Posts tagged with: agriculture

Blog author: lglinzak
Wednesday, March 9, 2011
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A big report is due out tomorrow which may have a positive or negative impact on economies across the globe. These numbers are not coming from the New York Stock Exchange, NASDAQ, the Tokyo Stock Exchange, the London Stock Exchange, or any other stock exchange; they are actually coming from a report being released by the U.S. Agriculture Department (USDA). It will talk about the role the U.S. will play in preventing or reducing the effects of a global food shortage.

There have been many pundits warning about a global food crisis resulting in a substantial increase in food prices. Shoppers are already experiencing the effects of higher food prices, with wheat prices up 80 percent from a year ago and U.S. retail food prices expecting to climb about 4 percent this year.

And prices are not expected to come down any time in the near future. The Ogallala Aquifer in the U.S. is depleting, and without a way to replenish itself, experts are wondering if the U.S. is on the verge of seeing another dust bowl. Texas’ wheat crop is also predicted to not meet harvesting expectations as 56 percent of its crop is rated in poor to very poor conditions by the USDA with dry weather persisting. Furthermore, an article published in Foreign Policy articulates many variables contributing to the increase in food prices and the potential food crisis which include population increase, arable lands depleting, the increasing demand for water for numerous uses, and urban sprawl. The industry is left with a lot of factors to compete with while trying to keep prices as low as possible.

It is important to note that the developed world is not immune from the adverse effects of a potential food crisis. Karen Ward, senior global economist at the worldwide bank HSBC, explains slow wage growth and use of food crops in alternative fuels are going to result in problems for those living in developed countries. While speaking on Jeff Randall Live, Ward also warned the UK may be subject to the food riots similar to those that occurred in other countries:

“Even in the developed world I think we have very, very low wage growth, so people aren’t getting more in their pay packet to compensate them for food and energy, and I think we could see social unrest certainly in parts of the developed world and the UK as well.”

She went on to highlight the link between high food prices and the escalating cost of crude oil.

“More and more we are seeing that some of these foodstuffs are actually substitutes for energy itself, particularly biofuels. So I think the energy markets are a significant contributor to these food price gains.”

While farmers are continuing to produce bigger crops, the U.S. is expected to see a 4 percent increase in the area planted along with a harvest record for corn of 13.73 billion bushels, it still may not be enough. However, corn is on such high demand due to the increase of the ethanol industry in the U.S., and current rising oil prices are even further contributing to the demand for ethanol. As a result, the 10 percent increase that is projected in the corn harvest will only add to reserves in the U.S. by five days, and by the time the fall harvest begins, the USDA predicts the U.S to only have enough corn left to satisfy the country’s appetite for 18 days.

Whether there is a food crisis of 2011 or not does not avoid the much needed ethical debate involving the use of crops. As I discussed in an earlier post, the U.S. is mandated to continue to increase its ethanol production, and with biofuels increasing the demand on crops and ever increasing population that demands food, priorities need to be evaluated and questions need to be raised. Shall more emphasis be placed on crops being harvested for food consumption or fuel usage?

Are the Old Continent’s farmers showing that they have a real entrepreneurial spirit and serving as role models of courage and innovation during the Great Recession? Surely not all of them, but there are some inspiring examples to be found in Central and Southern Europe.

This is somewhat surprising as Europe’s agricultural sector is usually among the most traditional, least open to market innovation and product flexibility, and heavily reliant on EU funding to keep the sector competitive. Alas, European leadership in international food trade has been slowly whittled down in the last 3-4 decades.

Some European farmers, however, are resilient and are pulling rabbits out of hats these days by risking and investing heavily to implement creative new forms of business on their farms – many of which had been on the brink of failure.

It is primarily the French and Italians who are showing their true entrepreneurial spirit and vocation to agriculture. They appear to be some of the most tenacious and creative. Just like the Michigan dairy farmer, Brad Morgan, the protagonist of Acton’s documentary The Call of the Entrepreneur, these farmers have turned to undervalued and completely overlooked assets to build lucrative profit-making ventures that often double and triple their old incomes. They have begun reshaping the way their traditional industry operates, and at a time when Europe has lost its competitive edge to cheaper food suppliers from Africa and South America.

