Monday Fun Read: Chapter 12 Bankruptcy...

A brief Twitter exchange prompted me to brush up on my farm bankruptcy basics. As is now too often the case, what I thought I knew was shaky, and what I didn't know/remember considerable.

First, I hazily remember farmers getting their own special category of bankruptcy during the depths of the '80s.

Chapter 12 Bankruptcy: Adjustment of Debts of a Family Farmer with Regular IncomeChapter 12 Bankruptcy provides debt relief to family farmers with regular annual income. Chapter 12 Bankruptcy is very similar to Chapter 13 Bankruptcy because both of these bankruptcy options allow the debtor to propose a plan of debt repaymentover a period of three to five years, as well as a trustee is assigned to the case who is responsible to oversee the bankruptcy process and disbursement of payments to the creditors. Chapter 12 Bankruptcy allows a family farmer to continue to operate the farm while the plan is being carried out. [More]

 The biggest differences are debt limits, costs, and creditor rights. In Chapter 12 all these favor the farmer more than the alternatives. A partial summary:

[Source][click image to embiggen]

Some more detail (11, 12, 13 - l to r):

[Source]

The other thing that I noticed is creditors don't get to approve Ch 12 plans - only the trustee (court appointed). This prevents battles between creditors forcing dissolution.

This whole discussion began when lawyers pressed the Chair of the Senate Judicial Committee.

With agricultural lenders fearing a tidal wave of farm bankruptcies as soon as this spring, lawyers in the Midwest say they want U.S. Senator Chuck Grassley of Iowa to raise the debt limit for so-called "family farmer" bankruptcies.Farmers in states like Illinois, Indiana and Iowa are scrambling to secure lending for the 2016 growing season at a time when prices for their corn have halved from three years ago.Many younger farmers, who tend to be more cash poor than their elders, are expected to be among the hardest hit by stubbornly high input costs such as fertilizer and seeds and souring export sales.As they seek restructuring advice, many are told their debts surpass the $4 million limit for a Chapter 12 family farm bankruptcy, said at least five lawyers who represent either debtors or creditors.They say the $4 million cap is out of touch with most farms' current operating size, often thousands of acres of land paid for by expensive leases and worked using tractors that can cost more than $250,000."The debt limit for Chapter 12 bankruptcies should be raised to at least $10 million," said Joseph Peiffer, a bankruptcy attorney in Cedar Rapids, Iowa. [More]

I'm not sure if Grassley is hearing increased rumors of rising numbers of farmers seeking debt relief, but this move is rooted in a familiar pattern: farmer wealth is not like other wealth.

This makes no sense economically or financially, but it sure resonates with farmer feeling of exceptionalism. It is the same bias that generates disturbingly self-righteous statements about estate taxation, for example. Our wealth (land) is different because we use it for our way of life, unlike mere stocks or cash. (I've dealt with this in TP before).

But that's an old debate. What is more useful perhaps is to see if this is a fight worth having. Do farmers use Chapter 12 often? Are we going to battle for a tiny number? More to the point, does CH 12 have better results?

