As Climate Changes, Taxpayers Will Shoulder Larger U.S. Payouts to Farmers
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Naively modeled as a service, if humans "timeout" for food at about two weeks, and there are 7.5B of us, I would want a system who's p99.9999999999 < 14 days.
The problem w/r/t climate change is we're taking the existing system we have, which already does not meet that target, and we're dialing the Chaos Monkey up and up and up.
It's not how these supports started out but it's what they have become to a very large degree.
As climate change makes disruptions more frequent I wouldn't be surprised if some investment fonds started launching their own cubesats to feed their prediction models to spot such opportunities before everyone else.
Ideally we would find a better form of government. I don't have any particularly good ideas though.
Arbitrage and clever tradable (or even non tradable) contracts (eg contract for difference) give you an opportunity to speculate on the price of grain without you (or anyone) actually holding any wheat.
In practice, you just bet someone else that the price will go up, and they pay you the difference if you're right. No wheat has to be stored.
There is very little relationship between derivative markets and the quantity of commodities siloed.
If you want an emergency "buffer stock," you need to buy and hold actual commodities.
So if futures prices ever show a price increase greater than the cost of storage, people will start filling warehouses with wheat everywhere. It's just that normally commodities don't increase in price at a rate that exceeds the cost of storage.
When oil-storage was filling up, oil-futures drop in response (because the market knows that physical space was running out).
That's the thing about the world: people exist in it, and can change the world. Increasing the number of warehouses (to make more money) is a good strategy, and the futures contracts provide a means for allocating these investments more efficiently.
I remember seeing these concept towers where food was grown inside in what was essentially a 40 stories of hydroponic grow rooms co-located inside cities so transporting of food was easy.
I guess I'm insanely naive about growing food at scale and indoors (I've dabbled with produce on a small scale) but why hasn't this approach taken off?
The purchase price of farmland in Ohio is about $5000-6000 per acre.
You're talking about building a skyscraper as if crop production can generate enough revenue to justify that expense and somehow compete with all the other farmers who are just using the land as the found it a couple hundred years ago.
The cost to build a parking garage space is $20,000-$30,000 - and parking garages are just a slab of concrete. You'd still have to add in the costs of irrigation and artificially light the crops.
And then, how do you efficiently harvest vertical farms? Farmers in Ohio drive a giant vehicle over the generally flat and square field. How are you harvesting a vertical farm without huge labor costs in comparison?
There's actually nothing "green" about this vertical farm idea when you think about the extra power, concrete, and construction material requirement needed to realize it.
Hit up the Ohio turnpike around Toledo and notice that at least half of the fields aren't even planted (just an eyeball guess on my part, take that "at least half" with a grain of alt). Rain has been too heavy this year and a lot of wheat and corn either couldn't be planted or the crop looks absolutely pitiful.
(Some people try to quantify the Earth's input into the industrial process of farming in economic terms, an "environmental services" number, to point out that environmental damage may reduce the availability of these free services. Such as pollination - if there aren't enough bees farmers have to rent some.)
But, indoor farming is not well suited for calorie-rich foods (think grains, corn, potatoes, etc). Many of those crops are not suited for hydroponics. They need soil and lots of sunlight. Corn roots grow down to almost 7 feet in the soil. Attempting to grow these crops out of soil and sunlight is incredibly inefficient and expensive.
In order for indoor farms to feed the majority of the world, we believe there needs to be more than one breakthrough than just the indoor farm system itself, including a breakthrough in the production of energy (enough to replace all the solar energy provided by the nuclear reactor in the sky that we use in agriculture today), a breakthrough in the production or collection of water that irrigates the millions of acres of land by rain clouds, and the biological breakthrough of high calorie foods that are adapted to grow hydroponically.
We also believe that the same money spent developing indoor farm systems is better spent developing better adapted crops and researching more efficient and sustainable agriculture practices.
Plants can gather carbon (CO2) from the air. But the Nitrogen cycle requires micro-organisms to capture air and sequester it into the plants roots (or alternatively, nitrogen-based fertilizer).
But C and N are just two of the macro-nutrients needed to grow a plant. You also need Phosphorus, Potassium (NPK == typical fertilizer), Sulfur, Calcium, Magnesium (secondary macronutrients).
Then depending on the plant, you'll need Iron, Molybdenum, Boron, Copper, Manganese... a lot of different micro-nutrients.
