Waiting for the Next Wave of Farm Bankruptcies

Sharon September 1st, 2009

Here’s something we definitely can’t afford – more farmers driven out of business.  And we’re about to get it.  The USDA projects that net farm incomes will drop 38% over last year, and 15% over the 10 year average.  While costs will drop over last year, mostly because of the decline in oil and oil-based input costs, they are still 5% higher than in 2007 – so incomes have dropped like a stone, while costs have risen overall.  This is not a recipe for good things.

These are particularly disastrous numbers for dairy farmers – who never really benefitted from the grain price boom, since so many of them were dependent on grain feeds anyway, on people who overplanted corn and wheat in response to meteoric price rises a year and a half ago,  and livestock farmers.  Where I live, a heavily dairy area, farmers are going out of business rapidly – and this follows decades of gradually losing dairy farmers. 

All over the world, Dairy farmers are facing disaster – they demonstrated in London and Brussels over falling milk prices.  In my own region, up to 20% of existing dairy farmers will face bankruptcy or foreclosure if these conditions persist.

From the Wall Street Journal, comes a painful echo of times past:

Gene Gourley, who raises 60,000 hogs every year on his farm in Webster City, Iowa, is losing as much as $30 on each hog he sells. He said Thursday that he is rethinking plans to buy a trailer for hauling feed to his livestock. “With hogs losing so much money, you’re basically burning up anything you could have saved,” said Mr. Gourley. “You just don’t have the equity to go buy new upgrades.”

In a bad year, farmers with a cushion or an understanding bank can endure disastrous prices.  In a bad decade, farmers disappear rapidly.  And we can’t afford to lose them – the idea that we can replace our agriculture with shadow farmers in other countries doesn’t add up with the reality of energy dependency, with the future of many of those regions under climate change, or with the disaster that globalization has been for everyone.

Moreover, this is how we end up in my personal nightmare – back into the disaster of the Great Depression, in which farmers overproduce, but cannot afford to sell their food, and lose their land, while people go hungry.  Think it couldn’t happen?  I wouldn’t hold my breath.  I’ve quoted this passage before, but it bears repeating – it comes from David Shannon’s collection of primary sources _The Great Depression_  – Consider this testimony given by Oscar Ameringer before Congress in 1932.

“During the last three months I have visited…some 20 states….In the state of Washington I was told that the forest fires raging in that region all summer and fall were caused by unemployed timber workers and bankrupt farmers in an endeavor to earn a few honest dollars as firefighters. The last thing I saw on the night I left Seattle was numbers of women searching for scraps of food in the refuse piles of the principal markets of that scity.  A number of Montana citizens told me of thousands of bushels of wheat left in the fields uncut on account of its low price that hardly paid for the harvesting.  In Oregon I saw thousands of bushels of apples rotting in the orchards because of the cost of transporting them to market. …At the same time there are millions of children who, on account of the poverty of their parents, will not eat one apple this winter.

While I was in Oregon, the Portland Oregonian bemoaned the fact that thousands of ewes were killed by sheep raisers because they did not bring enough in the market to pay the freight on them.  And while Oregon sheep raisers fed mutton to the buzzards, I saw men picking for meat scraps in the garbage cans of New York and Chicago.  I talked to one man in a restaurant in Chicago. He told me of his experience in raising sheep.  He said he had killed 3,000 sheep this fall and thrown them down the canyon, because it cost $1.10 to ship a sheep to market and then he would get less than a dollar for it.  He said he could not afford to feed the sheep and he would not let them starve, so he just cut their throats and threw them in the canyon.

The roads of the West and Southwest teem with hungry hitchhikers.  The camp fires of the homeless are seen along every railroad track.  I saw men, women and children walking voer the hard roads.  Most of them were tenant farmers who had lost their land and been foreclosed.  Between Clarksville and Russellville, Ark., I picked up a family.  The woman was hugging a dead chicken under her ragged coat.  When I asked her where she had procured the fowl, first she told me she had found it dead in the road, and then added in grim humor, ‘They promised me a chicken in every pot, and now I got mine.’

