©John Phipps 2006

Proud to be Industrial

Summer 2006

Few farmers are comfortable being labeled “industrial”. The word fairly drips contempt and calls to mind images of bleak desolation (did you picture a smokestack?). But in the faces of my farm visitors, I have seen the truth. The jolting difference between the farm they see and the farm they expected was troubling. “It looks so…industrial”, one visitor finally blurted.

Yes, it does. And for lack of a better description, I’m OK with it.  Heck – “industry” is a synonym for hard work, diligence and productiveness. Sounds like me. (Some of the time.)

Weird, isn’t it?  A community close to me just lost out in a competition for a new car assembly plant and thousands of good paying industrial jobs. The disappointment was keen. To even hint, however that farming in these parts has become an industry borders on the apocalyptic.

The reasons, I believe are woven deep in our culture. The agrarian ideal I explored earlier (March 2006) has been the promotional cover story for farm policy despite the fact it has been frozen in time since about 1945. Producers automatically disguise themselves as agrarians for a simple reason – it qualifies us for “empathy payments”.

But we aren’t quaint subsistence peasantry. Many of us simply avoid thinking too much about what GPS, HTA’s, and LDP’s imply about the level of technical and economic sophistication we actually employ.

We also have abdicated the heavy pondering of whether agriculture as we really, really practice it is less moral than the image we offer. By failing to articulate a justification of our actions we allow the populist condemnation of modern farming to stand unchallenged, and our own doubts to multiply.

Time’s up on that shrug-off. Industrial agriculture is a rational, efficient and ethical response to the need for “growable” goods. The technology used is morally inert – the way it is employed and the consequences should be the standard by which it is judged.

The agrarian model is self-centered, although portrayed as deeply intertwined with the “natural” world. Self-sufficiency in a tight community may actually be a benign cover for “It’s all about me and mine”. This business model fails the test of arithmetic. Agrarians never point out how their way of life could be extended to millions, nor do they seem to care. The idea that 300 million people in the US alone could be fed by farmer markets is laughable. Therein lays another subtext: agrarians border on being “anti-people” – or at least “anti-more-people”.  

Agrarians are leery of those who can work in larger-than-medieval groups. The basic techniques of industrialism – specialization, organization, centralization – are often portrayed as demeaning, even when the world has found huge payoffs for such cooperative effort.  And don’t bring up technology! Simple, they say, is a virtue.  Fair enough, but then to be complex and good is a greater achievement, and worth applauding.

An alternative view is industrialization is the evolution of artisanal work through technology and people skills. Industrialists may be despised, in short, because they can play well with others unlike themselves, as well as learn outside their discipline.

Fool me once. The inference that industrial agriculture is inherently harmful also conveniently overlooks one obvious rebuttal: how does such a bad practice continue so long in free societies?  Have we finally found a way to fool all of the people all of the time?

Our industrial system ensures such criticisms are heard and addressed. Industrialism is far from perfect, but it rewards innovation, enabling rapid answers. More importantly, industrial agriculture is scrutinized and regulated - from OSHA to EEOC – unlike small farms with blanket exemptions.  Guess which segment will have fewer child fatalities, for example. 

As our food industry progresses with industrial efficiencies, it is ironic that agrarian agriculture is a one beneficiary. The enormous wealth made possible by industrial methods makes small and/or organic farms catering to agrarian beliefs possible, and more importantly, profitably countercultural. If there were no Walmarts, in other words, there would be no Whole Foods.

I am an industrial farmer. I am proud to be part of a responsible team that provides food and more to the world. I welcome agrarians to provide their unique contributions and will abide by the decisions of the marketplace on our differences. But I will no longer stand mute as my work and values are disparaged simply to get an LDP.

And if customers find my product satisfactory, I will intensify my effort. And if they find my work practices insufficiently quaint to deserve subsidy, I guess I win again.

©John Phipps 2008

Licensed to till

One of the most curious differences between my farm and my Danish friends is the fact they are licensed farmers. Danish farmers must pass a test, have a degree in agriculture (although there are workarounds for this) and serve “apprenticeships” as training before being licensed to farm.  Further, farmers over 65 are not licensed, nor children.  Farmers must be licensed to buy and operate farm machinery, as well.

There are some upsides to this practice.  First, there are fewer incompetent farmers in their midst, and those who do farm can point to some proof of expertise.  We all look at our doctor’s diplomas while in the office for example.  And more than a few have tacked “CCA” to our business identity to suggest some credentials.