Making matters worse has been the total evaporation of their once abundant workforce. In France, for example, rural industry employees currently make up a mere 3% of the nation’s workers, when it once boasted over 40% at the turn of the last century (cf. August 2010 Time article “How to Save Rural France”). And figures for those farmers who have registered as operating “professional” establishments in France’s campagne have dropped from 2,000,000 to 350,000 in the last fifty years. As noted out in a 2006 Acton commentary (“French ‘Security’ and Economic Reality”), this is not at all surprising: the vast majority of France’s youth dream of careers as civil servants, or want to secure life-long union protected contracts, and furthermore claim to generally dislike or distrust free market economics.

A final blow to European farming may come in a few years when the industry’s most heavily relied upon system of public subsidy – the Common Agricultural Policy – is set to undergo reform in 2013. And no one is quite certain what the consequences may be, as EU finance officials nudge the sector to become more competitive and market orientated.

Just what are they doing?


While some major industries in France, like auto manufacturing, have received generous public subsidies to remain competitive, French farmers are beginning to rely on their entrepreneurial spirit and genuine vocation to agriculture to turn their sector around.

They are achieving this by doing exactly what entrepreneurs are called to do: take risks through investment and creatively diversify their business offerings to customers.

For example, entrepreneurial farmers in the southern Ile-de-France grain producing region have utilized the bucolic beauty of their wavy golden fields and soft rolling hillsides to create profit-making ventures. The same beauty that inspired France’s great impressionnistes, now lures thousands of international vacationers to their prime holiday centers built out of once dilapidated grain storage facilities with glorious hill-top views.

It is these same farmers who are using abandoned wheat and barley fields as horse riding tracks. They are converting their dusty old barns into equestrian club houses. Others, like Rabourdin farms in Brie, have added premium beer making facilities to their production portfolios and now attract thousands to their own micro brew facilities and connoisseurs can order their products on-line.

While interviewed for the same Time article, agricultural entrepreneur Bernadette Porchelu said that for her Basque-country farm to succeed “it required a lot of work and investment.”

“But now,” she says, “We are hustling to keep up with the demand and have more than doubled our income. When we first decided to make this move, everyone said we’d fail. Today I wonder how most farms will survive if they don’t undertake similar diversification –which may be why some of our visitors include fellow farmers asking us how we made it work.”

It’s not just the French

One of Italy’s leading agricultural entrepreneurs hailing from Rome, Annibale Gozzi, says that while France is making headlines with its creative agrotourism, Italy is not lagging too far behind.

He says that “neither can Italian farms keep up with fierce international competition in food production…Manual farm labor in other parts of the world is ten times cheaper than in Italy and we simply cannot compete even with our tremendous advances farming methods and technology.”

“We too have been forced to try different things and strive for the full integration of our products, services and assets.”

Those farms that are most successful, like Gozzi’s own agrotourism south of Rome, Villa Germaine, are the ones that have become full-scale “multi-function” operations in addition to producing traditional agriculture.

Referring to his own agriculture establishment as an example, Gozzi says he has risked huge amounts of capital to maximize his farm’s business to include “integrative products and services” such as farming courses, horse riding, premium viticulture and olive oil production, tuffa cave wine and cheese tasting facilities, as well as a full-service hotel and restaurant. His establishment now even regularly hosts business luncheons and wedding receptions with lavish menus featuring his own fresh meat and produce.

He says he does this with dedication and pride, a dream to “do a first-class job for what I love”. Gozzi’s thriving business at Villa Germaine not only has allowed him to maximize his farm’s assets and profits, but truly exemplifies what it means to combine entrepreneurial spirit and tradition all in the same business.

He adds that Italians are catching on to but this type of inventiveness, “but it is still much more appreciated by foreigners and France is clearly leading the way.”

Why they really do it

Vastly increasing revenue has been a driving factor for the survival of European farmers – especially knowing their major public financial support may dramatically change in a few years’ time and as their industry is being swept away by international competition.

