Category Archives: Agriculture

… Local

A few miles west of Chapel Hill, North Carolina, there is a raised wooden pavilion with tables and chairs, surrounded by acres of farmland. On these fields they grow berries, herbs, and even tea leaves, which are steeped and served at Honeysuckle Tea House, an establishment inside the breezy open-air structure.

Honeysuckle

The farm and Honeysuckle Tea House are part of a large ecosystem of corporate entities that work together to reinforce each other and enrich the local community.

EastWestHoneysuckle and the farm are owned by EastWest Organics, a farm management company that owns or leases 227 acres of farmland and food producing forest land in Orange County, NC. They produce agricultural products that are used in beverages, such as berries, nuts, tea leaves, and honey.

In addition to the farms, EastWest owns the aforementioned tea house, as well as the Looking Glass Café in Carrboro, NC and the Honeysuckle Meadery and Wine Bar, also in Carrboro. Looking Glass is a traditional coffee shop which is attached to the meadery’s tasting room. Here you can sample Honeysuckle’s meads as well as other local beverages, such as wines, ciders, beers, and fermented beverages like kombucha. The meadery makes Honeysuckle’s meads, with ingredients sourced from EastWest’s farms.

EastWest is 20% owned by Unique Places to Save, a local non-profit. Unique Places (“UP2Save”) conserves unique social, cultural, natural, and agricultural places around the United States, and has a lot of assets in North Carolina. One such is the Keith Arboretum and Forest, in Chapel Hill. The arboretum was founded by a University of North Carolina professor over 40 years ago, and now has more than 4,000 species from temperate forests around the world. The core arboretum is buffered by additional protected woodlands and the Keith family farmstead which is available for private rental.

Unique-Places-to-Save-1

UP2Save has allowed Bee Downtown, a local startup, to house their beehives at the arboretum. Bee Downtown places beehives on the premises of corporations and other institutions who pay to sponsor hives. In exchange, the corporations receive educational content, have a new method of engaging with their employees, and get the honey from the hives. Bee Downtown is a successful, growing company that is now expanding to Atlanta from the Research Triangle region of North Carolina. The arboretum is also one of the farms for EastWest Organics. The company cultivates botanics from the forests and fields and also uses the bees’ honey for its meads (Bee Downtown also has hives at the tea house location farm. The bees pollinate the plants at the farm which produce the crops, such as berries). Given the extreme biodiversity of the arboretum, the honey from these hives is arguably some of the most unique in the world!

bee-logo-orange-01The number of large corporations that Bee Downtown works with is remarkable. Just in the Research Triangle area they have hives at IBM, SAS, Murphy’s Naturals, North Carolina State University, and even Burt’s Bees. Although many of its customers are large companies, it partners with other local companies as well. They have designed t-shirts with Durham, NC-based apparel company Runaway. Local companies that sponsor hives can also take the honey they collect and sell it under their own brand name (as Runaway has done).

One of the interesting aspects of these strong ties between entities is that UP2Save is a non-profit. Nevertheless, it sits as an anchor and facilitates a lot of commercial activity. Another revenue generating activity for UP2Save (beyond the proceeds it receives from EastWest Organics) is mitigation banking. The US Army Corps of Engineers requires new developments to offset their impact on wetlands by purchasing mitigation credits. These credits are created by mitigation banks. The “banks” are conserved wetlands which conform to Army Corps of Engineers environmental standards. UP2Save is able to meet its conservation mission, generate revenue, and help facilitate the development of new properties in local communities.

Keith ArboAll of these interconnected activities also create educational opportunities. The various entities offer educational programs as well as have spaces for formal or informal educational events. Bee Downtown educates its corporate clients about the importance of bees to the world, and they also host school groups at the arboretum. The arboretum doubles as an educational and research laboratory, given the array of species that it houses. Honeysuckle’s beverages educate consumers about agricultural practices and beverages and wellness. Furthermore, the agritourism promoted by Honeysuckle Tea House, the arboretum, and Bee Downtown grow interest in conservation and agribusiness, and all of these entities offer internships and other practical experiences for students from all of the local universities.

