That headline is how one cattleman characterized his failure to anticipate the changes that occurred in this industry the last couple of years. Looking back, he was exactly right, and it's a lesson for all of us.
I've researched to try to find those who predicted the ethanol boom and $5/corn, even just a couple of years back, but I could find no really credible voice making those claims. I still remember one feedyard operator telling me he totally missed the run-up in corn that started that fall but took comfort in the fact all his competition, as well as the huge grain complexes, corn farmers, and even the ethanol plants, also missed the signs. The mortgage crisis, oil prices, the value of the dollar, and the overall economy, while not as sudden as the ethanol boon, were not anticipated to change to the degree that they have.
The lesson for the industry is that we tend to rely on actual facts and data, when the political climate has been the real key.
- Using a classic cost/benefit analysis, look at the value of ethanol, its cost of production and the like. While you might conclude some type of government support, who would foresee legislation mandating 36 billion gals. of biofuels and 12 billion gals. of corn-based ethanol? The facts and the logic were irrelevant to the strength of the political dynamics.
- For five months, the fundamentals of the economy looked to be relatively strong. Few economists would have predicted a major recession or the need for a $150-billion stimulus package. But it was an election year, and the combination led to a decline in consumer confidence and the fixes to bolster it.
- Who would have predicted a Hallmark/Westland fiasco, except for those respectful of the commitment of the Humane Society of the U.S. to the destruction of our industry?
If you adopted the industry's November 2003 strategic vision of being a low-cost producer of high-quality corn-fed beef in a thriving global marketplace, you were likely 100% right -- looking at all the pertinent facts. Less than five years later, however, you have to be rethinking that very foundation and all the decisions you made based on those assumptions.
I had the privilege several years ago of serving on the industry's Long Range Planning Task Force. The experts built key underlying assumptions for the industry, some of which have since proven seriously flawed. When one asks why, it's because we missed the one key outside source of information we needed -- someone who truly understood the political dynamics that occur in the pursuit of power and re-election.
The reversal of support for free trade, the ethanol mandates, the difficulty of reopening trade with Korea/Japan, etc., could only been predicted by someone truly knowledgeable of the political dynamics and winds of change blowing in this country and around the world. Those of us who profess to believe in free markets and capitalism are guilty of trying to base our predictions upon the presupposition that free markets and capitalism exist. But they exist only in the context of an environment that has seen government intrusion grow exponentially over time. Thus, the government is the key driver in shaping the future, and not the free hand of the marketplace.