"There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns—the ones we don’t know we don’t know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones."—Donald Rumsfeld, former U.S. Secretary of Defense, Feb. 12, 2002
This one quotation, difficult as it is, packs more wisdom into 72 words, I think, than any other statement made in the past decade.
It’s also pretty good guidance as we move through 2012. Most policy issues are being held captive by the Nov. 6 elections. Take the farm bill, for example.
Last year’s congressional supercommittee, charged with trimming nearly a trillion dollars from the federal budget, reportedly reached agreement on a farm bill. The farm bill’s dairy section mirrored the National Milk Producers Federation’s Foundation for the Future plan. "We were this close to getting it passed," said Jerry Kozak, NMPF CEO and president, holding his thumb and index finger a half-inch apart.
But the supercommittee failed, and the farm bill now languishes. Some, like Kozak and Jim Wiesemeyer, a policy analyst for Informa Economics, believe a farm bill is still possible this year. That’s largely because much of the work has already been done by congressional leaders and the supercommittee. And there is budget pressure to pass the farm bill sooner rather than later, when greater cuts could be required.
But others, like Andy Novakovic, chairman of USDA’s Dairy Industry Advisory Committee and a Cornell ag economist, think there’s just too much rancor in Congress to get a bill passed this year. "Do they want to pass something or continue to beat each other up?" he asks.
Then there’s immigration. Our story "Immigration Reform 2013" clearly suggests that no one
expects reform this year. But there are seven different bills in the House and Senate that offer dairy producers at least some hope for 2013. These bills would reform H-2A, the temporary, nine-month worker visa program.
Currently, H-2A does not include dairy. All seven of the pending bills do; some even extend the nine-month visas to three years.
The global economy teeters on the edge of turmoil in Greece, Italy and Spain and with the crises in Syria and Iran.
Crop prices for 2012 are far more uncertain than normal going into a crop year. Global feed grain stocks-to-use ratios are as tight as they’ve been in the past decade, says Sterling Liddell, vice president of food and agriculture programs for Rabobank.
And these are just the "known unknowns," as Rumsfeld put it. Black swans could also be circling. Who knows?
What to do? Risk management will be key, Liddell says. Look for price-setting opportunities in these highly volatile markets. Take advantage when you can, and err on the side of protecting margins.
Also heed Rumsfeld’s advice: "Learn to say ‘I don’t know.’ If used when appropriate, it will be often."
- March 2012