Saturday, May 14, 2011

Face of a Giant Agribusiness

My blog just got published on the Huffington Post, which is a major national media outlet:

The Face of a Giant Agribusiness

According to some, I am a giant agribusiness -- the worst kind of factory farmer.

What qualifies me for this dubious distinction? Nothing except that, based on U.S. Department of Agriculture (USDA) figures, my farm falls in the biggest six percent of U.S. farms. And these farms account for the bulk of federal farm policy support.

It sounds pretty damning, which is why it is the top talking point used by opponents of farm policy looking to dismantle a system, they say, is too tilted to agribusinesses and oppresses small, family farms.

But there's a lot more to this story than a 10-second sound bite would let on. For example, the USDA considers anyone with sales of more than $1,000 to be a farm, so that six percent figure is a little misleading.

The weekend grower on the side of the road selling tomatoes from her garden would be a farmer in the government's eyes. Ditto for the young retiree trying his hand at wine-making.

Ironically, my business is probably more in line with what most of us consider a farm. It is family-run. It was passed down to me from my father and grandfather. It is a full-time effort to support my wife and kids.

And, in order to make it my livelihood, it has sales exceeding $500,000.

Again, that figure can be spun to sound really bad, since most people don't know the difference between revenue and profit. But remember, the $500,000 represents gross sales, not how much money the farm or farmer is making.

A farmer may produce half-a-million dollars worth of goods but might have to spend just as much to grow the crop, making it a break-even proposition and sometimes a losing one.

Seems odd to call these farms corporate titans, especially when you consider that the Small Business Administration classifies most businesses as "small" if their gross sales are under $7 million a year.

How much profit could a "giant corporate farm" like mine hope to generate? The USDA puts profit margins in agriculture at 10 to 15 percent.

So under favorable circumstances -- Mother Nature cooperates, market prices are fair, oil doesn't spike and you don't run into any problems like equipment breaking down and needing expensive repairs -- that $500,000 in sales could generate between $50,000 and $75,000 in profit a year, according to the USDA's estimates.

No corporate executive in his or her right mind would get into such a risky business with such little profit upside. That's why 97 percent of U.S. farms are still owned by families, not by corporations like Cargill, or ADM, or Kraft.

I recognize that some may construe this article as a complaint about farm profits or an attack on smaller farm operations, but that is not my intent.

Farm prices are way up right now and near an all-time high -- and as a result, federal spending is way down. And I know that if America is going to meet tomorrow's food and fiber needs it will take farms of all shapes and sizes.

Smaller, organic growers are part of this puzzle, as are larger, conventional operations like mine, which supply more than three-quarters of our country's food and fiber.

As Secretary of State Clinton said this weekend, "We must redouble our commitment to sustainable agriculture and food security."

She's right. If this nation is going to keep pace with an exploding global population, and if it's going to do it in a sustainable way, then responsible farmers of all sizes have to come together in supporting and encouraging technology and best management practices.

In addition, America needs to urge the next generation to to get involved in farming, despite the low profit margins and risk, to replace aging growers who are retiring.

Our farmers and ranchers are a thin green line standing between a prosperous nation and a hungry world. It's time to refocus on holding all parts of this thin green line instead of tearing it apart with manipulated numbers and disingenuous spin.

I hope you enjoy my two cents - seems like many other people are agreeing with me!


Noah Hultgren

Thursday, May 12, 2011

Are Cropland Prices Really Rising?

As a farmland real estate expert, I read with interest an article in the Pioneer Press titled "Survey dispels idea that cropland prices are soaring", published on May 11, 2011. The article examines findings from Steve Taff, a University of Minnesota researcher, who looked at farmland sales from the first nine months of 2010.

Based on Taff's research, the median sales price of farmland fell 7 percent in 2010, to $3,030 per acre. Here is the text from the article, written by Tom Webb:

"In a booming ag economy, did the price of Minnesota farmland really fall in 2010?

A new statewide survey says yes. But the numbers leave room for a debate that is sure to follow in a hundred small-town coffee shops around Minnesota.

Thanks to galloping grain prices, the recent chatter in farm circles has been about the soaring price of cropland. But Steve Taff, a University of Minnesota economist, doesn't pay heed to chit-chat. Instead, he examines data from every sale of farmland across all of Minnesota, some 1,150 transactions in all.
In the first nine months of 2010, the median sales price of Minnesota farmland fell 7 percent, to $3,030 an acre, Taff found. His report was released Wednesday, and Taff knows the skeptics won't believe it.

"I think all the enthusiasm is based on a handful of sales that get repeated over and over again," Taff said. "We've got a depressed market in some parts of the state."

There are wrinkles. Regions with the most prime cropland, like south-central and southwest Minnesota, did report rising farmland prices. More dairy-intensive regions reported declines.
Plus, Taff's survey doesn't cover the final three months of 2010. Those data will come later. But the big run-up in grain prices in 2010 really didn't begin until mid-summer, so the data miss any effect.

Still, Taff knows there have been some much-talked-about farmland sales - and he can name them. An 80-acre parcel in Martin County sold for $8,000 an acre. A 40-acre parcel in McLeod County sold for $7,500 an acre, as did 80 acres in Blue Earth County. In Nicollet County, a 65-acre parcel sold for $7,000 an acre.

Those are exceptions, Taff says. Yet, they've misled landowners into thinking every parcel is selling for a record price. And that is contributing to a big drop in the number of land sales.

"People who think their land is going to sell at one of these high prices...they put up their sign, and nobody is willing to buy it at that price," Taff said. "So they take it off the market. We see kind of discouraged sellers, in some respects." 

The full report is available at"

After getting a full read of the article, it's easier to understand how farmland prices could be going down - the context is key. Land prices appear to be declining in the northern parts of the state; while they are still going up in our part of the state. In west central and southwest Minnesota, prices are remaining high.

If you are ready to sell your land, or would like an appraisal done to see what your land is worth, please contact me at 320-894-7528 or I'd be happy to help.

Take care,

Noah Hultgren