Will renewable energy renew Missouri's mining belt?

There recently has been considerable press about China's supposed monopoly on rare earth minerals. It's not so much a monopoly on the minerals as a monopoly on the mining techniques that retrieve the minerals (read: below U.S. environmental standards). In fact, the Obama administration is making WTO claims for Beijing's reluctance to export much of her rare earth.

As they contain many of the minerals required to make components for modern electronics, magnets for wind power, etc., Missouri's south east mineral deposits are accruing new value.

You can find plenty of green guilt if you do some innerwebs searching to see how the materials for your cell phone despoiled the Chinese countryside. But telescopic environmentalism never really considers the modern accoutrements we, errr, need for daily living such as cell phones and that thin new iPad (known by a certain branch of the tech press as "fondleslabs," a term we'd very much like to help popularize).

Some random digging yielded these links, some of which are not particularly new. I'll watch for additional headlines, and stand by for anti-mining-wind-proponent-pretzels if these mines get re-developed.

http://www.popsci.com/technology/article/2011-03/rare-earth-mine

http://www.bizjournals.com/stlouis/news/2010/12/10/scientists-tackle-rare-earth-advances.html

http://www.bbc.co.uk/news/business-17348648

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Worth saying again

Was visiting with an armchair economist about the state of China's economy and the future of import/export/monetary relations with that country. We didn't have a great many answers, but I thought it worth reviewing this piece from 2005, mostly for that great Jeffrery Benard line at the end. The good prognosticator equivocates to keep shelf life on predictions.

Update 04/02/12 The demographers pay particular attention to the dearth of youngsters compared to the lump of oldsters. "Most particularly, these countries need to change the incentives that, albeit unintentionally, create unsustainable levels of singleness, childlessness and the prospect of massive, rapid aging of their societies."


 

 
China is a country of staggering statistics, which we could get staggeringly wrong. 

 

Fairchild's first rule for bandwagons is to disembark. That's what I've been doing lately with the whole China craze. It's not like I'm going out on a limb. I haven't plumbed deeply into obscure economic data, but anytime the major three news weeklies agree on a topic, there is a good chance they've gotten it completely wrong. China's century, they're calling it. But, if you ask this Sino-skeptic, China is an Asian Tiger with a few hoops to jump through for title to the next 95 years.

I heard at the University of Missouri's Breimyer Seminar earlier this year that the biggest social concern in China is the countryside disgorging as farmers and others of the peasant class head en masse to cities looking for a better life. Perhaps this is a sign of more freedom. And the urban workers often send remittances back to their rural families, which slightly masks the division of wealth. But the migration is creating serious class division problems in east-coast city enclaves. Even in a country whose modern government is shored up by the bones of 70 million dead from Mao Tse-tung's Cultural Revolution, Beijing is loathe to submit itself to radical social upheaval. As we saw with tanks in Tiananmen Square, the establishment's control can be brutal. But brutality in this age of camera phones can cause cracks in the periphery that bring the whole machine down.

We hear plenty about the Chinese economy sizzling along at a sustainable 9 percent growth. Yet, in the grain trade, every statistic about Chinese production or consumption is offered with the caveat: "Of course, because of irregularities in reporting, nobody really knows." That's polite shorthand for the fact that in an authoritarian government, facts are built to suit.

Economists of the Sino-enthusiast stripe have lauded Beijing's decision to decouple the yuan from the underperforming American dollar and its subsequent peg to a basket of currencies. But skeptics point out that during the go-go years when the yuan was pegged to the stable but cheap dollar, hyper investment created overcapacity in backbone industries like textiles and electronics. Meanwhile, some report that to maintain the dollar peg, the People's Bank of China picked up the tab for a fifth of the U.S. Treasury Bonds issued during the deficit-happy Bush administration. Now econ wags say that the Chinese business class isn't interested in buying more American paper but would rather have things more tangible and symbolic. This should sound familiar if you recall a white-hot, T-Bill-rich Japanese economy of the 1980s. American golf courses and iconic cultural real estate fell quickly into Japanese hands. In light of China's similar position, does the junk-bond status of General Motors look more precarious?

That may frighten a union man in Detroit, but it goes to the heart of a Sino-skeptic's thinking. Japan's supposed clobbering of the U.S. economy never materialized. In retrospect, it was the incestuous relationship between its businesses and banks that brought on Japan's economic crash. Observers agree that Chinese banking is corrupt and its stock exchange weak. Is a meltdown in store?