You can pump these micronutrients into a hydroponic solution and grow plants in it. Or... you can buy 50+ Acres of land over there for just $10,000 with literally free energy, all the micro-nutrients automatically there from the sun to grow the plants.
The macro-nutrients are used in significant enough numbers you need to sow them into the ground every year. You can get the macro-nutrients from pretty cheap material: worm castings, pee tea, and chicken / horse manure, blood meal, and compost.
There's a reason why people farm in the farmlands. Land is cheap, Chickens are noisy and no one is allowed to keep a coop of chickens in the middle of NYC (you'd keep your neighbors up and people would complain about the smell and noise). Sowing the land with literally animal poop is extremely smelly and no one wants to live next to that.
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If you create an indoor farm, you're competing against farms with literally free solar energy that's roughly 400% more effective than solar panels, as well as macro-nutrient sources that are cheaper than whatever hydroponic chemical solution you can ever hope to batch up. Direct sun is extremely bright.
IIRC, the sun's energy is measured to be around 2000 PAR/m^2 on a typical day. Your typical indoor light is only 200 PAR/m^2, while the more expensive ones may reach 500PAR / m^2.
The common refrain among growers is that the sun on a cloudy day (!!) is still more effective than any LED lamp.
Indoor farms run their weaker ~500 PAR/m^2 lights for 14-hours a day, starting before sunrise and long after the sun has set to maximize their use. That's the only way plants get enough energy from these lower-intensity light sources.
There can be something said about saving on transportation costs + having fresher food inside of cities. But its grossly inefficient from an energy standpoint.
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Whenever I crunch the numbers, it seems like growing any plant in an agricultural zone, then shipping that plant into the city, is the most efficient strategy. Rooftop gardens would be the 2nd most efficient strategy.
Indoor farming conserves land, and maybe rich / expensive cities it makes sense as a source of fresh food for rich people. But indoor farming does NOT scale.
It might also cause the U.S. government to be forced to start to acknowledge and deal with climate change.
Zimbabwe's land reform destroyed the productive export-led farming industry, so the cost of required imports such as oil drove the Zim dollar into the ground. Similarly Venezuala trashed its oil export industry and failed to develop others.
Weimar Germany was required to pay reparations in gold to France. The postwar destroyed industry wasn't able to export enough goods to pay for the gold, so yet again other imports became prohibitively expensive.
The US is very, very unlikely to experience these kind of problems; it is large enough to not be so dependent on imports, and in recent years not even on oil. The last inflation spikes were due to OPEC: yet again import-led inflation.
If you study monetary history in the US, you'll find that the OPEC angle of the 1970s inflation was a scapegoat, and the real causes were politicians (in that case Nixon) refusing to raise interest rates (which indirectly slows monetary growth) because it would cool the economy and affect his popularity. It's a prime reason why the Fed (and most central banks in the world) now have "independence" to set rates. If the high cost of oil was all it took, we'd have had higher inflation during the oil spike a decade ago. Heck Germany, which has to import 100% of it's oil, saw it's inflation levels DROP in the 1970s as they raised rates to tame inflationary pressures.
Yes, that's part of what I mean; since no foreigners want Z$ to buy Zim export goods (since there weren't any), people in Zimbabwe found themselves needing more and more Z$ to buy the same level of things.
The role of oil in inflation seems to be disputed, but it looks like it used to be more correlated (probably indicating a greater dependence on cheap oil back then): https://www.frbsf.org/economic-research/publications/economi...
I agree that raising rates to combat inflation works astonishingly well for moderate inflation, and this is one of the big successes of orthodox economic policy. The catch is that this works by increasing unemployment. And it can't do anything about hyper inflation, which is where we got into this discussion.
Inflation can be stoked by the literal creation of the base supply of money (known as M1 to economists) as well as interest rates (which effect the growth of the other levels of money via the velocity of money trading hands).
Hyperinflation is almost always a former, whereas general high inflation is usually a product of the later via artificially low interest rates, though the later can be caused by overhang of a suddenly contracting economy. But to get in million-level percent sustained (hyper)inflation, it's gotta be the growth of M1.
