How Do Small Farms Survive?

Here's the piece from which I stole the heading:
The answer: renting out a minihouse through Airbnb

Another piece in the media suggesting comfort animals, as in those with big brown eyes, aka "cows", is the answer.

The real answers, of course, are:

1. off-farm income, as has been the case for decades.
2. drawing down capital (i.e., the value of land and buildings)   (My mother used to fuss about farmers who would be better off selling out and investing the proceeds in bonds.)

Farming: the Definition

I follow Cam Houle on twitter and was struck by his T-shirt in this tweet.

Turns out the t-shirt is available on Amazon.

It seems even in Canada with its supply management setup, dairying is a losing proposition.

Boundaries Are Important, as Are Perspectives

From the Foothill Agrarian blog:

"From a predation perspective, our lambing season comes at a time when the coyotes and mountain lions don’t have many dietary options. From a dog’s perspective, lambing season offers all sorts of gastronomic and maternal delights. Our dogs love to clean up afterbirth! We’ve had young female dogs that decided they should care for newborn lambs - their maternal instincts drive them to steal lambs from the ewes. Both predilections can create problems. Ideally, we need a dog that is attentive but respectful of lambing ewes. We need a dog that gives a ewe her space while lambing, but that keeps the predators at bay."

Purchasing Fertilizer in 1880

Turns out the 1880 Agricultural Census schedule recorded the cost of fertilizer purchased for the farm.

I'm not sure what fertilizers were available then--guano certainly.. The US had passed the Guano Islands Act in 1852.  The wikipedia article on guano suggests perhaps saltpeter was replacing it.

Economist Discovers Social Norms

The issue Scott Irwin, an economist, is considering is how farmers decide(d) either to plant corn late or to go with prevented planting.  The earlier tweets in this thread all considered rational calculations of return, but this tweet is his final thought:

13. Last, but not least, I don't think we can discount the social norm of not leaving ground bare here in the Corn Belt. I can't tell you how many emails and messages I have gotten from farmers considering PP who were absolutely in personal anguish about doing so.

— Scott Irwin (@ScottIrwinUI) June 24, 2019

I view myself as a rational human being, but over my life I've often not acted as such.  I'm not sure whether social norms, habit, or psychology were at work

NYTimes Articles

Today the Times had one article on projections of world population.  The projection for max population is lower than before because of falling birth rates.

The Times also had an article on research into new crops, which said it was very important because of the "rapidly growing population." 

I find it a bit inconsistent.

What was interesting in the second article was scientists finding ways to plant and harvest multiple times during the year, up to 6 plant/harvest cycles for wheat.  That permits more rapid development of  new varieties.  Norm Borlaug, father of the Green Revolution, was a pioneer in this, moving to Mexico where he could do two crops of wheat a year. 

Analogy of the Day: Phipps on Farm Bureau

"To be sure, farmers as a whole are heavily clustered on the political right, although their actual policy preferences are a mix of blatantly leftist protectionism (sugar, dairy) and subsidies (crop insurance) scattered like chocolate chips in a cookie of free-market rhetoric."

Phipps has had qualms about the Farm Bureau and its representation of farmers for years.  (Its claim of 6 million members is inflated by its insurance operation.)  In this article he lays out his case for leaving it. 

Dairy Supply Management for US?

Tamar Haspel, a food writer I follow on twitter, praised this article in Civil Eats about dairy supply management.  The article describes rising grass roots interest in supply management among Wisconsin dairy farmers and some other areas.  The Farm Bureau opposes it, of course. 

Canada has used supply management for dairy, poultry and eggs since at least 1972 according to this wikipedia article.  (I write "at least" because supply management was a feature of depression-era ag policies but I'm not sure Canada used it for dairy.)

Essentially supply management means assigning production quotas to farms, with penalties for over-production.  The US used to have supply management in place for wheat, cotton, rice, peanuts, and tobacco, rules which dated back to the 1930's.  Over time they've all been dismantled.   Judging by the impace of the change on tobacco farmers, the effect of supply management was to slow the decline of farm units.  In other words, it was harder to get bigger and easier to stay small, but the trends were the same.  The advance of technology and the power of markets still work, just slower.

Slow is what, IMO, the proponents want.  If you're a farmer in your 50's, you'd like to keep going until you can retire. Supply management might make that possible.  But if you're a young go-getter in your 30's looking to expand and adopt new technologies, you don't like the concept.  Politically there's always been more old farmers than young farmers.

Why Is Uber Like Farming?

Megan McArdle had an op-ed this morning arguing that Uber and Lyft were losing money because they weren't charging enough for rides.

Boosters of the ride-share revolution like to point out that most of the nation’s cars spend most of their time parked; there ought to be money in liberating all that unused capital. True enough — except that someone has to drive the car, including the time spent circling as they wait for rides.
In 2014, journalist Timothy B. Lee spent a week driving for Lyft. He drove for 50 hours but spent only 14 of those hours actually ferrying passengers. All that circling wears out the car and burns both gas and the driver’s valuable time.

