We are happy to update our customers that you can now enjoy our organic pecan pieces in a new breakfast cereal from Natures Path. The cereal, Flax Plus Maple Pecan Crunch, is a combination of toasted flax flakes and granola made with organic maple syrup and organic pecan pieces. It tastes as good as it sounds, and better still it is made with only certified organic ingredients! We hope you will try a box today, and if your local market doesn't carry the product, please ask your grocery aisle manager to request and stock this wonderful, healthy new cereal.
Recently, Rio Grande Organics helped to organize a community cleanup day...and boy were we surprised by the number of people who turned out to pitch in!!
On February 23, 2008, over a hundred people gathered in the small town of Quemado, TX to pitch in and help cleanup the town. We filled up two garbage trucks with the litter that was picked up, and we re-painted the stands at the community baseball field. Many Rio Grande employees gave up their Saturday to participate!
As you can see in the second picture, one of the real highlights of the day was the number of children who showed up with big smiles and the energy to make it happen.
Picture three, left to right: Pete, our Quemado orchard manager, Luanne, Ky Anne, our Director of Community Relations, Bob, Tim, from Wilbur Ellis, our other main co-sponsor of the day, and Patti.
In the next image, the 50 acre field was planted with the Pawnee variety this past winter. We are planting the trees on a very dense spacing in this field, around 70 trees per acre. This will allow us to make better, more efficient use of water in the early life of these trees. When these trees are seven years old, we will use a special piece of equipment to dig up every other tree and move it to a permanent location.
Clearing work continued all throught this past winter. Take a look at the last image and you can see how it progressed. We are clearing about 200 acres of land that will be replanted in pecan trees over the next few years. Pecan trees are native to both the Rio Grande River and the Nueces River. The southern United States and northern Mexico are the only places on the planet where pecan trees thrive. Demand for pecans in the Chinese market is doubling every year!
Every so often, a season on the farm ends with the general agreement that "we won't see a season like this past one perhaps ever again in our lives....." Our Crystal City orchard received over fifty inches of rain during the growing season; on average we receive twenty one inches of rain during the entire twelve month year. Over a ninety day period beginning in late April, it rained or misted almost every single day.
For a non-farmer, rainy weather is little more than a nuisance during the rush hour commute, and possibly an inconvenient imposition on weekend plans. If, however, you are in the business of taking care of trees, then continuous rain is a quite larger demon: it is something that modifies your environment and prevents you from carrying out the tasks that make up your livelihood. During the greater part of the period when the young nuts were beginning to develop on the trees, the saturated wet ground prevented us from entering the fields with our tractors and sprayers. As a result, we were unable to provide a modicum of care to the pecan trees, and insects and disease had a free pass to inflict damage at will on our developing leaves and nuts.
Our harvest will begin in earnest next week, and the current state of the crop would discourage even the most wild eyed optimist. The predominate variety that we grow is the Wichita nut, and this years crop has been hard hit by scab, a bacterial disease that is spread by the constant splashing of raindrops on the nuts and leaves. Many of the nuts have scab related damage over more than fifty percent of the nut shuck, and most of these nuts will be inedible. We will have to separate out the damaged nuts before we send the crop to the shelling plant, and thus the total poundage of nuts that we produce this year will be greatly reduced.
We are not smart enough to know, or even to hazard a guess, as to whether or not this years abnormal rainfall is somehow related to global climate change, or if it is within the bounds of the expected possible hundred year rainfall. In the past twenty years, we have never had this much rain, so frequently and so intensely. A low pressure system sat over our part of south Texas for months on end, and it seemed to drag every bit of moisture in the Western Hemisphere to the storm clouds over our orchard.
Of course, there will be some longer term benefits for the farmers in our region: the local reservoir that supplies irrigation water to our area is full, our river is flowing strongly, and the aquifer that supplies our water wells has been completely recharged. These blessings will be greatly appreciated in the coming years, as the fight over water in south Texas continues between the suburbia/carwash builders and the people who produce food for the world's growing population (And given the melt down in subprime mortgages, I think the suburbia builders may be in for a well deserved hiatus. Destroying the planet one subdivision at a time is hard work!)