In Oklahoma, Texas and Arkansas I saw untold bales of cotton rotting in the fields because the cotton pickers could not keep body and soul together on 35 cents for picking 100lbs.  The farmers cooperatives who loaned the money to make the crop require $5 a bale in payment. That means 70 cents a day for a picker who can pick 200lbs, and that doesn’t provide enough pork and beans to keep the picker alive in the field, so that there is fine staple cotton rotting down there by the hundreds and thousands of tons.

AS a result of this appalling overproduction on one side and the staggering underconsumption on the other side, 70 percent of the farmers of Oklahoma were unable to pay the interest on their mortgages.  Last week one of the largest and oldest mortgage companies in that state went into the hands of the reciever.  In that and other states we have now the interesting spectacle of farmers losing their farms by foreclosure and mortgage companies losing thier recouped holdings by tax sales that could never meet the value of the land.

The farmers are being pauperized by the poverty of the industrial population and the industrial population is being pauperized by the poverty of the farmers.  Neither has the money to buy the product of the other.” (David Shannon, _The Great Depression_ 26-28)

Think farm incomes don’t affect you?  Think again.

 Sharon

20 Responses to “Waiting for the Next Wave of Farm Bankruptcies”

  1. My young second-cousin-once-removed recently adopted a bull calf. In upstate NY where she lives, farmers can’t get pickup for their bull calves because the veal producers don’t make enough on veal to pay to pick up the calves. So the dairy farmers, who need the milk for themselves, let the calves starve.

    My cousin is nursing the calf back to health, and then it will join her aunt’s farm where it will be raised for beef and then slaughtered for family consumption.

  2. Wendy says:

    All the more reason to “eat locally” and patronize local farmers.

    I never buy anything at the grocery store that I can get from a local farmer, and during the summer, I buy extra and can it.

    It keeps them in business, and by patronizing our small, local farms, I’m ensuring my family has food to eat in the future.

  3. Heather says:

    We get our raw milk from a local dairy farmer who is about to lose everything. He had been so happy to be a dairy farmer. Now he can’t survive on what he gets for his milk. He decided to try for raw certification in hopes that people would see the added value in it. Not many of us are buying the raw milk and he’s about to go under.

    A dairy farmer down the road is in a similar bind. His family has been in the business for almost 100 years. Now they’re about to lose it all. He tells me that the major players in the dairy industry are trying to centralize everything into the midwest. The major players are so anti-local that its hard to fight. I wish that the smaller local farms could hold out, but don’t see how that’s possible.

  4. Peter says:

    There is a local dairy farmer just outside of town from whom we buy raw milk. He has a small but slowly growing clientele of black-market buyers who will buy his milk straight from the bulk tank at something close to retail prices. He is taking a great risk–if reported and caught by the dairy inspector, the fines and penalties will wipe him out, pretty much instantly. But he is skating so close to the edge of losing the farm already that he feels he has no choice. He is at least a third-generation farmer on that land and says he has never heard tell of it being as bad for the farm as it is right now.

    He is trying to diversify into other direct-to-consumer sales. We buy chicken and eggs from him, and he is looking into pork and beef as well. The problem for a cash-strapped farmer is that all these ventures take at least a little up-front investment and a larger time investment. And at the prices he will need to charge to make a profit on these ventures, there is a real risk that he will be unable to attract enough buyers to make it worthwhile.

    Meanwhile, the developers are beating a path to his door as his farm sits on good land. As much as he can’t stand the thought of losing the farm and can’t conceive of what he would do without farming, it is awfully hard to live day to day not knowing where the money to live the next day is going to come from. A developer waving a fat check under his nose is difficult to ignore. He has already leased a patch of ground to a cell phone company for a tower, a move which saddened him, but which put much needed cash in the bank. Unfortunately for him, his mother, who also works on the farm, told me that he is too soft-hearted to drive a hard bargain and got much less for the tower lease than he should have. (He also has trouble raising prices as necessary because he feels he is breaking faith with his customers. We try to tell him that we’ll pay the premium, but he will almost certainly lose some business if he ever does raise the prices to something sustainable.)

    My gut tells me he isn’t going to make it. He’s either going to get burnt by the raw milk sales or by the falling milk prices. Cell towers aside, the cash flow on the farm is insufficient to keep it going. And the parade of developers offering to buy the property is already slowing as the demand for houses has been falling quickly in our overbuilt area. There is no lesson in this you haven’t already touched on in your post. It’s just is a sad sad thing, something that touches me in a personal way.