But the real kicker is only licensed farmers can own farmland. Roll that thought around in your head for a while.  To be sure, crafty Danes have found ways to skirt this, but the vast majority of farmland in Denmark is farmer-owned as a result. This is a radical leap for Americans, but I can see both sides.

The whole idea, I’ll admit seems like a non-starter, actually. For the most part we look in horror at professional accreditation for our occupation.  In fact, when I mentioned this on US Farm Report, the response was remarkably hostile.

The first objection seems to be philosophical/political.  Professional licensing strikes many producers as trampling our individual rights.  And of course, you can’t hurl the “s-word” around enough these days: socialism.

But I have checked the Constitution, and the right to farm is not actually spelled out there.  Furthermore, the specter of over-regulation is not exactly a timely complaint as lax government oversight is repeatedly blamed for our current credit nightmare, and the solution cannot be disguised as close to capitalism.

Farmers have been exempt from too much for too long.  One glaring example is our appalling safety record, which annually tallies children killed at work. Imagine any other industry having public approval to put minors in dangerous situations.  Licensing curbs this abhorrent practice.

The truth is we long ago passed the era of being a labor-intensive industry.  Modern industrial agriculture is about capital, technology and management.  As Dan Anderson pointed out in his musing about licensing farmers, letting anybody operate modern farm machinery is asking for trouble.

Licensing also identifies who is truly a farmer for my European friends. The FSA would love to have that murky issue clarified. Plus it might just save your subsidy if fewer dollars went to Ted Turner. At the same time, self-imposed qualifications would do much to preempt environmental regulatory action.

The idea, of course, smacks of elitism – a political no-no.  Recognizing superior accomplishment triggers a defense that only the self-anointed possess the needed character. However, I notice friends always manage to drop the phrase “one of the best in the country” when talking about their doctor or hospital. That seems pretty elitist to me. On the same scale, what is wrong with wanting the best in the country to take care of the country?

Mostly there is resistance (that increases with age) to the idea of objective measurement of professional skill. The concept of passing the bar or CPA exam is well and good for eggheads, but we’re talking about farming, right?

Maybe not much longer.  The skill set that enabled me to start farming is now just the minimum. While many may not like the idea of evolving into a true profession, we need to remember that surgeons were once little more than barbers with way too much time on their hands.

For young farmers, licensing is one step that grants them full rights without undue restraint. Current producers would undoubtedly be grandfathered into the system, but the benefit would clearly accrue to early careers. State-of-the-art training is the most powerful market value young people can bring to the game, but without licensing it goes unrecognized.

Licensing American farmers would formalize a process already in progress. We no longer are a profession open to anyone, just as casual entrepreneurs can’t open a dentist’s office or even roof a house.

By refusing to adopt professional standards, we forego a chance to raise our collective performance right at a time when such reassurance would be most reassuring to our customers.  Worse yet, we impede the entrance and rise of better minds and greater ability.

But then, maybe that’s the idea.

Left behind – and I’m not enraptured

2004

Being in the middle of groups has a naturally comforting feel. Looking at the ubiquitous newspaper pie charts indicating public sentiment on everything from trade issues to toilet paper, we often are relieved when others agree with our opinion.

More frequently, however, I find myself tending to the margins – holding positions that are mildly out of the mainstream. On a few issues I seem to have wandered into the fringe. The manly response is to assert loudly that I don’t care about the opinions of the masses; that I am an independent thinker. This is nonsense, of course – we all care about what others think.

This separation can occur not only when I adopt unpopular beliefs, but also when mass opinion shifts and I do not. In the realm of popular issues, I am less alarmed. I don’t watch enough TV to keep up with rapidly shifting controversies. Howard Dean came and went before I really had formed a judgment, for example. The situations that perplex me are not spelled out in polls but corporate decisions or organizational policy signals.

For example, I have been a happy owner of a Case 2366 combine. It is the largest combine I have ever owned and its performance has been more than I hoped, not withstanding the unloading auger-power pole incident which I now admit was not a design flaw. Its capacity is more than enough for our 1350 acres.

I was stunned to hear that CNH will not be continuing this machine size, only larger harvesters. To me it indicated I was no longer a target market for them. I do not fault their marketing, but all the charts and graphs about where farm size is going don’t begin to have the impact of discovering your operation is too small to be of interest to long-term suppliers.

