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A similar oversupply happened right before the Great Depression. Wheat prices were dropping from too much supply partially attributed to newly expanded prairie

by mapmap 9y ago

A similar oversupply happened right before the Great Depression. Wheat prices were dropping from too much supply partially attributed to newly expanded prairie farming in the US. But these farmers owed fixed costs on their mortgaged land. So to pay their expenses, they plowed up more prairie and grew more wheat. This compounded the supply problem. Eventually, as wheat piled up at railroad depots unable to be sold, farmers left the plowed prairie fallow and the topsoil blew away. Source: The Worst Hard Time by Timothy Egan

StudentStuff 9y ago
Thing is, prices for food never really shot back up massively, instead our govt ended up creating price floors for many commodities, insofar as they would give farmers money if what they produced was sold for less than a certain amount[1]. This led to consolidation, whereby family farmers became much fewer in number, and those that owned and operated larger farms ended up working a 2nd job to cover their living expenses. What used to take a whole family to farm is now nearly entirely automated, causing food prices to continue to decline. 1 - https://en.wikipedia.org/wiki/Agricultural_subsidy#United_States https://en.wikipedia.org/wiki/Agricultural_subsidy#United_St...
- falsedan 9y ago
  > What used to take a whole family to farm is now nearly entirely automated, causing food prices to continue to decline I don't see the immediate causal relationship between these: cars are semi-automatically manufactured, but the price of cars hasn't declined anywhere near as much as grain/commodities.
  - Pyxl101 9y ago
    The quality of vehicles has increased dramatically over that time. There isn't a similar increase in the quality of grain. A vehicle that I purchased roughly ten years ago has operated perfectly fine with half of its scheduled oil changes and very little other maintenance. From an engineering perspective I find that mind-blowing: you buy these machines and they operate flawlessly for years, running for thousands of miles, while performing a complex, mechanical task with many moving parts. It's easy to take for granted how marvelous modern automobiles have become.
    - falsedan 9y ago
      Thanks for explaining how car quality has improved, but I still don't follow your link between automation and price decreases. I feel like your explanation doesn't address the market side of farming, and disregards the huge advances in crop & agricultural science.
      - danmaz74 9y ago
        Not the OP, but the point is that the car you buy today has much more value than a car that was sold 20 years ago at a similar price. So, even if the average price paid for a new car didn't go down, the price for the same car has effectively decreased, thanks to automation.
        pavlov 9y ago
        Also, the regulatory environment has changed. The car you could buy 40 years ago couldn't be sold today because it's unsafe, too polluting, etc.
        falsedan 9y ago
        I still don't see how this relates to farm automation: automation didn't significantly change the price point, it increased production, decreased labor costs and increased equipment/maintenance costs.
        jerf 9y ago
        I can't help but get the sense that you want to see "factor X made Y cheaper" come out in Y getting absolutely cheaper. But it's just a single factor in a complex world. Consider the alternative; do you really think that removing the automation today would have no impact on the price? Even after the economy had a chance to adjust? Personally I find the idea incredible, in the older sense of "not credible".
        falsedan 9y ago
        > do you really think that removing the automation today would have no impact on the price? I haven't considered that! I know it would affect production speed, which could be addressed by increasing capex to build more factories, and which could be funded by increased revenue or investment. But here's the thing: this car talk doesn't help me understand how agricultural automation caused grain prices to drop. That's my question & what I continually seek clarification on. BTW you can just ask me what I think instead of offering me some strawman claim to take under my wing. Argue in good faith! If a point of view sounds incredible to you, just go right ahead and assume I must have a more credible point of view that I haven't communicated effectively yet.
