Gene Logsdon and Friends

Big Farms Going Belly Up Again?

In Gene's Weekly Posts on April 3, 2013 at 7:05 am

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From GENE LOGSDON

I often wonder if the people who read my meanderings through the pastoral world care about news about big farmers going broke. We probably should care, but I wouldn’t blame those who didn’t. Big business, big government, and big farmers have forged an agricultural economy that is not sustainable. Everybody knows it. We have watched economic bust follow every economic boom regularly over the years. Why not just accept it all as the price of human greed and go our separate ways. But I can’t help being fascinated, the way rattlesnakes fascinate me.

What brings me to this subject (again) is the news that a huge farm— the Stamp Farm of 46,000 acres in Michigan— declared bankruptcy recently. I watch DTN/Progressive Farmer on the Internet for my daily information on farming. Its report, “No Farm Too Big To Fail,” by Marcia Karley Taylor, March 25, 2013, gives the names and numbers and details but I’ll just dwell on the part that is of interest to me. The farm grew to this huge size with borrowed money. The last couple of years, economists have assured us that the farm expansion to huge size was nothing to worry about because farmers were buying land with saved money, not borrowed money. That was not the whole truth (I don’t think it was even half true and said so often). Not taken into account was the huge amount of money farmers were borrowing that was going into land rents and new equipment. These big, fast-growing farms are called, in ag circles “alpha” farms to distinguish them from big farms that have grown large more slowly and conservatively with mostly earned money, not borrowed money. So we have the same old story, over and over again, of people borrowing too much money. Thus it shall ever be, I guess.

I can’t even imagine a farming operation of 46,000 acres but even “smaller” farms of 4000 acres or so could be on the verge of falling off this fiscal cliff. You can almost feel the tremors that are shivering through the moneylenders who have been supplying the cash for this folly when they comment on the bankruptcy of Stamp Farms. Among other things, they say they are going to demand more detailed business plans in the future. Harrumph.  Sounds like those investment bankers of 2007.

The rosy glow of $8 corn suddenly isn’t glowing so rosily. Farmers in the southeastern U.S. say they are going to switch to corn this year because cotton and peanuts have not been profitable lately. In the Kentucky bluegrass region, Wendell Berry tells me that thousands of acres of good pastureland are being plowed up for corn and soybeans, leading to horrible erosion problems. Dakota farmers are wishful thinking about how climate change is going to make them the corn belt of the future. My favorite farm columnist, Alan Guebert points out in his “Food and Farm File” that 1.3 million acres of grassland in Nebraska, the Dakotas, Minnesota and Iowa have been converted to corn and soybeans in recent years. None of this land is good corn land and using it that way is a disaster in the making. The experts are saying that if all this translates into bigger supplies of the “golden” grain and therefore cheaper prices, that’s all she wrote for a lot of alpha farms. The farmer who became an overnight millionaire with $8 corn will go broke with $5 corn. I’m thinking they might go broke on $10 corn even faster because it will just encourage bad farming. There is no way we can keep up this money folly.

At some point it would seem that the collective wisdom of mankind would dictate a change in how we assess profits and losses in a natural system like farming. We know what the problem is. It was expressed years and years ago by one William Shakespeare: “Neither a borrower nor a lender be/ For loan oft loses both itself and friend/ And borrowing dulls the edge of husbandry.” I can’t find in all of nature any example of a life that once created, goes on growing and never dies the way money is supposed to do. That is why, historically, a pastoral economy has always defined all interest on money as usury. The meaning of the ancient root of the word, usury, was “foul brood.” There are no foul broods in the food chain.
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  1. After watching the PBS documentary about the Dust Bowl and reading about it quite a bit over the winter, I couldn’t help but notice a lot of similarities. My wife is from Southwest NE, and my father in law has shown me some corn fields that he says weren’t even good pasture before they were broken up. I don’t know why people can’t see it coming, but this cannot last forever. Maybe I’m just too young and don’t know any better, and maybe I’ll be costing myself in the end, but I hate debt and am scared of expanding too rapidly, either with land or equipment. I guess time will tell.

    • I was thinking of the PBS Dust Bowl show too. We humans don’t ever learn. We’re ruining the earth in pursuit of money. Not to mention Monsanto and Round-Up issues. Sigh.., Good job, Mr. Logsdon.