Nor am I whining about loyalty. I have to make reciprocal decisions to protect my own business viability as well. Nonetheless it is a sobering wakeup call to my self-serving view of the world to find that agriculture is moving on without me.

A similar incident occurred at the AFBF (Farm Bureau) meeting recently. It has been a singular privilege to have been active in Farm Bureau at numerous levels, and I have many valued friends in the organization. I am fairly familiar with their policy from my days as a county president. One of these positions was a firm belief that free trade optimizes the outcome for all involved.

This changed in 2004. The AFBF delegate body approved a blatantly protectionist stance on selected commodities. Although the vote was razor- thin, the fact that any majority at all was assembled revealed to me how far from the pack I was. Of course this is just one issue, but added to other subtle shifts lately, I think we are “drifting apart”, to use modern relationship jargon.

Nor is it a direction I wish to go to in order to stay in the group. Loyalty to core beliefs is often more important than loyalty to groups or individuals. Farm Bureau shrewdly makes it difficult to register my disapproval by binding insurance policies to membership. Finding a new insurance agent when I really like the one I have is another hurdle altogether. So as far as the membership statistics the outside world sees, I remain another happy Farm Bureau member satisfied with policy decisions.

To be sure, I have the option of mounting a grass-roots campaign to reverse this decision, but frankly, I sense the weight of insurance customers moving in the opposite direction. My best use of time is probably to start pricing a new farm policy. Either way, I am obviously no longer in sync with much of my profession.

The latest jolt though, was President Bush’s 2005 budget. My position on the political chart has always been in the conservative Republican camp. This is where I thought the guy I voted for was anchored as well. But if planning more tax cuts in the face of $500B deficits, erecting trade barriers for politically powerful industries, attacking sincere dissent as craven disloyalty are the beliefs of conservative Republicans today, then I must be something else. Maybe I’m a liberal...Republican. I’ve heard there may be as many as 6 or 7 of us.

Now all these perceptions could simply be fusty middle-aged crankiness. Perhaps I am just not well-informed or smart enough to understand my principles are outdated. Regardless, my painfully-acquired intellectual tools and moral compass are all that I have to guide my decisions.

CNH, Farm Bureau, and the Republican Party are going where my conscience or circumstances prohibit. I suspect they won’t miss me at all.

Nevertheless, I shall miss them. 

Land Buyer's Logic

November 1996

Farm magazines can always count on the subject of buying land for several pages of print every year. This eternal agricultural question reminds me of the old joke about economics tests in college. Professors can use the same exam every year - they just change the answers.

To help readers decide whether to buy or not, most advice articles include rigorous mathematics and sobering statistics. I personally pore over these examples and then ignore them to make what seem to be exceptionally irrational decisions. Am I simply foolish (very possible) or are there other ways of analyzing this decision? In consideration, I would offer some usually ignored, but significant reasons in support of our desire to own the land we farm.

The Critical Ingredient: Of all the requirements needed to farm, nothing is more crucial than land. Moreover, nothing is more difficult to get and maintain control of. Machinery, labor, crop inputs - even money - are readily available from multiple sources at any time and location. Price is a major consideration, but not supply. Land, however, is both strongly held and thinly traded, especially rental land. The timing and location of land opportunities are seldom coordinated with your personal farm plans. This obstacle has impeded more farm careers than any other. To put it plainly, sometimes you buy land “against the numbers”, just so you can farm.

The Phantom Average: Unless the figures in the buying example are specific for one actual case, averages of some sort are substituted. As more and more averages are added, the usefulness of the analysis is diluted until, like the legendary American Family with 1.7 Children, it no longer represents reality. In reading the columns, I tend to note those figures that disagree with mine (yields are too low, seed cost too high, etc.), and then view the resulting totals as irrelevant to me. In addition, the number of hidden assumptions is very large. For instance, I have no knowledge of anyone actually confronted with a rent-or-buy decision. The assumption that land is always available to rent, or that a piece of desirable ground will be available to buy when you are good and ready is highly unlikely. The idea that land stays rented (or under the same terms) as long as land stays owned is questionable. Actual statistics for my area indicate an average tenure of about 12 years.

A corollary to this principle is the Precept of Compounded Probabilities. A one year cash flow statement strains my prognostication powers to the limits. A twenty-year projection is a shot in the dark by about year 3. Piling assumptions on probabilities yields at best, hand-grenade accuracy. History often provides a better perspective, and history does not show farm ownership in a bad light.

