I live in Western Oklahoma in a town that lives and dies with the oil/natural gas business and it’s not looking good for the foreseeable future. Makes you wonder what’s going to happen to those N. Dakota “Boom Towns” now that the Boom has gone Bust.
Elk City used to be split pretty evenly between energy and agriculture but five years of drought has seen Western Oklahoma’s agri-business dry-up worse than all the local fishing ponds. Currently W. Oklahoma’s agri-business is somewhat less than half what it was ten years ago with cattle production even lower than that. None of which is coming back even if the drought conditions end.
And what are all these young men, and nine out of ten field jobs in the energy sector economy are men, going to do now that the wheels have come off the high wage gravy train they are accustomed to?
Going from $120,000 or more a year to Wal-Mart wages is harsh, especially as most of these young men have little formal education beyond High School and are used to living much like it was still the Wild, Wild West.
I think there is one string to this bow that even the conspiratorial Tin-Foil Hat crowd is overlooking. I’d go into it but that might take this topic to far into politics.
Interesting you mention agriculture... a topic with which I have considerable familiarity...
This is a common theme throughout "cattle country"... droughts have repeated struck the various areas of the country producing most of our beef and livestock, usually repeatedly. Some areas have faced years of drought, some with short breaks and returns to drought, etc. First it was the southeast, then the mid-south, then Texas, then the far west, then the Great Plains, the Midwest, Texas again, the west, just a neverending cycle. I know the last big hit in southwest Texas a few years ago, most of the cattlemen had to sell out and just decided not to restock. Selling cattle for 30-40 cents a pound and then having to re-buy livestock at $1.40 a pound isn't a profitable scenario in ANYBODY'S book. Since the average age of farmers in the US is basically around the point most folks could draw Social Security, and the age of most southwest Texas ranchers is higher than that, one cannot blame them for not wanting to spend the money to start over from scratch.
This vicious cycle has repeated itself across the country time and time again. The result is that a lot of producers that were in the cattle business have disappeared forever, retired, gone broke, sold out, whatever. Those who remain have either had to sell off their stock or severely cull their herds to survive the droughts in their area, and have only restocked to a limited amount, so their herds are much smaller than they have been in the past. Where we used to run 65-70 head at Shiner, I'm currently running 37 at the moment. Similarly here on this farm we've run as high as 55-60 head, but I've sold down to 35 or so at the moment. This is pretty typical. Some other areas of the country have increased their herd size, but it's not enough to offset millions of head being sold off over the course of years.
Meanwhile, the "cattle market" analysts and economists and "farm policy" wonks keep screaming at the top of their lungs that the "market signals" are *demanding* that ranchers increase their herd size and production, meanwhile cattle numbers have shrunk to the lowest levels in 60 years... What they fail to realize or won't admit is that "market signals" are *irrelevant* to the REALITIES of lack of grazing, feed, and personal/business financial repercussions of having to sell off or severely cull and then restock. That's why, as I recently saw in a news report, where they reported that beef brisket prices have increased 62% in the last year... and of course food prices have generally followed suit, regardless of what it is (meat, milk, produce, grains, etc.)
I have to laugh every time I read the couple of free farm magazines I get... The 'ag press', parroting the buzzword talk of ag policy wonks, big agribiz, and ag college professors and researchers, is that "we have to double agricultural production over the next 20 years for the world not to fall into mass starvation". This is a COMPLETE pipe-dream... ag production has plateaued and what growth in production there has been has been minor or short term gains due to the introductions of new technologies, not massive "game changers" like the "green revolution" of the 1950's... (things like genetically engineered crops, new pesticide chemistries and systems, improved genetics from breeding programs, etc.) The "low hanging fruit" has all been picked LONG ago-- we've reached "the area of diminishing returns" a couple decades ago... Most folks tend to think that doubling production is as simple as "cranking up the inputs", doubling fertilizer and pesticide use to reduce weed competition and insect/disease destruction... nothing could be further from the truth! One can double their costs of production (inputs) and still only increase production by maybe a few dozen bushels per acre at most, maybe 15-20% at most. Of course such increases would be COMPLETELY unprofitable. In fact, with the current nosedive of ALL crop prices (more or less) farmers are looking for ways to cut production costs as much as possible without adversely affecting yields. The government and ag policy has been structured around "record farm income" over the past several years, due to high grain prices, ethanol production increasing demand, increasing international trade, etc. Now that prices have taken a hard nosedive in farm country (the days of five dollar a bushel corn and 10-12 dollar a bushel soybeans is over-- prices have fallen by about a third or more in the past year, and show no signs of increasing in a meaningful way in the next year). The "farm bill" is no longer about farmers and farming, but mostly about food stamps and other handout programs with essentially NO bearing on increased profitability or income in farm country but a vote-buying machine for politicians. I heard recently that due to cotton being removed from being a farm program crop, coupled with low market prices with little/no promise of improving, with ever-increasing costs for inputs (cotton is already one of the highest-cost crops to grow, which is why we quit row-crop farming a decade or so ago), has led a lot of mid-south farmers to say they're going to not plant at all this year-- either let their land lie fallow, or plant alternative crops like peanuts. Low corn and grain prices have made rotating into grains far less lucrative than it might have been in years past.
It's easy to see we're headed for a train wreck in the coming years... record high prices in the stores, but farmers getting a pittance and going broke, letting poorer producing farms/fields lie fallow and focusing on their best land, all the while reducing production at the very time that it's "necessary" to increase production. Of course it seems to escape the policy wonks that the more farmers produce, the cheaper the prices get; the more farmers have to spend to produce it while the less they make per-bushel, pound, or whatever.
It's going to get a LOT worse before it gets better... Much like oil, speculators are killing the agricultural pricing structure and siphoning off the profits that keep farmers producing. Sooner or later, the system will implode if corrections aren't made. Personally I'd like to see "speculation" in the stock and commodities markets banned, and violators thrown into prison. If you want to speculate, go to Vegas and bet on the games... and stop playing games with the essentials of life and those that produce them (either big oil or down on the farm-- it's all the same in the end...)
Later! OL JR
