Dwindling Peanut Industry

By Laura Simmons
April 3, 2011

For my enterprise paper I chose to write about the VA peanut industry and it's impact on the global peanut market. When I began my research I didn't know where to start. After contacting almost every peanut company in existence in Virginia, I started to see some results. My questions about the industry were met with overwhelming responses from peanut growers, shellers and sellers. I learned that the "Virginia" peanut is a gourmet peanut type that is mostly sold in the U.S, but is also sold on a global level. I also learned that while the U.S. had a global presence in the market historically, recently the industry has fallen behind China and Argentina. When speaking to the head of a "shelling" company (a business that buys peanuts from farmers and shells and cleans them before selling them to companies like Planters and Jif), he admitted that farmers in the U.S are pulling away from the peanut company because it is not as lucrative as other crops like cotton and soy. In addition, food safety is a huge issue with the peanut industry especially after serious salmonella scares that happened a few years ago in a peanut company located in Lynchburg, VA. Farmers are discouraged to grow peanuts because it requires such expensive food sanitation processes. But, there is still a lot of new research being done on peanut breeding and quality, which will hopefully re-vamp the U.S industry.

State Legislatures Play the Lotto

Last Friday, March 30, the jackpot for the Mega Millions lottery grew to a record-breaking $656 million.  With the jackpot at a record high, it caught the eye of not only millions of lotto hopefuls, but also state legislatures. 

The winner of the lotto has to pay a hefty tax back to their state.  In most states the tax on winnings ranges from 5 to 9 percent.  For states such as Rhode Island and New Hampshire, this meant the possibility of an over $20 million payout which would have gone a long way in their small state budgets.

In the end it was the Illinois, Maryland and Kansas state legislatures left with smiles on their faces as three residents from these three states split the record jackpot. Illinois and Kansas both have 5 percent taxes on winnings, meaning this jackpot alone will bring in an estimated $7.9 million for each state.  Maryland has an 8.5 percent tax rate on winnings and will take in an estimated $13.4 million from the winner. 

The Mega Millions jackpot is especially welcomed revenue for state legislatures because it comes largely from other states’ pockets.  Most lotteries are confined to one state but the Mega Millions is played in 42 states plus the District of Columbia and U.S. Virgin Islands. 

Many state legislatures rely on lottery revenue as part of the budget each year.  According to the website ThinkProgress.org, lotteries were first perceived as fiscal saviors, but they do not annually bring in the anticipated revenue.  Even with this knowledge, many states still earmark lottery revenue for specific parts of the budget, most often education. 

Studies have shown that this practice is not a good long-term solution to budget imbalances at the state and local level.  The Nelson A. Rockefeller Institute of Government found that “new gambling operations that are intended to pay for normal increases in general state spending may actually add to, rather than ease, state budget imbalances.”

Taking New Hampshire as an example, 27 percent of every dollar spent on a lottery ticket is earmarked for education.  What many people don’t realize is that because state governments expect to make a certain amount of money each year from the lottery, they actually decrease the allotted amount of stable funds for education. This means that the money from the lottery is not a bonus for education, but money that education actually relies on each year. 

This means states are betting on a steady revenue stream each year from lotteries.  Unfortunately for a state like New Hampshire that has seen the revenue on a steady decline for the past five years, this means less money for schools. 

So why earmark the lottery money for such a vital part of the budget such as education?

States often earmark lottery revenues toward education as a marketing ploy.  It sounds a lot better to a consumer when close to 30 percent of each dollar is going toward education rather than going to corrupt politicians’ salaries or an unnecessary regulatory board.

Lotteries aren’t just gambling away your money, they may be gambling away your child’s education too.  

-Tyler J. Tokarczyk

Sweden's Mexico: Conflicts Between The Needs of the Virginian Worker and His Ideology

For my enterprise story, I am writing about the Ikea plant that has opened in Danville, VA and the accusations surrounding the plant of mistreating and intimidating their workers.  

Ikea is a Swedish furniture factory, where in its native country, factory workers are paid about $19 an hour, and given five weeks of paid vacation thanks to government mandates. Danville workers, however, are paid at $8 an hour with merely 12 vacation days, eight of which are dates determined by the company.

One could portray Ikea as an evil corporation that is exploiting American workers. However, the company is for the most part working within the laws and regulations of the United States. Ikea has been criticized for not providing the same benefits to American workers that it does for their European counterparts. Why should Ikea be held responsible to operate by Swedish law in the United States?