All is not lost this year, as we have three other varieties of pecan that seem to have taken all the extra rain in stride. Our Cheyenne, Kiowa, and Desirable pecan trees all have full loads, and the nuts appear to have excellent quality. Although these trees make up less than half of our acreage, they do ensure that we will have some organic crop to sell to the many people who call us looking for organic pecan halves and pieces. As an insurance policy, they ‘paid off' this year, but it comes at a cost: on average, a Wichita tree will produce twice as many nuts as any one of these varieties.
This winter, as the great rainy season of 2007 fades from our mind, we will be ramping up one of the most important projects that we have undertaken at Rio Grande Organics. Over the past few winters, we have been experimenting with various cover crops to try and determine suitable plantings for our orchard soil type. Cover crops are generally members of the clover family or the vetch family, and as they grow during the winter, the plants take nitrogen out of the air and convert it to a usable form in the soil. By using cover crops in the winter, we will no longer have to provide nitrogen fertilizer to our trees in the spring. All of the nitrogen that they need will be ‘fixed' in the soil during the winter by the clover growing around the dormant tree.
Cover crops were always grown by farmers prior to WWII as a way of providing fertility to their spring crops of corn, cotton or tobacco. After the war, as inexpensive fertilizer from chemical plants became readily available, farmers stopped going to the trouble of planting and caring for a winter crop of yellow clover. It was much easier to simply spread cheap granulated fertilizer over the fields in early spring ahead of the seed planter. The knowledge of what cover crops worked in which soil types in south Texas has long been lost. Only with the recent price spike in fertilizer, which is mainly derived from natural gas, have farmers once again sought out suitable legumes to plant in their fields after harvest. Many of the plant varieties that we have tested over the past few years have actually been imported to this country from Australia, as their researchers have been leaders in the development of self-regenerating legumes for decades. We have had good results with four different plants, and this winter we will be planting various mixtures of these plants over a couple hundred acres of orchard. Our research will continue, as it is important to find a plant that will reseed itself year after year; a legume that has to be reseeded every year is not a great advantage over traditional fertilizer.
The search for a perfect cover crop will proceed this winter, and like so many other projects on a farm, the probability of reaching a conclusive solution is not great. Weather conditions and insect patterns change every year, and a promising clover this winter may fail to do much next year. It will only be after many successful winters that we will be able to say that we have a cover crop that works. But that, in a nutshell, is what farming is all about: an ongoing battle against nature and economic forces to profitably produce food that people want to eat. And as we carefully look over a trailer load of our nuts at the end of a harvest day, we will be thankful that we get to spend our time taking care of trees, and we will look forward to the challenges that next year brings.
People often ask us what it takes to grow pecans organically. One of the first subjects that an organic pecan grower has to master is an understanding of the insects that attack the pecan tree and the young nuts.
First shown is a nut that has been growing on the pecan tree for about six weeks. The mass of material at the base of the nut is called "frass"; it is actually feces left behind by a pecan casebearer worm as it chewed its way into the young nut. The worm is now inside the nut, eating all the soft tissue. This nut would fall off the tree in a matter of weeks, as the nut dies once a worm eats into it.
With the frass cleared away, you can clearly see the nice round hole where the worm has bored into the nut (in the second picture). We try every year to limit the damage to about 2% of the total nuts that are set on the trees. Without some type of control strategy, a pecan grower can lose between 50% and 70% of the crop to the pecan casebearer worm.
Next we can see that having been disturbed, this worm is crawling back out of the nut. Normally, the worm would morph into the pupal stage, and eventually it would emerge as a next generation moth. The moths lay eggs on branches close to the small nut. Our entomologist, Robert Sandner, scouts the orchard every two days looking for casebearer eggs. When he finds enough eggs, we spray the orchard with bT, a bacteria that is harmless to people, but is deadly to the newly hatched worms. Next, it looks like Mr Worm is headed for the border!!
