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Is the Second Farm Crisis Upon Us?

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Re: Is the Second Farm Crisis Upon Us?

#31

Post by randomdata »

chiefalchemist wrote: post #23

I read and read quickly, so perhaps I missed it. But all the examples seem to be farmers of commodities. If you're producing something that's consistently being over-produced, what do they expect to happen? Don't get me wrong. Obviously, the food supply is important. It's also difficult (i.e., weather). None the less, running full force into producing a commodity can't be the best option they have. Is it?

As a grain farmer in Canada, I see this year as being one of the better years for commodity prices.

Wheat was back to levels we haven't seen in a long time. Corn has held a little above average. Soybeans have taken a big hit in the last couple of months, but there were some good marketing opportunities earlier in the year. Unless harvest is a complete failure, there doesn't seem to be much to worry about. A welcome change from the last few years when the price was lower.

Not being in the US, I don't necessarily see the effects of the trade war like the US farmer is seeing, so I am unable to comment about that. But as far as the regular market price goes, which the article also raised concern about, I really don't see the issue. The grain farmers should be positioned fairly well right now.

Re: Is the Second Farm Crisis Upon Us?

#32

Post by cletus »

I see the multi-generational family farm being doomed as anything more than a niche boutique to make premium-priced organic produce in the next few decades.

The reason for this is automation, though it isn't really touched on by this article. At some point in the near future robots will not only be able to construct greenhouses for growing crops with hydroponics but they'll also be able to do most of the work too.

Look at these examples of hydroponic (vs soil) yields [1]. Hydroponic yields are in typically in the order of 3-10+ tims that of soil. In greenhouses you can control temperature, grow year-round and not have your crop wiped out by inclement weather (barring hurricanes/tornadoes, which may destroy your greenhouses but this is less of an issue than a frost or snowstorm destroying your crop).

When human labour is only minimally required to construct a greenhouse or man it you'll see (IMHO) the biggest change to human food production since the advent of agriculture.

It's also why I'm not particularly worried about the ability of the planet to feed itself. If food were produced this way, Earth could easily support a population of 50-100 billion.

The article mentions that two bad years can lose the farm. The only way to counter such risks is scale. That's why mega-farms are becoming and will become the norm.

Of course along the way I fully expect massive increases in government subsidies because of the political power of farmers (in the US and EU) but you just can't turn back time.

[1] http://uponics.com/hydroponics-yield/

Re: Is the Second Farm Crisis Upon Us?

#33

Post by downrightmike »

F3Life wrote: post #18
jdhn wrote: post #4

The article only mentions land value once, and in my opinion this is a huge oversight. There's articles going back to 2010[0] that speculate that a land bubble had been going for a few years, and when that's coupled with quantitative easing it means that people had to borrow increasing amounts of money to buy an equivalent amount of land. Combine that with decreasing crop prices and additional debt load that was take…

A lot of these farmers presumably owned their land prior to QE? Maybe it’s the ones who bought land after who are going to the wall. In the UK, economists say QE has been a success to the point where some say we have learned how to print money without creating Weimar-style inflation. However it looks like the inflation has simply transferred to assets, particularly property including farmland. And we don’t yet know w…

In the US, the subprime mortgage lending crisis was caused by good borrowers over leveraging the cheap mortgage rates they could get and buying extra homes to flip. When the money dried up and there was no one to flip to, they went under en mass. If farmers have been over leveraging on farm land, then something similar to a crash makes sense especially if yields are down or prices fall because of surplus.

Re: Is the Second Farm Crisis Upon Us?

#34

Post by downrightmike »

ewams wrote: post #2

"A gallon of milk costs a farmer approximately $1.90 to produce, but in the last year, farmers have been receiving as little as $1.35 per gallon." If it cost more to make it than they are getting, why are milk prices not higher?

A gallon in the stores costs $4-5

Re: Is the Second Farm Crisis Upon Us?

#35

Post by Nasrudith »

orf wrote: post #11
krapht wrote: post #7

This process of farm consolidation is inevitable. Agriculture benefits from economies of scale, even 2000 years ago the Roman latifundia fed an empire efficiently.

