In The Headlines
Dairy Farmers Struggle in the Wake of a Global Milk Glut
For dairy farmers in Britain, the U.S., New Zealand, Canada, Argentina, and countries worldwide, times are tough. Russia’s ban on European Union (EU) milk and the EU’s removal of production quotas have driven local prices down 20% in the past 12 months. That is why 6,000 farmers and 2,000 tractors converged on Brussels recently to protest EU farm policies. The world is awash in milk, with global trade in whole milk powder at its lowest since 2011, the U.S. Department of Agriculture says. For the first seven months of 2015, American dairy exports were down 28%, compared with the same period in 2014, says the U.S. Dairy Export Council. The USDA expects purchases of whole milk powder by China, the world’s biggest dairy importer, to drop 40% this year. The former No. 2 importer, Russia, has banned imports from not only the EU, but also the U.S. and Australia in retaliation for sanctions imposed to protest Russian intervention in Ukraine. “We don’t see any major recovery in sight,” says Pekka Pesonen, secretary general of Copa-Cogeca, a farm lobby in Brussels.
The Brussels demonstrations were the culmination of a summer of unrest in the countryside. French farmers blockaded highways. Their Lithuanian counterparts dumped 30 tons of milk to highlight their plight. In the U.K. angry farmers raided supermarkets and emptied shelves of milk to pressure retailers including Wal-Mart Stores to commit to higher prices. “Dairy farmers have been losing huge amounts of money,” says Rob Harrison, an English farmer. China and Russia are not the only culprits. Record prices last year primed farmers to bolster output in the U.S., where milk production in 2015 will reach 208.7 billion pounds—the fifth consecutive record-setting year. In April the EU, seeking to liberalize trade, removed quotas that had been in place for the past 30 years, leading to increased production from Ireland, the Netherlands, and the U.K. China is producing more milk thanks to investments such as a $140 million, 20,000-cow facility that China Modern Dairy Holdings, partly owned by private equity firm KKR, unveiled in 2013. The Chinese are also consuming stockpiled milk powder and importing less. Global milk supply grew 3.7% last year, almost triple the growth rate of 2013, the USDA says.
Dairy gluts have recurred since countries became more open to trade in the 1980s, says Andrew Novakovic, an economics professor at Cornell. Because cows do not have an on-off switch, increases in supply are harder to slow when demand drops unexpectedly. “If you overshoot because Russia’s closed down and China’s having an off year, prices go in the tank,” he says. The U.S. has lost more than 76% of its dairy farms in the past 25 years. “This is a problem of globalization,” he says. “You are exposing yourself to a lot of risk without a lot of control.”
Fonterra, New Zealand’s largest dairy cooperative, announced that it would offer interest-free loans to farmers. Hope Dairies, a unit of Hancock Prospecting, which is owned by Australian resources billionaire Gina Rinehart, has shelved plans to open a $349 million dairy farm and milk powder facility in Queensland. Agri-Mark, a New England cooperative with $1.1 billion in sales last year, began dumping milk in June for the first time in a half-century. Paul Doton, owner of a 130-cow dairy farm near Woodstock, VT, is keeping production steady. Prices are not covering his costs, but he still needs to sell milk to make his loan payments. “Everyone anticipated there’d be more supply, but we didn’t think we’d see the demand drop the way it did,” he says.
The dairy downturn has added an obstacle to the Trans-Pacific Partnership (TPP) free-trade negotiations. New Zealand is demanding greater access to markets in Canada, Japan, and the U.S., which are feeling pressure from local farmers to hold on to protections that limit imports. During the latest round of TPP talks in August, the government of Canadian Prime Minister Stephen Harper, facing a tough reelection battle in October, led the opposition to market liberalization. The meeting ended without an agreement.
In earlier slowdowns, exporters could count on ever-growing demand from China, but with the economy sputtering, Chinese consumers are not propping up the market anymore. Also, a false botulism scare affected the exports of Fonterra to China. India, the world’s biggest consumer of dairy products, is not much help. India will need to import by 2020, says agriculture company Cargill, but for now is self-sufficient. Overcapacity “is a long-term problem that a short-term fix won’t address,” says Robbie Turner, head of European markets at Rice Dairy International.
Production in New Zealand could fall more than 8% in the 2015-16 season, says Michael Harvey, an analyst with Rabobank in Melbourne. Many farmers are taking the painful step of culling their herds. Chris Lewis has 1,150 cows in the Waikato region of New Zealand’s North Island, 8% fewer than in 2013. He has seen bad times before and says the industry will turn around when demand picks up from China and Russia. “It’s just a matter of time till they come back to the market,” he says. For now, “the mood is very somber.”