All food producers, whether conventional or organic, face challenges controlling damaging insects. In our organic farming system, we use naturally ocurring substances, as opposed to synthetic chemicals, to control damaging insects. Our system of scouting for insects is very labor intensive, and the timing of our applications of bT is critical to achieve control.
In the fifth picture, you can see where the pecan casebearer worms have damaged three out of the four nuts. If this level of damage is extensive in the orchard, then there is very little chance of having a crop at the end of the season. Fortunately, in our four years of using organic farming methods, our orchards have built up large numbers of beneficial insects, such as lady beetles and green lacewings. These insects eat the casebearer eggs, and help to control the casebearer outbreak. Finally shown, this young pecan tree is entering its second growing season in Quemado. We are seeing some of the young branches exceed three feet of growth in one season. We are experimenting with a number of techniques to maximize the yearly growth on these young pecan trees.
Currently, most pecan trees need seven to eight growing seasons before they start to produce a harvestable crop. We are hoping that land leveling, intensive water and organic fertilizer management, and weed control will reduce this waiting period. The long period between tree planting and full nut production is one factor that keeps world nut production low, and nut prices high. As people look to add healthier items to their daily diet, the demand for tree nuts will continue to grow!
Many people are under the impression that winter is a time of rest for pecan farmers.....the reality is that it just may be our busiest time of the year!
It is now late March, and our pecan trees have not yet started to put out their new leaves, a process we call 'bud break'. The pecan tree will start to flower and put out it's pollen producing catkins very soon after bud break. The actual pecan nuts start to form in late April, and they will be growing and developing on the tree for close to six months.
The pecan trees in Crystal City have grown to a point where their size is interfering with the growth of surrounding trees. The Crystal City orchard sits on the bank of the Nueces River, and the soil is an optimal alluvial river soil. With proper watering, these trees are capable of living for 200 years, and attaining a height of 100 feet. We have had to designate about half of our trees as permanent trees, and the rest of the trees are 'temporary', although temporary may turn out to be 20 years. Our men have been hard at work extensively pruning back the temporary trees, and this will allow the permanent trees to continue to grow and produce lots of nuts. Note the heavy crop of clover growing under the trees; this will help put lots of nitrogen into the soil.
At Rio Grande Organics, we embrace our responsibility to future generations. This winter, we completed the planting of 40 acres of new pecan trees. We will be old men by the time that these trees are productive and full grown, but our children will be able to enjoy the nuts that are produced. Many people talk about making the world a better place - we are busy planting trees!
Our Quemado foreman, Alan Frerich, and our whole Quemado crew did a great job planting these new trees. These young trees will depend on water from the Rio Grande River for their survival. Agriculture in the US has been under relentless pressure from developers and environmentalists, who claim that our efforts are 'wasting water'. We like to think that watering suburban lawns and building endless car-washes is a much greater misuse of our precious resources.
It's harvest time in Crystal City, and Rio Grande Organics gears up to get the precious pecan crop harvested before any weather disasters strike.
Check out how our harvest season gets under way as our tree shakers move into action. This machine clamps ahold of the tree, and uses a powerful hydraulic engine to shake the tree vigorously. The ground under this tree is littered with pecans that have just been shaken off. Note the sweepers in front of and behind each wheel; these devices gently move the pecans to the side of the wheels as the vehicle moves through the orchard.
Next, the cluster in image two shows the progression of ripening pecan nuts. The nut on the right is at the stage where the green shuck is beinning to split open along the suture lines. The nut in the left center area shows the shuck fully open and drying to a brown coloration. In the last month prior to harvest, the nuts are susceptible to shuck decline disease and the shuckworm; both will keep the shuck from opening normally and will result in damaged nut meat.
In the next cluster, all of the shucks have opened normally, and the nuts will easily fall from the tree when shaking pressure is applied. The nuts can actually remain in this loosely held position for months.
In the fourth image, our senior organic consultant, Robert Sandner, stands in front of the first load of pecans harvested in 2006. Some of the pecans are still inside of their green shuck. A special machine in our cleaning plant will remove the shucks so that the nuts can dry out and be shelled. The 2006 harvest is very special to us, as it marks the end of our three year transitional period. The pecans harvested from our Quemado, TX orchard will be our first large 'Certified Organic' crop.