The Law of Highest and Best Use: The underlying motivation for many economic analyses is that I want to maximize my return, or generate more wealth, measured as MONEY. However, comparing a land purchase with high-yield corporate bonds doesn't mean much if I don't want to own bonds. If I choose to invest in land, perhaps it's because I know something about and like land, (plus it gives me some way to make a living), while I have much to learn about annuities or bonds. Maximizing satisfaction or happiness may lie in a slightly different direction than maximum dollars, and perhaps should be given at least equal weight. It is just as foolish to ignore your personal preferences when making investment decisions, as it is to slavishly follow your heart.

The Principle of Enforced Savings: Few things are more difficult for the self-employed than regular saving. The logic that the land payment that I would not be making if I did not buy ground would flow to some form of savings is doubtful at best - at least the full amount. I am old enough now to realize that it would largely sift through the economic cracks, leaving me wondering where it went. The land payment, however, gets bugeted, worried over, and somehow paid. Indeed, the bank has personnel specifically tasked to remind and urge me to make this payment. They will even call (repeatedly) and drive out to my farm (how thoughtful!) to see that the check gets written. Moreover, an increasing part of that check is written to “us”, in the form of equity, and now, after several years, a small light is glowing faintly at the end of a 20-year tunnel. For those like me, this Discipline of the Uniform Commercial Code, and simple honor, holds us to the fire better than our best intentions. While it may not be the absolutely most efficient method of accumulating wealth, it works modestly well for a semi-profligate such as myself.

The Problem with Predictions: Predicting land prices is not easy. There are currently several national advisers desperately looking for a price collapse they called to occur in the early 1990s. Look in the old copies of farm magazines under your couch at what the self-appointed doomsayers were predicting then. In my opinion, land should be viewed as a 100 year investment, as a minimum. Given that perspective, the long term investment is not too sensitive to when you buy, but if you buy. This is no different than any other sound investment, such as stocks. Expecting to pick the highs and lows of the land market will yield the same results as a similar grain marketing plan for most of us. Over the long haul, it really won’t matter. Perhaps my great-great-great-grandfather paid a ridiculous price for our home farm. Who cares? All I know is that his efforts gave me a chance to farm, and I honor his memory for it.

The Bias Problem: Much has been said about the single-minded focus of farmers for land. Interestingly enough, we are not the only profession with such prejudices. I have noticed accountants and financial advisors, for instance, tend to favor money, especially cash or easily convertible assets. The reason is analogous - they “farm” these assets like we do land. If you make your living by moving others’ money from one form to another, seeing it tied up for centuries in land, which ends their involvement (and commissions) is not attractive.

The Rule of Price: When is the price of land too high? Simple. When you want it and can't pay for it. Any price below this is OK, in my book. It has nothing to do with the price of corn or T-bills or inflation. The words “high” and “low” are subjective measurements, with personal meaning only. They measure the things you hold dear or meaningful, and have nothing to do with national averages or rates of return. A story was told by a farm business analyst of an 80+ year-old farmer paying a seemingly exorbitant price for a field. When asked, the old gentleman explained that it was the first farm he ever worked as a young man, and he had always promised himself that he would own it someday, somehow. The speaker's point was how irrational some are when it comes to land, but I think many of us can find more logic in the fulfillment of a half-century-old dream than the single-minded accumulation of cash. Whether we want to admit it or not, there is a Pearl of Great Price in all our lives. What a pity if it is only money.

The Cashflow Criteria Subaxiom: Land should always cash-flow. What this means is not universally agreed upon, but you won't be taken seriously if you don't use this phrase several times during any discussion of land. It is important to remember, however, that land prices only have to drop to the cash-flow point of the economically strongest farmer, not the average farmer (or farther below, me). Further, it seems always the case that these economically sound farmers are interested in the same piece of dirt you are. The result is that land prices seldom seem reasonable to a majority of farmers. Once land is paid for, however, the price of land doesn’t mean much, because farmers usually don’t intend to sell it.