Even if Europe’s few remaining die-hards simply had more public financing, it doesn’t mean they would come out on top. It has not worked for decades and surely it does not provide the answer to their future.

Rather, we must follow the lead of those real entrepreneurs who in the toughest economic times are true to their vocation and come up with ingenious solutions to their sector’s woes. If there is a future at all, they are providing viable alternatives. And to do so, they must not only be highly creative. They must also be willing to take risks –a courageous attitude undertaken by those who genuinely live out a vocation and exhibit a real passion for their trade.

(This article is the first of a regular monthly series dedicated to entrepreneurship in Europe.)

Blog author: kschmiesing
Wednesday, October 8, 2008
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There’s an interesting clip on YouTube of a discussion about the world food situation between, primarily, author Michal Pollan and Monsanto CEO Hugh Grant.

Pollan is a champion of the “slow food” movement, which is, to simplify, associated more generally with trends such as whole foods, farmers markets (“localvores”), organic food production, etc. (The participation of otherwise fiscal and cultural conservatives in what is often presented as a left-leaning movement is a phenomenon that gave rise to the term “crunchy cons.”)

A variety of observations might be made on the exchange, but I’ll focus on one. All the discussants underemphasize the role of free human action in the market. World hunger, they seem to assume, is a problem “we” need to solve, whether that be by research, technological dispersion, food distribution, or changing agricultural practices. Pollan’s suggestion that food production and distribution must be a “public” (i.e., government) enterprise is surely wrongheaded–the worst famines in history been the result of government interference or government failure (war, anarchy), not market failure–but Grant, too, apparently views big agricultural business as playing a kind of orchestrating role in steering food production in the right direction.

By all means, let’s continue research, let’s share knowledge with African farmers, and let’s create partnerships between corporations and non-profit entities. But the task of supplying the world’s food needs in the future will not be accomplished by the management of the economy by CEO’s, NGO directors, or heads of state. It will be accomplished if the market is permitted freely to convey information about supply and demand, if production and distribution are not thwarted by corrupt governments and military strife, and if obstacles to participation in the world market are removed.

Alarums raised about impending food shortages have been proven wrong again and again. They will this time, too, as long as the market’s incentives are not tampered with. The world can feed itself, if it is allowed to do so.

The new farm bill may be one of the most shameless displays of government largesse ever, even more so when you consider who will most benefit from the pork. Citizens Against Government Waste called it “The most farcical farm bill in history.” The Economist dubbed it “Harvest of Disgrace.” The Wall Street Journal opines, “If farm prices stay high, consumers face higher grocery bills and farmers get rich. If farm prices fall, taxpayers kick in the difference and farmers still get rich.” The most pressing concern is that billions of dollars in subsidies will be going to the wealthiest agribusiness corporations in the country.

President Bush vetoed the bill, saying the “Legislation is too expensive and would send too much government money to wealthy farmers.” He wanted a subsidy cap on farms with a gross income of more than $200,000. Senator McCain also urged the President to veto the bill. Despite this warning, many Congressional Republicans joined with Democrats to override the veto. The Wall Street Journal declared:

House Republicans are equally as complicit, despite their claims of having found fiscal religion after 2006. About half of them voted to override a Republican President. GOP leaders refused to whip against the bill, and two of them – Roy Blunt of Missouri and Adam Putnam of Florida – even voted for it. These are the same House Republicans who last week unveiled their new slogan, “The Change You Deserve.”

As food prices soar, it’s plain wrong to transfer large sums of taxpayer money to enrich already wealthy corporate farms. Citizens Against Government Waste also declared of the bill:

It continues to dole out $5.2 billion annually in direct payments to individuals (many of whom are no longer farming) without any regard to prices or income. These direct payments, 60 percent of which go to the wealthiest 10 percent of recipients, were created in 1996 and were supposed to phase out by 2002.

In one of this week’s Acton Commentaries, Ray Nothstine and I juxtapose a static, sedentary dependence on government subsidies with a dynamic, entrepreneurial spirit of innovation.