  - dredmorbius 9y ago
    What's happened with farming has been a tremendous reduction in the amount of human and animal energy inputs though a set of factors: * Increased mechanisation of farming -- direct muscle-power substitution. * Increased fertiliser application -- removal of binding constraints on plant productivity (see Leibig's Law of the minimum). * Increased pesticide application -- removal of parasite load and requirements for plant-provided parasite defence from production. * Breeding for increased caloric yield -- given the reduced demands on non-food plant metabolic expenditure, more of that energy budget is channeled into high-yield varietals and cultivars. (Howard Odum has excellent discussion of pest/productivity dynamics in plant energy budgets.) * Increased overall agricultural knowledge and management. Approaching the potential envelope by following maximally-effective practices. The ability to motivate large-scale activities quickly (e.g., harvest entire fields within days or hours of optimal state) factors into this. There's also the fact that the energy substituted for human and animal inputs is subject to a natural capital draw-down understatement of 10^2 to 10^6 magnitude (and more likely the higher). Petroleum and natural gas prices (NG is the primary input to nitrogen fertiliser production) are grossly understated under current economic and accounting models. For automobiles, the price reductions are less evident in large part because the starting point in the story occurs well into the inputs- and process-modification regime. If you extend the concept of "making cars" to "wagon construction and iron smelting" as of the 16th or 17th century, when wrought iron was fired by charcoal, not rock coal, you'd see fairly comparable efficiency gains. Metalurgy made tremendous leaps in the 19th century (Bessemer steel, 1860s, aluminium smelting, 1880s) as well, far in advance of generally affordable automobiles (1910s) and the explosion in automobile ownership (1950s, for the U.S., later elsewhere). Robert J. Gordon notes that the rate of patent filings for both automobiles and aircraft peaked by the 1920s. Not that there hasn't been additional technical refinement, but the rate is markedly slower. (See The Rise and Fall of American Growth, 2016.) Much automobile development has also gone into what I'd call technological "hygiene factors" -- addressing consequences of the initial concept development: safety, pollution, efficiency, and reliability. Another set of developments have gone into factors which influence surface appeal but do little for functional performance, call it bling. (Gordon also addresses, though IMO mis-attributes this factor.) There are other factors. So long as automobiles are made of steel or aluminium, there's a fixed energy cost in their production (ore reduction, refining, and smelting). Until and unless the underlying materials are substituted, that will remain. Actual assembly is fairly straightforward, and Henry Ford had already done a great deal to optimise assembly-line methods. The increased use of robotics substitutes more for the control element of labour than the energy input (as was the case in ag), resulting in more precision and consistency (and enabling greater complexity -- the Jevons Paradox). The cost of actually programming automated assembly equipment has (at least until recently) rivalled the cost of the robotics themselves. "Cheaply programmable" had not been a feature. Upshot: Farming as of 1920 offered far more opportunities for optimisation than automobile manufacture did. Automobile manufacturing saw additional, non-performance features added. Automation substituted for different factors than mechanisation. Corn and wheat don't demand cupholders, electric windows, in-vehicle entertainment, and self-parking systems.
dredmorbius 9y ago
The general phenomenon is the "Backward-S Shaped Supply Curve", and yes, I mention the Dust Bowl instance (from Egan via Burns's PBS series) sepecifically. There are others. https://redd.it/53mcxn https://redd.it/53mcxn You'll see this phenomenon any time an economic agent (individual person, labour market, farmer, extractive resource operator) has some inflexible and fixed minimum set of costs to maintain or they will go out of existence, vs. some variable production function or market price structure. It's similar with the general aviation phenomenon of "failure to maintain altitude". Aircraft fly fairly well through air. Performance characteristics through land or water are rather less optimal.

