Events in Japan impact the farm

Hoard's Dairyman: 

Events in Japan impact the farm

Wed, 03/16/2011

We are globally connected. The earthquake, tsunami, and pending nuclear crisis in Japan have reminded us of that.

We first need to reflect and be thankful for our own families and loved ones as we watch the overwhelming images and sounds from international media sources. Then, we must give what we can. Through thoughts and prayers, or financially, the people of Japan deserve our generosity at the moment.

After we have given ample thought to the situation in Japan, we must also realize how this all trickles back to the farm. At the Professional Dairy Producers of Wisconsin (PDPW) annual business conference, Dr. David Kohl explained to an over-capacity room just how important Japan is to the world economy.

First, Japan is 8 percent of the world economy. About half of U.S. debt is foreign-held. After China, Japan is the largest holder of the foreign-held portion. As the Japanese bank pumps money into their economy, interest rates may rise as the "easy money" becomes harder to find. If you've paid attention to the stock market in the past 10 days, you know that the disaster in Japan has quickly slowed climbing markets. Commodity prices (including dairy) have also slid in step.

The price of oil was also characterized as a "black swan event" by Dr. Kohl. He reminded the crowd that every dollar in the price of oil barrels equals 2.5 cents at the gas pump. And, for every cent at the gas pump, we have a $1 billion change in the U.S. economy.

Despite the uncertainty in the horizon, producers at the PDPW conference still seem to be in high spirits. Through innovation and frugality, producers made it through the past two years. Because of that, it appears that many farmers are still only window shopping. As one manufacturer put it, "Farmers are welding, screwing, and nailing gates back together. But, they're not ready to buy gates."

The two-day business conference ends with more great educational sessions and election results today. The crowd and trade show have continually grown each year from the original meeting of 38, nearly 20 years ago.