Local business is not an ideal in and of itself. The economics of local and small business is more nuanced than money staying in communities. However, local businesses that offer unique and superior value are worthy of our praise and patronage and can certainly strengthen communities all around the United States. Ecosystems of local businesses, such as the one highlighted here centered around UP2Save, promote culture, provide sustainable products for consumption, offer employment for individuals of varying levels of skill, and integrate with the society and education system. Importantly, they also offer partnerships and platforms for new local businesses to start up and grow. Perhaps the best argument for supporting local is that strong local business promotes income equality, whereas big box retail continues to consolidate wealth in the hands of a few wealthy individuals.

ROMRStrong local economic ecosystems also enhance service companies, and tech and platform companies. Many of the logos above were designed by a local creative agency called The Splinter Group. ROMR, a local tech company that allows individuals to book recreational access to private land (kind of like the AirBnB for conservation), has the Honeysuckle farm and the Keith Arboretum on its platform. However, these local economic ecosystems also rely on one-to-many companies for a variety of critical business services, and I continue to believe that one-to-many companies have an important role to play in the national economy and our local economies.

Splinter Group

Splinter Group’s work

For instance, all of these local companies and non-profits have websites, so they hosting and domain name registration services from companies like GoDaddy and Digital Ocean (I use these providers for my company). Splinter Group probably relies on Adobe for its design software. Nearly all of the companies promote themselves on a combination of Facebook, Twitter, Instagram, and Pinterest. Some also use LinkedIn for certain services. In addition, the local companies use payment services like Square or Clover to take payments and keep track of their finances. Companies that cheaply provide important business services to many companies will continue to play an outsize role in our economy. However, they need to proactively support the country’s economic values, or they run the risk of becoming vilified by the country, as we have recently seen with Facebook and other large tech companies.

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… My Favorite Entrepreneur

MomofukuOver my years (well, year and a half) at business school, I’ve been asked a handful of times, in formal interviews and informal settings, who my favorite entrepreneur is. I didn’t have an answer. However, over the last few months I’ve become increasingly impressed by David Chang. I’m now prepared to formally declare him my favorite entrepreneur.

David is a restauranteur. He opened Momofuku Noodle Bar in the East Village of New York City in 2004. It served Asian buns and noodle bowls. It gained a reputation for serving tasty food, and David opened another restaurant nearby. It did not take on quite as well, and was at risk of closing. David and his team scrapped the kooky Korean dishes for a more inventive late-night menu, and people began to show up in droves. He also fostered a friendship with a New York Times food writer, Peter Meehan, and in 2009 they published a cookbook inspired by Momofuku.

The cookbook was not David’s last foray into media. With Peter, he started a magazine called Lucky Peach (it recently published its last edition), and they have a new show on Netflix called Ugly Delicious. David’s restaurant business has proliferated into an empire, with approximately 13 properties around the world. In addition to the restaurants, he has a fast-casual fried chicken sandwich chain called Fuku and co-owns a chain of soft serve ice cream and cookie joints known as Milk Bar.  David is also prolific on Instagram, with far north of one million followers across his personal and professional accounts. He has made #uglydelicious one of my favorite hashtags. He was just in South Korea (David is a first-generation Korean-American) working with NBC on the Winter Olympics.

David’s work has always had a hint of the digital to it. Momofuku Ko is David’s two Michelin star restaurant. You can dine there by online reservation only, and it only has a tasting menu. Reservations become available 30 days prior to the day of service. David extended this online-only idea into a food delivery concept in New York called Ando. It was a delivery only company that aimed to use technology to revolutionize the food delivery space. It received millions of dollars in funding, but always had rocky business fortunes. In January, Uber Eats acquired Ando and will be integrating Ando and its technologies into the Uber Eats platform.

David did not stop at food service, media, or technology. He has also dived into food research. This has sparked a line of packaged food products that take seemingly off-kilter approaches to traditional Asian staples. David sells a miso made from chickpeas, sunflowers, or pistachios that he calls hozon and a grain-based soy-type sauce called bonji. I think my friend Dave (not Chang) even had a bonji Old Fashioned at Momofuku Má Pêche when we went there back in November. That meal remains my only Momofuku dining experience (although I did get a Compost Cookie at Milk Bar upstairs after the meal).

In addition to the packaged foods, David has partnered with a food lab called Booker and Dax to sell kitchen appliances. They have a special blowtorch for food, a food centrifuge, and a special tumbler for cocktail shakers. Booker and Dax is now also a bar inside one of David’s restaurants.