Farmer bankruptcies have always been a very small proportion of total farm numbers. Bankruptcies have been relatively more numerous, as would be expected, in periods of farm sector financial problems following periods in which debt had increased substantially. But the farmer bankruptcy cases per year are typically less than 0.1 percent of the total number of farmers and are measured in  bankruptcies per 10,000 farms. The number of farmer bankruptcies occurring from year to year appears to lag behind the movement of farm prices, farm income, and other economic conditions that are the primary causes of insolvency. Bankruptcy law is a blunt policy instrument overhanging the workings of the credit markets, rather than being finely tuned to specific subgroups. Bankruptcies occur during both prosperous and troubled economic times, but the effect of the law obviously is much more noticeable when times are hard. Chapter 12 has allowed some financially stressed farmers to continue farming, but the shortrun gain to financially stressed farmers comes at the expense of some creditors and, ultimately, other borrowers. Chapter 12, a special section in the Bankruptcy Code enacted in 1986 in response to the farm financial crisis, was originally scheduled to expire on October 1, 1993. But it has been extended 10 times and has succeeded in keeping some farmers in business and encouraged informal lender-farmer settlements out of court. However, it increases costs by encouraging both inefficient farmers who would otherwise liquidate and efficient farmers who would otherwise continue their operations at greater expense to reorganize their businesses and charge off part of their debts under the protection of bankruptcy. Some of these costs could be mitigated by allowing lenders the option of recapturing writedowns of secured debt if asset values increase subsequent to the writedown. Chapter 12 gives family farmers in financial stress more power to demand concessions from lenders than does Chapter 11. Chapter 12 was not necessarily designed to frame creditor negotiations, but it has had that effect. Under Chapter 11, where farmers desiring to reorganize typically filed before Chapter 12 became effective, creditors could more easily block the debtor’s plan and force liquidation. The availability of Chapter 12 to eligible farmers encourages creditors to negotiate debt-restructuring arrangements outside bankruptcy. But the effect may also include lenders’ restricting credit and raising interest rates to some degree. The decreasing discharge rate over time may indicate that more farm debtors are negotiating successfully with their creditors outside of Chapter 12. Chapter 12 thus has had a larger historical impact than what is indicated by the number of cases filed annually. The threat of possible Chapter 12 actions by farmers is an enduring possibility facing agricultural lenders. But debt-restructuring laws, such as Chapter 12, requiring debt writedown do not necessarily mean higher loan losses, as long as the value of restructured debt is greater than the amount the lender would receive through foreclosure. However, the risk of future default on the restructured debt is still present, and is an unknown cost to the lender. Because the lender in Chapter 12 loses the opportunity to recoup loan losses when restructured loan collateral appreciates in value, these higher costs are borne by the lender. [More][My emphasis]

So, unless Sen Grassley has reason to think a much larger than usual numbers of large farmers are in serious difficulties, this looks to me like simple constituent politics. Perhaps some powerful farm donors have whispered in his ear, but without more information this seems like a gift to a favored few producers ( and their lawyers).

Why is SCOTUS...  

Contemplating the GM patent rules? I was as surprised as anyone when the Supremes decided hear (cert) Bowman vs. Monsanto. Like Bryan Endres, I believe this could be bad (?) news for biotech profits.

What has the agricultural law community talking, however, is the planting of seeds not "saved" by the farmer from the previous growing season, but rather the purchase of soybeans from a grain elevator (known as "commodity seed") and the subsequent planting of those seeds. The seeds were "sold" by the original farmer to the grain elevator without restriction, and thus the question is whether the prohibition against planting commodity seeds applies to the subsequent farmer.
A federal trial court in Indiana, as well as the Court of Appeals for the Federal Circuit in Washington, DC, ruled in favor of the patent holder--Monsanto. See Monsanto Co. v. Bowman, 657 F.3d 1341 (Fed. Cir. 2011). The court avoided applying the First Sale Doctrine, holding that even if the patent rights in the commodity seed are exhausted by the authorized sale to the grain elevator, once the second farmer plants the commodity seed containing the patented technology and the next generation of seed develops, this farmer has in essence recreated the patented item without permission from the patent owner--a type of patent infringement somewhat similar to the example described above of building copies of the patented chair. See id. at 1347-48.
In many respects, the Court of Appeals' ruling in Bowman last year conformed with the general understanding of how patent law applies to agro-biotechnology and generated little discussion. So why would the U.S. Supreme Court, especially in light of the thousands of petitions for cert it receives each year, decide to look further into this particular case? Are the justices looking to solidify intellectual property protection for self-replicating patented products such as seeds? Or do they think intellectual property rights may have "gone too far" and that post-sale restrictions included in technology use agreements need to be scaled back? [More]

Given the solidity of the conservative wing of SCOTUS, I see a reversal as very plausible based in part on reining in intellectual property rights expansion at the expense of individual rights.

The president, ctd...  

Thanks for the great comments. I'll respond in this separate post, as linking is a bear in the comments.