I won't cast predictions here, only doubt. So consider the stability of a state where by 2020 the one-child policy will have produced 20 to 40 million bachelors (and an upcoming pension crisis); a state where an obscene wealth gap breeds contempt and where corruption and brutality still rule; a state that governs behind a cloak of secrecy and duplicity. A runaway China? I'd go with Jeffrey Bernard's wisdom instead: One way to stop a runaway horse is to bet on him.

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FAPRI's new baseline

 

University of Missouri Senior Writer Duane Dailey delivers the specifics on FAPRI’s new baseline, which will color how Congress approaches upcoming farm legislation...

United States net farm income is projected at $95 billion for 2012, down from $98 billion in 2011, by a report to Congress today from the Food and Agricultural Policy Research Institute (FAPRI).

"While net farm income may fall a little short of last year, we expect 2012 to be another good year for most producers," said Pat Westhoff, director of FAPRI at the University of Missouri-Columbia.

Corn yields dropped below trend line the last two years, reducing carryover stocks and pushing up prices. "With normal weather, a bigger crop in 2012 may lead to lower prices this fall," Westhoff said. "Other crop prices tend to follow corn."

The annual MU FAPRI baseline was presented today (March 5) to the U.S. Congress. The baseline, extending 10 years, provides a measure for analyzing proposed changes in farm policy.

Trend-line yield for 2011 season was 160 bushels per acre; however, actual production was 148 bushels.

"Crop prices would be a lot lower today if we had not had back-to-back years of below-trend corn yields," Westhoff said.

FAPRI projects planted corn acres this year at 93.5 million acres, up from 91.9 million last year. An assumed normal yield in 2012 reduces per-bushel price to $4.81, down from $5.96 for 2011-12 market year.

Ethanol production is projected to remain at 2011-12 levels after years of rapid growth. An end of the 45 cents per gallon tax credit, high corn prices and constraints on ethanol used in conventional 10-percent blends contribute to slower growth.

Soybean prices for 2012 remain over $11 per bushel, after averaging an estimated $11.61 for 2011-12. "Soybeans must remain strong to be competitive with corn for acreage," Westhoff said.

"Given current tight corn supplies, markets will be sensitive to news about 2012 supply-and-demand prospects," Westhoff said. "Prices could fall if favorable weather increases crop production."

Even with good weather and higher yields, demand should stay strong enough to keep crop prices above pre-2007 levels, Westhoff said. "Weather remains the major variable, affecting grain production and livestock grazing."

Volatility can be expected. "Many of the factors that caused recent price swings remain in flux," Westhoff said.

Crop insurance accounts for a larger share of public support to farms than in the past, Westhoff said. High crop prices reduced expenditures on traditional farm programs.

The consumer price index for food rose 3.7 percent in 2011 and could grow a similar rate in 2012. However, in the following years of the baseline, food price growth follows general inflation rates.

Meats will show the highest inflation in 2012, as they did in 2011.

Beef cow numbers fell sharply in 2011, despite the highest cow-calf net return since 2005. Drought in major beef states kept ranchers from responding to demand signals.

Beef exports remain strong, particularly for high-quality beef, helping sustain prices.

The 2012 price of feeder steers, the most common product from Missouri herds, rises to $154 per hundredweight for 600- to 650-pound calves at Oklahoma City. That's up from an average of $139 for 2011 and $102 in the recession year of 2009.

"While beef export growth since 2005 gained much media attention, the drop in imports in that period almost matched the export gains," Westhoff said. "The relatively weak dollar and tight beef supplies worldwide place the U.S. in position to gain markets for the next decade."

Corn and feedstuffs prices will affect feedlot profitability as they bid for a shrinking supply of calves. Domestic meat supply dropped an unprecedented 22 pounds per person between 2005 and 2011.

If feed prices moderate as projected, per capita meat availability should stabilize and then grow after 2013.

While farm income increased, production costs grew $36 billion, almost 12 percent, in 2011. Feed, fertilizer and fuel led increases. Feed should drop; however, fertilizer and fuel remain high.

The MU FAPRI baseline assumes normal weather and continuation of current farm polices. While the 2008 farm bill expires this year, analysts assume current law prevails through the 10 years, for comparison of policy alternatives.

Macroeconomics on interest rates and inflation are provided FAPRI by IHS Global Insight. Economists at the Agricultural and Food Policy Center, Texas A&M, provide the economic impact of the baseline on representative farms across the country.

The MU College of Agriculture, Food and Natural Resources supports MU FAPRI.

When delivered to Congress, the 64-page report will be posted on the Internet athttp://www.fapri.missouri.edu/.

 

 

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