Most of Texas is suffering from severe or extreme drought. We are very thankful for the irrigation systems that water our orchard.
First here, we see a picture of our nutlets back in early April. Someone once asked, “What does it take to make a good pecan?“ The answer is that it takes plenty of sunshine, plenty of water, and some method for keeping the destructive insects and fungi off of the developing nuts and leaves.
One of the questions that we are most frequently asked is “Aren't all pecans grown organically?" While this may be the case for some backyard trees, it is not even remotely the case for most commercial orchards. In order to control the insects that eat the developing nuts, and to control the fungi that grow on the nut's outer shuck, most commercial growers spray synthetic chemicals on the trees numerous times each year.
In the second picture, five months have passed, and these nuts are nearing maturity. The green shuck will split open, and the ripe nut inside will be ready for harvest. The highlite of the 2006 growing season was a hail storm that missed our orchard by less than half a mile. The baseball sized hail took the paint off of some nearby houses.
Farming in Texas is not for the faint of heart. Most of the state is subject to episodes of serious weather, including hail, tornadoes, hurricanes, floods, windstorms, and drought. Any one of these events can damage or destroy an agricultural crop. California, by comparison, is rarely subject to extreme weather, and as a result, it is the most productive farmland in the world. So , why do we continue to farm here? The answer is simple: the finest tasting pecans in the world are grown in South Texas!
Next, we see the latest addition to Rio Grande Organics. These 400 acres of pecans are on the banks of the Nueces River, near Crystal City, Texas. We have begun using only organic methods in this orchard. The trees were originally planted by Dr. Darrell Sparks of the University of Georgia, perhaps the worlds leading expert on pecan tree horticulture.
Most of the pecans in this orchard are of the Wichita variety, a heavy bearing, dependable producer. Pecans are notorious for being alternate bearers, meaning that the trees will only bear a crop every other year. Rio Grande Organics has an extensive program of nutrition, crop load management, and water management that has helped to reduce this tendency. We are fortunate to have two of the best pecan growers in Texas working with us; Robert Sandner, our organic consultant, and Joe Urban, our Crystal City farm manger.
In the fourth image, you can see the Amistad Reservoir, which was formed by damming the Rio Grande River just north of Del Rio, TX. A canal system that was built in the 1920's to irrigate farmland along the Rio Grande River brings water from this lake to our pecan orchard in Quemado, TX.
This reservoir is capable of holding 4.5 million acre-feet of water, with one acre-foot being the equivalent of 326,000 gallons of water. The Amistad Reservoir is one of eight reservoirs in Texas that can hold more than 1 million acre-feet of water. Only one of these giant reservoirs was built in the last thirty years; the other seven were built by a prior generation of forward looking citizens. Environmental opposition has halted the construction of most new reservoirs in Texas. If you like the “win-win“ of reliance on foreign oil, you're going to love being dependent on foreign food!
The Houston Chronicle had a short article today about the ongoing drought that stretches across much of Texas. The writer attempted to gauge the economic impact of the drought; it is thought that the direct economic losses to farmers and ranchers could be as high as $4 billion, with a possible indirect impact on rural economies of as much as $8 billion in losses.
The National Drought Monitor indicates that most of south Texas currently falls into the worst drought categories: D3, which is severe drought, and D4, which is exceptional drought. In Quemado, along the Rio Grande River, it has pretty much stopped raining over the last two years. Our normal yearly rainfall averages about 22 inches. In 2005, we received about 14 inches of rain, with 7 ½ inches falling on a single day. So far, in 2006, we have had a total of approximately 4 inches of rain.
As one travels across this area, the impact is clearly visible. Cattle wander across brown pastureland, searching for any edible green vegetation. Corn plants that would normally be six feet tall struggle to attain a height of four feet and are arranged irregularly in the row due to many seeds failing to germinate last spring. There was simply no moisture in the soil to initiate the plant's life.
