
Is the Second Farm Crisis Upon Us? - clumsysmurf
https://civileats.com/2018/09/10/is-the-second-farm-crisis-upon-us/
======
GlenTheMachine
“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 his full time job) in my area. 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.

The problem is that these vegetables, which don't have to be shipped any
distance and don't have the overhead of a grocery store, are still more
expensive than the equivalent groceries in the local Safeway. The economies of
scale in agriculture have become so strong that there's no way to compete on
price any other way. And people understandably don't want to double their
grocery bills just to buy local.

I grew up on a 300 acre cattle farm. Fifty years ago a family could make a
living on a 300 acre, well situated east coast farm. Not any more. You'd have
trouble just paying for gas, groceries, and medical care. Forget paying down a
mortgage or god forbid buying new farm equipment. The only way to even stay on
the farm, is to either walk into a situation where everything - land, house,
barn, equipment, everything - is already paid for. Or to get a full time job
in town and farm on the weekends. That's what my dad did. And it's what my
sister and brother-in-law do now.

We have a situation where we've harnessed economies of scale so much that we
have only a small handful of corporations producing our food. They mainly want
to grow exactly the same small number of crops, to keep supply chains simple.
We've wrung all of the redundancy, both financial and biodiversity, out of the
system.

So what happens if someone figures out how to weaponize that against us? What
happens if Chinese investors own half the farm land and we go to war with
China? 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.

~~~
tejohnso
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](https://www.youtube.com/watch?v=jbHwAfHQA9M)

~~~
GlenTheMachine
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.

------
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/](http://uponics.com/hydroponics-
yield/)

~~~
BariumBlue
For hydroponics, I've heard of lettuce being commercially grown, but nothing
else - it's more expensive than just farming a large section of land.

And for automation, yes it is a threat, but often times more expensive than
just paying cheap labor, which it seems the world won't be running out of in
the short term

~~~
xoa
> _it 's more expensive than just farming a large section of land._

Does that take into account all the externalities that are currently still
ignored in standard farming? I mean, one could argue that they'll continue to
get ignored indefinitely sure, but I wonder if we're starting to reach a
tipping point there again and while cletus didn't mention it I think that's
one of the most compelling arguments towards hydroponics. Pure physical
barriers could mean the elimination of pesticide and herbicide requirements
for example, and both of those hide and enormous amount of expense upstream
and downstream. Nutrients (fertilizer) can be applied vastly more effectively
and efficiently, and possibly at least as importantly excess can be recovered
or processed before any emission which can entirely eliminate runoff issues
and entry into the environment.

Even thinking politically, the general public often enjoys the views and
imagine romanticism of farming, but the general public can also quite easily
notice and hate algal blooms, outbreaks shutting down beaches, nutrient baths
causing explosions of invasives like zebra mussels, etc., and just general
reductions in recreational water quality even beyond any other effects. Those
also represent big, powerful industries as well. And there is the land itself,
hydroponics means arable land is unnecessary for basic food production, and
there are other compelling uses for said land.

Also land-wise and politically, one argument that frequently gets brought up
is "food security" and governments reasonably worried about having enough
basic food available in an emergency. But at least for rich countries, if
anything LED hydroponics could offer a _better_ story there (at a price),
since the facilities can even be put underground/underwater or in other non-
arable, dense and defensible positions. They can be protected from new forms
of diseases and pests far more effectively. Small developed countries that
currently must import might be able to achieve that politically attractive
(whatever the practical merits) "food independence" that is current infeasible
for them.

I mean, I don't think there will be any super rapid changes here, and I do
think many places will continue to have some agriculture as a boutique
offering, but hydroponics long term looks pretty compelling in a lot of major
ways.

------
rmason
I worked with farmers for over twenty years. It is a relentless game of ever
increasing efficiency. But what I observed were marked differences in ability
to market the crops they grew.

One guy I was good friends with would always sell enough of his crop ahead to
pay all his bills if the price was above his cost of production. Sometimes
he'd sell two or three years ahead when prices were good. He said in a ten
year period he had lots of neighbors who made more money than he did some
years only to lose it during the bad years. He said that gambling with
borrowed money didn't make any sense, only with your profits.

Knew two guys who let their wives do all the farms marketing. They went to
school for it and would network online with other farm marketers. They felt
that they were too emotional about it and that it helped their wives feel like
true partners.

------
jdhn
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 taken on as a result of buying/fixing
equipment, and you have a perfect storm.

[0]
[https://www.tandfonline.com/doi/abs/10.1080/1350485080229797...](https://www.tandfonline.com/doi/abs/10.1080/13504850802297970?journalCode=rael20)

~~~
F3Life
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 what the
impact is. Again in the UK, we might say in the future, increasing property
prices resulted in a reduced birth rate, and an increased need for inward
migration to plug the gap. Just speculation, but we don’t yet know how this
experiment plays out - and with your interesting insight, we might ask whether
the end of mid-scale farming was the impact. Given the importance of this
group, for many reasons, on American culture and identity, what will be the
victim of QE?

