30 April 2008

Fat Cash Farmers Where Are you?

We have a family farm in North Dakota that my oldest brother runs. At present they primarily grow three crops: soy beans, sugar beets, and money whine. I don't mind hearing about how the beets and beans are fairing, but I suddenly get a bad phone connection when he starts to whine about the financial struggles of family farms. "What's that? Furnace problems? The bills [crackle] sorry you're [crackle, crackle] you're, you're breaking up." The last thing I want to have is long-distance empathy for an agrarian sibling who used to lock me in the basement when mom and dad were away doing whatever it was that moms and dads did before Dr. Spock straightened them out.

Part of me thinks that he just wants to play it humble. I mean, I read the papers and things can't be that tough. According to the latest reports from the National Agricultural Statistics Service Soybeans value is up 51%, wheat (both winter and summer) value is up 62% and corn is up an astounding 110% since 2002. Humble shmumble, maybe my bro is just holding out on me. I'm sitting here losing hair and sleep in the struggling automotive industry while he's apparently living the high life as a fat cash farmer.

But, of course, that's not how it works. Despite some news reports that farmers are suddenly atop gilded combines due to an increased crop demand from "emerging countries" and the glory of ethanol, the costs of operation are increasing at a faster rate than profits. According to a recent report "costs are up across the board." Fuel costs have more than doubled over the past couple of years. Over the same span fertilizer has gone from $375 a ton to around $880 a ton. And equipment repair costs are up as much as 70%.

On top of the rising price of known variables, there are those annual gambles in farming that would drive Benny Binion to stable bond investments. Too little rain and the crops are at risk (even irrigation can't solve all of the problems since electricity in the air helps to release soil nitrogen). Too much rain and the beans stay green through harvest, reducing their value. Oh, and then there's the whole issue of when you contract. When can you get the best deal for your crops? Should you hold out a little longer and risk the weather? What about crop rotation? And should you invest in corn or other crops which could grow in value due to the scarcity created by your neighbors investing in corn?

So I guess that I should take it easy on my brother and listen when he talks about the economics of farming. Rising crop prices do not equate to rising profits. It is still a rough life and the rest of us need somebody to do it. But if I ever get a chance to trap him in a basement for an hour or so . . . let's just say I hope it's not a capital offence.

A somewhat meandering sidenote on ethanol: is it really a good idea to use food for fuel?