Thursday, April 02, 2009

Long answers...

Are perhaps my only true talent.

A reader poses this challenge:
 I always enjoy your perspective on the trials and tribulations of modern production agriculture. I thought your piece on honoring cash rent agreements was insightful and now would like to hear what you have to say about taking it to the next level and commenting on Greg Vincent's piece about "the ask" in the latest issue. Many have a double standard when they see their sweet heart rental deals threatened by the aggressive expansionist, yet have few qualms about letting a land lord know how much better they could do in today's market. Think you can navigate that one?
In a sense, I have to navigate it - I'm living it.  He refers to an editorial by Greg Vincent, the editor of Top Producer which refers back to the occasion of the Top Producer Seminar.  In part, this is Greg's view:

"I decided about three years ago my job was to ask,” said Richter, who farms about 7,500 acres with his brother and another partner. “I don’t say I’ll give you X amount, but I tell landowners what we do. I tell them what information they’ll receive from us. I ask that if they ever think about changing renters, to please think of us. You’ve got to at least let people know you’re interested.”

“I don’t think it’s unethical to ask,” Lasley said. “Now, I do think there are times when it may be inappropriate to ask.”

Joking while making a point, Richter responded, “Is that before or after the wake?”

I believe most agree that preying on landowners at a funeral, which has been done before, is not acceptable. But simply asking? Even that crosses the line in some people’s minds. Others are conflicted because they want to grow, but feel they can’t and still be a good citizen of the community. This was something the panelists understood, but didn’t feel was that difficult to balance.

“Why would it be bad? And maybe that’s the obvious question,” Spafford pointed out. “I’m not sure who gets upset at the ask. The landlord couldn’t be upset at the ask. But why would the current renter get upset? Is it because he’s paying under the market rate?

“I may be throwing stones out there, and that’s not the intent,” he added. “But maybe the obvious question is: If we’re upset because we’re paying under a market rate, maybe the ask doesn’t matter, because now who’s not being ethical?”

Is it simply that those who are threatened by farm growth and who are making accusations of unethical behavior are actually living in glass houses? Or is farming immune from business reality? [More]

This topic is going to be beaten to death while consolidation proceeds apace for several reasons that underlie the issue rather than the issue itself. So get comfortable - I'm going in.

First, issues of competition should be examined with respect to the cultural atmosphere of the community in which each particular acres is located.  I have blithered on at length between the different points of view of Yankee and Yeoman farming cultures, but a brief recap.
  • Yankee farmers tend to be descended from Anglo - American stock(British, Scot, Irish).  Not always but often.  They are several generations in this country and carry in them some internalized values: more libertarian outlook (individual rights are very important), less inter-generational responsibility beyond those necessary for raising children, less tendency to form coops, strong belief in laws over traditions, high activity in government and legal systems, less exclusive communities (strangers are people too), comfortable as traders and dealers as well as producers, and seem to have a stronger attraction to risk. Land ownership is not a mandatory virtue, and remaining in one place not absolutely critical.
  • Yeoman farmers tend to be more recent arrivals and hence are more numerous from Illinois westward.  The come from Northern Europe and Scandanavia, and often immigrated en masse to establish entire towns from one area. Their attachment to land and community is stronger, as are the filial duties in families (getting sons established in farming, and caring for aging parents, for example).  They have tended to be more patriarchical and less likely to encourage women to own and operate farms. They have a stronger sense of community and cooperation, designating individual rights a lower priority. They are more exclusive, both within families and communities (land should not leave either, as a rule).  As later arrivals who kept their native tongues until about WWII, they were in a poor position to participate in the establishment of the legal and legislative system and frequently chose to avoid both.  As a result, US law does not reflect their values as much as Yankees.
So when talking about how competition should work in farm communities, check the plat book first for last names. If they look like "Phipps", you're in a Yankee county; if you have to check how to spell them, you are more likely in Yeoman country.  Then refer back to the tendencies to get some perspective on where folks are "coming from".

Within each neighborhood, relationships also hinged on, oddly enough, church attendance. Since Yeoman communities tended to have one large Catholic/Lutheran church, discord within the congregation was avoided and even occasionally a matter for the clergy to ajudicate.  In Yankee communities with a flock of Protestant churches, disagreement between local farmers was less concerning - "What can you expect from a Methodist/Baptist/etc.?"  But the larger point, I think is that the ruling from the church body carried the weight of autority and hence a sense of a "right" answer more often is sought, and used as precedent in Yeoman communities.

Which brings us to absolutism. [Legalism].  Consider the questions outlined by Greg and frequently heard in farmer discussions. Most of them arise from strong aversion to tackling these increasingly common issues of ethical behavior on their own merits, case-by-case, without detailed moral or religious guidance.  If only there was an Eleventh Commandment to quote, these headaches would end!

