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September 2008 Archive for John Block Reports from Washington

RSS By: John Block, AgWeb.com

John Block has dedicated his professional career to the fields of agriculture, food and health.

Global Financial Conference – My Thoughts

Sep 26, 2008

Last week, I told you about the Global Financial Leadership Conference. I reviewed the points made by former Prime Minister Tony Blair and former Chairman of the Federal Reserve Paul Volcker.

I was on the program following those keynote presenters, and here is, in part, the message that I delivered.

What a difference a few weeks can make. We heard the hysteria about skyrocketing oil prices headed for 200 dollars a barrel. Corn was going to 9 dollars per bushel. Now, they are both down by more than 30%. The new hysteria in the spotlight is a national financial crisis.

On the oil front – let’s hope that just because the price is down some, we don’t forget that we need to reduce our dependence on foreign oil. Buying all this oil from other countries that aren’t even very friendly transfers our wealth and jobs to them. How dumb is that?

On the food versus fuel question – it’s time to take this dispute off the table. Maybe part of the explosion in corn prices was because of the speculators. Look how fast it came down.

We all know the cost of energy must be the main driver. If it weren’t the driver, how do we explain why apples and coffee and hops to make our beer went up as much or more than corn? The acres that grow those commodities are not the same ones we use to grow corn.

Let me add that most economists are now predicting that the breakeven price for corn production in 2009 will be about $4.00 per bushel. How did this happen? Energy inflation.

On average, our food prices have only experienced about a 5% run-up. Prices for food in some developing countries are up more than 40%. That is very serious since they already spend as much as 40% of their income on food. We spend less than 10%. Still, don’t blame the American farmer. We are doing our share exporting a record volume of food. More than 100 billion dollars worth last year; maybe 150 billion this year.

Those are some of the key points that I made in my presentation. We may be out of the spotlight for now but next year will be an interesting challenge for our farmers and ranchers.

Have a safe harvest.


Listen to the broadcast here.

Speaking To The CME

Sep 18, 2008
This week, I spoke to the Global Financial Leadership Conference presented by the Chicago Mercantile Exchange. The featured speakers on the program were Tony Blair, former Prime Minister of Great Britain, and Paul Volcker, former Chairman of the Federal Reserve Board.

Amazing timing to listen to Paul Volcker react to the Wall Street crash of 500-plus points and the end of Merrill Lynch and Lehman Brothers. A few points that he made –

1. Our lending system has gotten too complex.
2. The companies in trouble got way over extended. They gambled too much.
3. The companies got into this mess in part because compensation practices encourage excessive risk-taking.
4. He praised our export business and reminded us that exports are much bigger in our economy than housing.

Finally, he concluded that the loss of those companies should not seriously impact our broad economy. Let’s hope he’s right.
 
Tony Blair focused on the challenge that the U.S. and Europe face in dealing with radical Islam. He stressed that –

1. U.S. and Europe need a comprehensive joint plan. The alliance must be strong and determined and united.
2. We should understand that Islam has competing visions of the future. Most Muslims want to join the modern world. 
However, the reactionaries are mired in the past and do not accept the way the West lives.
 
I asked the Prime Minister a question that has been on my mind for a long time. I said, “It seems to me and a lot of people in the U.S. that most of the European countries are not willing to help very much in fighting the terrorists. We’re spending all the money and doing all the heavy lifting. Europeans are not doing their share. What is your reaction and what must be done to correct the imbalance?”
 
He agreed that Europe has been reluctant to step up. He advised the next President of the U.S. to sit down with the Europeans and put together a joint plan.

O.K. Worth a try.

We should do that, but it isn’t as if President Bush has not tried to engage the Europeans. I’m just not very optimistic.

Next week, I’ll tell you a little bit about the message I gave to the Conference.

Until next week, I am John Block from Washington.

Listen to the broadcast here.

Food Safety

Sep 12, 2008
For a long time, we have been hearing the screams of anguish from consumer organizations and politicians (especially the politicians) demanding that the government fix the food safety problem.

I am here to say, yes, we can do a better job, and we should. However, to fix the problem will not be easy or cheap, and there will be some casualties.

It is worth taking a look at a produce terminal market. I have visited these markets. Small growers and large growers deliver their produce in pick-up trucks. Tons of produce is sold every day. Move it fast while it’s fresh before it spoils. Some produce markets are huge – acres and acres in size with all levels of produce on display – peppers, mangoes, lettuce, spinach, watermelons, tomatoes, and more. Sometimes, product from different growers can be co-mingled. Produce from different countries is co-mingled. Distributors are selling. Buyers are buying. Some times on credit; sometimes with cash. Some buyers require records for traceability. Others don’t. They don’t have time. It costs too much money to handle all that paperwork. It is a madhouse.

Improving traceability is going to cost the consumer. It won’t be free. I said there will be some casualties. Small producers may not be able to compete. Already, some distributors are buying direct from big produce farms, leaving the small pick-up truck suppliers out in the cold.

Think about the small farmer markets that we’re familiar with. How much paperwork will they put up with? I was in my local supermarket last week. They featured tomatoes, melons, peaches, and other produce “locally grown.” Can all this be traced? Maybe.

The fact is we have the safest food supply in the world. We need to do a better job of improving traceability. The salmonella tomato problem this summer cost tomato growers millions and they now believe the problem wasn’t even a tomato but a pepper.

Our food safety system is not perfect. In fact, it never will be. Let me ask, do you get up in the morning worrying that you won’t be able to find any safe food to eat? I didn’t think so.

Until next week, I am John Block from Washington.

Listen to the broadcast here.

Promises, Promises

Sep 04, 2008
As great as our country is and as effective as our system of government has been, I begin to wonder sometimes -- can it be sustained?

Candidates for the House, candidates for the Senate, and for President – they promise this and promise that to the voters. But, if we are honest about it, we know the government can’t be everything for everybody. We can’t afford it. We have operated with a budget deficit 42 of the past 47 years. No family or business could do that.

The reality is that politicians just love to spend money on their constituents. As crude as it may sound, that is the way to buy their vote.

Look at some of the promises of the past. In 1976, the Democrats promised to fix the tax system and to moderate the interest rates. Well, they didn’t fix the tax system. And, interest rates went from 7% to 11.5%. In 1992, there was a promise to reduce dependence on foreign oil. Oil imports have shot up to 45% since then. In 2000, Republicans promised to downsize government. Instead, since then, we have added thousands of government jobs.

We have mandatory spending programs that are out of control. Social Security, Medicare, and Medicaid are gobbling up 40% of our annual budget and increasing. They are on automatic pilot. The courage to cut them back is just not there. If a politician said, “I’m going to cut your Social Security check,” he wouldn’t get elected. In farm country, if he said, “I’m going to abolish the farm support programs,” he would lose a lot of votes. The best way to get elected is to promise more government support and less taxes. As this election for the Congress and the President moves toward election day, listen to what the candidates have to say. If all they do is promise more of everything for everybody, remember the old truism. “There is no free lunch.”

Think about it. You will eventually pay.

Until next week, I am John Block from Washington.

Listen to the broadcast here.
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