  2. At this high level of debt, Stamps farms was not a farm anymore, more like a bank operation. Borrowing at a low interest rate for land is just a tool, and you can use it wisely or not. What shocks me more than borrowing for land is the concept of “operational loan”. While it may be justified for a newly installed farmer, if you still need an operational loan after a few years, it means that the farm cannot sustain itself and that you are living at the expense of others. When public subsidies stop, you’ll be ruining yourself in the process.

    • Totally agree. Operational loans should always be backed by sale-able assets. Having ready cash when your inventory isn’t sold yet can be a very useful thing, but counting your chickens before they hatch is a very bad practice.

  3. One thing my dad always use to say that he didn’t care if land was in crop production or pasture production, either was better then the land falling to urban sprawl.

  4. I wondered why suddenly so much land around me has been cleared for row cropping–lots of corn. I’ve been concerned because of the systemic pesticides used on the corn and the effect on my bees that sometimes collect corn pollen. I suspect a slow buildup of pesticides may be causing my queens to fail. Your post is good news though. I guess me and the bees will just hunker down and try to hand on for a couple of years til the corn farmers go bust and let their fields go back to woods and pasture?

  5. From Thoreau’s “Walden” (1854):

    “The farmer is endeavoring to solve the problem of a livelihood by a formula more complicated than the problem itself. To get his shoestrings he speculates in herds of cattle. With consummate skill he has set his trap with a hair spring to catch comfort and independence, and then, as he turned away, got his own leg into it.”

  6. So what’s going to happen to those 46,000 acres now, ownershipwise? Any idea?

    • Tyche’s Minder: The little I have read is that the farm is selling off a few thousand acres and regrouping perhaps splitting up into “smaller” parcels.Too soon to tell the ultimate outcome. Life on the Land: what a great quote. Ben: As a writer I made a similar decision about not going into debt anymore than absolutely necessary and that is the only thing that enabled me to keep on writing.Otherwise I would have had to get an honest job. Gene

      • Thank goodness you hate debt as much as I do. The world would be even poorer without the likes of you and Wendell.

  7. I do think it’s a shame that young people can’t go into and make a living at farming without going into debt. Many small farmers are like me, either retired or also working or both. Perhaps when people get tired of eating corn and begin to crave real food again, smaller truck farms can fill the need and make a living for the new farmers in their “food shed”?

  8. Shades of Marvelous Marvin Grabacre, the only farmer east of the Mississippi. I have never forgotten that essay Gene. It was 40 years ahead of its time. If capital markets ever freeze up the big boys will be in a world of hurt. Unless us small guys bail them out like the banking system at present.

    • Don Rudolph: Holy smokes. You make my day twice over, remembering something I wrote so long ago. Bless you. Gene

  9. Thoughout history civilizations have risen and fallen on their soil capacity. Enough said.

  10. What would your Grandpa Rall think of 46,000 acre farms?

    • Jeannie, Hard to say because he was quite the big farmer for his day. But I guarantee you one thing, he did not do it on borrowed money, Gene

  11. 46,000 Acres! My father raised 6 kids on 240 acres. How times have changed.

  12. Real change will only come about when we stop subsidies for large farms. The EU supports small farmers but not corporate agriculture. The large farms are like any large company, they stop caring for the employees and the land.

  13. Reminds me of the book Sacred Economics (Eisenstein), he writes how ‘unnatural’ money is, like a god which doesn’t decay, can ‘create’ (buy) anything, etc. Suggests things like switching to a monetary system backed by nonrenewable resources, negative interest rates, and other odd notions.

  14. Locally although we grow tremendous crops of corn and wheat under irrigation our economy is based upon perennial crops such as fruit trees, grapes for table and wine use and hops for beer. These industries directly or indirectly employ nearly everyone around here. I do what I can to support the local economy above and beyond what I produce myself. My Doctor’s orders include a glass of wine with dinner and a cold beer on a hot day. I like that doctor.

    However the dependence upon large scale perennial crop production has lead to the concept of a family farm being essentially a group of not necessarily related people growing similar produce collaboratively on many acres. The input of energy to produce these gustatory delights is tremendous, but on the whole the perennials are not tilled to the extent that the annual crops are, whether on a small or large farm, so erosion and water pollution are minimal. So perhaps the real question or problem isn’t farm size, but farm management as in: ” are the soil, water and air well taken care of?”