The long Texas summer is beginning to take a toll on some of the mature, native trees that have been growing for years near long abandoned farmsteads. One notices various red oaks and pine trees, which have been through earlier droughts in their sixty years of life, now turning brown from the top of the canopy downward, a sure sign that the tree's death is from a lack of water. A mature oak tree needs to absorb at least 50 gallons of water from the root zone each day to replace the water that has transpired from the leaves. There is simply not enough moisture in the soil today to keep the tree in balance.
Most of our extreme weather, such as flooding, hurricanes, and tornadoes, occurs over a short period of time, and the impact and loss from the storm can be quickly measured. Engineers can study the data, and propose solutions that will mitigate damage from future events. Droughts consist of endless sunny days, with bright blue skies. The damage accrues gradually. Each day begins with the hope that there will be some sign of incipient rainfall, and ends with the realization that there is no relief in sight. When the drought finally ends, there is often only the thought that it is a generational occurrence and not something that needs to be planned for and mitigated through some type of governmental action.
For the time being, our pecan crop is nourished by the waters that come to us from the Amistad Reservoir, by way of a canal system built in 1920. I always marvel at how the people of that time understood some of the vagaries of nature, and they formulated and executed a plan to provide water for agricultural and municipal use. The Maverick County Canal carries water to over 80,000 acres of farm and ranch land. Notably, the water flows by gravity, and thus there is no need for diesel fuel to pump this water. In an age of $3/gallon diesel, this turns out to be a very important consideration.
Over the past thirty years, a total of eight major new reservoirs have been constructed in Texas. These man made lakes hold between 181,000 acre feet (Joe Pool Lake) and 1.1 million acre feet (Richland-Chambers Reservoir). During this same period, the population of the state roughly doubled, from 12 million to 23 million inhabitants. Prior to 1976, there were approximately 28 major reservoirs constructed to provide water supplies for the state. These are all reservoirs that when full can store in excess of 250,000 acre-feet of water. Of these older reservoirs, seven were 'super' reservoirs that can hold in excess of 1 million acre feet of water.
It is hard to look at this water supply data and not consider that the future water supply needs of Texas have been seriously neglected. Rather than have an ample supply of water today for municipal, industrial, and agricultural use, we have devolved to a near state of warfare over the existing sources of water. The large municipalities are looking to usurp limited ground water from areas that are increasingly distant from their citizens. In West Texas, there is a push to limit, and perhaps eliminate agricultural water usage. All across the state, private equity financiers are buying up existing water and riparian rights, with the intention of reselling the water to the highest bidder. The common thread to all of these actions seems to be that agriculture is an "inefficient" user of water resources, and that municipal development is the "highest and best" use of scarce water resources.
In the late 1950's, following a previous period of severe drought, Walter Prescott Webb, a noted scholar and author, and a group of scientists from the University of Texas proposed a massive public works program to capture and redistribute water from the high rainfall area of East Texas to the low rainfall area of South Texas. They proposed building a number of large reservoirs on the Neches, Trinity, Sabine, Brazos, Guadalupe and Nueces Rivers that would in essence store excess rainfall. The genius of the plan was to construct an intra-river canal that would connect all of these river systems. The canal would lie about 70 miles inland from the coast. The redistribution of water would not only allow for the growth of all the coastal cities, including Victoria and Corpus Christi, but it would also provide water for the irrigation of almost 1 million acres of Rio Grande Valley farmland.
As the drought ended, the will to spend a large sum of money for water capture and redistribution evaporated. Could such a project be built today? It seems unlikely, given the rise of environmental groups whose agenda does not fall neatly into the municipal, industrial or agricultural bucket. The argument most often heard from the environmental groups is that we need to "preserve natural systems as they are", or, in fact, to "reverse the effects of man's influence, and restore natural systems to their original, pristine state". It is hard to envision a single new reservoir construction project that the environmental groups would support. And yet, by failing to build new reservoirs, we are in effect undermining our future ability to produce food and fiber in the state.
