The big fights on Capitol Hill haven’t made huge progress recently. But the Democrats have discovered their power isn’t unstoppable, and neither a majority of Congress nor many taxpayers are convinced that spending trillions “won’t cost anything.”
While it would appear that eliminating or crippling stepped-up basis and destroying the exemption that would be devastating to agriculture is not likely to pass this Congress, the revenue-hungry legislators bear watching. Some kind of income and capital gains tax increases are more likely. Even West Virginia Democrat Sen. Joe Manchin has revealed that he would like to eliminate the 2017 tax cuts.
Continued pressure on Congress against more taxes and spending is to be considered by anyone with a business or a job.
Across the pond, Europe is discovering the downside of depending on renewable energy sources. The wind didn’t blow enough this summer, so Europe had to use up natural gas to make up for the shortfall. They’ve shut down coal plants. So, electricity prices in the United Kingdom are up 700 percent from the last decade average, and Germany’s prices have doubled this year over last. Spot natural gas prices and coal prices have tripled.
Now Europe is scrambling to find enough natural or liquefied natural gas to get them through winter. U.S. prices are up 20 percent because we’ve been exporting more to Europe and Asia.
So will that lesson teach the European Union anything about supply and demand, applying leftist philosophies to economics or insisting on things counterproductive to the real world? The EU is making noise about food imports and how food is produced, desiring more organic practices and fewer pesticides. Some would change food labeling standards to push their ideas of production agriculture. We don’t sell huge amounts of beef and variety meats to the EU, but we’ve been making inroads. The question is, will our critical Asian countries pay any attention to European food production ideas if the EU uses labeling as a restrictive trade measure?
Labeling. Some in the U.S. trade-negotiating community would consider more labeling and stricter standards OK. Senators from a couple rural states have joined with a New Jersey farm “reform” senator to try to get the administration to find some way to reimpose mandatory country-of-origin labeling again.
California restaurants are getting concerned about getting bacon after the first of the year as California’s de facto ban on most bacon from other states begins.
Agriculture Secretary Tom Vilsack has made some unsettling noise about competition and “transparency” regarding our packing industry. He has not exactly defended free market agriculture lately, having proclaimed removing the stepped-up basis would hurt hardly anybody in agriculture. Even if it eliminated sources of capital and operating funds for farms and ranches—or even siblings in town providing capital or partnership as “investors” so the farm could continue—it wouldn’t be such a bad thing.
White House economists blamed beef, pork and poultry for causing most of the food price increases for consumers, which shows they’re willing to target American livestock producers and processors.
It will be a challenge for the livestock industry to deal with forces coming from several directions. It is astonishing how many “experts” are coming forward with “solutions” to never have any disruption in the meat supply again, magically having cheap meat prices for consumers but high prices for producers, and having a packing plant in every county so feeders never have to haul cattle very far and packers have no leverage ever again.
I have said repeatedly that one can’t repeal the laws of economics. There is nothing terribly wrong with USDA helping and funding additions to the packing capacity by fostering small plants. There are certainly not enough small plants to service even the tiny, locally-produced food trend. But there is no way even 100 small plants processing 500 head per month are going to supply at any reasonable and competitive price a significant part of the beef supply.
It remains to be seen how many of the 1,500-head per day plants planned will succeed. One of those plants would supply 1 percent of the total and require tremendous product differentiation and specific product outlets.
The huge amount of money USDA has aimed at tiny plants will not benefit most consumers. It would likely be better spent helping expand the packers that already have the scale and expertise to produce a high-quality, safe product. But—here come facts and the rules of economics—it might not be a good investment going into upcoming declining cattle numbers. — Steve Dittmer,WLJ columnist
(Steve Dittmer is the author of the Agribusiness Freedom Foundation newsletter. Views in the column do not necessarily represent the views or opinions of WLJ or its editorial staff.)
