Great advice from Adam Smith

From Goodreads. It is from his book The Theory of Moral Sentiments.

“The prudent man always studies seriously and earnestly to understand whatever he professes to understand, and not merely to persuade other people that he understands it; and though his talents may not always be very brilliant, they are always perfectly genuine. He neither endeavours to impose upon you by the cunning devices of an artful impostor, nor by the arrogant airs of an assuming pedant, nor by the confident assertions of a superficial and imprudent pretender. He is not ostentatious even of the abilities which he really possesses. His conversation is simple and modest, and he is averse to all the quackish arts by which other people so frequently thrust themselves into public notice and reputation.”

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Adam Smith And Joseph Campbell On The Dangers Of "The Man Of System" (2017) 

Adam Smith Meets Jonathan Haidt (on political polarization and the animosity of hostile factions) (2021)

America’s Ambitious Climate Plan Is Faltering

Global emissions are at records, while shift away from fossil fuels slows amid high costs, surging power demand

See By Ed Ballard and Amrith Ramkumar of The WSJ.

Keeping the air clean is laudable goal, but the benefit of actions in this area need to outweigh the costs.

Excerpts from the article:

"Renewable energy is growing faster than expected. But surging demand for power is sucking up much of that additional capacity and forcing utilities to burn fossil fuels, including coal, for longer than expected."

"The energy transition gained momentum in recent years as prices for renewable energy tumbled. Trillions of dollars in government and private investment flowed into technologies to address greenhouse-gas emissions. Industries like autos embraced major shifts in their businesses, and companies started to count and disclose their emissions.

That momentum stalled recently when costs soared, consumers balked and businesses fought against new regulations. Politicians stepped back from ambitious climate goals or campaigned against them."

"Emissions have declined as natural gas and renewables supplanted coal. But new data centers and factories are halting progress. A shift to electric vehicles and appliances could lead to a bigger crunch."

"Research firm Rhodium Group expects U.S. electricity demand to rise 24% to 29% by 2035, nearly twice the rate it projected a year ago."

"New York state’s aggressive goal of getting 70% of its electricity from renewables by 2030 has been upended by permit delays, rising costs and the cancellation of several early offshore-wind projects."

"Investment in improving the efficiency of buildings—a major driver of emissions—fell last year"

"Wind and solar are growing fast in that region [Southeast Asia] but are limited by the grid and other factors"

"Climate policy has also gotten wrapped up in trade politics. China controls swaths of the green-energy and materials supply chains. The U.S. showed it is willing to sacrifice climate action to build its own supply chains when the Biden administration put a 100% tariff on Chinese EVs."

"Faced with farmers blocking roads and spraying manure, the European Union this year dropped a proposed agricultural-emissions target from its new climate goal and relaxed green regulations in farming subsidies. Pro-environment parties that helped pass various climate laws suffered losses in recent EU elections."

"Ford Motor and General Motors are among the automakers dialing back their plans for new electric models amid flagging demand. Volvo Car recently abandoned a target to sell only fully electric cars by the end of the decade.

Mining giant Glencore was under pressure from shareholders to sell its coal business. They reversed course and encouraged the company to keep the unit, citing waning momentum in sustainable investing."

The U.S. Corn Crop Is Great. Farmers’ Finances, Not So Much. (how increased supply and inelastic demand can hurt farmers)

Grain prices have been in free fall since the Covid commodity boom ended, forcing some growers to consider difficult changes

By Kirk Maltais of The WSJ. Excerpts:

"The U.S. farm belt is headed for a bumper crop. Few farmers are celebrating, though.

Grain prices, under pressure since the Covid commodity boom crested, have fallen further in 2024. Rainfall has been ample across farm country for the first time in years, staving off the drought that has plagued the central U.S. and putting Midwestern corn and soybean harvests on track to set records."

"Prices for corn and soybeans were rangebound in the second half of the 2010s, weighing on farm returns. The record-high prices in 2021 and 2022 gave farmers a boost, but momentum has once again turned against them."

"Corn and soybeans are both trading at levels last seen in 2020. The producer-price index for corn, reflecting the change in the selling prices received by domestic producers for their output, has halved since hitting a recent high two years ago, thanks in part to strong production in Brazil. 

[farmer Steve] Nightingale is in the process of selling leftover crops from last year to make room for what he expects to be a bountiful harvest. But at his local grain elevator, he recently got $3.69 a bushel for last year’s corn—14% below the $4.30 he needs to break even."

"In February, the USDA forecast that net farm incomes would drop by a quarter this year. Economists at the University of Illinois say farmers in the state are likely to lose as much as $118 per acre of corn and $81 an acre for soybeans. The pain could be even worse if prices don’t rebound.

To be sure, weather is unpredictable, and any major event could reset what the economics look like for farmers. Any geopolitical volatility affecting the U.S. or a major trading partner such as China—that increasingly appears to be decoupling from reliance on U.S. agricultural exports—could spark a surge in grain prices.

But that aside, the growing presence of Brazil on the world agricultural market and the steady output of Russia are expected to keep pressure on prices and on U.S. farmers. 

“Between Brazil and Russia, they’re producing grain at a rate that is more than the world will ever need,” said Rob Fox, lead economist with agricultural lender CoBank’s research department. “The long-term picture looks not great.”

The pain facing farmers is ironic because few have seen such perfect growing conditions in an age that is coming to be synonymous with extreme weather events and other disasters."

This article basically says that supply shifted to the right. This led to a big price drop because demand for farm products is often inelastic (which usually means a fairly steep demand line). Price falls alot more than quantity rises, revenue falls. Demand for food can be inelastic because we can only eat so much. Even if food were free, most of might eat a little bit more but not much.

In the graph below, which comes from Economics Help.org, we can see that price falls much more than quantity rises. See What causes price fluctuations in agricultural markets? which discusses, among other things, inelastic demand.

Before supply increases in the graph below, total revenue for farmers would have been 700 = 350*20. But afterwards, revenue is just 440 = 200*22. This might be the situation that ADM is in right now.

 

Related post:

ADM Stock Slips After Falling U.S. Crop Prices Eat Into Profit (how increased supply and inelastic demand can hurt farmers) (2024)