For those of you not on twitter, this afternoon’s blog post got some negative feedback in the twitter universe that highlighted some of my inherent bias that I may have, given my background. I’ve never embarked on a debate in the social media realm but there is always a first time so here goes.
One assertion made was that as a Canadian, I do not support the creation of U.S. jobs. Beyond the fact that I do not subscribe to the “we versus them” mentality, U.S. job creation is good for my business. Roughly half of the pork produced in Canada is exported around the world and the U.S. accounts for over 30% of these exports (Stats taken from Ag Canada). When the American economy suffers, so does the demand for the pork that I produce. Furthermore, the price I receive for my pigs is based off the Chicago Mercantile Exchange, making our business vulnerable to currency fluctuations. As such, the weaker greenback that has occurred during the economic downturn has further lowered the price I receive for my pigs while also making Canadian pork less competitive in the global market. All in all, my family’s business has the best chance of succeeding when the American economy is firing on all cylinders.
The second point I’d like to talk about is the notion that I’m only interested in buying corn below its cost of production. What I’m truly interested in is buying corn at a price that is at the equilibrium between the supply and demand for corn. Domestic supports for ethanol in both Canada and the U.S. (we do have ethanol mandates here too) artificially boost demand for corn and thus inflates the price beyond what it would be if the subsidies were not available.
Finally, I would like to respond to the claim that my point surrounding food versus fuel has been debunked numerous times. To do so, I’m going to call on my good friend Adam Smith (if you aren’t sure who AS is, take a peek inside any microeconomic textbook and you will probably find him) because in my mind, his rules pertaining to supply and demand make the ultimate case in the food versus fuel argument. Simply put, any increase in demand without a corresponding increase in supply will lead to higher prices for the given good. One of the reasons that we don’t see any dramatic rise in our food prices here in the developed world is because the majority of our diet consists of processed products in which the farmgate value for the corn plays only a miniscule role when determining the price. Furthermore, we here in the developed world only spend around 10% of our disposable income on food, making us less vulnerable to price increases. If we look at the developing world however, the majority of people still have a diet of raw unprocessed goods and in many places corn is the staple product. These people can spend upwards of 75% of their income on food. Even a small increase in price has a much more dramatic impact on the amount of food they can afford and since our grain markets have become globalized, it now means that a price increase here in North American can be felt by people all around the world.
So far, the content on my blog is fairly weighted to the con side in the ethanol debate but I would love for someone to challenge me with facts of their own. I would invite anyone to contribute in this space, I really hope that someone stands up and disagrees with me…as I said in today’s earlier post; I do love a good debate.