My stance on the issue is not to defend Ikea in this situation, but to criticize the policies and voters of Virginia. I find the disconnect between the needs of the blue-collar Virginian, and his anti-government, anti-union, anti-interference values fascinating. Countries such as Sweden have found a way to formulate a mutually beneficial social contract between the government and its people. Why not us? Do Americans not want a higher quality of life? Do we prefer lower wages and less vacation days?

Perhaps some of our conservative values harken to a sense of patriotism, and the perception that government stepping in to protect workers from being abused is anti-American. Maybe it is an idealistic belief in the American Dream. To these types of thinkers, I offer this clip from The Daily Show with John Stewart, which deals with the reality that, in this instance at least, America has become "Sweden's Mexico".


http://www.thedailyshow.com/watch/wed-june-29-2011/swede-dreams---made-in-america

- Bryan Stuke

Fed Slows Down Efforts

            Today, the Fed showed signs that it would slow down its action to stimulate the economy. Apparently the Fed has decided to slow down its bond buying programs because the economy has showed signs of improvement.

            However, apparently Wall Street wasn’t as agreeable with this deal. According to an AP piece, traders started selling stocks and bonds after the minutes were released.

            This caused the yield on a 10-year treasury note to rise from 2.16 percent to 2.3 percent. This is pretty significant because the yield has an inverse relation with its price. As the yield rises, the price drops.

            The Dow closed today at 13,199 falling about 133 points throughout the day, 65 points lower from yesterday.

This seemed to be exactly what the Fed was trying not to do. They were so sure of the economy, so it stopped its policy of trying to stimulate the economy, only to have the Dow drop at the end of the day.

However, the Fed’s decision seems to be justified. They decided to do this with the recent drop in the unemployment rate. It is now at 8.3 percent, but, according to the article, Ben Bernanke says he doesn’t expect the unemployment rate to continue dropping at its current rate.

Billy Crosby

Oil Boom Towns Struggle to Adapt

            In 1995, the US Geological Survey published a report estimating that there were 150 million barrels of oil “technically recoverable” from the Bakken Shale formation, a rock unit covering around 200,000 square miles of land in Montana, North Dakota, and parts of Canada.  Because of rapid technological advances in surveying and extraction procedures, the estimate as of March 2012 now hovers around 24 billion barrels.  News of so much extractable oil has sent major US Energy companies racing to small towns near the formation to set up camp and get a piece of the profits, bringing with them a whole new set of challenges for local economies.

     

           Williston, North Dakota recorded a population of about 10,000 people from the 1960’s until 2000.   Like countless other towns in the region, Williston’s economy was based primarily around agriculture, that is until the mid 2000’s when major oil companies started eyeing North Dakota and the Bakken Formation for development.  Today, official estimates put the population level at 20 or even 30 thousand, comprised of workers from around the country coming for jobs where starting pay can surpass $100,000.

            

            The large number of workers have made Williston one of the top oil-producing sites in the United States in terms of output, close to surpassing Alaska’s Prudhoe Bay, the historical top-dog in domestic output.  This has brought big money, as well as unprecedented amounts of stress, to the once sleepy farm town. 

In just the past two years the Williston school district has dealt with 480 new students, a 22 percent overall increase.  This may not seem extraordinary, but the superintendent Viola Lafontaine notes that the increase is equivalent to adding “a whole elementary school.”  Even more, Lafontaine expects 1,200 more new students in the coming year. 

Because of a lack in available housing, oil workers used to sleep in their cars in the local Wal-Mart parking lot, which eventually evolved into a neighborhood of trailers and RV’s until management kicked everyone out.  There is finally some new housing going up, but demand is so high that workers can expect to pay $2000 a month for a small one bedroom apartment, that is if the they can find a lease.  Most new apartment complexes are entirely leased months before planned completion.

Williston’s economy might appear strong from the outside (it boasts a 0.8% unemployment rate), however many are concerned that the percentage of oil-revenues major companies are required to give to local economies is not keeping up with the explosion in economic demand.  Williston is a town built for 10,000 local residents, not 20,000 newcomers who now require new streets, sewer facilities, water-treatment plants, schools, housing etc.  Many locals, like Lafontaine, are fighting for more state aid for North Dakota’s booming oil-producing region, but they’ll need significantly more funds than they’re currently allocated to keep up with the soaring population levels and production rates found in towns around the Bakken Formation.