So why is he my favorite entrepreneur?

Sure, he is successful, but there are plenty of successful entrepreneurs, even more so than David. What I admire about David is that he has used different types of business to ever-expand his empire further outward, but has always kept a connection to his roots. It’s all food related, and shares similar themes of experimentation, and even the melding of the culinary and the technological. I value narrative as a high art form, and David seems to always have a narrative – whether it be literally telling stories on television shows or speaking about Asian gastronomy through his dishes.

I’m also excited to see how David can use his knowledge, experience, and funding, to make a positive impact on the world. He talks about improving the quality of life for food service employees. Booker and Dax is about finding solutions to food problems. Ando was about innovation in food delivery, and Ugly Delicious tackles issues of culture, politics, and place in the world. I hope that David, his team, and his posse expand the empire a little bit further and strive to make a persistent, positive impact that uses good business sense and a positive narrative to leave the world better off.

… Gas Prices

I hope I’m not biting off more than I can chew with this post, but it is important and interesting. Gas prices are going down – 8% since the end of June, and maybe further as we continue into the fall. And that is certainly good news. American consumers will spend less on gasoline, which means more money left over to spur other sectors of the economy and to retire debt and save.

A lot of times big news outlets only focus on a few determinants of gas prices when they talk about the economics of gas and oil, but it is a vast and complicated market that is not homogeneous worldwide or within the United States.

gaspump66% of the price of a gallon of gasoline is determined by the price of oil. Big news outlets like to talk about a few themes when they talk about the price of oil: rising consumption in emerging markets, such as China, and rising production in the US, coming from North Dakota’s Bakken Shale. In addition, they cover the price of oil. The most commonly cited price of oil are West Texas Intermediate (WTI) contracts traded on the NY Mercantile Exchange (NYMEX). However, unlike stocks and bonds which can be traded and transferred digitally, ultimately, for every oil contract, someone has to take delivery of the physical commodity. And due to the realities of geography, climate, and geopolitics, it isn’t possible to charge the same amount all over the world.

When we talk about gasoline, the buyers of the crude oil that we care about are the refineries. The US has refineries on all of our coasts: the East Coast, the West Coast, and the Gulf Coast. But all of these regions are sourcing oil from different parts of the world. Increasing levels of the North Dakota oil are heading East. The Gulf is importing high quality overseas oil, so that leaves the West Coast importing more expensive oversea oil, which is more expensive to refine.

One man that is embroiled in what very well may be the world’s most important logistical system is everyone’s favorite octogenarian, Warren Buffett. A large part of his conglomerate’s business is rail shipping, which includes North Dakotan oil. However, given capacity constraints, he has to balance oil shipments with grain shipments. When he is taking on too much oil the agriculture industry and food security experts get in a fuss (Warren even had a private talking-to with the Agriculture Secretary last week), and when he is shipping grains instead of black gold, every who cares about gas prices is up in a huff.

Ever since the Arab oil embargo the United States government has banned the export of US crude oil. Therefore, despite the rising domestic US oil production, it only has a muted effect on international oil prices. So all the refineries importing foreign oil, especially those on the West Coast and the Gulf Coast (since most of the good stuff from North Dakota is heading to the East Coast), are still beholden to international geopolitics. The good news is that international prices are down 16% since the end of June (US prices are only down 11% in the same time period).

Ukraine! Gaza! ISIS! Syria! Libya! Ebola! Egypt! How is it that international prices are down? The fact of the matter is that many of these conflicts have not adversely effected oil extraction and shipping to enough extent to disrupt prices. But I personally feel like there is still a lot of possibility for a shock event to push prices higher. For instance, the capital of Yemen, Sana’a has recently resembled a battlefield. Who knows how this could affect prices if there is an unexpected outcome. Even more so, if Ebola spreads through Nigeria and other West African countries that are large oil exporters there could be widespread export disruptions, driving up prices. That’s not to mention if Russian sanctions over Ukraine spill over into the energy sector, if ISIS expands its territory and the world blacklists its oil, or the Libyan conflict turns into a more disruptive civil war.

