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Friday, February 25, 2022
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Opinion
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Carl Sampson
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Our View
Will winds of war blow fortune to U.S. farmers?
W
ith Russian troops massed for invasion
along the Ukrainian border, Europe braces
for war and its inevitable humanitarian
and economic consequences.
Ukraine is Europe’s second-largest country behind
Russia. Once a part of the Soviet Union, it broke free in
1990. Russia has long taken steps to keep its influence,
backing separatist factions waging war with the gov-
ernment. In 2014, Russian troops took over the Crimea
region on the Black Sea.
Russian President Vladimir Putin is wary of
Ukraine’s ties to the West and its desire to join NATO.
Ukraine and western intelligence agencies say he’s
looking for a pretense to invade.
Ukraine is a major producer of wheat and corn —
12% and 16% of the world supply, respectively. Russia
is also a major wheat producer. The mere threat of an
invasion has sent commodity prices up, with wheat top-
ping $8 last week and corn exceeding $6.50 a bushel.
Putting aside the human toll to those on the front
lines, U.S. Secretary of Agriculture Tom Vilsack told
The Associated Press that a conflict in Ukraine would
present an “opportunity, obviously, for us to step in and
help our partners, help them through a difficult time and
Chernobyl
Kiev
Lviv
Kharkiv
UKRAINE
Donetsk
Odessa
Sevastopol
situation.”
It is, they say, truly an ill wind that doesn’t blow
someone some good.
If Ukrainian farmers are unable to produce or export
next season’s crop, U.S. farmers are ready to take up the
slack, at least according to Vilsack. And short supply
would mean higher prices.
That’s good for U.S. farmers, particularly wheat
growers in the Northwest — as far as it goes. What the
war giveth, the war can taketh away.
In addition to producing a lot of grain, Russia and
Ukraine also produce a huge share of the world’s fer-
tilizer supply. Should Ukrainian supplies be blocked
because of war and Russian supplies because of poten-
tial export sanctions, U.S. farmers can expect higher
prices as supplies shrink.
Sanctions threatened by the West would also boost
fertilizer prices, and the costs of other farm inputs.
Russia exports a lot of natural gas to the rest of
Europe. The West has threatened to cut off those exports
if Russia attacks. Less natural gas means higher prices
for the remaining supply.
Natural gas is a major component in the production
of fertilizer, pesticides, plastics and other inputs.
A major regional conflict, assuming a Russian inva-
sion would remain a regional conflict, would have
unknown impacts on the global supply chain. Russia is
a major supplier of raw materials — rare earth miner-
als and heavy metals. Ukraine is a supplier of neon, an
important component in semiconductor manufacturing.
Then there’s the human toll, which can’t be put
aside.
A little saber rattling might be good for business, but
an all-out shooting war would be bad for everyone —
particularly those in the path of a Russian army.
Farmers — and
consumers — will
suffer from ag
overtime mandate
Our View
T
Andrew Harnik/Associated Press
Agriculture Secretary Tom Vilsack, right, accompanied by National Economic Council Director Brian
Deese, left, speaks during a virtual meeting with family and independent farmers and ranchers Jan. 3 to
discuss work to boost competition and reduce prices in the meat-processing industry.
$1 billion bet on more
meat processing capacity
P
oliticians have a way of oversimplifying
complex problems. Often, their answer to a
problem is to add money, and lots of it.
If only it was that simple.
During the past two years — the Era of COVID
— the main answer to almost every problem that
arose was to add money. Trillions of dollars were
injected into the economy to keep the doors open at
certain businesses. Those were the success stories;
many other businesses closed permanently. Millions
of people were thrown out of work for extended
periods and received money, sometimes more than
they were making on the job.
Most recently, the Biden administration, with
Agriculture Secretary Tom Vilsack on board, has
decided to “solve” the complex problem of low cat-
tle prices and high meat prices by spending $1 bil-
lion to subsidize the construction or expansion of
small and medium-sized meat processing plants.
If only it was that simple.
First the facts. About 85% of the beef process-
ing capacity is owned by four large companies —
Tyson, Cargill, JBS and National Beef. During the
COVID pandemic, they struggled to keep up with
demand as employees fell ill. Until they figured
out how best to keep employees safe and healthy
the processors could not keep up with consumer
demand, and retail beef prices jumped.
At the same time, because the processors were
struggling just to keep their plants in operation, they
didn’t need to buy as much cattle as usual. Those
prices dropped — a body blow to ranchers and
feedlot owners who bought cattle anticipating a cer-
tain price range but received far less.
It was a worst-case scenario for cattle producers.
