An Urban's Rural View

Once upon a time, a long time ago, the public asked but one thing of farmers: produce enough food. Over time tastiness and affordability were added to the wish list, but that was about it. Nobody cared HOW farmers produced food; that they produced it sufficed.

Oh, what some farmers would give to return to those simpler times. Today the public, or substantial parts of it, demands a potpourri of sometimes-contradictory things. We want assurances of food safety, a healthier environment, a cure to obesity -- and, yes, we still want our food to taste good and go easy on the wallet.

For food companies and restaurants and the farmers who supply them, these demands pose both opportunities and problems. Take, for example, the experience of the fast-food chain Chipotle Mexican Grill.

Chipotle has distinguished itself from the competition by emphasizing "food with integrity," defined as "finding the very best ingredients raised with respect for the animals, the environment and the farmers (http://tiny.cc/…. The company promises meat from antibiotic-free animals, dairy products from cows raised without synthetic hormones and local and organic produce "when practical."

It's been a successful formula. From a single restaurant in Denver in 1993 Chipotle has grown to 1,800 outlets. Its stock has become a Wall Street darling, rising $250 a share over the last year to more than $725 a share (http://tiny.cc/…). The stock has a price-earnings ratio north of 50, more than double that of competitors like McDonald's (south of 18) or Yum! Brands (just above 22).

Still, the formula can break down. As MarketWatch.com points out in an analysis titled "10 things Chipotle won't tell you," Chipotle can't always get the ingredients it promises customers (http://tiny.cc/…). Just the other day the company had to take pork off the menu at a third of its restaurants because one of its suppliers flunked an animal-welfare audit (http://tiny.cc/…). Apparently the unnamed supplier wasn't giving its pigs deeply bedded barns and access to the outdoors.

Thus does opportunity mutate into problem. One security analyst immediately cut his estimate of Chipotle's first-quarter earnings seven cents a share (http://tiny.cc/…). And that might not be the end of the story. As the Washington Post observed (http://tiny.cc/…), if Chipotle continues to expand rapidly, this won't be the last time it has to take a topping off the menu.

You have to give the company credit for faithfulness to its standards. It fessed up and did the right thing. At the same time you have to wonder: If restaurant goers really want pork from well-treated pigs, why the shortage? Why aren't more hog farmers changing their ways to compete for Chipotle's business? Why aren't new suppliers waiting in the wings?

Here's my hypothesis. It goes back to the contradictions in the list of what the public now asks of farmers. Some of us may want pigs to have deeply bedded barns and access to the outside, but we also want affordable pork. There's a limit to what we'll pay for animal welfare.

A restaurant chain can only figure out where that limit lies by trial and error. It will tend to set the price near the low side of its best guess; why discourage demand more than necessary? The less it charges for pampered-pig carnitas, the less it can pay for pork.

Maybe, just maybe, it's not paying enough to tempt farmers to take on the extra cost of the practices the chain thinks its customers desire.

As I said, it's just a hypothesis. If and when additional information emerges, my theory could prove wrong. In general, though, there's little question that farmers respond to price signals. If the premium is sufficient, supply will materialize. Farmers produce what the public demands.

And, again in general, the longer the public's wish list, the more the chance for contradictions. Chipotle may illustrate another of these. As anyone who's ever sampled one of the restaurant's burritos knows, it's pretty easy to end up with a high-calorie serving on your plate. Sustainably raised the chain's food may be, but it isn't necessarily the answer to obesity.

These kinds of contradictions are, to be sure, problems of prosperity. In the less-bounteous past, the public didn't worry about obesity or environmental degradation or the treatment of animals. The public worried about getting enough to eat.

So, for that matter, did farmers. All in all, farmers are probably better off with today's wish list, contradictions and all.

Urban Lehner can be reached at urbanity@hotmail.com

(CZ)

© Copyright 2015 DTN/The Progressive Farmer. All rights reserved.