    Yes I realize the large farms producing perennial crops are somewhat energy intensive but after I just ate a purchased fresh apple from controlled atmosphere storage I have to say it was delicious. Yes my own apples are delicious as well and I enjoy them when they’re fresh, but because I don’t have controlled atmosphere storage like the big collaborative farms do I have to preserve my small harvest as dried or canned fruit.

    Just to clarify: controlled atmosphere storage keeps apples in just picked, ripe condition for months on end, but it takes either a large grower or a cooperative of smaller growers to make such storage feasible. Some may not agree but I think enjoying an apple in April that tastes like it did when picked in October is one of life’s delights I’m not yet willing to give up. So I’m working on ways to produce such perennial crop products more sustainably on my one acre, but I just can’t figure out how to make a small controlled atmosphere storage facility sustainable or even affordable. The point being that in my opinion, criticism of big agriculture should not be done unless we are willing to advocate, support and practice truly sustainable alternatives. Remember the saying about black pots and kettles.

    There were, not so long ago, a few small orchardists who made a decent living on their small orchards, but they did essentially all the work themselves. Perhaps the most famous is a survivor of Auschwitz who managed to relocate his wife in the aftermath of the collapse of Nazi Germany (she was also confined to a prison camp and somehow survived such horror) The two of them together managed to scrape and save to purchase a relatively small plot of ground locally and planted fruit trees, irrigated, pruned , harvested etc. with (so I’m told) their own labor and evidently not much hired help. Thriftiness (Meaning: I doubt they incurred much in the way of debt) allowed them to enjoy a good life. (I’d have to say that after surviving Auschwitrz, a good life including enough good home-grown food and no persecution would be truly appreciated.) I dare say their apples were as good ,if not better, than those produced by the largest corporate orchardists around; The fruit was probably better because I bet you could taste the love in the fruit.

    Also I’ve found online old documents which indicated that the original “progressive” orchardists in the Yakima Valley, WA (where I live) planted bluegrass, clover and alfalfa in their orchard sites and rotationally grazed sheep in the orchards. Nowadays the orchard extension agent gives little credit to such practices because he says : you can’t control how much Nitrogen is put on the apples.” Furthermore in the paranoia over manure described in Gene’s books Good Agricultural Practices protocols discourage or forbid such grazing. I doubt the guidelines will change without an outcry from consumers. Perhaps if farmers large and small instead of listening to the Extension Agent’s advice or follwiong the politically correct protocol so much were to seriously return to such practices as grazed bluegrass and clover as an understory to their main crop, whether apples or corn or wheat, not only would sustainability increase, but the bankers might not be subsidizing their operations over time.

    Of course the chemical fertilizer merchants might be unhappy inasmuch as unlike now, there would be limited demand for their products. I’ve read in the scientific journals and even Gene’s books that in the not too distant future chemical fertilizer will not be available to regular farmers anyway unless they have a very rich relative who dotes on them. Let’s be proactive and encourage all farmers, large and small, to seek true sustainability asap. If you see sheep grazing in an orchard shout hallelujah and buy some fruit from that farm.

  15. You people do relize that most money from the government goes into good stamps instead of farm subsidies.

  16. Food stamps

    • In the 2012 fiscal year, $74.6 billion in food assistance was distributed. As of September 2012, 47.7 million Americans were receiving on average $134.29 per month in food assistance.

      $277.3 billion in subsidies 1995-2011.

      $172.3 billion in commodity subsidies.

      $46.6 billion in crop insurance subsidies.

      $37.0 billion in conservation subsidies.

      $21.4 billion in disaster subsidies.

      62 percent of farms in United States did not collect subsidy payments – according to USDA.

      Ten percent collected 75 percent of all subsidies. Amounting to $172.2 billion over 17 years.

      Top 10%: $31,400 average per year between 1995 and 2011.

      Bottom 80%: $594 average per year between 1995 and 2011.

