Hopefully, the necessity to deal with climate change will cause the government to run out of money for the ludicrous subsidies of corn for ethanol, cheap HFCS, large agribusiness, etc.
It might also cause the U.S. government to be forced to start to acknowledge and deal with climate change.
A government that prints too much money eventually makes it worthless and then "runs out" of it, though. See also: Venezuela, Zimbabwe, Weimar Germany.
In fairness, none of them printed their own money really. They all relied on something else, and then printed promissory notes for that "something else". So the more promissory notes they printed, the less "something else" each promissory note was worth.
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?
It certainly isn't merely the word of the US, it is its status and behaviour. The big factor is that US is a very big and stable economy and military wise. People know that, so they think large and long-term fall of dollar value is quite unlikely to happen.
Both of these are right, rather than contradictory: a government can always keep printing its own currency. What it can't print is foreign currency. So hyperinflation shows up as a forex and balance of trade phenomenon first. As was the case in all three of those examples:
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.
I disagree. You don't get 79,600,000,000% (in Zimbabwe's case) inflation long after your farms had been idled. The price of goods in foreign "hard" currency actually remained relatively stable after some initial shocks, but the actual inflation was in Zimbabwe dollars after the gov't printed more Z$, which the majority of people there got paid in.
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.
That is interesting. Can you recommend some good sources on these economy laws? How can I convince somebody that increasing interest rates, an unpopular move, should prevent large inflation, which is something people want?
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")
(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.
> The price of goods in foreign "hard" currency actually remained relatively stable after some initial shocks, but the actual inflation was in Zimbabwe dollars after the gov't printed more Z$, which the majority of people there got paid in.
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.
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.
I think we mostly agree, but were kind of discussing different aspects.
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.
Farming is an activity that is critical to the national economy and a strategic asset. It's not like this is some boondoggle bridge to nowhere. Seems kind of like FUD spreading to say that we spend $8B subsidizing crop insurance and then saying we'll pay more (which is obvious, IMO) and acting like this is a problem without even floating an number for that future cost. And this is coming from someone who's against most farm subsidies.
I agree that farming as a whole is important, but how does subsidizing crop insurance help? Why can farmers not just pay 100% of their insurance premiums instead of only 40%?
We can either pay for the risk via subsidized premiums (40%) or through increased food costs (100%). Subsidizing the premiums is arguably less efficient (bureaucratic overhead on taxation) but is progressive in a progressive tax system.
I feel with technology everything should be localized to a point. Every time I go in to cast my vote for local elected positions give me a 100 checkbox list where I can number 1-10 what I personally want my tax money to go to.
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.
OK, so then the US should stop subsidizing corn (the vast majority of which isn't used for nutritional intake) and focus on actual food, but the current crop (pun intended) of farmers want to grow "easy" corn and have enough control of the political process to get subsidized for it.
IMHO a strategy of deliberate over-provisioning for food makes eminent sense, so I have no qualm with that "market" being artificially supported.
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.
As the chaos monkey dials up speculating on food becomes more profitable too, mitigating at least some of the risk. If I expect harvests to fail on a significant scale, buying up huge warehouses of grain (or other storable food) and selling it when prices soar is a great investment strategy.
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.
Relying on the free market and speculators to fix this problem sounds both realistic and incredibly dystopian to me. Sure, the market is efficient, but that does not mean it works for everyone. An imaginary efficient benevolent government would use the same prediction models to provision for extra food for the downtrodden instead of trying to exploit the demand they will create for profit. The free market solution really hurts the people that do not have the disposable income to "invest" in the market.
This is something a government should absolutely do, it's basically disaster prevention. However I don't think democracies are well equipped to handle such tasks in general: decisions are made by people who are either part of a body of hundreds of people or frequently have term limits that prevent them from seeing the consequences of decisions on disaster prevention. This creates a lack of consequences and personal responsibility. In comparison a dictator-for-life is easy to blame for all problems, he just may not care.
Ideally we would find a better form of government. I don't have any particularly good ideas though.