  5. Berkshire says:

    My wife was in CT over the weekend and visited the farm stand where she worked for over ten years tending the seedlings in early spring through to finishing up the fall harvest in late October.

    The owner has over 40 years of experience raising plants and fresh vegetables in his environment. His family has been on this land for three generations. This year as well as last were wipe outs due to the cold wet summers. He is ready to pull the plug. He has a few tomatoes by using large quantities of fungicides, the peppers never grew or set a crop and the sweet corn was a near failure. These are the 3 big money crops in this business.

    He shares my opinion that climate change has “been happening” for at least 25 years and has reached the point where experienced farmers might not be able to grow a crop in the rapidly changing environment. Gardening / farming gets you in touch with season, the bugs and the birds. The changes have been staggering. If an experienced farmer with all the techniques, practices and customer base that have been developed over many years can’t succeed, I fear that many of the new crop of organic farmers will also not make it.

  6. Heather G says:

    Are any of the above farmers in Massachusetts? If yes, maybe they can put some of their land into Chapter 61(a or b) or under something called a Covenant — it’s a way to get some money for getting equipment or whatever needs doing to continue to develop the land as farm land.

    And if any of the dairy farmers are in western MA, they should see about joining Our Family Farms, which is a coalition of western MA dairy farmers who sell their milk together at the grocery stores.

    Our most local dairy farm (1+ miles down the road from us) is a member mostly to support the other farms. They sell their milk mostly direct to locals, plus they make yogurt that is sold both locally and in some of the local supermarkets (I don’t know if it’s distributed out of state but I don’t think so).

  7. Jerry says:

    As a dairy farmer myself I know the price for class 1 milk (the stuff of gallons) has fallen more than the price we receive for it. I know everybody would like to buy local but the liability for selling raw milk is too much to assume.
    Since I milk my own cows twice every day I always had the perfect solution to our so called milk surplus. Make the dairy farmer milk his or her own cows and herd sizes will definitely become smaller, use a boatload less energy, and allow better care of fewer cows. There are only five dairy farms left in our town as compared to thirteen a few years ago.
    On the economic front I can never recall burning through equity like I have this year. It is just so expensive to buy health insurance , pay property taxes, and dairy feed and supplies. Bull calves are worth less than the trucking to auction yet the auction house doesn’t dare send anyone a bill fearing they will lose their cull cow business. There always was no money in farming, now there is even less.

  8. Sharon says:

    Jerry, I don’t know how you do it, but I’m glad you do. I truly and quite literally pray that things will get better for you and all the dairy farmers I know.

    Sharon

  9. Mike Morin says:

    Just started reading Sharon and Aaron’s book after finishing Paul Robert’s enheavying book, “The End of Food”.

    I’m looking forward to try to find some glimmer of hope, no matter how slim, within “A Nation of Farmers”.

    What we really need to do is form a coalition, including starting an active discussion group to discuss practical alternatives and how we can build a living food system while the extant one dies and crumbles.

    I understand that it is a next to impossible task, but if we want to “keep hope alive”, we NEED to DO IT!!!

  10. homebrewlibrarian says:

    Mike,

    Sharon (with others) has set up several Yahoo groups that touch on various aspects of preparing for a declining economy and future.

    http://groups.yahoo.com/group/adaptinginplace/
    http://groups.yahoo.com/group/sharonfoodstorage/
    http://groups.yahoo.com/group/90PercentReduction/

    I think if you browse through the messages in each you’ll see that the conversation has already started! Feel free to join in.

    Kerri in AK

  11. cecelia says:

    I appreciate this will seem callous – but part of the issue is too many dairy farmers and milk surpluses which drive the price down. In NJ there has been an effort to get dairy farmers to switch to crop farming – but this has met with little success. The problem then is that as these dairy farms go under – the land will not be turned to crop production but rather to residential development. So we continue to lose fertile land. Given this – one of the issues is that dairy farmers do need to switch to crop production. Of course, their reluctance stems from a lack of knowledge. But it is in every one’s best interest to keep farms from going under and more action and support for dairy farmers – even if it is to help them transition to other crops – from state’s would be a good help.

