After the first couple months of the new administration, the one thing we can say for certain is we voted for change and we’re certainly getting it. In a whole host of areas, we’re not seeing shifts in policy or emphasis, but seismic changes.
Despite Obama’s campaign criticisms of George W. Bush, foreign policy has largely remained the same. But, in most areas, especially those relating to environmental, economic and energy issues, the new administration is moving aggressively in totally new directions.
In part, because the policy changes have been so dramatic, the impacts have yet to be felt, and the trillions in additional spending have yet to be spent. The reshaping of the energy, health and ag segments of the economy has taken a back seat to the restructuring of the auto industry, but with each passing day these issues are moving higher on the political agenda. Immigration, taxes and the regulatory environment will be radically different. Then there’s the whole cap-and-trade carbon emission issue.
It’s a tremendous amount for a manager to absorb; there are just so many more unknowns to ponder in formulating one's strategic plan. Several things appear to be evident, however. Consumers will have less disposable income, taxes will rise and the historic debt and spending designed to reshape our economic structure will likely lead to a significant reduction in the value of the dollar and the resurgence of the greatest hidden tax of all – inflation.
The regulatory environment will be less friendly and greatly expanded. Cheap and efficient energy sources will be artificially priced higher to make other energy sources viable, in the hopes their subsidization will result in breakthroughs for alternative and "greener" energy sources.
As seen this week with the JBS and Tyson announcements, the larger entities that tend to have a more formalized planning structure are already adjusting to the new environment. That’s a pretty good indicator that, as producers, we need to sort through some of the ramifications of these policy changes and adjust our business model accordingly, as well.
One cattle feeder remarked (half jokingly) to me this week that the only way to take advantage of decreasing demand and increasing input costs is to buy cattle cheaper. The thing is that, while margin operators are quite capable of making appropriate changes to their models, it’s more difficult for cow-calf producers with such large fixed costs. Thus, increasing value and price received, while squeezing out all efficiencies, will be paramount in the months and years ahead.