by Michael Sansolo
There are few forces on earth more fearful than unintended consequences. We know all about them: something is done for one reason and causes all kinds of impact in its wake.
Unintended consequences aren't always bad of course. Consider this silly example. A few weeks back, I managed to badly sprain my ankle playing tennis. Although the injury hasn't fully healed, I had to push it last week when I was invited to play golf at a beautiful course nearby.
You’re probably thinking this ends with my suffering a more severe injury, but you couldn’t be more wrong. Instead, something miraculous happened. Playing with a painful right ankle, my golf game improved dramatically. Turns out, all I need do to play better golf is twist my ankle.
Many times, these unintended results work very differently. More often, the result is negative.
Take the report last week that beer prices are likely to rise soon thanks to higher prices for hops. And as you bemoan the rising prices of both chicken wings and the beer to wash them down, think about unintended consequences of energy.
What's happening to grain prices these days is simply a matter of economics and energy. The attraction of ethanol as an alternative fuel may or may not help on the nation's energy imports. It's also helped drive up the per bushel price of corn, the key ingredient in ethanol. After that, unintended consequences roll in a series of events like a Rube Goldberg illustration.
That corn price rise drives up the prices for foods that heavily use corn, including all the animals that feed on corn. In addition, it gives farmers pause about exactly which crop they should plant. The more lucrative price for corn suddenly creates a ripple effect as acres used for wheat or hops get switched to corn. (In 2006, Canada reported a stunning drop in its wheat yield due largely to all the acreage switched to corn.) Suddenly bread and beer cost more too.
Get used to reports like this. I spent time last week with a group representing the nation’s chicken industry and no issue looms larger for them than ethanol. The growing demand (and government incentives) for ethanol has these farmers worried where they will get the feed they need for chickens. Government officials assured them that such fears are unmerited in 2007, as the corn yield is larger than ever. Yet the farmers wisely pointed out that the weather doesn’t always guarantee a record crop.
It’s always amazing how many issues concern us. Wherever you are in the industry, you have to stay constantly concerned about changing shopper tastes, competition, food safety, employees and so much more. Energy is an issue too, but usually the discussions surround how to conserve to reduce resources and expenses.
Yet, every now and then an unintended consequence comes barreling our way. And suddenly, a rise in the price of beer means a whole lot than just a rise in the price of beer.
There are few forces on earth more fearful than unintended consequences. We know all about them: something is done for one reason and causes all kinds of impact in its wake.
Unintended consequences aren't always bad of course. Consider this silly example. A few weeks back, I managed to badly sprain my ankle playing tennis. Although the injury hasn't fully healed, I had to push it last week when I was invited to play golf at a beautiful course nearby.
You’re probably thinking this ends with my suffering a more severe injury, but you couldn’t be more wrong. Instead, something miraculous happened. Playing with a painful right ankle, my golf game improved dramatically. Turns out, all I need do to play better golf is twist my ankle.
Many times, these unintended results work very differently. More often, the result is negative.
Take the report last week that beer prices are likely to rise soon thanks to higher prices for hops. And as you bemoan the rising prices of both chicken wings and the beer to wash them down, think about unintended consequences of energy.
What's happening to grain prices these days is simply a matter of economics and energy. The attraction of ethanol as an alternative fuel may or may not help on the nation's energy imports. It's also helped drive up the per bushel price of corn, the key ingredient in ethanol. After that, unintended consequences roll in a series of events like a Rube Goldberg illustration.
That corn price rise drives up the prices for foods that heavily use corn, including all the animals that feed on corn. In addition, it gives farmers pause about exactly which crop they should plant. The more lucrative price for corn suddenly creates a ripple effect as acres used for wheat or hops get switched to corn. (In 2006, Canada reported a stunning drop in its wheat yield due largely to all the acreage switched to corn.) Suddenly bread and beer cost more too.
Get used to reports like this. I spent time last week with a group representing the nation’s chicken industry and no issue looms larger for them than ethanol. The growing demand (and government incentives) for ethanol has these farmers worried where they will get the feed they need for chickens. Government officials assured them that such fears are unmerited in 2007, as the corn yield is larger than ever. Yet the farmers wisely pointed out that the weather doesn’t always guarantee a record crop.
It’s always amazing how many issues concern us. Wherever you are in the industry, you have to stay constantly concerned about changing shopper tastes, competition, food safety, employees and so much more. Energy is an issue too, but usually the discussions surround how to conserve to reduce resources and expenses.
Yet, every now and then an unintended consequence comes barreling our way. And suddenly, a rise in the price of beer means a whole lot than just a rise in the price of beer.
- KC's View:
