David Rogers piece in today’s Politico on the reasons for the current profitability of cattle ranching is must read for anyone wanting a better understanding of the economics of a central segment of our food system. Clocking in at over 2500 words, it’s a bit of an investment, but well worth the investment.
The basics? Beef prices are up, corn prices are down.
Beef prices are up because we have far few head of cattle than we did even a few years ago.
As of January 2014, the total inventory of cattle and calves in the U.S. had fallen to 87.7 million — the lowest since Harry Truman was president. More important, the number of all cows and heifers that have calved was just 38.3 million, the lowest since 1941 and Franklin D. Roosevelt.
That’s been driven by the ethanol boom, which displaced hay and pasture in the Midwest to make room for more corn and three years of drought in states like Texas and Oklahoma. Meanwhile, exports to Asia have doubled in recent years, creating competition with domestic demand. This is in part driven by demand from China where US beef imports are illegal, but pour in through Vietnam and Hong Kong in a barely secret black market.
With prices high, the industry is trying to respond by increasing herd sizes again. Here’s the catch, cows don’t have litters, they have one calf at a time. Too produce bigger herds, ranchers need to hang on to more cows to have more calves. The project of rebuilding a herd is a multi-year project. The challenge is compounded by the fact that cattle live outdoors in an uncontrolled environment. There’s a lot going on.
Among the many fun facts in the piece: 84 percent of the beef cows in America are still in herds of 500 head or fewer. There are some parts of Ag that Big just won’t go.
Nathanael Johnson’s recent interview with veteran organic farmer Tom Willey made about a dozen great points and raised about a dozen vexing issues. I’d like to look at just one of them.
In the interview, Willey is outlines two problems with one solution. One of those problems is going to get more difficult for organic producers over time.
[On the value of farmer’s labor] Because we think that growing other people’s food is as important as, you know, being people’s pastor or doctor or lawyer, and those professions are certainly well compensated. So why have farmers always had to take it in the shorts economically? And grow food for so many people and work so many hours and so hard for so little remuneration?
I don’t have his permission to say who he is, but there’s a very successful and highly revered organic farmer on the East Coast, and two years ago he had a horrible bout with cancer and he didn’t have the money for health insurance. I mean that is just unconscionable. And he is feeding many people some of the best organic products that we know of. It’s just not right.
[On tracking costs] We don’t do that to that anal of a level in our farm, but we do it. We do it particularly with labor, because on a farm like ours it’s insanely labor intensive. I’m telling you the truth here: When I sell you a dollar’s worth of produce, 70 cents of that goes to labor compensation. We’ve had a wave of wage increases here in the Valley over the past year, because the scarcity of labor has become extreme with the border shut down for so many years. The border used to be a semi-permeable membrane, they’d open the valve a little bit close the valve a little bit, but since everyone has gone apoplectic about immigration, the border is basically shut down. So little by little the labor pool is eroding here.
[On working with immigrant workers] Well we do, we do, and a lot of our employees appreciate the fact that they have year-round work and other benefits. But when that wage started going up, our employees came to us and said, “Hey we need to have a chat here.” So we had a big meeting out in the front yard of the farm and we discussed it. They said, the disparity is just getting too great and you have to do something, or some of us are going to start melting away. So we instantly raised the wage a dollar. And with that, some of our crops became money losers, so we actually had to lose some of our diversity.
[On the need for serious attention to bookkeeping and marketing] There’s a saying that farmers are always price takers, not price makers. You have to become a farmer who is a price maker. You have to distinguish your product from the masses in the market.
We really need to be growing the highest quality, most nutrient-dense produce. Unfortunately we don’t have the tools to assess that cheaply on a daily basis. If you can do that, you are a price maker.
If you are just selling into an amorphous market, under someone else’s label, you are a price taker. But if you are selling locally, you can really identify your customers. We established our name and our label and found a few thousand people who would support it. You just carve out your constituency, figure out how to produce what they need, and get them to understand that they need to pay you fairly for it.
The first problem is the historical weakness that farmers have suffered from in the market’s price mechanism. For specialty growers (produce), this stems from the fact that they are selling a perishable good and they feel the clock ticking much more keenly than the buyer on the other end of the transaction. This is compounded by the tendency of agricultural markets towards gluts. Everyone’s asparagus crop hits the market at the same time, and they all need to sell in the same window of time.
