Sunday, January 20, 2008

Do farmers deserve a middle-class income?

I started reading Barbara Kingsolver's
"Animal, Vegetable, Miracle" last week and have been thoroughly enjoying it. However, I have noticed its critique of mainstream agriculture is not paired with empathy for average farmers, such as found in other books such as "The Omnivore's Dilemma" (post on that book to come).

Here's an example: Kingsolver's husband Steven L. Hopp steps in on page 76 to write approvingly about the supposed advantages of micro-agriculture: "Small farms less than four acres in size had an average net income of $1400 per acre. The per-acre profit declines steadily as farm size grows, to less than $40 an acre for farms above a thousand acres. Small operators have to be both grower and marketer... They're doing everything right, they just need customers..."

The thing that stands out right away is that the income from a four-acre farm makes a minimum-wage paycheck look pretty attractive. If this is the definition of a small farm, then the only people who can afford them either work other jobs, receive pensions, or are simply independently wealthy. As the USDA chart above shows, these people regularly put in hundreds of hours of unpaid work or write off the value of the land.

It's only the much maligned "big" farmers who seem to actually worry about things like paying off mortgages or earning a living. Fortunately, most of those who farm hundreds of acres or work with hundreds of animals have managed to survive on their incomes as full-time farmers. And that's good news for us: if our flour all came from four-acre wheat farms or our milk came from four-cow dairies, paying six dollars for a loaf or a gallon would suddenly become a bargain rather a guilt-assuaging indulgence.

Here in Skagit County, our organic family farms are mostly in the hundred-acre range, but they are able to sustain a respectable standard of living from the full-time work. Golden Glen Creamery on the north end of the Valley is not organic, but about 70 naturally-raised cows provide milk for a line of dairy products that support an extended family in a way that a couple of goats down the road from the Kingsolver cabin never could. Sustainable agriculture that doesn't provide a living for its farmers isn't sustainable; "Animal, Vegetable, Miracle" would have done better to celebrate farms that actually work.

In other news, we received a little more press in our local paper over the holidays when the Skagit Valley Herald made a courageous decision to annoy a large minority of its subscribers with a week-long front-page series of articles on climate change. Eventually we'll actually have enough developing that we can write a press release!

Monday, January 14, 2008

Will milk prices keep supporting farmer margins?

Even with historically high milk prices, dairy farmers aren't feeling too secure in their profitability. Input prices continue to rise, threatening margins. This can be seen most easily with corn prices.

Washington dairies do not depend on Midwestern corn. Unlike feedlot beef cattle, dairy cows primarily consume local grass or chopped-corn silage, augmented by alfalfa hay grown in drier regions. However, as grain prices have risen, crop farmers have shifted more of their fields to grain production with predictable effects on the availability of land for feeding cows.

Corn, soybeans, and wheat are all setting records this year. Corn futures on the Chicago Board of Trade are near the record of $5.50 a bushel set during the 1995-96 drought, and the chart of historical corn prices above shows that--in nominal terms--we are in new territory. Even here in Skagit County, winter wheat--a lowly rotation crop--is experiencing a boom as farmers contract for May prices quadruple the historical average. Landowners accustomed to earning a few hundred dollars per acre providing feed for dairy cows can rake in up to two thousand an acre by switching to wheat.

What is going on? The market seems to be driven by both American biofuels and international food demand. Almost a quarter of U.S. corn will be turned into ethanol this year, but strong exports have added fuel to the fire. Wheat does not have much of a biofuels role, so its price reflects a larger shift in worldwide carbohydrate needs.

At Farm Power, high grain prices will push our partner farmers into even greater reliance on their own land for animal feed. We have noticed increasing interest in our plans to increase the nutrient value of manure that we process, so we hope to start helping reduce feed production costs before higher prices really start to bite. Those farmers who have been adding extra grain to their cow rations will undoubtedly cut back, although milk production will suffer. As long as milk prices remain high, the transition won't be too painful; with a little luck, by the time margins start getting squeezed Farm Power will have its first digester running and provide a little more cushion. In the end, that's why we're here.