>But you'll have to start asking yourself eventually what
>is it that is pushing sus ag farmers towards bankruptcy.
In my experience it is only *some* sustag farmers, not all, just as it
it *some* conventional farmers, not all. The problem is commonly that
farmers need to think *more* like business people, not less. I say this
on the basis of having worked directly with hundreds of farmers in
several countries.
Few farmers think like shareholders and CEOs, with the common result
that they make consistently poor allocations of capital and seriously
undermine the profitability of their business. Borrowing money at high
(real) rates of interest to purchase expensive (and often oversized)
assets that depreciate at 10-20% per year (declining balance basis)
would not make a lot of sense in most businesses, yet farmers do it all
the time.
Not only do few farmers think like shareholders or CEOs, they rarely
even think like Vice-presidents. Most companies have VPs for Finance,
Operations, and Marketing. Altogether too many farmers, however,
abrogate these roles to external people who are understandably trying
to fatten their own bottom line. Thus the banker becomes the de facto
VP Finance. Suppliers become VPs for Operations. Buyers take over as
VP Marketing. The results are fairly predictable, and distressingly
common.
Profitable farms, on the other hand, have tended to duplicate the
management structure of larger business, to the extent that when a
farmer is working in the field (s)he is working according to a plan
developed by the VP Production. The VP Production developed that plan
to "deliver the numbers" to the CEO. The CEO determined those "numbers"
in order to maximize return on investment to the owner(s). Everyone of
those *roles* can be filled by the farm couple, but it is the style of
thinking that generates sustainable profits, and is (sadly) widely
lacking in today's farm businesses. When farmers start thinking like
owners, profitability almost always improves.
The small family business can be extraordinarily nimble, which can more
than make up for the lack of financial resources and a truncated
management structure. The key to success lies in duplicating the
management functions of larger businesses in order to better exploit
the *numerous* competitive advantages inherent in the very smallness of
the typical family farm. Going head-to-head with ADM in the #2 yellow
corn business is just plain dumb.
I don't know whether to laugh or cry as I read all these posts that
treat capitalism as just one more philosophy. Capitalism is not a
philosophy. It is a *description* (albeit incomplete and imperfect) of
the way things work. Fire can cook your supper and keep you warm ---
or it can burn down your house --- but the physics and chemistry of
fire are not a matter of philosophy, and treating them as such greatly
increases the chances of a house fire.
Bart Hall
Lawrence, Kansas
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