That problem affects all specialty growers, not just organic growers and the problem of gluts is an even bigger problem for commodity crop growers which is the reason why we have had various price stabilization policies in place since the Great Depression. The second problem Willey talks about is the fact that cultivating, processing and transporting organic produce on a small scale is incredibly labor intensive. This is where small organic producers run into a parallel version of Baumol’s cost disease.
The New Yorker’s James Suroweiki explains the disease:
When Mozart composed his String Quintet in G Minor (K. 516), in 1787, you needed five people to perform it—two violinists, two violists, and a cellist. Today, you still need five people, and, unless they play really fast, they take about as long to perform it as musicians did two centuries ago. So much for progress.
An economist would say that the productivity of classical musicians has not improved over time, and in this regard the musicians aren’t alone. In a number of industries, workers produce about as much per hour as they did a decade or two ago. The average college professor can’t grade papers or give lectures any faster today than he did in the early nineties. It takes a waiter just as long to serve a meal, and a car-repair guy just as long to fix a radiator hose.
The rest of the American economy functions differently. In most businesses, workers are continually getting more productive and can produce a lot more per hour than they could ten or twenty years ago. In 1979, workers at G.M. needed forty-one hours to assemble a car. Today, they need just twenty-four.
. . . Generally, productivity growth is a boon, but it creates problems for non-productive enterprises like classical music, education, and car repair: to keep luring talent, they have to increase wages, or else people eventually migrate to businesses that pay better. Instead of becoming nurses or mechanics, they become telecom engineers or machinists. That’s why teachers are getting paid a lot more than they were twenty years ago. (The average salary for an associate college professor has risen almost seventy per cent since the early eighties, and that’s if you adjust for inflation.) To pay those wages, schools and hospitals have to raise prices. The result is that in industries where productivity is flat costs and prices keep going up. Economists call this phenomenon “Baumol’s cost disease,” after William Baumol, the N.Y.U. economist who first made the diagnosis, using the Mozart analogy, in the sixties.
The problem for farmers is that they are competing with more productive industries for workers, but that they the goods they are selling compete directly with substitutes from more productive competitors.
Even the most vocal supporters have found organic [pdf] to require 35% more labor. On top of that, organic yields are consistently lower which is another way of saying that land costs per unit are higher. Because of the way that organic standards in the US are structured, the productivity gaps in labor and yield will almost certainly continue to widen over time. This means organic farmers will be competing with products that are increasingly cheaper in relative terms over time. Compound this with the structural problems that make all farmers price takers and you are facing a very steep climb. This is too say nothing of the problems with economies of scale that small farmers are saddled with.
From the start, Willey’s solution to these problems has been marketing. For farmers who choose organic certification, there are currently only two paths to profitability. You can either sell your soul and go big; selling tomatoes for sauce and canned tomatoes, salad greens for supermarket clamshells; or you can go niche, reaching high end restaurants, farmers markets and use the CSA model. This doesn’t bode well for those of us who’d like to see more produce grown under organic best practices at scales that can feed more people, more afford-ably, more sustainably. It’s not at all clear how marketing can take organic past carving out a niche market to capture the necessary price premium. If that is sufficient for those that want to follow their farming muse and find meaningful, remunerative work as farmers, that’s all to the good, but it relegates independent organic produce farms to being significant cultural assets, but insignificant parts of the food system.
Sustainable farming needs math as much as mulch, says one veteran
Nathanael Johnson | Thought for Food | Grist | 30 January 2014
What Ails Us
James Surowiecki | The New Yorker | 7 July 2003
Organic and Conventional Farming Systems: Environmental and Economic Issues [pdf]
David Pimentel1, Paul Hepperly, James Hanson, Rita Seidel and David Douds | Bioscience | July 2005
The crop yield gap between organic and conventional
Tomek de Ponti,Bert Rijk,Martin K. van Ittersum | Agricultural Systems | April 2012
Comparing the yields of organic and conventional agriculture
Verena Seufert,Navin Ramankutty & Jonathan A. Foley | Nature | 09 March 2012
Remarkable slideshow in The New York Times today.