The other day I noticed someone tweeting, I think, defending the usefulness of Uber.  The woman was divorced, supporting kids and with an odd work schedule (might have been an adjunct academic, I forget).  The point is that not only did she already have a vehicle, she had free time but at odd hours, odd enough she couldn't work a regular job, but she could drive for Uber and make money.

In a way she was similar to a farmer, someone who has land and equipment available and the decision is whether to use it to the fullest or not.  She, like the farmer, did, because that's what the market provides incentives for. When you look at what the farmer or driver is earning with the extra work, it may be very little, but as long as it covers the extra expenses incurred, if there's positive cash flow, the farmer or driver will likely work the hours.

A side issue:  I think cars are more reliable these days and last longer.  And in some cases, like mine, there's a mismatch.  All of my cars have become obsolete before they really became uneconomical to drive.  Repair bills were creeping up, partly because of age issues, not so much wear issues.  To the extent that's true for many people, Uber and Lyft will enable fuller usage of assets.  At least until the advent of self-driving cars which may change the paradigm again.

Why Blue America Is Blue--II

See this tweet on bankruptcies increasing from 2017 to 2018.

And see this report from Politico. 

I'd predict some "emergency" farm legislation will move before 2020.

What Historians Don't Know--the Case of Jill Lepore

So I got several books for Christmas.  First I read "Becoming" which was very good.  Then I read Carl Zimmer's "She Has Her Mother's Laugh", which also was very good.  Now I'm ready for Jill Lepore's " These Truths, a History of the United States". 

Lepore is a good writer.  I think I've read most of her books and enjoyed them.  She's more of a narrative historian than an analytical one, but she knows how to tell a story.

So she starts her history by imagining in the fall of 1787 readers of a New York newspaper seeing the language of the new constitution. By page ii of the Introduction she moves to the people of the United States considering whether to ratify it, "even as they went about baling hay, milling corn, tanning leather, singing hymns, and letting out the seams on last year's winter coats for mothers and fathers grown fatter, and letting down the hems, for children grown taller."

So what does she get wrong?

Obviously farmers weren't baling hay in 1787.  (I  know I've seen a similar error somewhere recently, forget where, might even have been Lepore in another form reusing the same material. )

I'd also challenge the idea of "milling" corn.  I find to my surprise that wikipedia covers it, but I'd be more comfortable with the wording: "grinding corn".

As the proportion of Americans who farm, or grew up on farms, dwindles, the understanding of that way of life starts to vanish.

ERS on US Agriculture: the Case of Hay

Farm Policy has a post summarizing a recent ERS report on the characteristics of farms in the US.

There's the points which are not new to me: when considering total value of production the dominance of the family farm, except in the case of very high value crops and beef, especially what are known as "large-scale family farms", which are the modal and median farms in the ERS categorization  Except, except in the case of hay and poultry.

Because poultry is, I think, dominated by contract farming I won't comment on it.  But hay is interesting--I suspect in part it representatives the last gasp of small scale dairy farms, where the production pattern is harvesting hay in the summer and feeding the hay in the winter.  But dairy itself is dominated by the large-scale family farms, likely meaning their cows don't graze the pastures, but have their feed delivered to them in their barns/feed lots.   In that context a small farm can find a niche space--growing and harvesting hay is not that difficult to combine with getting income from elsewhere, like social security or off-farm employment.  And the the big dairies provide a market.

McConnell's Gift to KY Farmers: Hemp Price Support Loans to Follow?

Mitch McConnell will face the electorate in 2020.  Kentucky has announced 1000+ farmers have been given licenses to grow hemp. That might help Mitch in his primary in 2020 since he's closely identified with getting the approval for hemp. But the farmers are planning to grow 42,000 acres of hemp, which strikes me as possibly threatening a hemp surplus. (To compare, KY may have about 4,000 tobacco farmers and something under 100,000 acres of tobacco.)

(I don't know, but I don't think anyone else does either.  We don't know how big the demand will be, how well the farmers will do in growing hemp, how good the processing facilities will be. The Rural Blog post I link to mentions CBD oil.  I had the impression that CBD oil came from marijuana, not hemp.  I found this assertion though: ">BD is one of 60 chemicals known as cannabinoids that are specific to cannabis plants. The CBD that we use in our CBD hemp oil tinctures is made from industrial hemp, a non-psychoactive derivative of cannabis that contains insignificant traces of THC. Industrial hemp products are legal nationwide and contain less than 0.3% THC.")

So I wonder how long it will be before hemp farmers find the need for and the political clout to get price support loans incorporated in farm legislation?

John Boyd on BBC

Since I mentioned Boyd's appearance in a Post article, I should give equal time to the BBC, where a sound bite from Boyd was included in their piece on the impact of the partial shutdown of the government.

In fairness to Boyd, I suspect he has a reputation for giving good quotes to the media--he's articulate.  In the last century I was  bit dubious of him, thinking he was more a paper farmer than a real one.  But apparently he's (re?)married with kids now and still going with soybeans, getting older along with all the rest of us.

What City Folks Don't Know

This post doesn't cover everything city folks (as my mother would call them) don't know, but just one thing.