First:

"From VA":
1. For most objectors I know, it is more about the appropriate role and size of government. Not withstanding the many previous encroachments, if Obamacare stands, there is nothing in my life that the feds cannot dictate. The concept of limited government is gone completely and many of us find this a travesty.

2, Your own source says "The number of significant federal rules, defined as those costing more than $100 million, has gone up under Obama, with 129 approved so far, compared with 90 for Bush, 115 for President Bill Clinton and 127 for the first President Bush over the same period in their first terms." This is more than a 40% increase in the most burdensome regulations. Also, for aggies, think GIPSA, dust, child labor, and TMDL. I very definite pattern of increasing regulation impacting agriculture.

3. I have witnessed this administration "vetting" of very routine, perfunctory, commodity board appointments where they have indeed used Chicago tactics, and have confronted the most minor appointee with their record of campaign contributions.

4.I agree, no jamming.

5. I think it is not Obama as a person many aggies find repugnant, but it is his view of government and his belief that government always knows best that most of us reject.

Okay, in similar order:

1. Your objection to the mandate as THE line in the governmental size stand is typical.  It has been nicknamed the "broccoli argument"  as it requires an affirmative commercial action. There are two answers to this. First, we said the same thing about Kelo and imminent domain. I thought that was dumb decision as it trampled private property rights, but so far we haven't seen cities, etc. seizing land will-nilly. Second,

 The law’s critics, for instance, do not challenge rulings like Wickard vs. Filburn, which allowed Congress to forbid a farmer from growing his own wheat that he did not plan to sell. Of course, growing wheat for personal consumption is an elemental act of human civilization, a definitive act of a person who wishes to provide for himself and be left alone. Not coincidentally, some of history’s most monstrous tyrannies denied individuals the right to grow their own food unmolested – think of Stalin’s Russia, inducing a famine among the productive farmers of the Ukraine, who were forbidden from using their own time to grow their own food.

Indeed, if we imagine a reverse situation – in which conservatives were conceding the government the right to regulate “inactivity” but not “activity” – their hyperventilations over the perilous state of freedom in America would be more persuasive. The line between the laws legitimized by Wickard and real communist tyranny is actually quite thin. Instead they have managed to whip themselves into a frenzy by painting fantastical, concocted stories about the government forcing people to eat broccoli – as if they truly cannot imagine a legal or philosophical principle that would allow the government to enforce a health care mandate (that conservatives invented!) and not allow the government to force-feed broccoli to its population. [More]

2. Note the source (thanks for reading the link, BTW) does not compute any benefits, only costs. What does preventing another well blow-out count? The EPA and other regulators tackled some hard problems like finance reform that have already cost us billions. We can complain regulations cost us but as ethanol supporters like to shout, "Look at all the benefits!"  Regardless, I simply disagree with the perception there has been a "tsunami" of regulation. More, perhaps, but it is a matter of degree.
3. I think those type of tactics are now pretty standard across both parties, Look at how slow the Senate has been to confirm appointees.
4. N/A
5. I'm glad you are on a different e-mail spam list than me, VA. You might visit ag talk blogs or listen to Rush. I appreciate your objection is based on policy, but after three years of bad jokes when with other farmers, my opinion is as I stated.

But a truly insightful comment with which I agree followed (albeit mislocated):

Ed Arndt Rich. Co ND said...
John,

On Obama. I didn't vote for Obama but was willing to give him the benefit of the doubt. I had hoped he would stop the shredding of the constitution started by George W. Bush with the Patriot Act. However,under Obama and his attorney general Eric Holder, the process has been accelerated. Under sections 1021 and 1022 of the National Defense Authorization Act the government can indefinitely detain terrorist suspects. The suspect has no right or opportunity to defend himself or make an attempt to refute the governments action. Are we to believe the government will never make a mistake? Think about that for a bit.