Despite its small size, the Netherlands punches above its weight in farm exports, second only to the United States. When Henk Wildschut set out to photograph the food industry for “Document Nederland,” an exhibition by the Rijksmuseum and the Dutch newspaper NRC Handelsblad, he says he saw it as unhealthy and unethical. But his project, which focused on innovative production efforts and became the basis for his book, “Food,” revealed a gap between the “consumer-driven romanticized ideal and the reality of food production.’’ Increasingly, he says, ‘‘our food is created in a clean world of rules and protocols.”
I can appreciate his feeling of disconnect from the agriculture that he found. But consider the contrast with the filth and cruelty of an industrial egg laying operation or the pollution from our CAFO’s.
The farm’s of a planet with 4 billion people are not going to feed a planet with 9 billion. They need to be the smartest farms they can be. The Dutch are giving us a glance at that.
The productivity is astonishing. Consider. The Netherlands is 41,543 sq km. The US is 9,826,675 sq km. The US is 236 times the size of the Netherlands. Yet at $102 Billion, the Netherlands agricultural exports are 70% of the United States $145 billion in exports.
The Netherlands agriculture economy is 5x’s as productive as the European average. Factor those productivity numbers on top of the fact that the Netherlands minimum wage at $11.77 an hour is high compared to most of Europe. In fact, higher productivity in that sector would imply higher wages relative to less productive sectors in the Dutch economy. Meanwhile in the US farm workers bottom out at $7.25 an hour.
It goes to show that high tech, high productivity agriculture can be sustainable and humane without being exploitative. Check it out if you want to see what agriculture on a planet with 9 Billion middle class inhabitants is going to look like.
De Wieringermeer grows red, yellow and green sweet peppers on a 40-hectare site in Wieringermeer. An individual hectare is marked off with colored ribbon to provide staff with a visual clue of the growth process and allow for work to be planned accordingly.
At the Swine Innovation Center at Wageningen University, a small porker used a toilet system called Pigsy. Piglets are trained early to defecate in a special corner of the facility, making it possible to collect feces at a single point, which lowers ammonia emissions.
More of Henk Wildschut’s food photography can be food here.
1.WHAT THE FEDERAL SHUTDOWN MEANS FOR PEOPLE WHO EAT AND GROW FOOD
Sam Brasch | Modern Farmer
The USDA Can’t…
Help pregnant women or women with new children buy healthy food. Special Supplemental Nutrition Program for Women, Infants and Children (WIC) doesn’t have funding to continue during the shutdown. The $6 billion dollar program buys healthy food for pregnant women or new mothers if they are poor or at risk of buying unhealthy food. The Huffington Post reports that states can step in for a few days, but if the shutdown goes on too long, mothers and kids could be turned away.
Keep in touch with consumers. In the event of a shutdown, the USDA will basically shutter its office of communications. The website will go dark, reporters won’t have anyone to contact, and all USDA publications and press releases will stop. So even if the agency can find a listeria outbreak, it’s won’t have all channels available to let you know about it.
Keep their databases open. This might not seem like a big deal, but for farmers, it’s huge. Markets rely on reports from the USDA to set the price of soy, wheat, corn, beef, etc. Without an October report traders would be adjusting prices in the dark and farmers would be selling without knowing the real value of their crops.
2.THE RISE OF FOOD ALLERGIES AND FIRST WORLD PROBLEMS
Noah Davis | Pacific Standard
Dr. Scott H. Sicherer, a professor of pediatrics and chief of the Division of Allergy and Immunology at The Mount Sinai Medical Center’s Jaffe Food Allergy Institute, told me that his team conducted a random calling in 1997. It showed one in 250 children were allergic to peanuts. When they did the same study in 2008, the number jumped to one in 70. “That sounds crazy, because it’s a tripling, but the numbers from other countries are similar,” the American Academy of Allergy, Asthma & Immunology (AAAAI) fellow said, pointing to similar studies with similar results from Canada, the U.K., and Australia.