~~~
downrightmike
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.

~~~
dbcurtis
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.)

------
mac01021
The article illustrates the crisis, producing an example of how farmers fail
to make ends meet:

>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.

But they don't explain the underlying economic forces. The only possible
reason (I think) that a farmer can't charge more than $1.35 for a gallon of
milk is that _some other farmer_ is able to produce a gallon of milk for less
than $1.35.

So, clearly, some farmers are quite successful, and their success (or maybe
just their efficiency) is part of the reason that other farmers are having a
hard time? But the article doesn't talk about that much.

Slightly off topic: I pay my local supermarket $3 for a gallon of milk and now
I'm curious about the breakdown of what that markup is spent on.

~~~
BariumBlue
> the only possible reason that a farmer can't charge more than $1.35 for a
> gallon of milk is that some other farmer is able to produce a gallon of milk
> for less than $1.35

Not necessarily - if you have demand for 300 units of milk and there are
enough producers to match, then when demand halves, the producers are still
producing 300 units of milk and paying for the costs to produce that amount of
milk. To offset those costs as much as possible, they'll willingly momentarily
sell under marginal cost - the production costs have already been spent
anyways

~~~
heavenlyhash
Oh boy. If you and GP think there's a purely unregulated Laissez-faire market
for dairy products in the U.S., you've got some fun reading to catchup on.

A sibling comment lower down the page provides some links:
[https://news.ycombinator.com/item?id=17996881](https://news.ycombinator.com/item?id=17996881)

~~~
rmason
What can change things dramatically at least in the upper Midwest is if the US
is able to convince Canada to eliminate or greatly lower the tariff on milk
and cheese.

In our area of Michigan a huge new cheese plant is going in and the only
justification I can see for that large an investment is they already know the
dairy tariff is ending.

[https://www.lansingstatejournal.com/story/news/2018/08/09/55...](https://www.lansingstatejournal.com/story/news/2018/08/09/555-m-milk-
processing-factory-coming-st-johns-glanbia/850914002/)

St. Johns is a small farm town North of Lansing which is Michigan's state
capital.

------
chiefalchemist
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?

~~~
randomdata
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.

~~~
chiefalchemist
Yes. But if you're going to do whatever one else is doing, that's not a plan
to prosper. It's suicidal.

For example, I didn't see a single mention of "...so we're going to go
organic..."

Again. Don't get me wrong. Food supply is important. One article does not a
trend make. That said, sharing a bad idea with 100 or 1000 other people
(farmers) still makes it a bad idea.

I realize change isn't something most farmers seek, none the less, they are
not immune to the definition of insanity.

~~~
DareRight
So you're saying, "Grow something unusual."? Something like... water
chestnuts? Or mint?

Convert your wheat crop to mint?

Commodities are commodities because there is such a huge demand for them.
Niche products are not some super easy to get rich with scheme.

If you want to succeed in the mint market, you'd better do you homework,
execute perfectly, and get lucky. Just like in the commodities market.

~~~
chiefalchemist
> "Commodities are commodities because there is such a huge demand for them."

True. However, that doesn't mean, per the article, they are profitable. And if
they are unprofitable, doesn't that mean supply is greater than demand?

Growing an unprofitable commodity and then saying "I'm not making money"
doesn't make sense. Even if there oversight (e.g., Uncle Sam) and you trust
that oversight (which we know is inconsistent) I would think it makes sense,
if you want to be legitimately profitable, you'd try to mitigate the risks.

Farmers are being paid to grow food that gets destroyed. The masses are eating
so much cheap food they're becoming ill more often and/or dying younger. The
status quo doesn't feel sustainable.

------
TulliusCicero
> He can offer help to many farmers, but what was once a robust network of
> state-funded farmer advocates has shrunk dramatically

Do we have a robust network of state-funded plumber advocates or cashier
advocates? If farming is unprofitable for many, then the expected market
response is people exiting the market, which itself will make it more
profitable for those who remain.

Farming is largely a commodity game. That we need fewer farmers over time due
to technological advances is entirely expected and even good! A society where
a large percentage of people still had to be farmers to have enough food to
eat would be a poorer one.

------
ewams
"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?

~~~
downrightmike
A gallon in the stores costs $4-5