    Berkshire – you brought up an issue I have been thinking about this summer. After years of successful home gardening this summer has been a disaster. No peppers, low yields of other veggies, and a mess with the tomatoes. In the beginning of August I took a chance – given how cool and wet this summer has been – I planted more beets, carrots etc that I thought would have a better chance. But how successful can we expect inexperienced gardeners to be if experienced farmers are having problems with the weather? The problem I see is that climate change has been giving us unpredictable weather so one never knows for certain what the conditions will be and so what to grow. I thought the one hope we did have was the potential of home gardening – but with constant changes in weather – affecting yields – I am becoming pessimistic about this.

    Sharon – could you share your thoughts with us on this issue? I would love to hear what you think.

  12. cecelia says:

    Just one more comment on this issue – I lost almost all my fruit this year due to constant heavy rain and repeated hail storms. Commercial apple growers in the south of our state were declared a disaster area because of hail storms destroying their crops. This has made very real to me how bad climate change is and will be – I started planting fruit trees several years ago to prepare – yet that effort will be useless if poor weather conditions ruin the crop. Does anyone know how we can protect fruit trees from summer hail storms?

  13. Sharon says:

    Hi Cecelia – The issue of climate change is one I think I need a post to talk about.

    As for dairy farms, perhaps in New Jersey it is possible to see them converted to row crops (although I’d be stunned to know that New Jersey dairy production was so great that it exceeded the needs of the surrounding areas of the I95 corridor – totally stunned. With the exception of Wisconsin and maybe Vermont, there aren’t any states with a “dairy surplus” in relationship to the consumer need of the region – merely states where people are eating a lot of imported dairy) – but in many of the areas near me, the dairy farms are on steep and hilly land, often with thin soils that would be vastly better used for grazing than for row crops, except on a very small scale. I admit, I don’t know enough about the situation in NJ, but I’m a bit reluctant to immediately leap to the notion that the problem is that the farmers aren’t willing to adapt.

    Sharon

  14. cecelia says:

    Sharon – thanks for the response – I do look forward to your post.

    Re: the dairy farms – NJ is almost independent in meeting its milk needs – some portion goes to border counties from NY. The state has done a lot to try to protect dairy farming but the number of farms has eclined from 3500 in the 60′s to 130 now. However, herd size has not declined.

    There has been a big effort to also help dairy farmer’s produce cheese and for those farmer’s who bought in – it has been a help – this suggests a strategy for other states perhaps.

    NJ tried to protect its farms but making it more difficult to “import” milk but NY state went to court and stopped the law.

    I wonder if federal price supports for milk are a way to stem the tide?

  15. Lori Scott says:

    The quote from 1932 reminded me of the australian experience.

    We were in the grips of fearsome drought, many from 1995 to 2005. During that time, we were on the land. We were only employees of the company who owned the sheep station and the drought was hard enough for us but we recall conversations with owners from properties further north and west of us who were in dire straits for a lot longer.

    One commented that it was widely known the graziers would dig large pits, herd sheep into them and bury them alive because they could not meet the cost of shooting them or finding another way to destroy them. Many of these men were shattered by their drought experience and will never work on the land again.

    Many have mental/ stress issues and this type of thing is never talked about within these isolated communities. During a long drought in the ’70′s there was a speight of young men dying of gunshot injuries. Mainly there was an explanation like “oh he was getting through a barb wire fence and got hooked up and the gun went off” but everyone knew what was really going on.

    On the other hand, at least as a community, we have an idea the type of pressure that climate change can exert both personally and within a community. We’re ahead there. I think the message is that climate pressure is here, has always been here and whether it is cyclical or changing, don’t expect a nice gradual adjustment time to work with. Droughts and floods are a way of life for us.

  16. Deb says:

    Here in Wisconsin, I have a local dairy farm up the road that bottles and markets it’s own line of unhomogenized milks and creams plus things like eggnog and smoothies in season. He partners with a local yogurt producer and a local egg producer to do home deliveries. Last I heard they were talking about adding a cheese option to thier product line. It’s a mom and pop farm, along with school age kids who work during the summers and after school. They have a milk route in the nearby large town with daily deliveries. A pint of their cream is around $3 before the bottle deposit which you get back when you return the bottle. Often, the grocery stores dont have any on the shelf because they sell out so fast. I dont drink anything else anymore. There is no comparison. And the whipping cream is thick and yellow and whips up so firm it lasts for several days without wilting in the fridge. His cows are pasture raised tho he is not certified as organic. My guess is he will be in business as long as he cares to be. There are at least 2 other farmers using the same small business model in two nearby counties that I know of.