But the question is elusively relativistic, I believe.  Within broad outlines of moral conduct that apply to all people, we have to apply our value system each time and rebalance the good and bad; costs and benefits.  (Of course, this could simply be the Yankee in me talking.) Some of us create some guidelines to prevent covering the same arguments again and again, but even these are subject to revision as the world and people change.

For me, the question is almost one of physics, rooted in time and space.

The first is time.  The old canard about funeral home behavior is a dated issue. The conversations to rent ground are best initiated years, even decades earlier.  My experience is farmers without long range plans are the ones who resort to unfortunate last second actions, whereas those who are committed to be farming (or their descendants) are constantly sowing local seeds of reminders of interest in the land. When you speak is as important as what you say, and can even be game-deciding.  My rule of thumb: you can't be too early.

But what form should this conversation take?  Subject to community tradition (although my guess is Yankee standards are dominating competition practice) certainly numbers could be used, but that can be counterproductive in the long run. Those who live by the high bid, lose by it as well.  But at the same time, the attitude that the local competitor should be given a break is poor logic.  The local should value the land more and bid higher.

Another tactic could be a refusal to name a figure unless it will be considered a legitimate bid that could lead to actually renting the farm. Otherwise, you are simply doing an appraiser's job for free, and escalating a neighbor's rent for what resembles spite alone.

But more important, IMHO is the factor of space (location). Imagine a ring of concentric circles centered on your farm. As you journey outward, you decrease geometrically the power of your personal reputation and connections.  After all, those closest to you have lived with (put up with) you the longest. In fact, I consider the ruckus over aggressive cash-renters to be about 75% caused by simple displacement.

This feeling could arise from the deeply ingrained agrarian principle of farming as a "rooted" occupation, and our exploitation of that image for subsidies. The image we choose to offer even today is of a localized producer.  Until we decide to face the non-farm world as we are, we will continue to struggle to balance our widespread operations with our homey PR feint.  Too often we don't even realize this self-deception is what gets up our nose when a farmer three counties over moves into farm next door.  We really buy into our own spin.

Even the comment that you can't rent ground close betrays the fact that among those who know you best, you are less persuasive than strangers.  This too strikes me as short-term (less than 20 years) planning.  Besides our instinctive reverence for contiguous (or at least nearby) land is so universal, even competitors will grudgingly admit at least understanding your aggressiveness to rent it.  In short, distance alters the expectations of conduct.  It is my impression that producers have discovered acting like a jerk far from homw is not as bad as pulling the same shenanigans at home.The power of shame diminishes with distance as well.  This is a golden opportunity for favorable comparison by locals, it seems to me.

Most astounding to me are neighbors who will resent a rental coup by one to the extent they would prefer an outsider whom they both can despise. Now that's a strategy!

The "ask" could be a common part of prospective conversations are between neighbors who have many discussions, and who in the course of normal communication will touch on business matters.  Especially if couched in terms of a succeeding generation (my son may be farming and...) few will condemn the ethics of laying our your hopes for a future for your farm.  But this grace should not be expected to extend beyond your immediate community.

There is a moral proximity premium. But it can be negated by poor choices with your landowners. If you do not establish a framework of operation that can withstand competition from the outside or even the consequences of terms reached with other landowners, the personal good will you have established can evaporate, only to be recovered with enormous effort and time.

More than that, I have always suspected we undervalue farming close under the pressure to farm large.  Size is lionized on magazine covers, I know. But the subtle grip ACRES alone can have on your thought processes too often skews our value decisions. Nonetheless, BTO's exist because we as a profession allow them to, whether by refusing to invest in land (following some extremely bogus financial advice in the 80's) or by astonishing insensitivity to landowner goals or by a sense of entitlement via family or residence.

In fact, if your gripe is some yahoo from across the state (or even county) can rent ground next to you, it is your business model that needs upgrading - not his. Simple proximity should add $40-50 from efficiency alone (fewer miles, central storage, larger fields,etc.)  Personal reputation should clinch the deal.

Even the argument of "subsidized" bidders is groundless.  Outside sources of income are not only fair, but dang effective.  The question is better framed, "Which renter wants to farm more - the one who will work off-farm or devote personal wealth, or the one expects a "decent profit"? Farmers have long since learned to quietly leave unmentioned a wife's salary that effectively subsidizes the farm when complaining about competitors with "outside money".  Until you find a way to legislate how individuals deploy their own wealth which - despite incessant jeremiads of "looming socialism" - would require more than few revisions to the Constitution, the right to farm for nothing is still inviolable.

