I remember helping my grandfather haul cherries to market, and when we got there they would sample the cherries and weigh them and tell him what they were worth. Sure, you can time your deliveries a bit to the swing of the market, but you don’t set the price. It would be like GM delivering a load of trucks and then having someone else say what they would pay for them. You make TVs, you set the price. You make cars, you set the price. You make food, you take what is offered to you. Doesn’t seem right.
Gotcha, BobLibDem. But I think you might be overestimating the flexibility manufacturers have in setting prices. Competition for a particular market segment forces manufacturers to set prices lower than they’d like. I’d agree with msmith537’s statement that producers of commodities probably have less flexibility in pricing than do manufacturers of branded products, but there are other market forces which dictate the limits.
Then why are they all about the same price?
I’m not aware of them always having been in hock to the banks. Currently, the problem is that productivity had risen dramatically, but the number of producers and the amount of land under cultivation has not dropped to accomodate these facts. That’s basically it. The industry has enjoyed a leap in productivity and now the marginal producers have to leave the market because prices are too low.
That’s the sort of prejudice that keeps the industry from going through the reforms it needs to deal with. Farmers may produce food, but they are no more important than the grocer who makes the food available to you, or any other of the myriad roles in our economy.
In the township next to ours, there is a farmer who hasn’t made a profit in tart cherries for the last eighteen years, yet he is still in the tart cherry business. Why? We have farmland preservation projects to either buy land or provide money for more equipment so that production can go up, yet that’s not going to bring cherry prices to a level that is profitable.
One farmer said it simply: The only thing that will save farming is a good price for cherries. Well? The price is low for a reason: there are too many cherries on the market at a price that would be profitable for the producers.
If you want to see for yourself, you can go to the Dept. of Agriculture website and look up the information on productivity and land under till to see just how much farmland has been actually disappearing.
I grew up in a semi rural area. Worked on a friends farm off and on for years. One of his pet peeves is urban sprall.
Raises property values in the town and with the new population people expect services I don’t remember in town as a kid. Garbage pick up and school expantion for example. His property taxes have gone up with everybody else’s, but it’s on hundreds of acres not the typical 1/2 acre house plot. Yes the rate is different for Ag than residential but it adds up.
He getting by making a living but something always comes up. Farm equiptment is ghastly expensive. He bought (with a HUGE loan) a $125,000 tractor two years ago to replace two tired worn out ones from the 1950’s. Other equipment needs to be replaced, but can’t afford it. I’ve spent a lot of time wrenching on old tired iron keeping it going “one more year.”
My favorite is the 1980 pick up with 400,000+ miles on it. Last time I was there, it was being used in 4x4 mode as front wheel drive only. Something happened to the back axle so they took the driveshaft off and kept going.
Just some personal observations.
Is there any other career that requires a guy just out of college to put up front an initial capitalization on the order of a million or two just to get started?
At one time, all you needed to get started was an axe, a wheelbarrow and a strong back. In today’s world the family farm seems as practical as the family oil refinery.
Hmmm, how would this work on a bumper sticker: SAVE THE FAMILY OIL REFINERY!!!
A couple of guys were looking into a restaurant in our Township and the sewer hookup alone were going to be $120,000. Starting a business is expensive.
In Michigan, farms get all sorts of breaks on property taxes, plus Prop. A means that taxable value grows w/ the CPI and not the assessment.
It’s really quite simple. Productivity up. Output up. Demand not up so much. Prices down. Someone’s got to leave the industry. Otherwise it’s just a case of “save the family oil refinery.”
To become a wage slave? Doubtful. If you wanna be an enterpreneur and own your own business, then yeah, lots of 'em.
Hmmmm. A $125k capital asset that can (with proper maintenance) be made to last 50 years doesn’t sound too terribly expensive to me. Manufacturing - and even office - equipment is all expensive. We spent here at work about $90K last year to upgrade our servers (2), workstations (9), laptops (6) and the network; we also bought some upgrades to a few of our engineering software applications. And we’re a pretty small organization - $1.4 million gross sales in 2004. And that stuff isn’t expected to be viable for but a few years. I’ve got a piece of design software on this computer that alone was well over $20k; it’ll be obsolete in three years.
I can’t find the productivity data. However, I recall that it has almost doubled in recent history. In terms of farms and farmland lost, this graph is instructive. It is for Michigan, but it is not too far off the US, IIRC. For example, in 1998, the US had 994,423,000 acres in farms, in 2002 the US had 940,300,000 acres in farms. So the US has seen a 5.6% decline in land in farm with an enormous leap in productivity. What does that mean? Supply goes up but demand does not grow to match, prices go down.
The only way to get prices up is to increase demand or reduce supply. The suburbs are not the cause of the problems. Nor are the banks. Nor is anything else to blame. It’s just life, and like every other industry that has had to contract because of efficiency, this one does too.
Well…yes…however that all changed with the invention of the motorized tractor. A modern combine can probably do the work of a thousand strong backs in a tenth the time.
I think it’s be stated before but I believe the trouble small farmers generally have boils down to two things.
Very small profit margins + Very high costs.
A large corporate or cooperative farming group has the capital to absorb bad streaks. Likewise, if a market becomes unsustainable they can use that capital to adjust. Finally, a large group has a lobbying power to mold the market to their needs. As such, many of the agricultural “protections” were written to benefit large-scale operations and while small-scale farmers benefit the majority of the system is not set up for them.
Basically, it comes down to this. Your smaller “family-owned” farms are playing blackjack [though with better odds] and every year they bet a substantial portion of their pot. Most years they do alright but a few bad years and they go bust.