prop 2 initiative (and this was as it was coming out in opposition to the measure):

Although Proposition 2 isn't the answer, the egg industry is due for an overhaul, and chicken farmers should take heed. Polls indicate that this measure has wide support. If it passes, that will be in part because the egg industry either has been oblivious to consumer concerns or recalcitrant about coming up with its own solutions. Proposition 2 is proof that if farmers insist on mistreating animals, people will act.

The Humane Society of the U.S. was able to frame the issue about proper vs. improper treatment of chickens, and voters (ahem) ate it up.  But the Times is right; if livestock producers are oblivious to the belief systems of even poorly-informed consumers, at some point, we’ll be in the fight for our lives.  Despite its name, the Humane Society is willing to fight dirty if that’s what it takes to win.  And they’re getting good at it.