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.

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

Sincerely,

Noah Hultgren
The Farmlandman.com
320-894-7528

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 landeconomics.umn.edu"

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 noah@farmlandman.com. I'd be happy to help.

Take care,

Noah Hultgren
The FarmlandMan.com

Ethanol Policy

I received a press release the other day that I thought would be worth passing on. It is copied below, including contact information if you'd like more information:

Ethanol: The Right Policy for Combating Oil Prices for Food and Energy Security
WASHINGTON (April 14, 2011) – The following statement was released today by the National Corn Growers Association, the Renewable Fuels Association, Growth Energy and the American Coalition for Ethanol in response to Thursday’s Policy Forum on Corn Ethanol Policy in the 112th Congress.
“Any energy policy forum must include comprehensive and adult conversations about America’s entire energy agenda, including subsidies and other supportive policies for mature and aging technologies like petroleum. Unfortunately, it is unlikely this ‘forum’ will include any of those discussions. Rather, this is yet another example of defenders of the status quo wasting the time of Congress focusing on bogus claims against the ethanol industry instead of finding solutions to the real problems.
“Anyone who has filled a gas tank the last few months has unwittingly witnessed the prime cause of soaring prices for all consumer goods, especially food. The last time corn and food prices rose, the Congressional Budget Office found that factors other than biofuels were responsible for as much as 90 percent of the hike. The World Bank and the government of the United Kingdom have concluded that speculation and energy prices were chief drivers of the 2007-08 spikes in commodity and food prices. How anyone can point fingers at farmers for driving up food prices when they receive less than 12 cents of every food dollar defies common sense.
“Ethanol is the only viable solution we have today to help with our country’s energy security and independence. Today, when it can easily cost over $50 to fill a gas tank, critics would be wise to remember that domestic ethanol actually has helped motorists by lowering gas prices by estimates as high as 40 cents per gallon. To put it in even better perspective, the value of the crude oil displaced by U.S. ethanol amounted to $34 billion in 2010 – money that stayed in the American economy. In the end, that’s the best way to support food and energy security, not through holding make-believe one-sided policy forums.”
The group pointed out that, according to the Institute for Local Self Reliance, 75 cents of every dollar spent on biofuels re‐circulates through the local economy while 75 cents of every dollar spent on oil exits the local economy and, in most cases, the country.

For More Information Contact:
Janice Tolley Walters, NCGA, (202) 628-7001 or walters@dc.ncga.com
Matt Hartwig, Renewal Fuels Association, (202)289-3835 or mhartwig@ethanolrfa.org
Kristin Brekke, American Coalition for Ethanol, (605) 334-3381 or kbrekke@ethanol.org
Stephanie Dreyer, Growth Energy, (202) 545-4000 or sdreyer@growthenergy.org

About the National Corn Growers Association
Founded in 1957, the National Corn Growers Association represents 35,000 dues-paying corn farmers nationwide and the interests of more than 300,000 growers who contribute through corn checkoff programs in their states. NCGA and its 48 affiliated state associations and checkoff organizations work together to create and increase opportunities for their members and their industry. For more information, visit www.ncga.com.

About Growth Energy
Growth Energy is a group committed to the promise of agriculture and growing America's economy through cleaner, greener energy. Growth Energy members recognize America needs a new ethanol approach. Through smart policy reform and a proactive grassroots campaign, Growth Energy promotes reducing greenhouse gas emissions, expanding the use of ethanol in gasoline, decreasing our dependence on foreign oil, and creating American jobs at home. More information can be found at GrowthEnergy.org.

About the American Coalition for Ethanol
The American Coalition for Ethanol (ACE) is the grassroots voice of the U.S. ethanol industry, a national advocacy association for the ethanol industry with nearly 1,500 members nationwide, including farmers, ethanol producers, commodity organizations, businesses supplying goods and services to the ethanol industry, rural electric cooperatives, and individuals supportive of increased production and use of ethanol. For more information about ethanol or ACE, visit www.ethanol.org or call (605) 334-3381.
About the Renewable Fuels Association
The RFA is the national trade association for the U.S. ethanol industry. Since 1981, the RFA serves as the voice of the ethanol industry, providing advocacy, authoritative analysis, and important industry data to its members, Congress, federal and state government agencies, strategic partners, the media and other opinion-leader audiences. For more information visit www.EthanolRFA.org.