I had the opportunity to meet Earl Butz way back in my early university days and have a more or less informal, if not brief chat with him about the future of agriculture. With his passing I am reminded how structural change brings about big adjustments for those in Agriculture. He seemed to believe that production and more production was the way out of any problem (export whatever we couldn't consume) regardless of the current market signals. We could not figure him out since prices had been saying "enough already" for quite some time. I suspect now he had a much longer view in mind.
Butz was quite possibility the most villified man in agricultural circles in history. He is now blamed for the obesity epidemic, he was jailed for tax evasion, he was chased by a bishop for some anti-pope remarks, he made crude racist jokes, he gave over a million dollars to Purdue University which caved to modern day student protests and dumped the idea of naming something after him on campus. You just don't get that much controversy in an ag guy very often. By sticking with one view on production through thick and thin, he spanned the cycles and circles until now at his passing, his advice on agriculture at least looks sage again.
At his passing we have a battle taking place on a global level between population and income growth and the ability of technological advancement in food production to keep up. Over the decades, one side of that battle temporarily gets the upper hand and some big impacts land in the lap of producers. Sometimes that means exit for some while at the exact same time, others are reeling in huge benefits. Those that can stay at the party eventually seem to look smart again.
Fifteen years ago in the swine business, a lot of veterinary consultants urged their producers to specialize in swine and get rid of the crops. They did this because the industry was becoming dominated by specialized producers and that "green paint" disease always seemed to interject just the right amount of inefficiency and value loss for the swine to put the operation in potential financial jeopardy. Now we are hearing of people leaving their specialized but depreciated hog buildings by the wayside to "re-specialize" in corn, beans and wheat production. Fifteen years from now, their sons and daughters might very well be back.
Cost of production contracts with a packer are always a bad idea in my opinion (unless of course you can get one for just the length of time that it takes for the pass-through to take place when crops decide to have one of their "every 25 year" moves to a higher price plateau). Funny, the packers don't like to sell that kind of insurance for some reason.
"Never hedge (sell) the summer futures in lean hogs"...thats a rule of thumb that prevents the seemingly constant regret one has after falling in the doldrums of January for what looks like a very nice summer price, hedging it and then finding it somewhere near the mediocre level when summer highs are actually put in. Of course, that old adage is completely blown out of the water in a demand driven market so be advised. It will work its way around again to good advice in a few years...just hold on...like Earl Butz did and sooner or later, you will be a genius.