ISIS

Right now the cheapest gasoline can be found in the South, and the most expensive in the Northwest. State gasoline taxes also play a huge role in the final price at the pump, but this is purely a political phenomenon, not an economical one. Next time you fill up or hear or read a news story on oil or gas try to remember that the economics of the issue is a lot more complicated than the story may lead you to believe, and that prices may not stay this low forever.

This is part three of a four-part series of posts on the Economics of Oil. Other posts:

The Economics of International Oil Price Conspiracies

The Economics of Airfare

The Economics of Bitcoin Mining

 

Sources:

http://www.businessweek.com/articles/2014-09-17/u-dot-s-dot-gas-price-falling-fast-time-for-the-return-of-the-3-gallon#r=rss

http://www.eia.gov/petroleum/gasdiesel/

http://www.businessweek.com/articles/2014-08-20/public-data-sheds-light-on-secret-rail-movements-of-crude-oil

http://www.nytimes.com/interactive/2014/09/16/world/middleeast/how-isis-works.html?ref=world&_r=0

 

… El Niño

El Niño has been gathering some attention in the United States and in Nicaragua, where I am currently living and serving as a US Peace Corps Volunteer. Basically, El Niño is when a wide band of surface water in the Pacific Ocean off northwestern South America heats up, altering weather patterns worldwide. I guess at this point I want to emphasize that whether or not this is a good or bad thing is completely subjective. It depends on your stake in the climate. For house insurers in coastal areas, it is definitely a good thing. For farmers in Nicaragua, not so much. However, from an economic point-of-view, the effects of El Niño, I believe, can be objectively discussed and predicted.

First of all, we’re not in El Niño yet. The National Oceanic and Atmospheric Association (NOAA) has to declare an El Niño based on observed conditions, and they haven’t been observed yet. However, many climatologists are predicting an El Niño to be declared later this year, and the effects of the oceanic temperatures are already being felt. Last week the federal Climate Prediction Center released a monthly report giving an El Niño event a two-in-three chance of developing.

If you live in a hurricane zone, you can breathe a sigh of relief. The weather patterns sparked by El Niño typically subdue hurricane forces in the Atlantic, leading to a below average hurricane season. The polar vortex probably won’t be back this winter. And California may have some wet months ahead to quench its drought (but with storms come mudslides in California). However, unless this El Niño is intense, which is looking increasingly unlikely, it probably will not bring enough rain to completely alleviate the drought conditions.

Two hurricanes! In Hawaii?

Two hurricanes! In Hawaii?

On the other hand, if you’re in the Pacific hurricane zone (Mexico and Central America – which means me, in Nicaragua) get your go-bag ready. El Niño can make for more and stronger Pacific storms. The Midwest also better dust the cobwebs out its storm cellars. There is a correlation between tornadic activity and El Niño.

Parched California

Parched California

So what does this all mean for economic activity in the latter part of this year and 2015?

Crop yields and livestock production will probably drop in 2015 as a result of the changes in weather patterns, which will drive up prices and put a minor dent in GDP. Adverse effects on crops in Southeast Asia could also drive up prices on foodstuffs like palm oil, which is already feeling the pinch from Ebola. However, more significantly, the warmer weather through the winter could be a boon for consumer spending (no one goes out and does stuff or buys stuff when it’s snowing, as we saw this last winter, but during mild winters GDP usually gets a healthy boost). Ironically, Japan is monitoring for the opposite effect. The coming seasons could be unseasonably mild and wet, dampening consumer spending.

Agricultural production is a relatively small portion of the US economic output, so the effects of El Niño could be quite muted in America (of course the wildcard is freak storms, severe droughts, or other unanticipated effects that have dynamic effects of the economy). However, in many countries around the world – in fact, in most countries around the world, agriculture is a much larger component of economic output. Nicaraguan farmers are already struggling with a slow rainy season, and hot weather in the mountains could be contributing to the spread of “coffee rust,” a disease that affects coffee plants and is spreading through Nicaragua and other parts of Central America. Since agriculture is such a large part of the Nicaraguan economy, the impacts of El Niño could be far more serious down here. Plus, American farmers have crop insurance at their disposal to insulate themselves from the effects of a poor harvest. Most Nicaraguan farmers have no such recourses and their personal well-being and that of their families’ could be seriously harmed by adverse El Niño effects.

Coffee rust

Coffee rust

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