Now consider this. On Mar. 5th, in a speech at Northwestern University, Attorney General Eric Holder made the astounding statement (astounding to me at least)that the constitution guarantees due process of law, but it does not guarantee judicial process. For all of my adult life I had always believed that due process of law included a public trial before judge and jury. Not according to Holder. Under Holder's version due process becomes whatever the government says it is, not open to public or even congressional scrutiny. Holder's remarks were referring to the killing of Anwar al Awliki by drone strike, and various arguments can be made in defense of this action. However, the precedents set by Holder's speech are terrifying. How long until some other branch of government decides that it is not obligated to provide judicial process and instead provides whatever due process the government decides will suffice? Under this scenario, what we have commonly held to be constitutional guarantees become null and void.

These things have not been much reported in the mainstream media. Why? Is the media keeping it a secret? Or does the media think(I fear correctly) that the public is not interested?

You can google "Eric Holder's speech at Northwestern University" for background on this subject.

I was irate when habeus corpus was decimated under Bush, and am dumbfounded that Obama has doubled down on this insidious attack on personal liberty. What is more profoundly troubling is this is still not invasive enough for the Republican party excepting the sane voice of Ron Paul. They are cheering him [Obama] on!

This matter is far and away more devastating to me than Obamacare, but that is the issue that the public wants to debate. In fact, the public seems OK with killing suspected terrorists, even if they are American citizens, under the thinking I guess it wouldn't happen to someone named Phipps, of course.

Until you are targeted by the president to be killed (as just a suspect), I suppose.

All is not well...

In the boardrooms of big law firms. To begin with we have a surplus of lawyers, at least lawyers who will work for nosebleed hourly rates.


Which is a lot of 'em.

Meanwhile, law schools keep disgorging new litigators like there was a need for them.

Over the past decade, the number of law-school students has also steadily increased, as universities have opened or expanded their schools. Law schools tend to be moneymakers: They're cheap to set up, and tuition runs high, even at poorly rated programs. Thus, universities have added them on with relish, and the list of approved law schools has increased 9 percent in the past decade, to 200. That means that the number of new lawyers minted every year has not stopped growing, either: Law schools awarded 44,004 degrees last year, up 13 percent in a decade.
But the prospects for those legions of new lawyers have been grim, a fact hardly unbeknownst to them. As I reported this fall, in the past few years, young lawyers faced a glut of competition from other legal professionals; plummeting wages; a reduction in openings in and offers at big law firms; and cripplingly high student-loan debts. When the recession hit, thousands of young lawyers suddenly found themselves trying to work off six figures of debt in pay-per-hour assistant gigs. Granted, things are looking better. But the National Association of Legal-Career Professionals still cautions that "entry-level recruiting volumes have not returned to anything like the levels measured before the recession." [More]

I've always thought most people were panicked by outlier cases into over-lawyering. (And for that matter, over-accountanting). But my risk threshold is mine, of course.

But for whatever reason, the market isn't great for billing the big bucks. [Note the opening sentence below: Dept. of Duh!]

When not paid by the hour, lawyers’ approach to their work changes, said Carl A. Leonard, a former chairman of Morrison & Foerster who is now a senior consultant at Hildebrandt International, which advises professional services firms.
In one case, he said, Morrison & Foerster negotiated a fixed fee for defending a company in court, covering work up to the point of a motion for summary judgment.
On top of the fee, if the case settled for less than what the company feared having to pay if it lost in court, the law firm got a percentage of the amount saved. The arrangement made sense when the goal was to resolve the dispute quickly, Mr. Leonard said.
Lawyers on the case negotiated a settlement for much less than the client’s worst-case number, Mr. Leonard said. “The effective hourly rate was something like 150 percent of our hourly rates,” he added. “We made money, the client was happy.”
In litigation, firms that charge by the hour can suffer if they are too successful and end a lawsuit — and the stream of payments from continuing work — too quickly. One law firm that recently collapsed, Heller Ehrman, was hurt in part because a number of cases had settled.
That collapse highlights the risk to law firms experimenting with other payment arrangements: If lawyers set too low a price, they lose money. Many lawyers may not be good enough businessmen to pick the right price, said Mr. Krebs, of the Association of Corporate Counsel. [More]

I'm probably crossing the line into simple lawyer-bashing, but I have always found it hard to figure out what good most of their "work" really is. I think much of that value comes from our inability to judge risks anywhere close to objectively.