    My other neighbor is also a dairy farmer. He’s barely hanging on. Several years ago they put in a huge milking parlor with lights to increase production to 3 milkings per day. They had to build what we fondly call the shit pond to take care of all the manure. He has to hire help to take care of the midnight milking. His cows never see a pasture or grass–they stay in their stanchions all the time. He also raises corn and grain. His milk is bought by the corporate folks. His wife has to work in town to help keep food on the table. He cant seem to make enough money off the cows to pay back his debts. He’s thinking of taking on a second job to help out.

    I dont know what the answer is. I do know that I would rather get my milk from pasture fed cows who arent crowded into inhumane, unhealthy conditions.

    Deb

  17. Lisa says:

    I’m in Australia also and here in Tasmania we have had a lot of rain (some flooding) this winter, after several years of near-drought and drought. Our area on the NW coast is regarded as a food bowl for a lot of vegetables as well as dairy and meat animals. Our current problem is too much water and with a lot of land under water our farmers are struggling to do any planting. There is concern over whether the planting will get done in time to mature and then get harvested before next autumn/winter because everyone will need everything done all at the same time. We still have about two more weeks of rain forecast but hopefully it won’t be the flooding kind.

    The large dairy companies here have just cut milk prices to our farmers and I think we will be in the same boat as the USA before long, with farmers losing money and having to get out of the industry. I blame cheap imports as there is a big difference in prices between our locally produced non-homogenised milk and the no-name supermarket milk that a lot of people buy, so again it comes down to fuel prices making a big impact. I’m hoping when oil goes up and stays up the dairy farmers will benefit, along with all our local industries.

    Cecelia, I suggest you grow your fruit trees in groves. I’m going to do this on the suggestion of Jackie French, an Australian gardening author, who says it is beneficial for the trees and for yield. By growing them close together they protect each other from wind, drying out, bird attack etc. Don’t prune them too much either and the leafy branches aid in the protection of the fruit. If you also grow vines and other crops under and through the trees you can massively increase the yields of everything and confuse pests such as birds.

  18. Ani says:

    RE: dairy farms. Yes, some of the issue is an oversupply of milk thus lowered prices, but it is not the small dairy-farms that are the cause of this imo, but rather the mega-dairies. It is often the small farms however that can’t hold on and will go under. Many of these farms,in this area, are on hilly, rocky land- perfectly suited to dairy farming but not other types of crops. Many farmers here are deep in debt at this time- a combo of both low prices for milk, high grain prices and such wet weather that hay was hard to get in.

    Re: the weather- yes- it has been really rough the past few years. In the past I could grow eggplants, peppers, melons, etc- some in the field some in cold tunnels, but they grew well. The past 2 years- zilch! I just started harvesting greenhouse grown tomatoes the end of August! There is no way to make up for the lack of a season here. And no eggplants, pepppers or melons of course- haven’t even made pesto for home use! I’ve been at this for awhile- with a small organic diversified farm- and so many crops were totally wiped out both last year and even more this year.

    Home gardeners got a taste of what it feels like with late blight which has wiped out most potato and tomato crops other than those heavily sprayed- unfortunately they also helped transmit it to others as they had no clue in general what they had…..

  19. Deb says:

    Ani,

    my CSA is having the same problem tho they have a bumper crop of eggplants this year. Not tomatoes tho and only muskmelons. Only one watermelon plant set fruit and it may ripen if the frost holds off. They are getting green pepper but not in the quantities they had hoped for. I do a worker share so I am lucky and get the produce they cant give to customersn because it’s not pretty enough. I’m not even sure if the pumpkins and squash are doing well. It’s been so cool and rainy here in Wisconsin. We’ve had very few days over 80 and our nights are in the 40′s.

  20. jay moses says:

    this is a clear example of price deflation. steadily falling prices destroy all debtors, including farmers.
    here is another great reason to get out of debt if at all possible. As prices (which includes wages) fall, making a fixed mortgage or other debt payment becomes more difficult. This is not just a farm issue, it affects all of us who are in debt. it’s the 1890′s redux.

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