      Government Expenses of the Crop Insurance Program in the United States (1995-2011)

      Indemnities $61,660,883,338

      Administrative and Operating Expense Reimbursements $15,206,279,098

      Other Federal Expenses $2,762,503,797

      Expenses to the Government $79,629,666,233

      Government Revenue of the Crop Insurance Program in the United States (1995-2011)

      Farmer Premiums $32,179,209,658

      Government Earned Interest $757,910,003

      Revenue to the Government $32,937,119,661

      Cost to the Government* $46,692,546,572

      So, yes, the government spends more money on SNAP, but it also benefits many more people–people who cannot live without food. However, large agribusinesses can survive and even thrive without most government farm subsidies.

  17. Its a real curious thing that high prices not low prices for commidities are what bankrupt farmers by the thousands.There used to be an old saying and it stands true today,”When hog prices go high butcher the sow” because when prices are high they have no where to
    go but down.But farmers always pile onto whatever is selling high then over produce and drive the prices down.The time to get into something is when they’re giving it away.
    Large scale agriculture these days depends on cheap fuel and Gov’t Money and both are
    going the way of the Passenger Pigeon shortly so their future isn’t so bright and now farmers are buying land based on price increases for grain when it looks like the prices are going to drop.Just like the 80’s there will be a lot of bargains in equipment at bankruptcy auctions before long.

  18. After watching the new big farmers move into my neighborhood…
    1. When you have huge amounts of money you can do a really good job of farming. You can have new tractors and GPS and you can work all night and all day.

    2. If you farm 100 acres and you make $5 an acre, that ain’t a whole lot of profit for a farm family. If you farm 10,000 acres and you make $5 an acre then that is pretty good for one young man. If you combine a few family members and do a few more acres then it all adds up. Then there are the really good times and you make money exponentially.

    3. The old way of handshakes and not spending money and being conservative are last century.

    4. We can talk all we want about conservation and local and sustainable and the benefits of poop and congratulate ourselves all we want, but…
    When the big guys with their deep pockets decide to be conservation minded I suppose we will all lose that little spark of hope that keeps us all going. Look what happened with the organic label.

    Not to be negative or anything. Just having a hard time talking myself into another year… Times change, or do they?

    • Budd, I hear you deeply. And I too wonder about “change”. I happened to be looking at some ruins of ancient once flourishing cities in North Africa the other day. North Africa sure has changed, but the humans there keep right on fighting. Gene

  19. And another thing…
    I’m setting at my kitchen table eating my lunch and watching the big semi-trucks haul straw out of the giant shed across the road from my house. When I was a kid watched the top blow off of Mt. St. Helens from this view point. Now we see big hay sheds.
    But that is not the point I want to make.
    The other very important observation is that once those farms go broke that land that they have accumulated, through rent or though purchase, is NOT going back to the small farmer. The small farmer of the future is a micro-farmer with a max of five acres in on spot. Farmers like myself who farm say 100 to 800 acres and make a living off of it are a dying breed.
    But we were the ones who bought local and served on the local boards and our father’s started the co-operatives and started the conservation districts and the local extension service.
    In my humble opinion.

  20. I notice another type of farmer around here. These are wealthy folks from Nashville who buy several hundred acres and then hire someone to oversee and farm it for them. They come down on the weekends, maybe. I can’t see how they could be making any money from these places for all they’re spending on them–building big houses and barns, hiring overseers, hiring all the farm work done. Are these just tax write-offs for them? I have to say, the land stays rural and they do hire a lot of locals.

    • Well, now. This is just my opinion. I have watched my family farm (which I now own) vary from $450/acre up to estimates now of $10,000 or better. How can 200bu corn ground support prices higher than subdivision lots? Heck, the flat ground is being priced at $16k! That’s 8 fancy-pants bred cows per acre! I don’t know how they make the interest payments. (BTW, historically, either cows are under-priced or land is overpriced. I’m buying cows.)

      It looks to me like outside investors are just looking for a place to park their money. The banks effectively punish you for sitting on savings, bonds are not attractive at current rates, the stock market is a big question mark. I really think it’s retirement money from large firms just being parked in farmland. It’s going to be bad for farmers and retirees when this bubble pops.

  21. I think Gene is correct. I noticed that the Stamp Farm bankrupcty allowed an even bigger out of the state of Michigan outfit to swoop in a take the best land. The ‘new’ farm already had 50,000 acres – so it is even bigger now.

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