Letter from Langdon: Wall Street Farms
[imgbelt img=farmvalue2.jpg]The rising value of farmland has corporate investors looking hungrily at the heartland. It’s the latest in a long line of maneuvers giving corporations greater control of our food.
Interest rates headed lower, which made owning land an even better deal. Mortgages were cheap. Land, purchased on credit, returned – on paper at least – more than loan costs.
Why buy jumbo CD’s at decimal returns when land earns 20 times as much?
Prices for commodities like corn and soybeans shot higher, fueled by demand generated from the renewable energy market. Outside investors (people with underperforming stock and bank accounts) saw a better deal. Land price appreciation fed by low interest rates and higher commodity prices got attention from the big boys.
The most popular quote on land investment became “they aren’t making any more.”
Now land has attracted not just farmers, but private equity investors and even foreign governments. That means more competition for available supplies of land because farms seldom sell more than once in two or three generations, if ever.
Any time there’s demand for something, people start searching for new ways to get more.
Looking back over the last 50 years of farming history, first to go were chickens that used to be grown on farms everywhere. Both they and their eggs are long gone from family farms unless they’re contract production for corporate monopolies. No one bought that business out, they got hold of it simply through the use of tools like unfair markets and oversupply, to reduce the value of products. Bedraggled farmers agreed to produce chickens and eggs under corporate contract, providing assets and labor without actually owning the products of their farms.
Then hogs went the same as poultry.
Corporations took control.
Among animal proteins, beef remains a holdout. The same segments of that farm business are slipping away. And without enforcement of fair market rules amidst increasing power of global corporations, there’s not much doubt that someday cowboys will work under the same types of contracts as poultry and pork.
A few already do.
After years of study, both USDA and the U.S. Department of Justice have dropped their efforts to open up monopolistic markets and the producer-funded, corporate-controlled per-head tax called the “Check Off.” Those corporations are now off-limits to law enforcement.
Now that multinational JBS of Brazil owns significant packing plant capacity in the United States, they want to import South American beef here, even though South American beef poses grave health risks for U.S. cattle and consumers alike (they still have rampant outbreaks of foot and mouth disease there, and packing plants aren’t USDA inspected).
In spite of that USDA says they are dedicated to opening our border to South American beef.
There it is again. The same market-killing oversupply trick of corporate poultry and pork. Eliminate competition by breaking the backs of family farmers and ranchers through cheap products.
But what about grain farmers in Americas breadbasket? Surely with so much meat consumption both here and there, and with feed grains and oil seeds used widely for animal and human food, grain farms must be in tall cotton.
Remember, farm land in the U.S. sells only a little at a time. On top of that it takes big capital to buy expensive land. Higher grain prices combined with climbing land values means big business must be innovative to gain the upper hand. They’ve tried the oldest trick in the book: depressing prices through excess supply. But even corporations can’t control some things. Earthly water is as limited as earth itself. Thanks to drought and climate variability, marginal land brought into corn production isn’t proving to offer solid growth potential. So that’s continued to limit the supply of grain.
But there’s more than one way to skin a farmer.
Patented seeds, the kind most corn and oil seed farmers buy, have become increasingly expensive just like the land that nurtures them. Last year and in 2012, corn yields in drought stressed parts of the country were so low some didn’t even return enough to pay $100-per-acre seed costs. Adding in fertilizer and pesticide costs raises the bar three times as high.
Merchandisers of crop inputs typically say a dollar spent on their products returns two to the farmer. That sounds like a good deal. But if weather doesn’t cooperate, or if returns are overstated, or if products don’t perform as advertised, farmers can find themselves behind the eight ball.
A few weeks ago, I reported that patented, engineered seeds aren’t all they’re cracked up to be.
About a week later USDA said the same thing. But that doesn’t stop big seed companies from advertising to the contrary, because they control much of the commercial seed market.
What if companies that control the patents and both seeds and chemical price their inputs so high that only farmers who contract with them can afford to buy?
What if corporations that feed and slaughter livestock and poultry combine forces with grain buyers and seed companies for seamless flow of products from farm to market?
Right now people will say there’s not much chance of that.
But in the 1950s when prices were low and profits lower, no one imagined corporations taking over livestock businesses. In the late 1980’s no one imagined land prices would ever recover.
And during the 90’s when grain prices were cheap and grain elevators made about 10 cents on every bushel, no one imagined that grain handling would consolidate even more.
If asked, people would have said there’s not much chance of that.
But it grain handling has consolidated, and the trend continues.
People say corporations can only go so far in controlling food from field to table. There’s not much chance because there are laws government can enforce to keep that from happening.
Based on experience, there’s not much chance of that.
Richard Oswald, a fifth generation farmer, lives in Langdon, Missouri, and is president of the Missouri Farmers Union.