[Vwdiesel] Biodiesel support

[James Hansen]

On Thursday, July 04, 2002 6:22 PM, Jonbonbart at aol.com
[SMTP:Jonbonbart at aol.com] wrote:
> The nice thing is that it doesn't take millions of dollars to start a
> biodiesel production facility. Farmer Brown can start his own "agribusiness".
> Jonathan Bartlett

Thing is Johnathan, it's nice to think this way, but if left to the
"agribusinesses" to start and run the production facility, they are like any
other aspect of industry.  They exist to do business at max profit, and that
involves buying their inputs at the lowest possible cost.  To think the farmer
sees the benefits as you describe would be wrong- he remains a primary
producer, buying his inputs at retail, and selling his goods at wholesale.
 Farmer Brown may see a reflection of a few cents a bushel etc as there is
another customer bidding for his product in Chicago or Minneapolis only if
 they choose to use hedging as a input cost control tool, but in reality, the
farmer is still a price taker from his local buyer.  To assume he become an
"agribusiness" participant at any other level than primary seller of raw
materials is an incorrect one.
  An example:  We had a oat processing facility start up locally, by a local
businessman. The government boys were raving about how good it will be for
farmers,  the federal ag people were gladhanding and backslapping about the
western diversification aspect, which would be process it here, save on
shipping it to the ports, the money goes to the farmers because they can
deliver it directly to the processor etc, they even shoved 1.2 million of
farmer's money into his pockets.  Now how has this benefitted the local farmer
?  At present, about five years later  they don't buy hardly any oats directly
from  the local farmer, it's all bought through local elevators, the stuff they
do buy direct is at the current price offered in the elevator.  To add insult
to injury, he sold the facility last year to a US firm, and pocketed the cash.
 Can't blame him really, just using the system as it exists, but it sure pissed
off enough people to see the money that was "given" to him free and clear to
build a local business gets pocketed within 5 years of the grant.   This also
means that the shipping money that is "saved" (freight costs are deducted at
the elevator for a hypothetical final shipping seaport destination) goes
directly to the owner of the facility, or the elevator, not the farmer at all.
 I don't want to start a big biodiesel style argument again, but here is what I
already sent Scott.  I had just hit reply, and didn't look at the header to see
lack of the list addresses. (outlook strikes again)

"That's a tough one Scott. The fellow that makes the least amount of money from
any primary product consuming process is the primary producer.  What works
moderately well here are the new generation cooperatives like have been set up
for specialty crop processing, and inland terminals.  By moderately well, there
are considerations such as difficulty of generating startup capital from
private shareholders. Set up properly, the members are the shareholders, run
the business through the board of directors and company officers etc, but
shareholders are the producers of the raw material.  If you are not a grain
grower (in this instance) you cannot be a shareholder, and if you retire for
instance, there is fair buyout clause based on share net worth.  Strict
adherence to the rules puts the profits into the pockets of the local farmers,
who in turn spend their money in the community etc etc.  They are quite
successful as compared to the old style cooperatives who were nothing much more
than another agribusiness corporation with anyone for shareholders, and the
annual meetings tended to reflect the views of the speculative investor, not
the producer investor.  There has been some partnering of these organizations
with the ag business sector, but these tend not to be as successful for the
small investor in the long run- the game plan tends to change to reflect
generating higher share prices, rather than providing service at lowest
possible cost while generating dividend income, which is what they were set up
to do in the first place.  Legislation would have to limit who could own the
particular type of cooperative- clearly defining occupation (in this case
canola grower) as a prerequisite to share ownership.

There was one set up near here recently- a strawboard plant.  The majority
shareholders are farmers, you bought one share which represented the straw
yield of one quarter section of wheat.  You could buy as many shares as you
wanted,  provided you owned the land base, and deliver straw from that quarter
at a much higher purchase price than that bought from non members.  It's just
started operation this spring, so it remains to be seen how successful, but it
should very much so benefit the local farmer/shareholder greatly, who will then
in turn buy the fertilizer, seed and herbicides that makes agribusiness into
the corporate giants they are.  They still get their money in the long run, but
it's nice to see it get one or two turns through the local economy first."
-James

So this is my opinion fwiw.
-James