Thank You Sir May I Have Another

The Starvation Caused by Short Term Gains

Those of us who see the destruction and devastation all around us find it difficult to condone what others pursue as “a good business practice.” We have heard for years about stock market players (in particular mutual fund and hedge fund managers) pursuing short term gains to juice their overall portfolio. We have watched corporations which were once the model for the world sell their future down the drain in order to make a fast buck this quarter (think GM and its pension plan.) Hell, we the tax payer, have had to bail most of them out this year, yet their executives still demand multi-million dollar compensation packages.

I guess I shouldn’t be surprised that it has finally hit agriculture in an end-of-the-industry way. I’ve watched it happening for the past couple of decades. I’m not talking about the huge corporate farms poisoning the world in order to make a fast buck. Eventually the excess population would be weeded off and the remaining people would simply quit buying stuff from supermarket chains. Perhaps China would claim jurisdiction over the corporate executives who poisoned so many. After all, in China they have public executions for people that poison consumable products.

What is happening now is a perfect storm which will leave the land unable to grow enough food and no trick of technology will help it. I’m not some alarmist tree hugger. I’m simply someone whose made a living over the past 20+ years being a problem solving analyst. I can find nothing which will solve this problem. But I can find historical evidence to back up my statements though.

The information is a bit hard to find on-line without buying DVDs, but the History Channel has run at least one show covering the Hanging Gardens of Babylon and how the continual irrigation to grow things in a desert lead to “salted earth.” You can even find textbooks covering the subject of irrigation failure.

Irrigation, however, is only a tiny portion of the problem. In fact, irrigation was the first warning sign we were headed down the path of short term gains destruction. Today, all the stops have been removed and we are running flat out towards world wide starvation, all for the sake of a fast buck.

As always, MBAs are at the root of this problem. After having trashed every industry they have touched, they moved into agriculture. First it was just the equipment manufacturers, then it was the packing plants, and then into livestock production. Since they couldn’t control enough that way, they bribed the politicians with lobbyist dollars to change the tax laws. Just about the only way to pass on a family farm to your heirs became the LLC-trust tool. If you didn’t use it, the government would take 75% of the estimated value of all assets in death taxes. The LLC-trust tool eventually puts all family farms under the control of a corporation, and guess who runs the corporations? Nice huh?

Most of you will have no idea this is going on. Most of you simply see the advertising on the product packaging showing a hard working family farmer, his picturesque little plot of land with a big red barn, and perhaps a small family. Wide open spaces, happy livestock, and a person who is one with the land. Subconsciously you buy into this because you want to believe it. The simple fact is, nothing could be further from the truth. Every year Willie Nelson and a bunch of others put on an event called Farm-Aid, but every year, fewer and fewer understand what is behind it. The simple truth is, they are trying to save the last few remaining family farms which actually live up to that picturesque marketing image. Most of them have “gone corporate” in some fashion. Sometimes they simply are forced into a contract to raise livestock in an un-healthy manner (watch the documentary Food, Inc. for some memorable images of this.) Other times the LLC-trusts they are forced to do business with force them into a raping of the land.

When the trusts first started out, they weren’t a purely evil thing like they are today. The entire focus and charter of the trust was the care and husbandry of the land. Back then the trust would partner with a farm family on a 50/50 or similar basis. Buildings and equipment on premises were maintained, and soil tests were regularly done on the land to ensure it was improving every year.

Today, the MBAs have put the industry in a death spiral. The entire focus is squeezing every risk free dollar possible out of this goose until it quits laying golden eggs. Massively high cash rents are requested, and bottom feeders pony up. There is no soil testing nor soil care plan. The bottom feeders over plant and provide the soil with no additional inputs. The soil is strip mined in the truest sense of the word, only this kind of strip mining doesn’t leave a gaping hole in the ground. You “see” this strip mining in the average yield movement or relative to fields around them.

Of course now, it is illegal for a realtor or anybody else to request the five year average yield report from the ASCS office. Only the owner can be given that. Why? Because once land has been had by a strip mine farming operation it is worthless. Nobody living locally will purchase it. The realtor has to sucker in an “investor” from far away promising the new owner the same continued high dollar cash rent which will pay for the land in no time. Most banks in or near a farming community will no longer issue a loan to anyone who says they expect the farming operation to pay for itself via cash rent. They’ve gone down that road before. Five years into the loan the land is ruined and absolutely worthless. The bank is left holding the bag in most cases. A bunch of money spent with lobbyists got the law changed so the buyer now has to take the realtor’s word for the yields when the current owner refuses to cough up the ASCS documentation.

I’ve been watching this happen a lot lately. In an effort to try and squeeze out every last nickel from the golden goose of LLC-trust land, the farm managers have ceased doing any and all maintenance on the property. They got the cash rent jacked up extra high because the farm came with on-site grain and equipment storage. A functioning grain dryer was also pointed out. Well, the grain bins have gone past their life expectancy and the dryer ceased functioning two years ago, but the rent hasn’t come down. The new trend now is to tell the tenant that they have to provide their own storage and drying facilities. The original farm family would roll over in their graves hearing this, but today it is considered “good business practice” by the MBAs and Farm Management Teams.

Perhaps it is easier for me to see living out in the farm area part time. I’ve watched one farm which, while not the best in the world, used to average 120-160 bushel per acre corn and 35-42 bushel per acre for soybeans. The farmer who had it died. Things changed hands a few times until it ended up in some kind of trust renting to a strip mine farming operation. The first few years they had the farm the auger cart made many trips across the fields hauling grain away from the combine. It was not uncommon to see the cart weighting for one of 4-6 semis to return from an elevator. Two years in, the auger cart was making far fewer trips and you got to see trucks waiting for hours to get filled. Just over a year ago I watched as the combine, the auger cart, and the first truck all left the bean field at the same time. Ah, but a big farming operation like that can play the insurance game filing claim after claim. The insurance companies don’t mandate inspections and proof of good farming practices. They simply cash the premium checks and hope for the best. In the mean time, everybody’s premiums go up around the country.

Once upon a time, these operations were an isolated case. Now they are common. In fact, the MBAs that run much of the Ag industry magazine business are starting to hold them up as shining examples of “best farmers” due to the size of their operations and the equipment leasing business they give the large equipment manufacturers.

What is overlooked in all of this is the fact the land cannot be magically healed once an operation like this is done with it. The land will have to lie fallow for three to five years getting treatments of manure and lime. That won’t get it back to healthy, but it will get it back to where some legitimate farming practices can begin to tend it.

The strip mining practice isn’t just an American problem. Most of the large operations have grabbed as many dollars as they can in this country and raced down to Brazil ( and a few other places) buying up cheap land and stripping it bare. The Ag magazines are always running stories about large farming operations which exist on multiple continents. Think about that. A farming operation existing on multiple continents. Obviously not that picturesque family farm you see on the packages in the supermarket, so how come they are legally allowed to use those images?