In theory... In practice, if you think harvests will fail, futures contracts make the whole warehousing thing moot.
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.
If enough people bet on wheat prices to rise, futures contracts get expensive compared to the current price of wheat. This opens the opportunity for someone to rent a warehouse, fill it with wheat, and then take the opposite side of the futures contract (i.e. lock in a high future selling price for your wheat), yielding a guaranteed profit.
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.
The warehouse is a theoretical construct, in practice. Whatever the market does and whatever investors want their position to be (long, short..), they can take that position without any physical wheat actually entering or leaving a silo.
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.
The futures market is what farmers use to decide what to plant and when to deliver their harvest. Farmers have granaries to expedite harvest, the futures market allows them to get cash by promising to deliver in the future, allowing them to store the grain on the farm.
Farm subsidies make us have less diversity in our diet because only a certain short list of crops are insured. America makes way too much corn and soybeans, and we should be using that land for something else that could create more value. Not mentioned how soy and high fructose corn syrup get shoved into every food item because of these.
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.
I'll be honest this was just a guess, I know milk has been driven down a lot lately by almond milk, oat milk, and other alternative kinds of milk.
But an initial google search indicates, I am not too far off:
In trade negotiations, the Canadians argued that 73 percent of returns to milk producers in the US are governmental subsidies, but not sure how that squares with the store price.
I'm willing to bet that even if farm subsidies went away, the price would at most double. Milk is really popular, and there's no way that supermarkets would let one of their highest volume products soar up in price like that.
Canada has a stupid system of high milk prices to keep legacy dairy farmers in business (quota system).
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.
You are way off in your guess about the cost! According to the study you yourself linked in another comment, the subsidies are $12.06 per cental, which is 26cents per quart. The subsidies are a big part of the margin though (3/4 of it).
We have a CSA with a vegetable farmer. It's crazy how many government programs are just unavailable to her, which she'd have access to if she grew corn.
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.
In permaculture we say, the problem is the solution. That farmer should take 1/4 of his land and have airplanes drop rice. The worst case it doesn't work but he learns a lot, the best case is he has a new crop for when this situation occurs.
I don't know much about farming, but I wouldn't expect a corn farmer to be equipped to suddenly farm rice. None of his machines really work for that, and manual harvesting seems out of the question at US wages.
I'm quite surprised indoor farming powered by renewable energy isn't being taken more seriously.
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?
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.
Modern dripping farming systems let farmers mimic hydroponic delivery mechanisms by seeding the local soil with the necessary minerals. However, this does increase maintenance costs over a standard drip-irrigation system, which is already pretty expensive compared to standard factory-farm irrigation methods.
It's incredibly expensive, both in terms of capital and energy? Whereas transport is cheap, even if it has to be refrigerated.
(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.)
Solar panels are 22% efficient and LED lamps are 50% efficient. So you need to cover 10 times as much land with solar panels and then also build your indoor farm.
Farmers in Ohio basically plow empty, undeveloped land, plant seeds, use pesticides sometimes, and nature does the rest. They don't even irrigate, rain comes down from the sky and waters the crops.
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.
Yes - this year in Ohio is a great example, many farmers are rained out of planting much of anything at all.
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.
I work in the agtech space and the way we look at indoor farms are that for now they are only a solution for expensive speciality crops (leafy vegetables). There's a lot of value in improving the production of leafy greens near urban centers (where tech workers will pay $15 for a salad), and that's why all the VC money is pouring in.
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.
Just like all the profits made from the "war on drugs" government will just view climate change taxes as a new source of revenue with no incentive to truly end the problem.
I found the last few paragraphs about most of the study's authors leaving USDA because of relocation of their agency to be pretty poignant. Looks like a last hurrah in the face of this administration's campaign to shutdown independent science in general and climate science in particular.
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[ 3.3 ms ] story [ 142 ms ] threadIt might also cause the U.S. government to be forced to start to acknowledge and deal with climate change.
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?
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.
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.
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.
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.
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.
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.
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-...
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.
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.
When life gives you lemons, you make lemonade.
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?
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.
(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.)
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.
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.