Tort reform reality...

(My thanks to commenters below) I guess I have not written about this idea - which I indeed support.  Not just due to the normal friction between doctors, lawyers, and engineers in jokes, mind you, but because our medical malpractice system truly has been shown  - like large banks - to be incapable of self-regulating.

That said, it it NOT much help in addressing health care costs.

The CBO report lends credence to Republican arguments that substantive limits on malpractice lawsuits will reduce health-care costs. However, President Obama opposes one of the chief proposed changes the CBO studied, caps on jury awards, and analysts give the measures little chance of passage.

"These numbers show that this problem deserves more than lip service from policy-makers," Hatch said in a statement. "Unfortunately, up to now, that has been all the President and his Democratic allies in Congress have been willing to provide."

The letter comes in response to questions Hatch raised during the Senate Finance Committee's recent debate over health-care reform.

Elmendorf wrote that newly available research prompted CBO to update "its analysis of the effects of tort reform." The agency's conclusion: A package of reforms that included a $250,000 cap on damages for pain and suffering and a $500,000 cap on punitive damages "would reduce total national health care spending by about 0.5 percent."

The federal government would reap a substantial portion of those savings, the CBO said, primarily through reduced Medicare costs. [More]

There are other (usually older), larger estimates of savings, but the CBO is the Gold Standard for these comparisons.  It is as well the most recent. Also the recent exposure of the McAllen, TX medical fiasco - a state that boasts strict malpractice limits - is not encouraging.

It is hard to imagine how tort reform would help the uninsured, for example.  Like removing interstate barriers to insurance sales (which the HCR bill allows via coops) it is a small, worthwhile gesture that avoids tackling any substantive curve-bending.

Nonetheless, I think the Republicans could easily get tort reform if they were to negotiate in good faith.

I got this note from someone with many decades' experience in national politics, about a discussion between two Congressmen over details of the stimulus bill:
"GOP member: 'I'd like this in the bill.'

"Dem member response: 'If we put it in, will you vote for the bill?'

"GOP member:  'You know I can't vote for the bill.'

"Dem member:  'Then why should we put it in the bill?'

"I witnessed this myself." [More]

Now about the other 99.5%...

Mandates and the Constitution...

Among the several comments I have received about health care reform is the suggestion mandates to buy health insurance are unconstitutional.  I hadn't hear any debate about this, but I have been pretty well out of the loop (no, still not done).

My initial reaction is why health insurance would be any more unconstitutional than auto insurance, but luckily better minds than mine have pondered this question.

Before we get started down this road, yes, the individual mandate is constitutional. For a roundup of the argument, see this Tim Noah piece. For a longer, more technical explanation, see this post by law professor Erik Hall.

The summary is that you can look at the individual mandate as a tax, which is constitutional, or as a regulation forcing private actors to engage in a certain transaction, much like the minimum wage, which is also constitutional. I've also heard scholars mention auto insurance, which is an obvious analogue, and the Americans With Disabilities Act, which proved that the government can order businesses to install ramps, despite the fact that the constitution doesn't explicitly give the federal government jurisdiction over entryways. [More]

And of course, the mind wanders to the ethanol mandate...

I'm no tax expert...

But I've got some theories and I enjoy the game. And I have done my own taxes for 40 years without indictment or incarceration. So, as Aaron and I discuss how to transfer the farm business, one idea has been an installment loan for some assets. It seems we're not the only family considering this approach.

It's a nice problem to have: enough money that you need to think about lessening estate taxes for heirs. And this is a good time to start estate planning, since the interest rates the government sets for one strategy, called installment sales, make it particularly attractive right now.

The strategy is called a sale, but it's more like a loan.

