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TradIsGood
Chalkless climber
the Gunks end of the country
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Topic Author's Original Post - Sep 30, 2008 - 05:07pm PT
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Let's get away from blame, finger pointing, etc. for a few minutes and try to understand what has happened. There are a whole ton of players that led to the current catastrophe. Let's leave them and their roles aside for a minute and consider the ordinary pig Sus scrofa.
Way back in the day a farmer might keep a few pigs around for access to meat. They were fairly domestic, raising them was pretty easy, and they could eat scraps of food and garbage that might otherwise just rot outside. They are relatively easy to slaughter.
Salt curing techniques (sorry to anybody with religious objections...) allowed much of the meat of a pig to serve as a nice protein source. So a farmer could get a fair amount of nutritional value from a pig.
Later, refrigeration and electricity allowed for pork to last a bit longer, so a bit more of the pig could be eaten.
Preservatives added additional value to a pig.
Rail transportation, and eventually cars, and trucks, made a pig even more valuable. It also allowed some differentiation in what parts of the pork got eaten. The "higher" parts (high off the hog) commanded a greater price. There is no reason to proceed much further with the food aspects. You can see all sorts of "yummy" parts of a pig that people eat here: http://en.wikipedia.org/wiki/Pork
Hairs from a hog can even be sold for bristle used on finer paint brushes. The hide is used for leather. Virtually nothing is wasted.
Today, the market for park is far more efficient with respect to using this animal. Pork Belly futures go up in the summer because McDonalds BLT's become seasonal sandwiches.
Is today's farmer greedier than farmers in times past? Are transportation companies greedy? What about restaurants, wholesalers, futures brokers (OK, maybe they are right?)
Seriously, today pork is a part of a far more complex commercial system than it was 200 years ago.
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jstan
climber
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Sep 30, 2008 - 05:22pm PT
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When we were raising hogs after butchering a cow I would use a stone boat to haul the guts down to the hog lot and feed them to the hogs. Though 9 years old I thought that was probably not good but since we knew all of the animals were entirely healthy and diseases are also less likely to cross between different animals, we did it anyway. Nowadays if you have any kind of a sick animal it gets fed to other animals, such as beef cattle, as regular feed. (Beats me how a ruminant can even digest flesh.)
This happens except when you can get it to the slaughter pen before the FDA inspectors arrive at the plant in the morning. In that case it goes right into the food stream going to school lunch programs.
The same exact thing has been going on in the financial industry as far as I can tell.
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Karl Baba
Trad climber
Yosemite, Ca
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Sep 30, 2008 - 05:23pm PT
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So it's important to bailout any firms that bought derivitives based on a basket of future contracts based on future Pork options written by farmers who bought thousands of acres to expand their pork farms?
So we can continue to have an efficient market (which, not many months ago, you would have claimed to be self-correcting)
peace
Karl
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TradIsGood
Chalkless climber
the Gunks end of the country
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Topic Author's Reply - Sep 30, 2008 - 05:24pm PT
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jstan, I thought of the FDA and their regulatory role after posting. Thanks for bringing them up.
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JuanDeFuca
Big Wall climber
Stoney Point
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Sep 30, 2008 - 05:26pm PT
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Former US Federal Reserve Chairman Alan Greenspan once argued, before the advent of monetarism, that
"under the gold standard, a free banking system stands as the protector of an economy's stability and balanced growth... The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit... In the absence of the gold standard, there is no way to protect savings from confiscation through inflation."[5]
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TradIsGood
Chalkless climber
the Gunks end of the country
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Topic Author's Reply - Sep 30, 2008 - 05:28pm PT
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Karl, I think it is somewhat clear now that the futures markets have corrected somewhat.
I am not making a case for bailing out anybody. I am using this as an example of how a simple thing can get somewhat complex.
The development of markets for pig products, and associated industries to serve them.
Some may wish to condemn me for occasionally (well almost never anymore) eating a BLT or serving pork in a nice mole' sauce when I did not raise the pig myself.
But I need to eat, and I am not a farmer nor do I own enough acreage to be one.
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jstan
climber
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Sep 30, 2008 - 05:42pm PT
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On that line I will occasionally eat beef if I know for a fact it was grass fed.
Otherwise------no more beef.
I'll bet money George eats only grass fed.
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TradIsGood
Chalkless climber
the Gunks end of the country
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Topic Author's Reply - Sep 30, 2008 - 05:52pm PT
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It is probably fair to say that at some point, farms even specialized with pork farmers buying feedstocks, e.g. corn from other farmers with different specialties.
The specialized farmer may even have some college background in animal husbandry, marketing, etc.
He likely also has periodic need for veterinarians to keep his animals healthy.
It is probably safe to say that in a mature market there are a number of related participants. The market may develop both vertically and horizontally. Supply chains will develop in support of the producer and supply chains will develop between the producer and the end consumer. Most of us do not go visit a farmer and pick out a hog and ask for a slab of bacon and some ribs.
Each participant in the market competes with others to supply a good or service. Some are better at it than others and grow larger.
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Karl Baba
Trad climber
Yosemite, Ca
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Sep 30, 2008 - 05:55pm PT
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Tig
"Karl, I think it is somewhat clear now that the futures markets have corrected somewhat.
I am not making a case for bailing out anybody. I am using this as an example of how a simple thing can get somewhat complex. "
Same point I was making, to the point that we have millions of dollars changing hands that are either hedging or speculating about pork bellies and sub-prime mortgages.
Don't be fooled into thinking there won't be pigs if investments speculating about futures of pork bellies go belly up.
Peace
Karl
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TradIsGood
Chalkless climber
the Gunks end of the country
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Topic Author's Reply - Sep 30, 2008 - 06:00pm PT
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Product specialization and differentiation.
Some farmers may decide to capitalize on (or create) a market for organic pork!
Some may breed specifically for pork with better nutritional values, or even engineer them genetically. (The horror! I know.)
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