Broadly, cheap credit -> more purchases by individuals and business -> demand expands relative to supply -> prices and wages rise ; or vice versa. The unpleasant side effect of this is that there is a minimum level of unemployment for the policy to work (NAIRU, "non-accelerating inflation rate of unemployment")
It involves understanding the money supply levels( https://www.investopedia.com/terms/m/moneysupply.asp ), fractional reserve banking ( https://www.learningmarkets.com/understanding-the-fractional... ), and how the velocity of money (eg how often money changes hands in spending/loans) affects prices.
(I'm going to simplify some things here to keep this high level).
In modern banking, a central bank creates money. Let's say it's $1000. That's monetary growth in the base monetary supply (usually known as M0 or M1 in economic cirlces depending on the country). That $1000 gets deposited into a bank at a set core interest rate. The bank then keeps a fraction as a reserve and lends the rest out, lets say half of it. Now you get $1000 in the original bank and $500 in another bank. So now we have $1500 total. the 2nd bank takes the $500, keeps a reserve, and loans out more and so on until eventually a "stable" supply of money exists. Sustained hyperinflation happens when the central bank just pumps out the base cash. Since there'd be so much money sloshing around, prices across the board rise.
If the growth of the base of money is relatively stable (and how much it should increase is a long topic with tons of minutia), interest rates affect the growth of the later levels of money (known as M2/M3). Lower interest rates mean more borrowing and therefor more spending. But if it's too low for too long, prices will rise and you'll drown out productive growth. This happened in the "stagflation" of the 1970s where you had high inflation coupled with low economic growth. If interest rates are too high, you risk making it difficult for productive use of money to be used.
So that's the dilemma of central banks. The temping thing is that keeping interest rates low can look good in the short term, as inflation tends to take awhile to work its way through the economy. Milton Friedman loved to say that artificially low rates are let getting drunk. The party is now, but there's a hangover you have to deal with later.
The hard part is that inflation isn't necessarily something people want. You want it if you have too much debt or assets that are inflation "protected" (gold, housing), but if you're on a fixed income, you get screwed.
The hard part is that while we've had low inflation over the past few decades, we've had several asset bubbles that have driving up housing, commodities, etc all over the place.
If you're explaining it to somebody else in laymans terms, it helps to explain that money is subject to the same supply and demand curves as anything else (even when it was backed by gold, new gold discoveries in the late 1800s drove inflation). Too much money makes it less valuable and vise versa. Higher interest rates make the money "rarer" and thus increase it's worth to everything else.
One of the most confusing things to me in some of my econ classes was the realization that there is no "something else" backing my nation's currency. The US Dollar. As I understood it, it's just backed by the word of the US? (Could be wrong, it's been a while.) So I always wondered, what keeps them in check? I've never really figured that out. Someday maybe I'll go back and sit in on some more advanced classes?
Why farming vs k-12 education vs university education vs healthcare vs roads?
Aggregate this data and you ideally will have what people need in the area.
Town A - everyone put a 1, 2, or 3 in for roads.
Town B - no one put hardly anything for roads.
Town A's roads are suffering so they chose this.
Town B decided their roads are okay however they want to pump education/school funding.
This could be done locally/state/federal level.
Obviously this would require some oversight but I want a popular vote for my tax dollars.
Just my 2 cents, probably not worth a penny.
Farm subsidies are anti-capitalist. Milk is a perfect example of how this is an issue, I can get a gallon of milk for about 2 dollars in the USA. It should cost about 8 dollars. The cost difference is made up by farm subsidies. There are many cheaper ways to get the nutritional value provided by milk, but the US government is choking these industries out. If the free market were to decide milk would not be a beverage and only used for cooking because it would be impractical to drink.
I am all for a safety net for farmers, but the farm subsidies need major restructuring with the American consumer and the small farmer in mind, instead of the farm industry and the profits of some of the biggest corporations in the world.
For example, this spring we had tons of really heavy rain and she lost a potato crop. No crop insurance available, that's $ straight out of pocket.
With that, 4L of pasteurized fresh milk (in bags) costs CAD$4.39 retail, or a little over US$3.25
It might be a slight loss leader for grocery stores, but that’s the price when governments ensure farmers get a “fair” (high) price without direct subsidies.
It’s still a very stupid system because it’s incredibly regressive.
8 bucks? I know that farm subsidies drive down costs, but a 4x increase seems quite high to me.
https://www.realagriculture.com/2018/02/u-s-dairy-subsidies-...
When life gives you lemons, you make lemonade.