Texas is unique among states in that it contains within its borders areas of abundant rainfall, and areas of moderate rainfall that are subject to occasional periods of drought. We need some forward looking citizens, like the pioneers of 1920, to push forward a grand, visionary plan to capture the abundant rain of the eastern part of the state, and make it available for the growth of the western part of the state. Most of us can readily see the havoc caused to our daily lives by an over reliance on foreign produced energy resources. The latest mantra of the WTO free-traders is that agricultural production needs to move to the less developed areas of the world, where food can be produced at lower cost. While this may have some validity in the short term, it fails to calculate and include the cost of deploying "the world's police force" to keep the supply lines open and to keep the food moving freely along international trade routes. Once these costs are factored in, foreign food, like foreign oil, will not be a "cheap" alternative. Our future, as a growing, vibrant economy, depends on us acting today to harness the abundant water resources that we have.
The pecan trees we are planting this winter will start to bear nuts in 8 years, and they will reach full production in about 16 years. We hope we're around to see that...
The young pecan tree shown in image one is putting on a big flush of new growth. We use borders along the tree row to flood irrigate each strip of new trees. This land was precision leveled with a GPS system and large earth moving equipment before the trees were planted. This ensures that the irrigation water and the rainfall will flow evenly across the land.
As the irrigation water moves down the row, many of the weed seeds are germinated, leaving the green strip you can see in image two. As an organic farm, we do not use herbicides such as RoundUp to kill the weeds. We will actually mow the weeds to create a mulch strip. Marcello Stabile, our agronomist from Brazil, helped to oversee the planting of 50 acres of new pecan trees this winter.
Native pecan trees are usually found growing along rivers in the southern US and Mexico. Although the field in the next image is only about 100 yards from the Rio Grande River, it is unlikely that flood water from the river will reach the trees. An extensive system of dams and levees is in place to control the flow of the Rio Grande. Rest assured, however, that nature will eventually put together a flood event that will put this whole area under water.
This spring, we are growing about 60 acres of watermelons. The next image shows that using a mechanical planter and the seedlings that we raised in a greenhouse, our crew is able to plant about 25 acres of watermelons a day.
Finally, you can see that we have spent many hours perfecting the art of mechanical weed control. We use various implements , such as a rotary hoe, to control the weeds in our melon patch. To do a good job, you have to drive the tractor in an absolute straight line. It is much faster and easier to spray a field with herbicide, but we simply don't know much about the long term effect of exposure to synthetic chemicals in our diet.
The recent holiday season was once again a feast of epic proportions; copious amounts of food and drink, endless hours of televised sporting events, and a healthy dose of guilt free marathon mall foraging. For most, the enormous quantities of food are plainly a metaphor for the greater abundances of life, such as career, family and material wealth. It is unlikely that there are many among us who are content to accept that a wealth of nourishment is cause for great celebration, or even that this condition is somewhat of a miracle when viewed against the long historical struggle to feed the world's growing population.
There is certainly an appreciation of "fine" food in America today; it is evident in the selection of outstanding wines available at almost any discount retail store and it is apparent in the many hours of televised cooking lessons that feature celebrity gourmet chefs. The fabulous generation of wealth in America over the past thirty years has created demand for a highly varied diet, and it is not unusual for an American restaurant, or supermarket, to offer New Zealand lamb, Japanese sushi, French foie gras, and Chilean sea bass every day of the year. Even the concept of food seasonality, such as the appearance of fresh, crisp apples in the fall, is an outdated notion, and one that is certain to generate looks of bewilderment if brought up as a topic for discussion in polite company.
The disconnecting of urban America from rural America is a process that has been occurring over the past sixty years; it is largely a process that began in the aftermath of World War Two. During the war, a large industry was developed to produce various nitrate chemicals, which were used in everything from bullets to bombs. After the war, there was a major drive to seek other uses for the industries and infrastructure which were built to support the war effort. The chemical plants that made gunpowder, also known as ammonium nitrate, were converted into fertilizer factories, and soon rural America was awash in low cost plant nutrients. With the improvements in mechanical technology that came from the war efforts and the rapid advances in plant genetics, the stage was set for some stunning advances in efficiency by the American farmer. The result of what is commonly referred to as the "Green Revolution" staggers the imagination; today less than one in two hundred Americans lists his (or her) occupation as "farmer" and agricultural commodities are America's fourth largest export category.