The Pursuit of Freedom: You choose "rent" in the rent/buy decision. Now you want to try no-till (or tofu beans, or post-emergence chemicals). But what will the landlord think of you, even if he/she agrees? Perhaps you better play it safe and do it The Way We've Always Done It. What will happen to the innovators who need perhaps 10-15 years of mixed results to hone the farming solutions for the future? We need the freedom of some ground where we can exercise our own ideas, or at the least relax a little when we farm it. What number can you put in the analysis for the privilege to farm without having a cranky ex-farmer second-guess your efforts or pressure your decision-making? Or more difficult, what is it worth not having to worry about your widowed landlady making ends meet because you picked the wrong herbicide? I personally consider the rights of a landlord to choose the farmer to be the single biggest asset included in the land purchase. As talk of sky-high cash rents, privilege rents, and 60/40 shares becomes fact, this right, acquired only with ownership, adds even more value to a land purchase.

Widened Horizons: Farmers who buy farmland get other things hidden in the deal that they don't expect, such as (a) a new appreciation for land assessment methods, (b) a eye-opening lesson how much bins, sheds, and tile cost in comparison to the return, and (c) a strange sense of isolation when distributing blame. This in turn, frequently makes him a better tenant, and more likely to think before (a) voting for a new school swimming pool, (b) whining about how bad the old barn is, and why we need a grain leg, or (c) blaming the landlord (he won't let me use enough fertilizer) for disappointing performances. At the least, it may help the farmer appreciate the point of view of his landlords.

The Cure for Myopia: Next to marriage, a mortgage is the longest obligation many of us will ever incur. Given the current marriage statistics, it may be number one. In order for a farmer, or it is to be hoped, a farm family, to decide to buy land, they must first reach an assessment of what they can do in the future. This act of evaluation can force them out of a ME- NOW world, into an US-THEN world sometime in the future. They make a commitment and publicly declare it, enacting traditional ideas of honor and faithfulness. This process is one of the most necessary activities of a meaningful existence. It sets a definite goal in the future and provides a way to measure the progress. Buying land is a statement about your belief in yourself and your basic optimism about our industry. It does not say that conditions will always be easy, but that you believe you can find a way to succeed. The most surprising part is that this attitude can buoy the spirits of those around you. Many successful landowners were encouraged to action by the example of one of their friends - i.e., “Crimony! If John Phipps can do it, I certainly can.”

The American Tradition: As best I can discover, early American settlers did not leave the serfdom of Europe to come and be tenants here. Neither was the Homestead Act devised to enable farmers to rent more ground. An abiding principle in the development of US agriculture has been farmer- ownership, so it is hardly surprising that many of us feel an almost inborn compulsion to own ground. Maybe there is a “farmer gene”. This desire is at least as reasonable as other drives, such as the desire to explore, or the desire to build. It is an expression of the spirit of our nation and defies quantification. We may yet exchange this heritage for salaries and full health care benefits, rushing eagerly into economic serfdom to a landed gentry, but it will be at the cost of a key element of the American character.

The Last Refuge of the Mildly Competent: I am not a great farmer. In our business, this is not a secret that can be long hidden. For me to expect to be selected to rent ground over the jaw-droppingly accomplished and driven competition I face is specious logic. I mean, I don't even have an entire- shop-in-a-truck or a fax in my combine and (this is difficult to admit in public) I DON'T USE OPTIONS! I suspect there may be one or two other farmers out there that are not in the SUPER 100 MOST EXCELLENT MANAGED FARMS IN THE KNOWN UNIVERSE. Sooner or later it dawns on you that the only person likely to rent ground to you is you.

The point of all these arguments is not that economic analysis is of little use. I read and use many of the ideas of ag economists and financial advisers to aid decisions to buy or not buy land, as well as reams of paper and hours of computer time. But non-numerical reasons cannot be dismissed as trivial and, knowingly or not, advisers flavor their analyses with their own personal spin. Our lives cannot be totally reduced to financial terms. What the numbers can do is provide a path for us to follow once we have identified what our goal is - and the goal IS NOT the accumulation of money. The goal is the accumulation of happiness. 

Furthermore, the obvious risk of buying land may mean more anxiety than you want. This too, is a valid recognition of what is important in your life. What is seldom mentioned in the arguments over buying or not, is that most people are successful at it. Payments get made, mortgages get lifted, difficult times are endured. For example, the default rate for commercial farm mortgages at the height of the farm “crisis” (1987) was about 7%, or as I like to describe it, a success rate of 93%.

In the end, buying land was best described to me by my father, who summed it up as “biting off more than you can chew, and then chewing it”.