It lets you temporarily transfer, or "sell," an asset to an heir. The asset could be cash, real estate, or a share in a family business, among other things. As long as the heir signs a promissory note, eventually returns the asset, and pays you a government-set interest rate—3.2% in June for three- to nine-year notes—they can keep what they've earned on the asset above that rate.

That benefits both you and your heirs, says Holly Isdale, managing director at Lehman Brothers (LEH). Since the appreciation on the asset above 3.2% goes to the heir, rather than into the estate, it lessens potential estate tax and lets the heir benefit from the wealth now.

What's key to the deal—aside from smart investing and, with real estate, asset valuations that may be low today—is the 3.2% rate, known as the Applicable Federal Rate. The AFR changes monthly but applies to the life of a note and is based on the one-month average of a basket of short-, medium-, or long-term Treasuries. June's rate of 3.2% for mid-term notes, while low, is up from May's 2.74%, the lowest rate since July, 2003. For notes of less than three years, the current rate is 2.08%. [More]

Of course, we would not be expecting the machinery, etc. to be returned, but for the loan to be paid off. I knew there was an official lowest rate allowable, but this helped me understand how it could be used.

Even as we struggle with production problems, our assets are increasing in value. And 2010 - which looked so far away a few years ago - is bearing down on us. Solid predictions on what the politics of estate taxes will look like then are not widely available. This one sounds very appealing:

The estate-tax repeal could find new life in an election-year compromise between a Republican in a Democratic state and a Democrat in a Republican state.

Republican Senator Jon Kyl of Arizona has been talking with Montana Democrat Senator Max Baucus. Baucus is the top Democrat on the Senate Finance Committee. New York Democrat Senator Charles Schumer is taking part in the talks, as well. Aides say that a deal should be reached in the next couple of days.

The senators are working on legislation that would exempt all taxpayers, except the very wealthy, from paying taxes on their estates. This could exempt estates up to $10 million. The senators are also discussing lowering the tax rates that individuals pay on the value of their estates when they die. [More]

We could be facing a pretty serious wealth transfer problem without some action, and a bi-partisan approach offers some glimmer of a solution.

Or an enormously lucrative estate planner's full employment future.

This, too, is your mind on drugs...

A week later, the little white pills arrived in the post. I sat down and took one 200mg tablet with a glass of water. It didn’t seem odd: for years, I took an anti-depressant. Then I pottered about the flat for an hour, listening to music and tidying up, before sitting down on the settee. I picked up a book about quantum physics and super-string theory I have been meaning to read for ages, for a column I’m thinking of writing. It had been hanging over me, daring me to read it. Five hours later, I realised I had hit the last page. I looked up. It was getting dark outside. I was hungry. I hadn’t noticed anything, except the words I was reading, and they came in cool, clear passages; I didn’t stop or stumble once. [More of a fascinating account]

By now, or especially if you read the entire article, you may be upset, horrified, or any of a number of unimagined reactions. My own surprised me.

I'd consider it.

Really. This sixty-year old farmer who has never (unlike seemingly every other Boomer) even tried pot, let alone more uptown drugs, finds Provigil to be a different breed of moral issue altogether. I can only imagine then how likely its prevalence is on campuses and trading floors and cubicles. And battlefields.

Provigil is a drug that keeps you awake. It has legitimate medical uses and is used for performance enhancement by the military for pilots and soldiers in combat situations. Provigil enhances short-term memory and lets users stay awake for extended periods. [More]

Now you may start to see some of the conflict pharmaceuticals like this will cause for certain people. I think it is safe to say there is considerable overlap between those who support military action as a matter of duty regardless of the wisdom, and those who abhor drug use. Meanwhile, Uncle Sam is passing out pills to keep soldiers alert and alive.

Unlike the mixed emotions of the excitement of a steroid-enhanced home-run battle between equally pumped up sluggers, Provigil seems to carry very few side-effects and long term dangers. Meanwhile, as ex-wrestlers and football players deflate and die young, that particular bargain looks pretty Faustian.