~~~
khuey
Even in San Francisco a gallon of milk at Trader Joe's is under $3/gallon.

~~~
shagie
There's some interesting mechanics in the milk subsidies. The original subsidy
was based on the distance from Eau Claire, Wisconsin (
[http://icetronauts.tripod.com/milk.htm](http://icetronauts.tripod.com/milk.htm)
).

> Under the system established in the 1930s, the farther a state was from Eau
> Claire, the higher were the federal price subsidies paid to its dairy
> farmers on milk sold for bottling.

> For example, the maximum subsidy, or differential, paid to Wisconsin dairy
> farmers is $1.20 per 100 pounds of milk, while farmers in southern Florida
> are paid $4.18 per 100 pounds.

California is even further away.

The particulars of it are at [https://www.gpo.gov/fdsys/pkg/GAOREPORTS-
RCED-95-97BR/html/G...](https://www.gpo.gov/fdsys/pkg/GAOREPORTS-
RCED-95-97BR/html/GAOREPORTS-RCED-95-97BR.htm)

It is _still_ based in part on Eau Claire.
[https://www.bostonglobe.com/business/2013/06/08/what-does-
bo...](https://www.bostonglobe.com/business/2013/06/08/what-does-boston-have-
with-milk-prices-wisconsin-turns-out-lot/AUfXl8MXtCffhdw3PD79bJ/story.html)

Between water policy, oversupply during the Eau Claire Base Point and existing
subsidies... California is a very odd place to produce milk and the cheap milk
is a legacy of those policies.

And the last spring and hot summer in Eau Claire (
[http://www.aos.wisc.edu/%7Esco/clim-
history/stations/eau/eau...](http://www.aos.wisc.edu/%7Esco/clim-
history/stations/eau/eau-gddu-2018.gif) &
[https://madison.com/wsj/business/usda-wisconsin-milk-
product...](https://madison.com/wsj/business/usda-wisconsin-milk-production-
slows/article_51ca73f4-b466-5f2d-ab1b-8b08874643c0.html) ) will impact the
price of milk there, along with the tariff spat with Canada... which in turn
changes the amount of the subsidy across the country.

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

~~~
orf
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

~~~
jandrese
There is an argument that all famine is political, and has been for several
centuries. It seems crazy on the surface, but it's hard to find
counterexamples.

~~~
khuey
All of the worst famines are political, because the combination of political
and natural factors push the death tolls beyond what nature itself is capable
of.

------
janee
Other than smaller farms suffering, what would be the dangers of farm
consolidation? I was looking for a section in the article that talks about it,
but couldn't really find any.

~~~
downrightmike
In the last US census less than 1% reported were farmers. Huge change in
demographics in 100 years. A lot of that has been made possible by large
agribusinesses. The small guys day's have over for a while.

------
cheez
Are farmers not able to use financial instruments to hedge their costs? Simply
borrowing money with no hedge seems VERY scary to me. I guess that's just the
game?

~~~
NTDF9
I'm not aware of these instruments. What are some examples of hedges to farm
borrowing so I can look them up?

~~~
village-idiot
Most farmers and their direct consumers will buy/sell a portion of their
harvest in advance in the form of commodity grain futures. This protects the
farmer from dropping prices and their consumer from rising prices. It's one of
the reasons why prices don't shift around a ton from winter to summer anymore.

You can also hedge risk against changes in production cost by using
instruments that track the difference between raw grains and their immediate
products (e.g. Soybean Crush). But that's not really a game the farmer might
play.

These systems have their limits, and are really there to protect all parties
against sudden shifts caused by external events like drought and international
trade. When the trend is long and smooth in one direction there's very little
the farmer can do to fix their situation via purely financial means. No baker
is going to pre-purchase their wheat at old prices when the market price has
been slowly declining for a decade.

------
dbs
Large scale agriculture will add up, until someday it doesn't. This fable told
by Jeremy Grantham explains it quite well.

<i>My favourite story is about the contract between the farmer and the devil.
The devil says, "sign this contract and I'll triple your farm's profits". But
there are 25 footnotes, as there always is with the devil. Footnote 22 says
that 1% of your soil will be eroded each year, which is actually horrifyingly
close to the real average over the past 50 years. The farmer signs and makes a
fortune on a 40-year contract. And his son then signs up for the next 40-year
contract and makes a fortune. And his son then signs up for the third and
final contract. He still does very well, and in the final 20 years the family
has accumulated enormous wealth, but the soil has gone. It's the same story
for all his neighbouring farms and everyone is out of business. My sick joke
is that at least he will die a rich farmer when all the starving hordes arrive
from the city.</i>

[https://www.theguardian.com/environment/blog/2013/apr/16/jer...](https://www.theguardian.com/environment/blog/2013/apr/16/jeremy-
grantham-food-oil-capitalism)

------
HIPisTheAnswer
Not quite; the greatest crisis humanity has ever faced is upon us. Trickles
down into farming, and everything else. We are just getting started.

~~~
gnulinux
This sort non-evidence-based apocalypse talking, fear mongering isn't my
favorite part of HN. I wish you could base your claims to some links, or
books.

------
delbel
these aren't "farmers" these are big agricultural 4000 acres mega-farms. they
took out huge loans and make ridiculous purchases ($400k tractors) and relied
on pie in the sky subsidizes, some are to actually not to farm. if you have an
oxygen machine and your power company threatens to turn it off, you can get a
doctor's note to prevent this. They specifically go through this with you
during collection and refer you to the program, which is a federal grant and
state program. I helped my neighbor do this who is on an oxygen machine. She
even got solar installed "just in case the rid went down"