From Cowboy to Cool: Stetson Looks to Change Its Image
Stetson Worldwide is the scrappy remainder of a hat kingdom that once served as both a paragon of American manufacturing and the frontier culture represented by such movie stars as John Wayne and Roy Rogers. Those days are long gone. As cattle jobs faded, Western shows vanished, and fashion trends changed, Stetson has struggled to survive. While the privately held company does not release revenue numbers, it acknowledges the need to diversify its clientele to stay relevant. Under the leadership of CEO Izumi Kajimoto, who took over in 2012, the company is trying to attract a new kind of customer—more hipster than rancher. Her plan is to hook young, fashionable buyers by offering an eclectic, trendy mix of hats; everything from nylon boonies to satin-lined trilbys with tattoo designs is now part of the Stetson repertoire. “We’re a lot of things that seem to be eclipsed by our overwhelming identity as Western,” Kajimoto says across a long, wooden table inside Stetson’s modest headquarters. “We must be at the forefront of haberdashery and fashion. I don’t want the urban contemporary, city, international guy to think, ‘I have nothing in common with Stetson.’”
When Kajimoto was 11, her parents moved the family from Osaka to New Jersey. She arrived at Stetson after a 27-year career in fashion, working largely in licensing and holding senior posts at Calvin Klein, Donna Karen, Marc Jacobs, and Betsey Johnson. That was after Kajimoto got her start at Ralph Lauren, where she spent nine years pushing the brand into international markets. The Stetson job is a bit of a return to those roots, bringing traditional Americana to a more diverse customer lineup.
Stetson was expanding its offerings for years before Kajimoto took over. The company sells fragrances, home goods, apparel, boots, belts, and even branded bourbon. All those products hark back to the company’s U.S. heritage. Knowing she needs to make that heritage seem cool, Stetson, under Kajimoto’s leadership, has made a major push into the fashion industry with a focus on associating Stetson with events that attract young, hip attendees. “Depicting really cool, fabulous people with hats on is one thing,” says Kajimoto. “But what really matters is getting the right hat on their head. I don’t want to look like a dork in a hat.”
Stetson was founded in 1865 by John Batterson Stetson, who started making the company’s signature hat out of a small rented space in Philadelphia. He didn’t invent the tall, brown, wide-brim headpiece, but Stetson made better ones than his competitors. The right people took notice. For ranchers and cattlemen, hats were as important as boots and a saddle, serving as a shield from scorching sun and pouring rain. Stetson’s hardy wares became a necessity and a status symbol among workmen, says Don Reeves, a curator and chair of cowboy culture at the National Cowboy & Western Heritage Museum in Oklahoma. “If you had this kind of hat, it says: ‘I’ve made it.’” By the early 1900s, the company’s Philadelphia plant had grown into the world’s largest hat factory. At the time, most men wore hats, and Stetson thrived by selling all kinds of fashionable, everyday chapeaus alongside practical Western ones. The company endured the Great Depression and both world wars, when it made thousands of hats for the U.S. military. It then benefited from the popularity of Western TV shows and movies. “There was a romance of the Old West that they could play up in advertising,” says Sonya Abrego, a fashion historian at the Pratt Institute. “It started as functional and became fashionable.” In 1947, sales of Stetson hats peaked at $29 million, the equivalent of more than $300 million today.
Soon after, the company started to flounder. Fewer people were working as cowboys and ranchers, and hats went out of style among city dwellers. Stetson’s sales plunged to around $8 million in 1970, a more than 70% slide from the company’s heyday. A year later, Stetson shut down production at its Philadelphia factory, later donating the land to the city and divesting its manufacturing operations. A company called Hatco now makes Stetson’s emblematic cowboy hats at a factory in Garland, TX. Stetson has survived as a licensing company. Whereas its bustling factory once employed more than 5,000 workers, fewer than 10 people, mostly in the New York office, now oversee Stetson’s licenses and evangelize for the brand.
In August, Kajimoto and four members of her team traveled to Salida, CO, for a festival headlined by Mumford & Sons. Stetson used the event to promote attire that has traditionally complemented the band’s style of folksy music, with company staff members operating a booth at which attendees could try on and purchase a selection of caps. As Kajimoto sees it, easing nervousness about wearing hats is crucial to the company’s future. “I find American guys most self-conscious about a hat,” she says. “What’s most important is that he feels comfortable.” Summer concert season is Stetson’s busiest, but the push for new customers entails an endless churn of events through the year, each geared toward a specific demographic. In October, the team will go to Joshua Tree, CA, for Babes Ride Out, a women-only motorcycle campout, to provide a Stetson-themed venue for riders to try on hats and take selfies in a photo booth. After that, Stetson will host launch parties in Los Angeles and New York to promote a new hat design and a corresponding exhibit in collaboration with artist and photographer Tasya van Ree. Stetson focuses on event-based promotions because they get hats on heads, an important step in convincing shoppers to buy an optional accessory. Kajimoto attends most of them in person.