The impetus for this short piece was an article that originally appeared in the Grand Rapids Press (linked in the commentary). I have two things to say about these stories and then I want to add some further reflections on the world of agricultures subsidies.

First, I found the article’s “hook” to be quite shoddy and lame. The blatant attempt to “shock” the reader into a reaction of disgust that a billionaire like Dick DeVos, yes, “that Dick DeVos,” got a whopping “$6,000 in federal farm subsidies from 2003 to 2005.” That’s roughly $2k a year for three years.

Unsurprisingly, DeVos’ spokesperson didn’t know anything about it. It’s ludicrous to think that a guy with as much on his plate as Dick DeVos would have any time for what is essentially pocket change for a billionaire. Does the fact that DeVos got a subsidy even though he campaigned on eliminating government waste make him a hypocrite?

Judge for yourself, but I think these payments say more about the government’s inefficiency and waste than they do about DeVos’ integrity. People of all income brackets pay tax professionals to maximize their returns. For the very wealthy, it’s simply a process that’s on a bigger scale, that’s much more thorough, and with many more loopholes than when you or I go to H&R Block. The more diversified your holdings, the more likely there are a plethora of tax breaks for you to exploit. The breathless lede to this story was simply off-putting to me, especially given the rather clear political undertones of the insinuations.

“Simplify, man.”

What’s the real lesson? As a recycling hippie once told The Simpsons‘ Principal Skinner in a quite different context, “Simplify, man.” Simplify the tax code and eliminate all these special interest loopholes.

But the complaint about the story’s hook is really a minor quibble compared to my second point. In a companion piece, Lisa Rose Starner, executive director at Blandford Nature Center and Mixed Greens says that farm subsidies are essentially about “social justice.” That’s right, subsidies are about social justice. They’re about the social injustice of subsidizing a product so that people from poorer nations around the world, who would like to do more than simply engage in subsistence farming, can’t compete in a global marketplace because prices are artificially deflated. So, our subsidies are feeding the rich at the expense of the poor in more ways than one.

Of course, the pat response is that other nations are subsidizing too, so our subsidies are just leveling the playing field. To be sure, the world of agricultural business is a complex one, as many of the commenters on our piece point out. Direct farm subsidies are just one thin slice of the government’s intervention into agriculture. Perhaps they’re the most obvious, but they may also not be the most insidious. As one astute reader wrote to me, “The web of market interference in ag is broad and complex.”

Simplify, man.

Update: The Detroit News ran a version of the original piece here.

To hear the NYT tell it (and Sojourners, for that matter), the family farm is facing severe threats. With no small degree of dramatic flourish, the NYT editorial linked above concludes:

For the past 75 years, America’s system of farm subsidies has unfortunately driven farming toward such concentration, and there’s no sign that the next farm bill will change that. The difference this time is that American farming is poised on the brink of true industrialization, creating a landscape driven by energy production and what is now called “biorefining.” What we may be witnessing is the beginning of the tragic moment in which the ownership of America’s farmland passes from the farmer to the industrial giants of energy and agricultural production.

If federal subsidies for corporate agribusiness is a threat to the family farm, then so is extensive FDA regulation of homegrown products and the morass of complex zoning regulations, telling people what they can sell, when they can sell, it and where they can sell it.

As my colleague Kevin Schmiesing wonders within a similar context, is the problem that the government just doesn’t quite have the right approach nailed down yet, or that the unintended consequences of government intervention into the market (in various ways) inevitably will screw things up (because, perhaps, special interests, whether corporate or individual, will always have an undue influence in the formation of policy)?

Kris Mauren (far right) and African guests get ready to visit GFS.

Acton University is now well underway, and on Wednesday a group of seven African attendees joined Kris Mauren on a visit to Gordon Food Service’s Grand Rapids headquarters for an up-close look at ethical capitalism. Mauren called it a great opportunity for people from countries with barren and corrupt markets to see an efficient, principled business for themselves. “The management of GFS also has a strong concern for philanthropy and international missions,” he said. “So it’s a great model of the capitalist ideal to hold up for these folks, who are used to a much more hostile economic climate.”

