27 August 2007

Market Economics














Aside from the dot-com bubble of the 1990s, I can think of no great boom in American history built more on enthusiasm, and less on profit.
~Tom Phillpott


While listening to a song over at Log Cabin Homestead I couldn't help but think of this article which looks at the economics of local farmers markets and the current state of small scale farming:


"The overall income picture for small commercial farms is dismal. Key USDA stat: Farms with annual revenues between $10,000 and $99,000 -- which describes the vast majority of farmers' market vendors -- have an average operating profit margin of negative 24.5 percent.

Simply put, small farms lose money, and their losses are financed by the off-farm incomes of the families that run them. From this angle, so-called sustainable farming looks like a precarious enterprise.

Why, then, do farmers' markets and CSAs continue to grow and multiply? Why do people still farm? The local-food revival, it seems to me, runs on passion: people's desire for connection to the seasons, to the soil that feeds them, to powerful flavors that can't be manufactured with chemicals or preserved over 1,300-mile delivery hauls. Aside from the dot-com bubble of the 1990s, I can think of no great boom in American history built more on enthusiasm, and less on profit.

Yet passion has practical limits (as investors in, say, Pets.com learned in 2000). For local farms to supply significantly more than 2 percent of the nation's produce (or meat, dairy, and eggs, for that matter), small-scale farming will have to become an economically viable activity.

Some optimists argue that market forces are already quietly working to achieve that goal. The argument goes like this: surging consumer demand for local food -- coupled with rising energy costs -- has convinced the large supermarket companies to rethink their far-flung supply chains and seek out small-scale producers near individual retail outlets. These corporate buyers will pump cash into local farm economies across the nation, reviving the fortunes of small-scale farmers.

Certainly, evidence for this scenario abounds. The phrase "local is the new organic" has become commonplace. Having turned organic food into another consumer fetish drained of much of its original meaning, the big corporate retailers are setting their sights on "local" cache. Shoppers entering Whole Foods outlets can hardly grab a basket without reading "buy local" propaganda."


I think much of what the writer states and then glosses over is summed up well in these words:

People's desire for connection to the seasons, to the soil that feeds them, to powerful flavors that can't be manufactured with chemicals or preserved over 1,300-mile delivery hauls.

Now apart from economics of mammon there is the dynamics of home economics which can be found in Wendell Berry's works, a collection of fourteen essays, which can be found here: Home Economics at Cumberland Books, a great source for literature and writing. Where the root of economics is stewardship through proper household management. This being the greater good, if you will or the driving "Why" behind what has become an agrarian push to the shove of modern societies "madness of the masses". To know what benefit it is to live with ones own, spend time in common tasks and instill value to the soul of sons and daughters so that they to may live to do likewise from generation to generation. Until next time..............

To live is not to pass time, but to spend time.


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4 Comments:

At 6:20 PM, Anonymous Bill Wilson said...

Very interesting. You said, “To live is not to pass time, but to spend time.” You’re tying small-farming and the products of small farms to values. But IMHO, I think those values are mainly embraced by those producing farm products, not those using them. Modern societies “madness of the masses” exists expressly because society will NOT embrace these values.

 
At 3:17 PM, Blogger Scott Holtzman said...

I think what people espouse sometimes follows along with the he said-she said crowd. What they embrace, hold close or pine for at times is less chaos not more.

I can not argue that many hands that touch the soil gain new appreciation for all things living, but more than a time even those who share in the bounty of fruitful labors waft in a sentiment or thought for something simple than what they now have or their lot in life.

Does a small thought change the course of tides? Perhaps in time.

 
At 5:17 AM, Blogger Walter Jeffries said...

Thanks for that pointer to the Grist article. In the letters someone says to do land trust to compensate for a lack of farm income. That has the problem of it will only last for so long, to start with. But there are other issues.