Celebrity endorsements are a key part of Stetson’s strategy for garnering mainstream publicity. While Stetson does not have a marketing budget, some famous folks promote the hats free of charge. The company sends an unlimited supply of hats to celebrities, including Leonard Cohen, Willie Nelson, and Brad Paisley, provided they wear them in public. The company also remains involved in cowboy culture. Every December, company reps show off Stetson wares at the National Finals Rodeo, a 10-day extravaganza in Las Vegas. When there is a major competition, from the Calgary Stampede to the Pendleton Round-Up, Stetson is usually there. It is all to maintain support among what Kajimoto calls “core Western culture,” the rural, ranching families who still drive some of Stetson’s business. “Not to say that Western runs itself,” Kajimoto says. “You always have to replenish and support all of your efforts. With the Western side, the challenge would be complacency.” Kajimoto hopes that these combined efforts can convince more people to put a hat on, even if they are walking down San Francisco sidewalks rather than herding cattle in the Great Plains.
The Good News Is . . .
• U.S. producer prices were flat in August, pointing to benign inflation pressures that could influence the Federal Reserve’s decision whether to hike interest rates. The unchanged reading in the producer price index (PPI) last month followed a 0.2% gain in July, the Labor Department said. The drag on producer prices from lower crude oil prices and a strong dollar was offset by an increase in profit margins for apparel, footwear, and accessories retailing. In the 12 months through August, the PPI fell 0.8%. It was the seventh straight 12-month decrease in the index.
• TJX Companies, Inc., the leading off-price apparel and home fashions retailer in the U.S., reported earnings of $0.80 per share, an increase of 6.7% over year earlier earnings of $0.75 per share. The firm’s earnings topped the consensus estimate of analysts by $0.04. The company reported revenues of $7.4 billion, a 6.5% increase. Management attributed the company’s results to strong comparable store sales driven by increased customer traffic.
• Meredith Corporation has agreed to sell itself to a competitor, Media General, for $2.4 billion. The merger highlights the consolidation underway within the television industry. Content providers, station operators, and cable companies have all sought to gain negotiating leverage, in large part by combining with peers. Media General is betting that Meredith’s television stations, and not its magazines, will be the path to success. The combined company, to be known as Meredith Media General, will be one of the largest owners of broadcast network affiliates in the United States, with 88 stations in 54 markets. Under the terms of the deal, Meredith investors will receive cash and stock valued at $51.53 a share.
Planning Tips for Long-Term Care
Almost 70% of people turning age 65 will need long-term care at some point in their lives. Doing some advance planning to prepare for that possibility can be an invaluable asset to a family or spouse who may someday need to provide care for you. Below are some tips to help you plan for the situation where you might need long-term care.
Anticipate long-term care needs – Covering the cost of long-term care is easier said than done. Long-term care insurance is one option, but it is not a fit for many consumers. Many providers have left the field, and premiums have gone up. Hybrid life insurance policies (also called life-combination products) are another option, and some life insurance policies also come with an accelerated death benefit rider that allows policyholders to use the value for lifetime care. Allow yourself time to research the options and make the best choice for your personal circumstances.
Collect and organize financial paperwork – The biggest favor you can do your family in the future is to declutter your financial paperwork so someone else can find what they need to locate. Poor records could mean family members are not aware of assets or insurance that could help fund better care and avoid bigger out-of-pocket bills.
Have the talk – Aging adults should make sure their families know what their wishes are, including whether they expect to age at home, and if they want prolonged medical care. Unless that is communicated, family members may make the wrong choices for you. It is not a talk you need to have all at once—both generations may be less on the defensive if they tackle topics individually, as needed.
Rethink your retirement locale – We often live in houses that are just not built for people who are getting older, and communities without public transportation or safe places to walk. Options are not limited to just continuing care or retirement communities. A growing number of cities and towns have age-friendly initiatives, while so-called naturally occurring retirement communities (NORCs)—which can be counties, towns, or even specific apartment buildings—coordinate extra services for aging residents.
Sign Powers of Attorney – These documents, which allow someone to make financial and health decisions for you should you become incapacitated, are more easily put in place when you are in good health. Caregivers often regret not having asked their parent about taking this step earlier. It is important to be sure that everyone is “on the same page” as you are while you are still healthy and taking care of yourself per usual.
1. http://bit.ly/1KLVIX3 – National Care Planning Council
2. http://bit.ly/1FFR6uh – AARP
3. http://cnb.cx/1QyflAY – CNBC
4. http://onforb.es/1vZ6fQL – Forbes
5. http://1.usa.gov/1oCHpCZ – LongTermCare.gov