4. DO HIPSTERS ON FOOD STAMPS SHOP AT WHOLE FOODS?
Dana Woldow | BeyondChron
How many of Saunders’ imagined able-bodied childless moochers can possibly be getting SNAP benefits? According to the Center on Budget and Policy Priorities, as recently as 2011, children and elderly or disabled adults comprised 64% of SNAP recipients. Of the remaining 36%, 22% are adults in families with children; just 14% of SNAP recipients are able bodied, childless adults of working age. With about 48 million individuals getting SNAP, that would be about 6.7 million potential “deadbeats”.
But according to the USDA, “Generally, able-bodied adults aged 18 to 50 who do not have children and are not pregnant can only get SNAP benefits for 3 months in a 3-year period unless they are working or participating in a work or workfare program.”
5. THE PLIGHT OF THE POLLINATORS
Jason Mark | Civil Eats
“Earlier this year people were getting very worried, because they weren’t seeing monarchs very far north,” says Lincoln Brower, a research professor of biology at Sweet Briar College and a butterfly expert. “Our predictions have proven to be true. There have been very few sightings in August and now into September. Right now things are looking very grim. I have seen a total of five monarchs in my garden since October 2012. I would normally see a couple of hundred, at least.”
Several species of native bumblebees are also suffering.
“As dramatic as the honeybee declines have been, they pale in comparison to what we have seen with our native bumblebees,” says Eric Mader, a program director at the Xerces Society, an Oregon-based group working to raise awareness about the role of native pollinators. “Honeybees are not going extinct, and that’s the crucial difference with our native pollinators.”
HOUSE MEMBERS ADVOCATE FOR ORGANIC AGRICULTURE IN FARM BILL
National Sustainable Agriculture Coalition
A bipartisan group of Representatives delivered a “Dear Colleague” letter to House leadership on Friday September 27th, calling for House farm bill conferees to support key programs for organic agriculture in any upcoming negotiations.
Thanks to the leadership of Representatives Peter DeFazio (D-OR), Richard Hanna (R-NY), Sam Farr (D-CA), and Ron Kind (D-WI) , as well as strong grassroots pressure from NSAC members and partners in the organic sector, dozens of Representatives from both parties and all parts of the country have joined together in calling for key investments in the future of organic agriculture as an essential part of the 2013 Farm Bill.
7. RECIPE: WHOLE WHEAT PENNE OR FUSILLI WITH FRESH TOMATOES, SHELL BEANS AND FETA
Martha Rose Shulman | The New York Times
Shell beans and tomatoes are still available at the end of September in farmers’ markets, and I’ll continue to make pasta with uncooked tomatoes until there are no sweet tomatoes to be found. Shell beans are a rare treat, soft and velvety, to be savored during their short season.
This piece has gotten fairly wide circulation and deservedly so. I have a few quibbles and observations.
1. You really need to disentangle biotech seeds and problems relating to the pesticide use associated with specific seeds before you explain how they are related. To someone who isn’t already on top of the issues, they are hopelessly conflated in this piece.
The local differences over glyphosate are feeding the long-running debate over biotech crops, which currently account for roughly 90 percent of the corn, soybeans and sugar beets grown in the United States.
While regulators and many scientists say biotech crops are no different from their conventional cousins, others worry that they are damaging the environment and human health. The battle is being waged at the polls, with ballot initiatives to require labeling of genetically modified foods; in courtrooms, where lawyers want to undo patents on biotech seeds; and on supermarket shelves containing products promoting conventionally grown ingredients.
This is the opposite problem from what Amy Harmon was criticized for in her citrus greening piece. Many felt that she did not provide enough context. I disagreed with that criticism. I thought Harmon was wise not to attach a giant boilerplate rehash of the entire GMO debate before moving on to tell the story that she had chosen to tell. Balancing the proper amount of background necessary for clarity and context is tricky.
2. Strom’s choice to use the term ‘biotech’ without ever using ‘GMO’ is an interesting and loaded choice. I’m not entirely sure what to make of it. Is there a move a foot at The Times to tell these stories in a less polarizing way? Not enough data. Stay tuned.
3. I’m sure that this story will fuel Monsanto Derangement Syndrome but it’s not clear to me that there are any clear policy takeaways other than the need for funding independent ag research at our public universities to make sure farmers get the information they need to make good choices.