Letter from Langdon: Cheaper to Buy Than to Grow

Agricultural corporations' virtual monopoly on the farming sector means there's little competition in the unregulated world of seed sales. So farmers either have to pay up or get out.

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A friend of mine is an oracle of family farming. Raised on his parent’s farm in Northeast Missouri, he finished high school and earned a degree in ag economics at a state university. Returning home, he has been on the family farm for the last 60 years.

This is what he had to say recently, after cattle prices plummeted in 2016 after free-trade courts and Congress took away Country of Origin labeling for U.S. beef:

“There used to be nothing more expensive than feeding corn silage to a beef cow. The cheapest roughage that you could feed to a beef cow is round bales, cheaper still if you could buy them from a neighbor. Don’t ask the price, just buy it. Things have changed. Now, it is probably cheaper to feed GMO corn (than relatively cheap roughage). Why would a farmer pay $3 for a low energy, 6- pound bale of plain old grass hay and sell his corn for $3 per 56-pound bushel? The Book of Proverbs has many things to say about the struggles of man. Maybe that is why farmers who only have daughters cash rent their farms to bigger farmers and live a good life after they retire (unless she wants to farm. That’s his generation talking)….But those who have sons who want to farm struggle until the day they die.”

There endeth the lesson. Amen, my friend.

The trouble with farming has always been that it is cheaper to buy what we produce from other farmers like us than it is to produce those things ourselves. That’s why industries serving agriculture always seem to do better than farmers themselves. For example, Iowa State University published tables of annual average corn and soybean prices and average annual production costs per bushel of corn and soybeans on Iowa’s farms from 1968 to 2016.

What the tables clearly show is that it is cheaper to buy those crops than to grow them. That’s why keeping the kids down on the farm is so hard.

Unfortunately, while farmers grew corn in 2016 worth $3.44 per bushel, they spent $4.11 to do it. Soybeans are a similar story, costing $10.67 per bushel to grow while only worth $9.24 at the elevator. On the other hand, after warning of sharply decreased 2016 earnings due to lower farm profits, Monsanto has turned it all around with a big earnings surprise.

Unlike Monsanto’s sudden good fortune, with 2016 dead and gone, farmers won’t be turning this one around. Clearly, farm profits have nothing to do with Monsanto’s profits. News reports always make it sound as though farmers’ fortunes are tied to Monsantos. Nothing could be further from the truth.

How do they do it?

Monsanto gets a big piece of the farmer pie-chart of expenses because they produce and sell the patented seeds and chemicals farmers rely on to grow corn and soybeans. The Holy Grail of genetic modification, glyphosate resistance in crops, no longer works as it once did, which means not only will farmers use more glyphosate to counter natural resistance in weeds it once controlled, they will be using more of other herbicides as well. The same can be said for patented insect resistant traits as pests like corn root worm evolution makes them more resistant as well. University research has indicated that if farmers are to triumph over bugs, they’ll need more insecticide to do it. That all boils down to the fact that to remain competitive, farmers must spend more– not less–if we intend to grow these crops.

Predictions of financial loss for companies like Monsanto, in merger talks with the giant German pharmaceutical company Bayer, seem premature. Other than statutory time limits on patents, there are no requirements for disclosure on how seed and chemical pricing is set. Government watchdogs assume competition will net the best price for farmers. But with patenting and cross licensing among 4 major seed and chemical companies controlling 80% of the business, it is in their best interests to come to terms rather than engage in cut throat pricing that would benefit farmers

But don’t take my word for it, compare this year’s profits on U.S. farms to those of the top four: Monsanto, Dow, Dupont, and Syngenta.

With the squeeze on farmers, crop innovation has turned to finding old pesticides that still work, and genetically modifying once susceptible crops like soybeans or corn so they are immune. That’s what happened when Monsanto patented it’s dicamba resistant Xtend soybeans.

Dicamba is a very old herbicide in the 2-4,D family (2,4-D dates back to the 1940’s), used to kill broadleaf weeds. Corn is naturally resistant to dicamba in both early and later stages of growth. But dicamba has always been deadly to soybeans and other crops, like vegetables and fruit crops and ornamentals. That all changed for some soybeans with the Xtend trait. But the problem is that dicamba tends to volatize and drift across wide areas near where it is used, and all the other plants it once killed, including conventional and earlier Roundup Ready soybeans, are still susceptible.

This is a different type of drift than happens when spray mist is carried on the wind for a few feet, because dicamba vapors can travel on light breezes and convection currents–sometimes for miles.

Monsanto chose to release dicamba resistant Xtend soybean seed before government dicamba use and guidelines were issued for application to those soybeans, and before releasing their own patented dicamba formulation for resistant soybeans. As a result, many farmers bought soybean seed with the Xtend trait in 2015 and 2016, and sprayed those fields off label with volatile dicamba. The result was many neighboring crops and plants were injured. Now at least one farmer in Missouri is suing Monsanto for damages.

There is no doubt that technology has advanced farming on many fronts, from higher-horsepower, less polluting diesel tractors to GPS guidance and site specific application of fertilizers and pesticides. No one has profited more from that technology than the corporations who have refined and marketed it to farmers. But just as Iowa State research on costs and returns to American farms show, patented technologies in the hands of monopolies do little to sustain family farms. What they do, in fact, is remove the need to compete from corporate responsibility, bringing it to bear fully on farms that have little choice but to buy those products with little to no competitive pricing scales in effect, and little in the way of alternatives

That’s because most of today’s grain farms operate in a fast paced world of production and marketing within a time window of only about 150 days each year.

We don’t get to see a breakdown of technology trait costs in the seed we buy. All we can tell is that patented soybeans sold as seed are priced about six times higher than the identical bushel of commodity soybeans we sell.

Organic and non-GMO production is one way farmers avoid high technology costs. In some areas, especially near terminal markets in the eastern Corn Belt, farmers actually receive a premium price for corn and soybeans that are trait and pesticide free. But the majority of farmers lack access to such markets, which make up a very small part of total demand.

Remember how this conversation began. Integrated livestock and poultry, monopolistic corporations, and free trade agreements that level an unfair penalty on U.S. farmers like those who grow soybeans, cattle, and corn, have placed a profit blockade on America’s family farms so that now we can buy what we grow cheaper than we can grow it ourselves.

But there’s just one catch.

We can’t afford to.

Richard Oswald is a fifth-generation farmer and president of the Missouri Farmers Union.

 

Topics: Ag and Trade
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