With all the success that has been achieved in the mass production of food, it is easy to see how few Americans would worry about the possibility that our food supply chain has an Achilles heel, or that we were in danger of facing rapidly escalating food costs. Food in recent years has been a non-issue; there is plenty available and relative to other goods and services, it is cheap. But behind the great success story lies a dark, foreboding fact: almost every component of our food production and distribution system is dependent on low cost petroleum. Fertilizer, in the form of ammonia, is made from natural gas; which has recently tripled in price. The various machines used to plant, till and harvest crops all run on diesel fuel. Pesticides, herbicides and fungicides are almost entirely produced by plants that use petroleum as the primary feedstock. Fresh vegetables and meat are transported to our local markets by diesel fueled trucks, and these products are kept cold in transit by diesel fueled refrigeration units. Much of the water used to irrigate crops today is ground water that needs to be pumped out of the ground by large diesel motors. Our entire food supply chain is critically dependent on petroleum.
Clearly, the current and future population of the world is heavily dependent on a continued supply of low cost petroleum and natural gas. The global population has grown rapidly as the supply of food has increased; this is the expected action in any system that contains living organisms. Increase the food supply and the population will grow. Yet even with all of the great food producing efficiency of the Green Revolution, there are still large numbers of people who are on the cusp of starvation. As the cost of food increases, or as the amount of food produced yearly decreases (because of higher costs), this group of starving, under nourished people will grow.
There are those who question this entire line of thought, and they generally point to the fact that food prices do not seem to be following the same upward trajectory of oil prices. It is instructive to view the costs in our food supply chain as being similar to a freight train at rest; as the engine starts to move, there is a lot of slack in the couplings between cars that must be taken up before the rear car starts to move. For example, farmers generally pay for their next year's fertilizer at harvest time. That would mean that the fertilizer used to produce the 2005 crop was paid for in the fall of 2004, when oil prices were somewhat lower than they are today. And as fertilizer prices rise, farmers will start to put out smaller amounts of fertilizer for each crop. For a few years, unused fertilizer in the soil from previous crops can be utilized by the plants to produce similar yields. But make no mistake, at some near term point, the nutrients in the ground will be insufficient and the yields will go off a cliff.
Already, a large number of American farmers are at a point where they are no longer financially able to farm. Two years of rising input prices have coincided with low commodity prices brought on by the global shift to free, open markets. This synchronization of global commodity prices will produce a one time reduction of some prices in certain markets, but after that, global prices can be expected to move in lock step. The savings brought about by the great global labor arbitrage, whereby the labor rates of Minnesota are replaced by the labor rates of Indonesia, and the resulting savings is passed to the American consumer in the form of lower prices, is truly a one time event. Soon enough, the rising price of oil will be felt throughout the food chain, and owing to the universal pricing of oil, all agricultural producers will be faced with a great margin squeeze.
The first warning flares are being fired off by some of the biggest food processors as this is written. Kraft has just announced that due to ‘higher commodity costs' of some $800 million, they will close 20 plants and lay off 8,000 workers, which is about 8% of their workforce. What boggles the mind is that a large multinational such as Kraft has had a huge impact of lower input costs from their global sourcing capability. But this ability to obtain agricultural inputs at more advantageous pricing cannot offset the huge energy costs that food processors face. Tyson Corporation, which is a large producer of beef and chicken products, has just reported quarterly results that Wall Street analysts have described as a "train wreck". The phrase that keeps re- appearing in their report to shareholders is "higher energy costs".
For the foreseeable future, it appears that energy costs, including crude oil, gasoline, and natural gas will remain at elevated levels, or even possibly rise from the current levels. The time when higher costs can be absorbed by the producers and processors of America's food has passed. Expect to see some hefty increases in the price of food at the consumer level. And also expect that there will be a restructuring of the larger food producers, while many smaller food businesses will cease to exist.
