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Is the Second Farm Crisis Upon Us?

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Re: Is the Second Farm Crisis Upon Us?

#51

“We’re heading to a place where we don’t have farmers; we just have food production.” This. I don't know what the solution to this is. I have a small farm, and raise meat sheep. But it's very much a hobby. The problem is, though, that almost all of the other farmers in my area, the ones I meet at the feed store or the livestock auction, they're also hobby farmers. There is exactly one “real” farmer (meaning that it's…

What do you make of stories like this[1] talking about grossing six figures on a quarter acre? I know it's gross, but it still paints a much rosier picture than your claim that even 300 acres can't be farmed to a halfway decent lifestyle.

There are plenty of very positive stories about significant profits on less than five acres, even less than one acre. I'd like to hear your take on it.

[1] https://www.youtube.com/watch?v=jbHwAfHQA9M

Re: Is the Second Farm Crisis Upon Us?

#52
post #18

Earlier quoted context omitted.

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.

Farm land borrowing is through completely different organizations from home loans. Farm Credit Association, for instance. And the backer is FmHA, the farmer lending equivalent of FNMA.

Farm lending is not nearly so highly leveraged as home lending. FmHA equity requirements are much larger than on home loans.

Farm land prices are driven by commodity prices. When corn and soybeans were high, Iowa cash rents went up, and land prices followed. Commodity prices have come down, cash rents have come down, and land prices are following.

There is some speculation on price appreciation -- just about any Iowa farmer will tell you about "the piece of ground he wish he had bought", but didn't have the stomach to bid higher on at the auction. Most farmers are buying land with the idea that it is a multi-generational investment, and when good ground near/adjacent to your current farm comes up, you tend to dig deeper into your pocket and hope your children will see the value appreciation -- because that piece may not come on the market again in your lifetime. So there is a certain psychological component priced in to the bid, but mostly it has to pencil out.

If you think land prices are completely unhinged, then here is an anecdote: I own some ground in Winnebago county Iowa. When land in Winnebago county was selling for $11K/Ac there was land 5 miles north on the Minnesota side of the state line selling for about $10K/Ac. Same soil type. Same weather. Same local market elevators to sell crops to. Same local market seed/chemical coops to buy your input. Why the difference in price? Minnesota real estate taxes are higher (I won't go into the politics of that.) The taxes are a per-acre annual production cost, and get priced into the land value.

Commodity prices are coming down, that is causing the income squeeze. Leveraged farmers are going to feel a squeeze, certainly. But the amount of leverage is nothing like what was happening to home owners during the housing crisis. Farm land owners simply can not borrow at those kind of loan-to-value ratios.

(Source: Owner and/or partner in several pieces of farm land in Iowa and Minnesota, some inherited, some purchased.)

Oh.. about corn prices... back when there were enough ethynol plant building permits on file to eventually make Iowa a net importer of corn... yeah, that was a corn price bubble. Those days are gone. (Let's not diverge into the silliness of ethynol, we all know it defies physics.)

Re: Is the Second Farm Crisis Upon Us?

#53
post #18

Earlier quoted context omitted.

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.

To say that flippers caused the crisis is grossly simplifying the causes. That was certainly a part of it, but far from the only part.

Re: Is the Second Farm Crisis Upon Us?

#54

“We’re heading to a place where we don’t have farmers; we just have food production.” This. I don't know what the solution to this is. I have a small farm, and raise meat sheep. But it's very much a hobby. The problem is, though, that almost all of the other farmers in my area, the ones I meet at the feed store or the livestock auction, they're also hobby farmers. There is exactly one “real” farmer (meaning that it's…

what happens if we encounter this generation's version of potato blight on corn or wheat

Out of curiosity, how would you rate the quality of the soil in today's agribusiness farmlands? Seems food production now involves clones fed on ammonium nitrate derived from natural gas and mined potash. This suggests the crops of today are being raised on junk food.

Re: Is the Second Farm Crisis Upon Us?

#55
post #50

“We’re heading to a place where we don’t have farmers; we just have food production.” This. I don't know what the solution to this is. I have a small farm, and raise meat sheep. But it's very much a hobby. The problem is, though, that almost all of the other farmers in my area, the ones I meet at the feed store or the livestock auction, they're also hobby farmers. There is exactly one “real” farmer (meaning that it's…

This is interesting, thank you for sharing. Is the main problem simply the reduced price of output (due to competition with large scale industrial agriculture), rather than other factors (such as potential increased costs of inputs, degraded soil quality, access to water). > We've wrung all of the redundancy, both financial and biodiversity, out of the system. I have similar concerns, not just about farming but other…

“Is the main problem simply the reduced price of output (due to competition with large scale industrial agriculture), rather than other factors (such as potential increased costs of inputs, degraded soil quality, access to water).”

It's mostly the market price of outputs. As was stated in the OP, producing a gallon of milk costs $1.90 or thereabouts. The cost in the grocery store is $2.59 in my area this week. This price has to cover not just the farmr's costs, but the shipping, packaging, and grocery store overhead. The farmer is lucky to break even, and often doesn't. I've read elsewhere that to guarantee a dairy farmer a living wage, without government subsidies, a gallon of milk would have to go for closer to $5. If you want organic, non-feedlot milk, that cost is even higher.

In my sister's case, our 300 acre farm can support around 75 breed cows, which means you could expect about 65 heifers and steers born every spring and sold every fall. These will be around 1200 pounds, at a “dressing percent” of 63% which means you get a 750 pound carcass. 490 pounds of this will be meat - let's call it 500 as a round figure. So she could produce 32,500 pounds of beef a year. The vast majority of this, over 75%, is going to be ground beef. A small fraction of it will be filet mignon.