Got a new biography of Benjamin Rush from the library the other day. (Rush was the prominent doctor in PA and a founding father and abolitionist.)  Just read a few pages, since I'm behind my reading of other books.  It looks good, well-written.

But, and there's a but.  Rush was born when his parents had a farm outside Philadelphia, though they moved to the city where his father soon died, leaving his mother to support the family.  Anyhow, the author writes about the work of "cutting and baling hay".  That's wrong--they would have cut the grass with a scythe, but they would not have "baled" it--that's a 19th century innovation--they would have likely stacked the hay, possibly stored it in a barn.

When Are Farmers No Longer Farmers

From a Congressional Research Service report on 2018 Farm Income Outlook comes  a table which I can't incorporate.

You can access it here.  What struck me first, from the CRS report, was the rapid increase in farm household income from off farm sources, to the point that off-farm accounted for easily 3 or 4 times as much income as farm sources.

Then, as I tried to find a way to get the image into this post, and failed, I found this ERS spreadsheet.  We all remember the difference between "mean" and "median", right.  According to the table the median farmer had no income from farming in the years 2013-2018. 

That's weird, but this helps to explain it (from a Rural Development Perspectives article)

Almost 90 percent of elderly operators' average household income came from off-farm sources, with nearly half of their off-farm income coming from "other off-farm income," which includes Social Security. Another 19 percent of their off-farm income came from interest and dividends, reflecting savings and investments by these households during earlier years. Unlike elderly operators, operators under age 65 received most of their off-farm income from wages, salaries, or self-employment.

 That was my mother after my father died--for a number of years she continued the poultry operation, but SS income was really the basis of her livelihood.  But we don't think of these situations when discussing "farmers".

Succesion on the Farm

NYTimes has an op-ed on Trump's trade war, focusing on the emptying of the rural landscape.   His example:

A friend, a small-town Iowa banker who specializes in working with farmers, offered a local example. It’s time for Mom and Dad to retire, get off the farm and move to town. Much of the time, if no heir is interested in continuing the operation, the farm is auctioned to the highest bidder.
This time, one son wanted to take over the farm. But there were other children entitled to their share, so the farm went up for auction.
But now they had to compete with larger farm operations. The son “did the best he could,” said my friend, but a big operation “bid it up more than it was worth, some guy from out of town no one knew — probably from one of the big operations up north. The kid didn’t have a chance. It was heartbreaking.”

It's wrenching, but good planning might have saved the day:  the parents establish a legal entity (not a lawyer but likely a corporation of some ilk) in which all the children share equally, with the son who wants to farm an employee/owner.  Over time, if the operation is profitable the son buys out his siblings, assuming they don't want any link to the farm.

A couple things of note:

• this proposed sequence means converting a "family farm" into a "corporate farm" even though there may not be much change in the day-to-day operation.  Although likely the son who wanted to farm was bearing much of the workload when his parents decided to throw in the towel.
• the "big operation" is unknown, unspecified.  It could well have been a neighbor who has the greater access to capital than the aspiring son has.  It's logical it's a bigger operation: with everything else equal, the bigger operation will have lower per-acre operating costs than the smaller operation
• the succession problem is one reason why the median farmer is old.   

Median Farmers Aren't?

Saw an interesting chart today on Twitter, which I was able to find again by using the search function:

,

What's amazing to me is the disparity between the farm and nonfarm income. The bottom line would seem to be that median farmers get their income from nonfarm sources, so why call them farmers?

(I've some thoughts on the age of farmers which I'll stick in another post.  I think my logic there will somewhat undermine the picture above.)

Two Small Livestock Farmers: Different Strategies

I follow a handful of farmers: a couple are gradually withdrawing from farming while two of the younger ones (i.e, maybe 45-50) are involved, but with different strategies:

Walt Jeffries at Sugar Mountain Farm (sadly no longer regularly blogging about his family) specializes in hogs, while Dan Macon at Foothill Agrarian does sheep.

Walt has expanded his operation, using vertical integration, by which I mean he raises hogs and markets the meat, both directly and to stores.  Over the years he's changed from using a commercial butcher to building and running his own butcher shop, just recently receiving his USDA certification so he can sell across state lines instead of just in Vermont.  When you follow him over the years, his determination and drive and the obstacles overcome are amazing, For that reason, I don't recommend his past blog posts for new farmers--they might well be intimidated.

Dan's most recent post, linked to above, explains the logic which leads him not to do marketing, but instead sell his lambs live.  He also notes the economic realities which mean he isn't a full-time farmer.

I recommend both.

[updated to expand on Walt]

Keeping Up With Lawyers and Business: Contract Farming

Modern Farmer reports that SBA's inspector general has determined that poultry farmers operating on a contract with a processor (which 97 percent do) don't qualify as a "small business".

Reminds me of back in the day when ASCS determined that growers of seed corn, which operate under a contract with seed companies, didn't qualify as "producers" because they didn't share in the risk of producing the crop.  That determination was speedily reversed by pressure from Congress (not sure they put it in legislation or appropriations, but reversed it was).

The bottom line is people don't like risk, so for many many years people have been planning and scheming on ways to minimize it.