Much of the antagonism is rooted in sheer intimidation by size.  This too is bogus, as even economies of scale cannot overcome vibrant, living personal ties.  In my opinion, few people ever rent ground away from satisfied landowners. But big guys just make us crazy because down deep we want to be one.  So we create a stereotype that often doesn't match reality.  Consider this thoughtful message I got recently referring to an earlier post:
I enjoy reading your "incoming" blog everyday, your posts are always insightful and interesting.  As a professional farmer and a faithful member of The Church of Jesus Christ of Latter Day Saints I was particularly interested in your recent post about "large corporate farms".  Your mention of the Mormon church as the largest agricultural operation in the US is to my knowledge correct.  I live and farm adjacent to one such welfare farm here in XXXX, I sometimes contribute time and labor, I also have a younger brother employed on a church owned farm in another state.  Because of my background I thought I could add some additional information if you have any interest.  The Wikipedia articles linked about the church farms and bishop's storehouses are substantially accurate.  In addition to the welfare system farms mentioned, the church owns several large operations in the US and internationally operated under the name "Ag Reserves Inc."  These operations, (one of which employs my brother) are operated for profit and pay taxes as any other company would.  Neither type of farm accepts USDA subsidy payments.  The stated purpose of the Ag Reserves unit is implied by its name, to hold and improve ag properties until which time their production may be needed to supplement the existing demand on the current welfare system.  The church does not typically publicize it's holdings, but a general outline of the purpose and scope of the system is not meant to be "top secret" either.

I have managed a small irrigated operation raising alfalfa, wheat, and corn for 15 years and provided for my family on all rented land.  I recognize many would say I am disadvantaged as compared to any large farm operation.  I strongly disagree.  I literally farm across the fence from the largest farm operation in the US and voluntarily tithe my income to contribute to their expansion, yet I don't fear their competitive advantage or anyone else's for that matter.  The church farms are remarkably well managed and I am aware of some of their advantages, (I wish I could get the same volume refund on new JD equipment they have arranged with Deere after they purchase from the local dealer for example).  Certainly there is such a thing as economies of scale, but there are also competitive advantages I have that don't transfer to large operations.  I am proud of my industry but I am disappointed in our frequent crying foul at anyone we think is too big.  The big guys face the same challenges I do with two more zeros.  
The zero-sum nature of farming has been long denied even as it was obvious to all in the profession. We have very few frontiers to expand, although global warming could change that somewhat. Coupled with the need for very few farms as we deploy enormously powerful technology, a tiny handful of industrial producers will dominate grain farming just as has occurred with livestock and other ag sectors.

One skill these operators seem to have in common may be an ability to express their ambitions in a way that dovetails with the hopes and dreams of those they seek to serve.  And if you have not caught on the the fact that grain farming is a service industry, you're already way behind the curve.

If you are competitive today, it is risky to bet your continued success on outside forces like tradition or professional ethics.  One really good reason is we have no "professional ethics".  Not necessarily because we are all scoundrels, but because farmers refuse to accept any of the responsibilities incumbent with a true profession.

When I suggested licensing farmers, I was well and truly battered by incensed farmers protesting regulations and interference.  But in order to address the tumult of what professional conduct should be and propagate a "Code of the Midwest" (whatever), producers must first of all be  willing to abide by professional standards.  In short, if you think competitors are behaving badly, you too must agree to the same standards of ethical behavior you want to impose on them.  We can have a street fight or an association meeting, but not both.

If we want ethical professional behavior, we need to 1) agree on what that entails and write it down, and 2) raise our hands and swear to abide by them.

Or we can keep pointing out the mote in our brother's eye.

And (literally) losing ground.


Anonymous said...

Very nice post John; I think you addressed a number of ongoing landowner-tennant issues quite well. I have witnessed an incresing number of farmers in this area make the comment that landowners "owe" loyalty to their tennants. Yet very few reveal what they "owe" the landowner. I think these farmers forget that cash-rent is a business transaction: the farmer uses the land for a year to grow his crop and the landowner gets paid for allowing said usage. Even if there is a personal relationship between the two, business is business. Nothing more, nothing less. Perhaps this is the same entitlement mentality which prolongs dependance on farm subsities...?

Ron in IA said...


You are to be commended on an excellent article on farm leasing issues. I marvel at your insight. Every so often you produce a "classic" and this is certainly one of them.

I witnessed the discussion on ethics at the Top Producer Seminar and it appeared to me there was a polarization of the audience into two different camps. Thinking about this on the way home, I wondered if it is a indirect result of mechanization. With the movement to larger operations and bigger machinery, there isn't the dependence on neighborboods to work together that used to exist. This tends to put a "neighbor" in more of a adversary role. All of this is beginning to fray the rural fabric that has held the ag community together in the past and may have lasting rural sociological implications in the future.

And finally, we are all really just tenants working with the land resource entrusted to us while we are here on earth.

Ron in IA

John Phipps said...


I used to agree more strongly with the "business is business" creed, but have in my dotage discovered I am uncomfortable with allowing financial gain to occupy my highest priority all the time.

Even more remarkably, I now believe we fail to fully take into account very long range payoffs when making such economic decisions. Perhaps we have been unable to convey down succeeding generations the ability to include that real value of community and honor in terms that can stand comparison to wealth acquisition.

I also have come round to the point of view that too much of of our ambition is based on a forced pace that not only robs us of a young life well spent but ignores the incredible opportunities that will continue late into our lives, unlike most other Americans.

Anyhoo, thanks for reading.