If you figure that her business expenses are going to be in the neighborhood of $150,000, which is going to include equipment upkeep, fuel, fertilizer, seed, feed milling costs, farm maintenance costs, vet fees, medication per animal, and so on. She is going to need $50,000 in income to support her family, so that means her price per pound of beef would have to be about $6.15. Not including the cost of butchering, transport, auction fees, and all of the upstream costs (packaging, grocery store overhead and profits, etc). Now if you walk into your grocery store you will find ground beef commonly going for $5 a pound or less.

The 4-H says it costs about $7 a pound to produce beef, so that's a pretty good estimate.

And note that this does not include buying new equipment. A new tractor of a size that would let her bale hay starts at $50,000. Paying to have the farm re-fenced would be somewhere between $50,000 and $100,000 depending on specifics. It also does not count all of the horrible things that can and do go wrong farming. If she cuts hay and it gets rained on before it dries, she loses that crop. You get three hay cuttings a year. That's a third of your hay crop gone, which means you have to buy hay. If there's a drought, you might have to buy water by the ton and have it trucked. If you get an outbreak of hoof rot, you lose a significant number of your animals and a significant amount of your pasture has to lay fallow for years until the pathogen dies. The number of horrible things that can go wrong that are beyond your control means that the above prices don't provide enough financial cushion to make it through a bad year or two.

Re: Is the Second Farm Crisis Upon Us?

#57

“We’re heading to a place where we don’t have farmers; we just have food production.” This. I don't know what the solution to this is. I have a small farm, and raise meat sheep. But it's very much a hobby. The problem is, though, that almost all of the other farmers in my area, the ones I meet at the feed store or the livestock auction, they're also hobby farmers. There is exactly one “real” farmer (meaning that it's…

> He raises specialty row crops and runs an agricultural co-op, the kind where you pay a certain amount a month and get a box of fresh vegetables every week. But hobby farmers can't feed the country. We can't even feed ourselves, if it comes to that.

Is this actually true that small farmers can't feed the country? Farming productivity even on small farms is at an all time high. It's probably higher than the 1970's.

Gas will likely flatline as electricity takes over more and more. Health care is an issue for everybody that needs to get taken care of.

My math on farms always seems to tell me that labor is the primary problem. Why work on a farm which is really hard work when just about any job will pay better?

How far do food prices have to rise to reverse this?

> Or what happens if we encounter this generation's version of potato blight on corn or wheat? This is not just a human tragedy. It's a huge national security issue, and it looks like nobody is paying attention.

Maximally efficient is minimally robust. We learn that, painfully, over and over and over ....

Re: Is the Second Farm Crisis Upon Us?

#58

“We’re heading to a place where we don’t have farmers; we just have food production.” This. I don't know what the solution to this is. I have a small farm, and raise meat sheep. But it's very much a hobby. The problem is, though, that almost all of the other farmers in my area, the ones I meet at the feed store or the livestock auction, they're also hobby farmers. There is exactly one “real” farmer (meaning that it's…

What do you make of stories like this[1] talking about grossing six figures on a quarter acre? I know it's gross, but it still paints a much rosier picture than your claim that even 300 acres can't be farmed to a halfway decent lifestyle. There are plenty of very positive stories about significant profits on less than five acres, even less than one acre. I'd like to hear your take on it. [1] https://www.youtube.com/w…

I have been involved with csas as both a consumer and a promoter. I see turnover but I also see csas succeeding. I think that farms are bifurcating into mega farms and local farms of under 10 acres close to cities and their markets that are willing to support local produce (truck farms).

This means that rural areas will continue to depopulate and that farming will either be industrial or bespoke.

Re: Is the Second Farm Crisis Upon Us?

#59

“We’re heading to a place where we don’t have farmers; we just have food production.” This. I don't know what the solution to this is. I have a small farm, and raise meat sheep. But it's very much a hobby. The problem is, though, that almost all of the other farmers in my area, the ones I meet at the feed store or the livestock auction, they're also hobby farmers. There is exactly one “real” farmer (meaning that it's…

All of the massive 'at scale' operations are going to turn into dust bowls. 'Small operations' will mean those people do not starve to death. Vegetable prices will make gold look cheap. Grow food anywhere you can, we all have to become farmers now to avoid a very bad situation, where the only thing to eat is other people.

Re: Is the Second Farm Crisis Upon Us?

#60

“We’re heading to a place where we don’t have farmers; we just have food production.” This. I don't know what the solution to this is. I have a small farm, and raise meat sheep. But it's very much a hobby. The problem is, though, that almost all of the other farmers in my area, the ones I meet at the feed store or the livestock auction, they're also hobby farmers. There is exactly one “real” farmer (meaning that it's…

What do you make of stories like this[1] talking about grossing six figures on a quarter acre? I know it's gross, but it still paints a much rosier picture than your claim that even 300 acres can't be farmed to a halfway decent lifestyle. There are plenty of very positive stories about significant profits on less than five acres, even less than one acre. I'd like to hear your take on it. [1] https://www.youtube.com/w…

I've heard about these $100,000 on a quarter acre claims, but I just can't see how they could possibly be true. Even pot farmers don't make that much, do they?

The guy across the road from me, the “real” farmer, has 90 acres. He seems to do ok. He runs old tractors, and he lives in a simple one story brick house, so he isn't living large. His land was placed in the local agricultural preservation program, which means it can't legally be developed, and hence cost him a lot less than what would otherwise have been the going price in this area.

He makes money by raising hyper-local, organic specialty row crops on a subscription basis to extremely wealthy households in the Washington DC suburbs. That's a sustainable business plan, but only for a very small number of farmers. It's only possible because he was able to buy a farm at an extreme discount in a rapidly gentrifying area that is now one of the wealthiest counties in America and is getting wealthier by the year. If he was in Iowa that whole business plan falls apart.

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