American farmers may need to pay attention to Wal-Mart business practices as they look for ways to survive in a global economy.
“People either love Wal-Mart or hate it,” says former U.S. Rep. Charlie Stenholm, “but (the company) is tremendously competitive. The working men and women who get good prices like it. Competitors who can't compete, don't.”
Stenholm, who recently signed on with a Washington, D.C., law firm as an agricultural adviser after losing the congressional seat he's held for 26 years to Texas redistricting, spoke at the recent Conservation Tillage, Cotton and Rice Conference in Houston and encouraged farmers to do everything possible to improve efficiency and to conserve resources.
The marketplace, he says, will play an increasingly important role in on-farm decisions. He says farmers can look to Wal-Mart and airlines for models of how and how not to run their businesses.
“The airlines that have streamlined and improved efficiency will survive,” he says. “The ones that will not won't make it.”
He says airline pricing defies common sense. “If airlines are losing money, why do they keep doing what they are doing?”
He says farmers can't afford that kind of management. “Farmers have to change their way of thinking,” he says, “and that's always hard to do. I was privileged to participate in five different farm programs and every one of them was different and each moved more into the marketplace.”
That marketplace is no longer the local gin or elevator. International trade agreements affect farmers' profit potential, he says. “Today, 96 percent of the world population lives outside of the United States. It makes little sense to focus on only 4 percent of the world population. The future lies in the international market. Like it or not, trade promotion authority is necessary. We have to get our government negotiators at the table to talk and determine how trade will affect our producers.”
Stenholm says the U.S. government must stand “shoulder-to-shoulder” with its farmers and other producers.
He says farm legislation will continue to focus more on environmental concerns. “The 2002 bill was the greenest ever and the next one will be greener and I will be for it. Conservation is essential to farmers and landowners.”
He says conservation and increased efficiency go hand in hand. “Growers are going to conservation tillage primarily because it is more efficient. We have to make it work even better. God's not making any more land so we have to take care of what we have.”
Stenholm says U.S. trade negotiators need to look hard at the World Trade Organization and develop a better agreement. “We need a new WTO agreement, better than the one we have. We also need to stop making these bi-lateral agreements one at a time. That will get us in trouble eventually. We need a guidepost for what our trade negotiators need to do to help our producers.”
He says allowing agriculture to be singled out in international trade is a mistake.
Tougher with China
Stenholm says China must “change a lot faster than they want to. We have to get tougher with China.” He says the Chinese complain about other countries' subsidies but create their own by manipulating their currency. “Australia has also eliminated subsidies but has created a currency advantage.”
He says the declining value of the U.S. dollar makes us more competitive but can decrease only so far until it hurts the economy. “The marketplace will be brutal if we don't get our fiscal house in order.”
He says farmers, as well as other Americans, should be concerned about who our bankers are — China and Japan. “The administration says deficits don't matter, but look at the economy. I'm a believer in the marketplace and the United States is not immune (to the way it works). There is a limit on how much money the United States can borrow before our bankers say that's the limit or start imposing high interest rates. I hope I'm wrong, but I don't think this will last forever. The market will determine what we do. The international market is ruthless and we must compete as efficiently as we can or it will whip us.”
Stenholm says farm organizations will be tested this session to preserve the farm bill. “It's on the line. We re-opened it last year when we passed the disaster bill.”
A big concern, he says, is maintaining coalitions with environmental groups that helped pass the 2002 law. “How will they react now that we have reneged on our promise? How much support will we get next time?”
He expects agricultural programs to take some hits as Congress trims the budget in its attempt to get the burgeoning deficit under control. “Agricultural organizations have to take a hard look at their programs and determine what cuts will do the least damage.”
Stenholm says other challenges for farm and ranch economies include assuring the public that BSE (mad cow disease) stays out of the U.S. food supply. “So far, American consumers have not reacted strongly to recent discoveries of BSE cattle in Canada. We do not have a BSE problem in the United States. I don't think we will have a problem because we learned from the Europeans. We removed meat and bone scraps out of cattle feed.
‘Can't afford that’
“But individual animal identification is critical for the cattle business. Market risk factors exist. The market took a four cents per pound drop in a few days after the latest BSE identification in Canada. We can't afford that; our margins are not that high to begin with.”
He says continued efforts in technology development will be crucial for agriculture. Nutrition, he says, also must be a key part of any farm bill.
Stenholm also says the country's agricultural program will do well if Congress and trade negotiators just apply a little “West Texas tractor-seat common sense,” to solving problems. “We have opportunities,” Stenholm says “and we will meet those opportunities with continued persistence.”