Now throw in the number of Ambien users who deploy the chemical to make long flights something other than 6 hours wasted. The first time a friend offered me one on a flight, he told me the company nurse made them available for all the employees traveling to and from overseas locations. I passed, although the conversation creeped me out. These were not your typical drug abusers.

It is estimated that 90% of Provigil use is "off label." And as the "most tempting drug to some along in decades", I can see why. We are entering a whole new arena of lifestyle drugs, and of all the lures, the ability to concentrate may be the most powerful. Creativity as a rule declines with age, and recapturing (or even surpassing) your former abilities by enhancing concentration doesn't seem all that wrong. [I can only hope the prescription is impossible to get and expensive, engaging my economic outrage at drug companies to prevent the experiment.]

If my cohorts can use drugs to keep their cholesterol and blood pressure down to allow them to continue to produce on the job, would aiding my mind to put words together and stay on track be so much different? I honestly don't know. Now imagine there are no more adverse consequences than taking aspirin. We've seldom had choices this subtle before.

Still, the label is the law. Nonetheless, if this old fraidy-cat is mildly curious, I would guess millions may be actively experimenting. And I wouldn't be surprised if a few of those round-the-clock farm operators aren't taking a lesson from a returning family veteran.

Why I'm not skinny-dipping in our pool anymore...

The Feds have deployed some pretty invasive spy technology to track mary-joo-wana growers.

The SkySeer runs quietly and its tiny video camera can resolve whether a person is armed with a handgun from 250 feet in the air – high enough for the 4-foot-long craft to become invisible from the ground, according to its inventor, Sam De La Torres.

"You can really sneak up on people," said De La Torres, who works at Octatron, a Los Angeles County firm that specializes in military surveillance gear. [More]

Just keep looking up!

Count the spoons*...

I spoke today with a reader about the possibility of grain heists in farm country. But the ag boom is world-wide and so is the ag crime boom.

An international criminal gang is believed to be behind the theft of £3 million ($A6.69 million) worth of tractors, diggers, trailers and quad bikes a year.

Police believe thieves have routinely been stealing two vehicles a night from either farms or dealerships, The Times reported.

They then wait a few days before breaking into a different dealership where they steal identification documents and electronic vehicle management boxes, or "black boxes", from similar but unsold vehicles.

In one case a John Deere 6920 tractor and telescopic handler, which works in a similar way to a forklift, worth £115,000 ($A256,639.14) were stolen from a farm in Leicestershire.

Both vehicles were given new identification numbers and electronic boxes stolen from another dealership.

They were then shipped to Sydney and Rotterdam in the Netherlands, with the proceeds split between criminals in Australia and Britain, the newspaper said. [More]

It's strange actually having stuff other people want for a change.

*I guess this reference is a little obscure.

Gaming the farm program: In the beginning....

As negotiators work to make payment rules we sneaky farmers can't (with ample professional help) subvert, we could be simply echoing ancient rituals from very, very early "farm programs".

Shmita (Hebrew: שמיטה, literally "release"), also called the Sabbatical Year, is the seventh year of the seven-year agricultural cycle mandated by the Torah for the Land of Israel.

During Shmita, the land is left to lay fallow and all agricultural activity—including plowing, planting, pruning and harvesting—is forbidden by Torah law. Other cultivation techniques—such as watering, fertilizing, weeding, spraying, trimming and mowing—may be performed as a preventative measure only, not to improve the growth of trees or plants. Additionally, any fruits which grow of their own accord are deemed hefker (ownerless) and may be picked by anyone. A variety of laws also apply to the sale, consumption and disposal of Shmita produce.

A second aspect of Shmita concerns debts and loans. When the Shmita year starts, personal debts are considered nullified and forgiven.

The Book of Leviticus promises bountiful harvests to those who observe the shmita and makes observance a test of religious faith.