-Harper Coulson

RIM's New Woes

            Research in Motion, once the leading player in the Smartphone market, recently posted a quarterly loss of $125 million, or $0.24 per share, amid fierce competition from Apple and Android.  Adjusted net income fell from earnings of $934 million this time a year ago to just $418 million, confirming analyst’s weak revenue expectations. Former co-chief executive and board member Jim Balsillie and chief technology officer David Yacht resigned shortly after the posted loss, adding to the company’s woes. 

            Thorsten Heins, recently brought in as CEO, made a statement claiming RIM would start focusing on the business market, a segment it dominated in the early 2000’s when it was one of the only companies to offer email on a mobile phone.  “We plan to refocus on the enterprise business and capitalize on our leading position in this segment,” he said.

            RIM has long been losing relevancy across the board as key competitors continue to innovate and crowd out market share.  RIM seemed to have been so blinded by their successful stranglehold on the market in its early years that it forgot to continue pushing the envelope, staying true to the basic applications like email, calendars and SMS messaging while Apple introduced us to a world of cutting-edge Smartphone technology.

            Many analysts are starting to draw comparison between RIM and Blockbuster, one of the most prominent business flops of the past decade.  Blockbuster one dominated its space for years, but failed to keep up with innovative competitors like Netflix who offered a more convenient and cost-effective business model focused on DVD rental by mail.

            Is RIM destined to go the way of other obsolete technology companies that fell from market dominance? Top executives think there is still time to make a push to regain market share by refocusing on the foundation of its core business.  Investors apparently share this confidence-- RIM stock traded close to $15 with high volume the day after the earnings report was released. 

            On the short term RIM stock looks to be a risky investment as it undergoes complex corporate refocusing.  However, investors seem to be willing to ride the wave for a payout in the long-term as RIM seeks to become the business-enterprise focused company it once was.

-Harper Coulson

Why Should We Care About the ESM?

By: Mike Ott
3/29/12

For something that has yet to do anything, the Eurozone’s new European Stability Mechanism, or ESM, has commanded plenty of attention this year. The ESM is a pool of funds which takes money from Eurozone member countries and sets it aside for use in case a member of the Eurozone is threatened with insolvency. Right now, the ESM is planned to replace the European Financial Stability Fund, or EFSF, which is expected to last until mid-2013. The ESM, which is meant to be a permanent fund, is expected to become operational during June of 2013. Currently, it is expected that the ESM will have 500 billion Euros with which to lend or purchase assets in distressed situations. The Eurozone is also in talks to combine the EFSF with the ESM, effectively creating a 740 billion Euro fund.

Will an improved ESM really defend the Eurozone against collapse? Not alone. The real answer hinges on other components such as the ECB, politics, the capital markets, economic growth and just plain good luck.

First, let’s look at the positives. More than anything else the ESM shows that the Eurozone is committed to staying together. By committing their taxpayer money to a permanent fund, the Eurozone countries are betting on the Euro’s survival. Secondly, the fund is a very large sum of money. By comparison, Greece’s most recent bailout was 130 billion Euros. So while it is not enough to stem a systemic collapse, it is sizeable. Third, the money is being set aside in advance, reducing the risk that political squabbling could squander a solution in a crisis situation.

However, the ESM is a far cry from a solution to Europe’s problems. Mario Draghi’s policy changes as head of the ECB have thus far been the most effective steps towards preventing a crisis in the Eurozone. In the event of a crisis, all Euro member countries still need to vote to approve the use of ESM funds, essentially still leaving Europe’s political conundrum as a potential risk. There is also the risk that the ESM will become a self-fulfilling prophecy. While it seems evident that Greece and other slow-growing, spendthrift countries will have troubles for years to come, having funds already set aside to bail them out may just encourage bad habits. True, the release of funds needs to be approved by all Euro members. However, the threat is not quite as strong as it would be if the funds had not already been set aside and the breakup of the Euro was a more realistic possibility.

Standing alone, the ESM will not prevent a crisis. Reducing the debt burden of the PIIGS will take years, economic growth, help from the ECB, and the full commitment of Eurozone governments – which derive their power from Europe’s large and fragmented population. The best outcome that can come from the Euro crisis is that enough economic growth materializes and the right policies are put in place over several years, enabling the PIIGS to slowly reduce their debt burden with bailout help along the way. Unfortunately, stability will still rely on politics, economic growth, and perhaps most of all just plain good luck that no unexpected events cast Europe into a deep recession.