Sunday, September 29, 2013

Advantage small farms have over large...

I was reading an article about farming, big farming.  It was written to explain the commodity markets and looked at the long term profitability of commodity farms -- farms that grow most of what we eat.  Soybeans and corn.   The conclusion?  Several that were interesting: 

1) commodity farms have, in the long term, zero profit.  Yes, they do well some years, and other years not so good.  But over the long term they aren't profitable.  For every good corn year you'll get a bad one.  Same for soybeans. 
2) Crop prices are rising, but so are input prices -- the stuff you buy to grow the crops.  So the overall dollars spent on the crops are going up, but the amount that the farmer keeps is shrinking
3) Small farmers have some big advantages over larger ones.  Here's the quote: 

"The nice woman selling you tomatoes at the farmers market has all manner of ways of distinguishing her product—she's offering such-and-such varieties, grown by this or that method, on some particular piece of land. And she has a range of customers—the teeming hordes of individuals who stream into farmers markets these days—to whom she can make her pitch. The customers may be price-conscious, but they came to the farmers market because they have more than just price in mind: Some combination of quality, locality, aversion to chemicals or what have you all factor into each buyer's decision.

Now consider the farmer with 5,000 acres of corn and soy in Iowa. His products are essentially identical to those of hundreds of thousands of similar farmers—and not just in the US corn belt, but also in places like Brazil and Argentina. Their products won't be sold to individual consumers. They'll be mixed together and processed industrially and end up as, say, livestock feed, car fuel, or cooking oil. "

Being a small farm, closer to your market, and selling directly to consumers is how I've found my farm to grow and be profitable; and I absolutely agree with what he's saying.  Commodities, long term, suck. 

He also points out something that I think americans have forgotten about when we say we hate farm subsidies:  People like stable, low food prices, and we all have to eat.  There's a reason we spend billions of dollars, and sure, some of that is wasted money, but it solves a problem, too.  Food riots are ugly. 

You'll find the original article here. 

1 comment:

George said...

I guess it matters as to what a "small scale" farm is. My neighbor farms approx 600 acres of corn, soybeans, wheat a year. He makes PLENTY of profits selling those off at contract prices. New equipment purchased every few years, in cash, no debt, owns his 300 acre farm, leases the rest. Yea, it's tight some years over others, but he's a 2nd generation farmer, he and his dad started the farm, and he is stilling running it after dad passed on.

5000 acres should yield right around 1.0-1.4 million dollars at 150 bu/ac. which puts gross amounts at around $260/acre... I can see how that is not very profitable.... Even doubling the yield won't make that look good. I'd have to think more about I would manage something like that...