The premise of this idea (Land conservation easement donations producing tax deductions) is based on the idea that you have excess income that can be offset. That doesn't work for most small farmers. I'm cash poor but I'm land rich. I have a lot of land and little cash.
If I give away the development rights to a land trust then I am giving away my retirement, my insurance policy, my savings and there will be no benefit because the "tax incentive" is useless - I don't have enough income to offset. That is true for most small farmers.

One of the things I have run into is that the land trust people, and others, don't understand that our land is our retirement fund, our health insurance, our disaster insurance, our savings. We don't have a 401K, IRA or any of those fancy things. We also aren't likely to get much or any social security even if the system exists down the road. I can't just give away for free the equity that we have worked hard to build up. Would you just hand your retirement plan over to some bum on the street?

Just as importantly the land trusts offer only a pittance for the high value of our land's development rights. Mostly the land trusts want us to donate the development rights but sometimes they offer to buy them. Their explanation is they have a tight budget - hey, I understand, but so do I. Land trusts offer about $2,000 per acre. I can sell the land for $5,000 to $100,000 per acre. If the land trust wants to get the land then they need to offer a lot more. The math says it is better for me to sell a few acres for home lots - I'll get a lot more money than conserving a lot of land - and then continue to farm the remaining land.

The process of going through with the land trust is very expensive and complicated. I've worked through it multiple times and I really don't have the time to waste. I've got farming to do. In the times I've dealt with land trusts I have felt like they treated me as if I was not important. That's fine. If they've got other fish to fry just say so. Instead they drag the process out. Take huge amounts of time to respond. Miss deadlines. Change personnel. Lose files. In general an unprofessional process and a waste of my time.

There is no long term tax incentive because my real estate taxes, one of our biggest annual costs, don't go down when the land trust buys the development rights. In fact, they actually could go up. It's complicated but a real factor and not something the land trusts like to talk about.

Then there are the tax disincentives. My real estate and income taxes will get more complicated and possibly higher every single year if I do the land trust thing. I would have to pay a capital gains tax on the income from the sale of the development rights at both the federal and the state levels. My tax forms go from being something I can handle to something requiring an 'expert' who makes hidden mistakes (been there, seen that) and costs me a lot each year. The government has put hurdles in the way that make this sort of thing even less appealing.

As much as I like the idea of land trusts and conservation the system is not working for small farmers. The whole thing is geared toward rich folk who want to donate the easements on their land and gain a tax benefit to offset their high income. Small farmers are in a very different boat and the whole land trust thing isn't working for us or other small farmers I've talked with.

What we really need is to end all subsidies. Subsidies go to only a few (6%) of farmers and most of those are big corporations. This means that my tax dollars are helping my competition and I don't like that. We need to eliminate the subsidies to everything, not just farming. If all subsidies were eliminated then the cost of petroleum would take on it's real value. That would mean there would no longer be the shipping of cheap goods half way round the world or even across the country. This would create more local jobs in farming, manufacturing and other job sectors. Yes, there would be some turbulence as the market settled but we would save on taxes when we no longer spent hundreds of billions on subsidies - that would offset the price increases.

 
At 5:17 PM, Blogger Scott Holtzman said...

"We need to eliminate the subsidies to everything, not just farming. If all subsidies were eliminated then the cost of petroleum would take on it's real value. That would mean there would no longer be the shipping of cheap goods half way round the world or even across the country."

That Walter is one idea I would embrace entirely! Which I think in turn would create quite a change in the economic power(s) of the state and local communities. Which is better tended to than a far of bureaucrat who can not be "touched" with the daily concerns of a localized government.

Weening the sucklings from the tit of the government sow is something of a word picture you are all too familiar with to say the least, I am sure.

Next one would be asking for a gold backed denomination of currency - heretical!

I agree with many points of the land trust issue as well. Bottom line is what better steward and charge would a non-entity have over the landowner him or her self? It is a subtle form of not so obvious serfdom when extended to it's logical conclusion - personally I'd prefer my 30 pieces of silver by some honest measure such as the ingenuity of my mind or the sweat of my brow over "easy gains" or (supposed) "tax relief".

Thanks for stopping by, I really am enjoying the photos there at SMF.

Regards.

 

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