Did they? What's up with all the famine then? The empire relied on an obscene amount of grain shipments from North Africa and Egypt (plus sicily to begin with). Roman food distribution was anything but efficient or fair

That was an economic issue - or at least perceived as such contemporarily. This is all second hand recollections so don't take me as an expert or anything. From what I recall of Revelations interpretation much of it was coded political satire like remarks about famine but plenty of wine. Essentially prolonged war harmed citizen-soldier farmers and there was a glut of slaves from their victory over Carthage. That meant the wealthy could benefit from buying up poorly maintained farms and they made more profit from growing grapes for wine than growing grain.

Inequality essentially lead to the famine indirectly. If the major buyers were the people enmasse wine would be less prioritized. Grain shipments would still happen given relative advantage in trade but it wouldn't have had such a dysfunction as food demand would have the proper 'clout'.

I recall hearing about one further irony later in history. One reform that made things even worse for equality was having state supplied armaments instead of citizens being expected to provide their own. It has long been essentially common sense and the way a military seems like it should work. One would think that would be better for equality by allowing rich and poor to fight and advance in status but it helped set up a proto-generalismo situation by having the power derived by the state instead of citizens.

Re: Is the Second Farm Crisis Upon Us?

#36

Post by Nasrudith »

jdhn wrote: post #4

The article only mentions land value once, and in my opinion this is a huge oversight. There's articles going back to 2010[0] that speculate that a land bubble had been going for a few years, and when that's coupled with quantitative easing it means that people had to borrow increasing amounts of money to buy an equivalent amount of land. Combine that with decreasing crop prices and additional debt load that was take…

I thought that usually worked out the opposite for farmers. Usually they get land where it is cheap and then once city starts to encroach get the payout. Granted then they aren't farmers anymore unless they buy cheaper land elsewhere.

Re: Is the Second Farm Crisis Upon Us?

#37

Post by ams6110 »

downrightmike wrote: post #34
ewams wrote: post #2

"A gallon of milk costs a farmer approximately $1.90 to produce, but in the last year, farmers have been receiving as little as $1.35 per gallon." If it cost more to make it than they are getting, why are milk prices not higher?

A gallon in the stores costs $4-5

Yes if you buy "organic" milk in a glass bottle. Around here a gallon in a plastic jug at Kroger is about $2.00. Keep in mind milk is often priced as a "loss leader" to get people into the store..

Re: Is the Second Farm Crisis Upon Us?

#38

Post by GlenTheMachine »

downrightmike wrote: post #34
ewams wrote: post #2

"A gallon of milk costs a farmer approximately $1.90 to produce, but in the last year, farmers have been receiving as little as $1.35 per gallon." If it cost more to make it than they are getting, why are milk prices not higher?

A gallon in the stores costs $4-5

I don't know where you're shopping. A gallon of milk this afternoon cost me $2.59.

Re: Is the Second Farm Crisis Upon Us?

#39

Post by ams6110 »

randomdata wrote: post #31
chiefalchemist wrote: post #23

I read and read quickly, so perhaps I missed it. But all the examples seem to be farmers of commodities. If you're producing something that's consistently being over-produced, what do they expect to happen? Don't get me wrong. Obviously, the food supply is important. It's also difficult (i.e., weather). None the less, running full force into producing a commodity can't be the best option they have. Is it?

As a grain farmer in Canada, I see this year as being one of the better years for commodity prices. Wheat was back to levels we haven't seen in a long time. Corn has held a little above average. Soybeans have taken a big hit in the last couple of months, but there were some good marketing opportunities earlier in the year. Unless harvest is a complete failure, there doesn't seem to be much to worry about. A welcome c…

What about futures contracts? I didn't see that mentioned at all and I thought that was the primary means that farmers used to remove uncertainty over what they would be paid for their harvest?

Update: this is discussed in another sub-thread on this page.

Re: Is the Second Farm Crisis Upon Us?

#40

Post by simonsarris »

dade_ wrote: post #15
ewams wrote: post #2

"A gallon of milk costs a farmer approximately $1.90 to produce, but in the last year, farmers have been receiving as little as $1.35 per gallon." If it cost more to make it than they are getting, why are milk prices not higher?

Really makes you wonder why a country would implement supply management. Oh America...

Just FYI the situation is the same in Austria, and possibly other EU countries, w.r.t milk prices.
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