
Oreos, Vomitoxin, and the Price of Wheat - tptacek
http://www.bloombergview.com/articles/2015-04-02/my-dog-is-gluten-free
======
limaoscarjuliet
General population easily dismisses food processed and prepared by large
corporations. Vomitoxin, feces, infestation, insect damaged kernels. All bad.
People want natural unprocessed food...

I was born and raised in Eastern Europe. Thanks to complete failure of
socialism, there was no large functioning food industry. We had natural food
back then, chicken raised by Grandma, wheat she sow herself, fresh eggs every
day. And now the surprise: eggs were dirty, wheat was damaged by insects, meat
was processed with dirty hands. Yup, all natural and all with vomitoxin levels
exceeding any today's standards likely. Salmonella poisoning was pretty
common. Hey, but it's all good because... no one checked the levels of x, no
one tested for salmonella, etc.

The modern food that guarantees some standard is not so bad! At least we know
what it has and we can work on reducing it.

~~~
enraged_camel
But that is a false dichotomy. There are lots of farms in the US that grow
their products naturally and without processing. They don't have increased
risk of diseases (probably just the opposite since they aren't keeping their
animals packed inside enclosed spaces and pumping them full of antibiotics),
and the food tastes _amazing_.

~~~
raverbashing
> There are lots of farms in the US that grow their products naturally and
> without processing

You're buying into the hype

"Naturally" means nothing.

Sure, the poultry raised there is healthier, but the risk of Salmonella in
eggs is probably the same, or even higher.

You can also bet they have some rodents going around, insects, fungus, and
depending on what you get from there, yes, it's ending up in your food.

Of course I prefer food that wasn't picked/slaughtered as soon as possible
(and helped by hormones)

~~~
enraged_camel
>>"Naturally" means nothing.

I'm not talking about the word "all natural" as it is used in labeling food.
Yes, you're absolutely right: that one means nothing.

I'm using "naturally" to describe conditions that are as close as possible to
the animal's natural lifestyle. Chickens that roam outdoors in open spaces,
cows that are fed their natural diet (as opposed to processed foods), things
like that.

>>Sure, the poultry raised there is healthier, but the risk of Salmonella in
eggs is probably the same, or even higher.

Not really. Those farms are under the same regulations as factory farms. There
isn't a reason why the risk of salmonella should be higher.

------
huxley
Reminds me of Milo Minderbinder and the Maltese eggs from "Catch 22" [1]

"But Yossarian still didn't understand either how Milo could buy eggs in Malta
for seven cents apiece and sell them at a profit in Pianosa for five cents."

... later ...

"Milo chortled proudly. "I don't buy eggs from Malta," he confessed... "I buy
them in Sicily at one cent apiece and transfer them to Malta secretly at four
and a half cents apiece in order to get the price of eggs up to seven cents
when people come to Malta looking for them."

"Then you do make a profit for yourself," Yossarian declared.

"Of course I do. But it all goes to the syndicate. And everybody has a share.
Don't you understand? It's exactly what happens with those plum tomatoes I
sell to Colonel Cathcart."

"Buy," Yossarian corrected him. "You don't sell plum tomatoes to Colonel
Cathcart and Colonel Korn. You buy plum tomatoes from them."

"No, sell," Milo corrected Yossarian. "I distribute my plum tomatoes in
markets all over Pianosa under an assumed name so that Colonel Cathcart and
Colonel Korn can buy them up from me under their assumed names at four cents
apiece and sell them back to me the next day at five cents apiece. They make a
profit of one cent apiece, I make a profit of three and a half cents apiece,
and everybody comes out ahead."

[1]
[http://en.wikipedia.org/wiki/Catch-22](http://en.wikipedia.org/wiki/Catch-22)

------
JamisonM
The premise of the article, at least at the start, that CBOT contracts are not
useful to Kraft because Vomitoxin limits are too high is misleading. The
author appears to be ignorant of this fact, but as a farmer I can assure him,
and everyone else, that the vast majority of Wheat delivered is far below the
Vomi limits attached to contracts in general, and that also does not mean that
those contracts are not useful for hedging and/or accepting delivery of wheat
with low tolerance of vomi.

The guy doesn't even bother to find out what a basis is.. at least it is good
to know he's not a regular on the commodities beat.

------
ChuckMcM
Oh I loved reading that. The first time I had heard of vomitoxin was when my
wife asked General Mills for the nutritional content of her 50 lb bags of
flour, they sent her an assay that included less than 1 part per million of
vomitoxin and we just had to look it up.

That said, I would be disappointed if the CFTC won the argument here. It
really does seem like Kraft was well within their rights to order as much
wheat as they wanted. And by taking delivery they also took all the risk that
the market would respond in a way that helped rather than hindered them. My
biggest impression was that the traders were pissed off that a food company
had pulled one over on them and they hadn't been able to cash in on the change
in the spreads. But that isn't really Kraft's fault as far as I am concerned.

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qooleot
"This raises an important question, which is, who was using that wheat that
the FDA considers unfit for human consumption? I worry that my dog is eating a
lot of vomitoxin."

From Wikipedia:

Vomitoxin is not a known carcinogen as with aflatoxin. Large amounts of grain
with vomitoxin would have to be consumed to pose a health risk to humans.

Companion animals: Dogs and cats are restricted to 5 ppm and of grains and
grain byproducts and the grains are not to exceed 40% percent of the diet.