Even before COVID, cattle producers worried
out loud that processors held too much sway over
the markets. They called for more openness in price
discovery through public auctions so everyone
could see what the prices were and who was pay-
ing them.
USDA under Vilsack has opened some of those
doors, even promising to work with the Department
of Justice to look for antitrust violations.
We have to wonder why the USDA and DOJ
weren’t doing that all along. One of their jobs is
making sure all U.S. commodity markets are open
and competitive.
We believe in competition. It is the lifeblood of
capitalism. But we worry about the unintended con-
sequences of injecting $1 billion into the beef pro-
cessing industry.
Will it go to the processing plants that are already
under construction? Will it go to plants that are
struggling? Will it convince reticent local politi-
cians that new processing plants are good for their
communities?
And, ultimately, will it increase cattle prices and
decrease beef prices?
These are questions without answers, and cer-
tainly without any guarantees attached.
All we know is it will be a long time before new
plants — or additions to small and medium plants
— go online.
And when that happens, we can only hope the
supply of labor will be adequate. Getting and keep-
ing good employees has been one of the largest
challenges facing processors of all sizes.
We hope Vilsack and President Biden have
thought this through. The new worst-case scenario
that we don’t want to see is to be five years down
the road and still have low cattle prices and high
beef prices even after spending $1 billion.
he agricultural
world is a lot dif-
ferent now than it
was when I started run-
ning Townsend Farms in
Fairview, Ore., in 1980.
What used to be a sea of
strawberry and raspberry
fields in Western Ore-
gon has been transformed
mostly into subdivisions
and other development
as land has skyrocketed
in value along with the
state’s population.
Oregonians haven’t
stopped buying fruits and
vegetables. But fewer and
fewer come from local
growers. An ever-shrink-
ing percentage of local
blueberries and blackber-
ries and very few straw-
berries are now grown in
Oregon, as large retail-
ers have opted to buy
cheaper berries from
foreign countries with
cheaper labor, often as
low as $2 to $4 an hour.
In the last two
decades, the size of Ore-
gon’s locally produced
strawberry crop has fallen
from around 80 million
pounds annually to just
8 million pounds. Rasp-
berries have seen an even
more significant fall,
from roughly 15 million
pounds a year to not more
than 500,000 pounds a
year.
Local growers now
rely primarily on blueber-
ries and blackberries. But
between 2009 and 2021,
the cost to prune and
wrap an acre of black-
berries has jumped from
$800 to $1,800. Com-
bined with an ever-in-
creasing minimum wage
in Oregon, the picture is
clear. Blackberries and
other fruits from Chile,
Argentina, Peru, Mexico,
Serbia and other coun-
tries are taking an ever-
larger share of the local
market away from local
growers.
We still employ
upward of 1,400 peo-
ple at Townsend Farms
during the peak of the
harvest months and
closer to 400 people
during the rest of the
year at our two packing
facilities and farms. This
includes our fruit pro-
cessing operation work-
ers and the seasonal
workers that we employ
(at $16.34 an hour in
2021) and temporar-
ily house on H2A visas.
GUEST
VIEW
Mike
Townsend
Those costs also grow
annually.
Labor, however, is
not the only issue affect-
ing local growers. More
stringent food safety reg-
ulations in the U.S. and
the increased cost of fuel,
fertilizer and other chem-
icals contribute.
And now, the Ore-
gon Legislature is con-
sidering new legislation
that would mandate over-
time pay for agricultural
workers putting in more
than 40 hours a week,
even though this type of
workload only happens
for a few weeks at a time
during the height of har-
vest season.
Therefore, as a voter,
we would hope you would
consider the impact of
the cost increases that it
will take for your local
growers to stay in busi-
ness. This includes the
fact that reliance on food
imports also contributes
to the exact global climate
change that a recent study
by environmental toxicol-
ogist Deke Gunderson of
Pacific University con-
cluded is “already caus-
ing significant impacts on
farms.”
The next generation
has asked us to be more
concerned about our cli-
mate. And as good stew-
ards of our land, we need
to point out that import-
ing too high of a percent-
age of frozen and fresh
products can and will
continue to impact the
environment negatively.
We must take precautions
to take care of what God
has given us, the land,
and the crops.
We want to help vot-
ers understand the effects
of policies that will con-
tribute to the rising labor
cost in Oregon, including
a law mandating over-
time pay. Because the
alternative is a continual
rise in the price of both
fresh and frozen produce
for consumers — and the
continued erosion of Ore-
gon’s treasured agricul-
tural industry.
Mike Townsend oper-
ates Townsend Farms in
Fairview, Ore.