by mapmap 9y ago

StudentStuff 9y ago

Thing is, prices for food never really shot back up massively, instead our govt ended up creating price floors for many commodities, insofar as they would give farmers money if what they produced was sold for less than a certain amount[1]. This led to consolidation, whereby family farmers became much fewer in number, and those that owned and operated larger farms ended up working a 2nd job to cover their living expenses. What used to take a whole family to farm is now nearly entirely automated, causing food prices to continue to decline. 1 - https://en.wikipedia.org/wiki/Agricultural_subsidy#United_States https://en.wikipedia.org/wiki/Agricultural_subsidy#United_St...

falsedan 9y ago
> What used to take a whole family to farm is now nearly entirely automated, causing food prices to continue to decline I don't see the immediate causal relationship between these: cars are semi-automatically manufactured, but the price of cars hasn't declined anywhere near as much as grain/commodities.
- Pyxl101 9y ago
  The quality of vehicles has increased dramatically over that time. There isn't a similar increase in the quality of grain. A vehicle that I purchased roughly ten years ago has operated perfectly fine with half of its scheduled oil changes and very little other maintenance. From an engineering perspective I find that mind-blowing: you buy these machines and they operate flawlessly for years, running for thousands of miles, while performing a complex, mechanical task with many moving parts. It's easy to take for granted how marvelous modern automobiles have become.
  - falsedan 9y ago
    Thanks for explaining how car quality has improved, but I still don't follow your link between automation and price decreases. I feel like your explanation doesn't address the market side of farming, and disregards the huge advances in crop & agricultural science.
    - danmaz74 9y ago
      Not the OP, but the point is that the car you buy today has much more value than a car that was sold 20 years ago at a similar price. So, even if the average price paid for a new car didn't go down, the price for the same car has effectively decreased, thanks to automation.
      - pavlov 9y ago
        Also, the regulatory environment has changed. The car you could buy 40 years ago couldn't be sold today because it's unsafe, too polluting, etc.
      - falsedan 9y ago
        I still don't see how this relates to farm automation: automation didn't significantly change the price point, it increased production, decreased labor costs and increased equipment/maintenance costs.
        jerf 9y ago
        I can't help but get the sense that you want to see "factor X made Y cheaper" come out in Y getting absolutely cheaper. But it's just a single factor in a complex world. Consider the alternative; do you really think that removing the automation today would have no impact on the price? Even after the economy had a chance to adjust? Personally I find the idea incredible, in the older sense of "not credible".
        falsedan 9y ago
        > do you really think that removing the automation today would have no impact on the price? I haven't considered that! I know it would affect production speed, which could be addressed by increasing capex to build more factories, and which could be funded by increased revenue or investment. But here's the thing: this car talk doesn't help me understand how agricultural automation caused grain prices to drop. That's my question & what I continually seek clarification on. BTW you can just ask me what I think instead of offering me some strawman claim to take under my wing. Argue in good faith! If a point of view sounds incredible to you, just go right ahead and assume I must have a more credible point of view that I haven't communicated effectively yet.
- dredmorbius 9y ago
  What's happened with farming has been a tremendous reduction in the amount of human and animal energy inputs though a set of factors: * Increased mechanisation of farming -- direct muscle-power substitution. * Increased fertiliser application -- removal of binding constraints on plant productivity (see Leibig's Law of the minimum). * Increased pesticide application -- removal of parasite load and requirements for plant-provided parasite defence from production. * Breeding for increased caloric yield -- given the reduced demands on non-food plant metabolic expenditure, more of that energy budget is channeled into high-yield varietals and cultivars. (Howard Odum has excellent discussion of pest/productivity dynamics in plant energy budgets.) * Increased overall agricultural knowledge and management. Approaching the potential envelope by following maximally-effective practices. The ability to motivate large-scale activities quickly (e.g., harvest entire fields within days or hours of optimal state) factors into this. There's also the fact that the energy substituted for human and animal inputs is subject to a natural capital draw-down understatement of 10^2 to 10^6 magnitude (and more likely the higher). Petroleum and natural gas prices (NG is the primary input to nitrogen fertiliser production) are grossly understated under current economic and accounting models. For automobiles, the price reductions are less evident in large part because the starting point in the story occurs well into the inputs- and process-modification regime. If you extend the concept of "making cars" to "wagon construction and iron smelting" as of the 16th or 17th century, when wrought iron was fired by charcoal, not rock coal, you'd see fairly comparable efficiency gains. Metalurgy made tremendous leaps in the 19th century (Bessemer steel, 1860s, aluminium smelting, 1880s) as well, far in advance of generally affordable automobiles (1910s) and the explosion in automobile ownership (1950s, for the U.S., later elsewhere). Robert J. Gordon notes that the rate of patent filings for both automobiles and aircraft peaked by the 1920s. Not that there hasn't been additional technical refinement, but the rate is markedly slower. (See The Rise and Fall of American Growth, 2016.) Much automobile development has also gone into what I'd call technological "hygiene factors" -- addressing consequences of the initial concept development: safety, pollution, efficiency, and reliability. Another set of developments have gone into factors which influence surface appeal but do little for functional performance, call it bling. (Gordon also addresses, though IMO mis-attributes this factor.) There are other factors. So long as automobiles are made of steel or aluminium, there's a fixed energy cost in their production (ore reduction, refining, and smelting). Until and unless the underlying materials are substituted, that will remain. Actual assembly is fairly straightforward, and Henry Ford had already done a great deal to optimise assembly-line methods. The increased use of robotics substitutes more for the control element of labour than the energy input (as was the case in ag), resulting in more precision and consistency (and enabling greater complexity -- the Jevons Paradox). The cost of actually programming automated assembly equipment has (at least until recently) rivalled the cost of the robotics themselves. "Cheaply programmable" had not been a feature. Upshot: Farming as of 1920 offered far more opportunities for optimisation than automobile manufacture did. Automobile manufacturing saw additional, non-performance features added. Automation substituted for different factors than mechanisation. Corn and wheat don't demand cupholders, electric windows, in-vehicle entertainment, and self-parking systems.

dredmorbius 9y ago

The general phenomenon is the "Backward-S Shaped Supply Curve", and yes, I mention the Dust Bowl instance (from Egan via Burns's PBS series) sepecifically. There are others. https://redd.it/53mcxn https://redd.it/53mcxn You'll see this phenomenon any time an economic agent (individual person, labour market, farmer, extractive resource operator) has some inflexible and fixed minimum set of costs to maintain or they will go out of existence, vs. some variable production function or market price structure. It's similar with the general aviation phenomenon of "failure to maintain altitude". Aircraft fly fairly well through air. Performance characteristics through land or water are rather less optimal.