~~~
douche
Simple answer, buy the more expensive dog food. I spend roughly $50/50lb per
bag of 0-grain feed that I give my dog. This lasts 2-3 months for a 40-50 lb
dog.

~~~
scoot
Completely OT, but holy $#!+ that's cheap! I pay $2.50 a lb (GBP45 for a 12kg
bag) for dog food that is only 20% meat / meat derivatives, and includes
grain. It's far from the most expensive but it's the best I have found at that
price.

------
krupt
Some poor bastard worked very hard on that little bit of javascript that
intercepts internal anchor links so they don't ugly up the address bar with
#footnote ... or exist in history, which is why I'm back here commenting on an
article I was trying to read.

------
HorizonXP
I actually don't see why this is a problem. The author's metaphor at the end
about Kraft "going across the aisle" seems perfectly plausible. Anyone in a
position to buy a product will do their best to negotiate the price down.

~~~
CamperBob2
Agreed, and I also don't see why it fooled anybody. Wouldn't it be common
knowledge in the industry that the CBOT-traded wheat was unsuitable for use by
Kraft in their products?

~~~
kasey_junk
The contract specifies a maximum, but you can mix it with other stuff to make
it acceptable. Or it could have been Kraft doing a true hedge. It is really
hard to discern precisely _why_ another market participant, even a very large
one, is doing something.

------
tptacek
This is the best thing you will read all day.

~~~
rayiner
Initially thought it was going to be a rant about something icky sounding
that's inevitable in food. Was pleasantly surprised.

~~~
grubles
*toxin bad! Click-bait title good!

------
potatote
Can someone help me--who isn't familiar with future trading--understand this
article by providing a "layman" explanation? I read this twice and from what I
can gather, Kraft bought futures for a different type of grain and as a
result, the price for the other type of grain/wheat is reduced? Thanks in
advance! (wish I learned a bit more economics)

~~~
protomyth
Try this:
[http://ageconsearch.umn.edu/bitstream/15814/1/er040001.pdf](http://ageconsearch.umn.edu/bitstream/15814/1/er040001.pdf)
and these:
[http://www.kisfutures.com/grains.html](http://www.kisfutures.com/grains.html)

You need to understand normal hedging of futures then this makes a lot more
sense.

------
protomyth
To help some folks along.

Commodity Standards and Grades:
[http://www.usda.gov/wps/portal/usda/usdahome?navid=COMMODITY...](http://www.usda.gov/wps/portal/usda/usdahome?navid=COMMODITY_STANDARDS)

U.S. Standards for Grain:
[http://www.gipsa.usda.gov/fgis/usstandards.aspx](http://www.gipsa.usda.gov/fgis/usstandards.aspx)

Wheat (PDF):
[http://www.gipsa.usda.gov/fgis/standards/810wheat.pdf](http://www.gipsa.usda.gov/fgis/standards/810wheat.pdf)

Aflatoxin:
[http://www.gipsa.usda.gov/fgis/publication/broch/b-aflatox.p...](http://www.gipsa.usda.gov/fgis/publication/broch/b-aflatox.pdf)

Vomitoxin:
[http://ars.usda.gov/Main/docs.htm?docid=9765](http://ars.usda.gov/Main/docs.htm?docid=9765)

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AceJohnny2
I'm disappointed. He never really answered how Kraft made 2ppm vomitoxin out
of the 4ppm vomitoxin they get from stopping futures.

~~~
tcas
It mentions in the end in the footnotes you can mix together high vomitoxin
and low vomitoxin wheat to produce the needed amount.

    
    
      I'm kidding. My dog is gluten-free. Also if you buy 
      the high-vomitoxin wheat you can blend it with 
      low-vomitoxin wheat until you get the perfect amount 
      of vomitoxin. Appetizing, no?

------
AceJohnny2
Wow, this story looks like it's right up cstross' alley (his stories often
include, if not build on, economic situations)

------
pyrocat
But what does this have to do with the price of bread???

~~~
AceJohnny2
Back when I was a kid, with some friends we played a game where we'd try and
come up with nonsensical phrases like "but have you taken into account the
quality of venezuelan poultry when predicting Marseille's weather??". If no-
one could come up with a plausible chain of logic linking the things together
they'd get a point.

In retrospect, this (and your comment), reminds me of Pinky's responses to
Brain's "are you pondering what I'm pondering?"

~~~
zhte415
That sounds like an awesome game. You may like the blog macro-man, which is
full of similar connect-the-dots stuff [I'm a reader, and have no connection
to the author(s)], you may also not like it, but here's a link: [http://macro-
man.blogspot.com/](http://macro-man.blogspot.com/)