The group met with Gordon Food Service management for a luncheon, then toured the company’s office and factory area. Harry Ayile, formerly from Ghana and now residing in Norway, was completely blown away by what he observed. “It was like … wow,” Ayile commented with a smile. He was struck by the dedication shown by the company’s workers. “At every level, the workers are extremely well-organized, focused, and committed to doing their jobs excellently,” he said.

Ayile was astonished at how the “energetic” GFS employees took pains to avoid mistakes in the orders they were filling. “The business has a good system of checks and balances, and most of the employees have been there for fifteen years or more,” he said. “They take true satisfaction in their work.”

Comparing Gordon Food Service’s methods to the way business is done in Africa and even in Europe, Ayile said his visit couldn’t have been more of an eye-opener. “Before I came to Acton, I thought all people who did business were evil,” he said.

Ayile recalled one food-production company in Ghana that deliberately had been selling expired grain infested with maggots. “They would just sift out the maggots, package the grain, and sell it at full price,” he said. “Finally one employee caught on to what was happening and was able to produce evidence and pictures, but it went on for awhile.” Ayile called the incident typical of business practices in much of Africa, which lacks the institutional support necessary for free enterprise to flourish. When the rule of law is unreliable, incentives for greedy and corrupt behavior often outweigh the benefits of integrity. He added that many businesses “show very little respect for the consumer, as opposed to the way American businesses like Gordon Food Service care about their customers.”

Ayile and others from the group — which included visitors from the Congo, Kenya, and other African countries — all said they were very impressed with the way GFS invested in its employees and how these employees, in turn, were invested in the success of the company. Although Africa has a long way to go, Ayile said his visit was inspiring and gave him hope for the future of Ghana and other developing countries in Africa.

On last week’s Huffington Post blog, Dr. Julianne Malveaux decries the practices of milk “charlatans,” who she claims, “combine the concern about pesticides and additives with their own desire to grab hold of the profits available to those who can distinguish the food they produce from ‘ordinary’ food.”

Malveaux argues that milk producers who identify their products as “hormone-free” are being dishonest and misrepresenting the truth. She says, “Animals produce hormones. Whether milk production is enhanced by rBST, a synthetic version of the bovine hormone cows naturally produced, or not, it is not ‘hormone free’.” Because the “organic” label meets certain Dept. of Agriculture requirements, for Malveaux it means something, while claims of “hormone-free” milk don’t.

The concern for Malveaux is that consumers are being exploited: “The difference comes when a consumer, concerned that her newborn is ingesting too many chemicals, decides to go with the ‘hormone free’ milk at an extra dollar a carton, and gets nothing different than if she’d chosen a carton that does not say ‘hormone free.’ The consumer’s fears are being exploited. She’s reading a label, but not seeing the fine print. Hormone free milk is presented as being ‘better’ or ‘safer’ than milk produced using rBST. But it isn’t!”

Here’s what the cap on a gallon of milk I bought yesterday says:

Is this misleading? I don’t think so. I don’t see claims of “hormone free” milk. The label simply says there aren’t any synthetic hormones added and even points out that “no significant difference” has been shown between the two kinds of milk.

Are consumers not responsible for educating themselves? Shouldn’t they take some more time before deciding to spend $1 more per gallon, and if they want to spend more for peace of mind, shouldn’t they be allowed that freedom?

Malveaux’s piece follows the work of a group called the National Organization for African Americans in Housing (NOAAH), a non-profit advocate for low-income citizens, which last December “called on the U.S. Food & Drug Administration to stop dairy processors from deceptively marketing ‘no rBST’ milk.”

Malveaux and the NOAAH want to protect people from themselves by expanding the role of a nanny government: “Low-income consumers, especially, wanting the best for their kids are pushed into spending money they can ill afford for a product that is exactly the same as a cheaper product. It’s time for the FDA to step in to require dairy processors to do the right thing.”

What exactly is the right thing? Should the FDA require labels like the one above? Or should they ban advertising that states a true fact: there are no hormones added to the cows that made this milk. As it stands, the relevance and importance of that fact is up for the individual consumer to decide. And that’s as it should be.