The rabbis of the Talmud and later times interpreted the Shmita laws in various ways to ease the burden they created for farmers and the agricultural industry. The Heter Mechirah (leniency of sale), developed for the Shmita year of 1888-1889, permitted Jewish farmers to sell their land to non-Jews so that they could continue to work the land as usual during Shmita. This temporary solution to the impoverishment of the Jewish settlement in those days was later adopted by the Chief Rabbinate of Israel as a permanent edict, generating ongoing controversy between Zionist and Hareidi leaders to this day.[1]

The current Shmita year began on Rosh Hashanah of the Hebrew year 5768, and extends until 29 Elul 5768 (September 13, 2007-September 29, 2008). (However, fruits which are harvested in the spring and summer of 2008 must be treated as Shmita produce well into the first year of the new agricultural cycle.) [More]

Seemingly arbitrary rules deigned for religious or (in our case, political reasons with economic pretensions) are tough to enforce at the lowest level. The belief in enforcement without full buy-in by the people involved is, I think, proving to be ill-founded. Despite setbacks here and abroad individual freedom and empowerment are on the rise, and both the size of populations and technology (abetted by no small amount of truculence) has made the threat of punishment pretty laughable.

Shmita occurs every seventh year, as a kind of sabbatical for the land, and it is mandated in the Torah. In Exodus 23:10-11, for instance, shmita precedes the injunction for individuals to rest on the seventh day. “Six years you shall sow your land and gather in its produce, but the seventh year you shall let it rest and lie fallow, that the poor of your people may eat; and what they leave, the beasts of the field may eat. In like manner you shall do with your vineyard and your olive grove.”

That presumably worked fine in a primitive economy before decent fertilizer, but shmita presented problems for the new Jewish state. Zionism was founded on the notion of a return to the land, but a modern country cannot live on what falls to the ground.

So respected rabbis from both the Ashkenazic and the Sephardic communities compromised. Charged with interpreting religious law, or halacha, they devised the “heter mechira,” or sale permit, which allows Jews to temporarily “sell” their land to non-Jews for the shmita year, so the land may be cultivated.

It is similar to the practice during Passover, when lawyers do a big business “selling” leavened products to non-Jews, so they need not be discarded.

In largely Arab East Jerusalem, the manager of Jafar’s Super Market and Sweets describes shmita this way: “It’s all about fooling the man upstairs.”[More]

I have written about the hypocrisy of soon-to-be-meaningless refuge rules and as I suspected, farmers are already validating the illogic with their planters.

The principle lesson here (IMHO) is that few laws work well all of the time. Which is why we need fewer laws.

Word of the day: champerty...

One thing we know how to do here in the US of A is litigation. Populated with lawyers over (over 4 times as many as industrial farmers) these hard-working citizens need stuff to do, but the economics of long delays in the courts often cause litigants to do the wrong thing and settle.

Meanwhile, venture capitalists need places to invest billions and earn juicy returns now that the CDO market seems to have vaporized. Enter good ol' American/English entrepreneurship.

Profiting from other people's lawsuits, a practice known as champerty, is illegal in some jurisdictions and risks accusations of ambulance-chasing, but Juridica is concentrating on backing business plaintiffs, where the practice is better established and more accepted.

Some well-known investors, including Invesco Perpetual and Jupiter, are backing the company and Cenkos is the nominated adviser.

Pursuing legal claims can be frighteningly expensive. Plaintiffs have to commit management time and cash years into the future with no certainty of success. Getting an outside investor to share some of the financial pain can be very attractive. So can tapping their litigation experience. While most large companies are well resourced with in-house lawyers, few have litigation experience. [More]

While this could be just a curious legal footnote, it could also seep into lawsuits farmers have more investment in - such as environmental litigation against large targets like agribusinesses or government. Or anti-development suits. Cost has always been significant deterrent to plaintiffs as cases drag on regardless of outcome probabilities.

[via h&r; MR]

Mortgage is not a four-letter word...

After struggling to settle four estates, and living to tell the story, I could curl your hair with exasperating tales of our legal property system. For farmland, getting descriptions and easements and liens and yadda yadda just so to suit lawyers can drive a man to drink. Or at least encourage him to have another.

But without this administrative headache we would be just like, well, Chinese farmers.

A critical determinant of China's long-term economic growth and social stability will be whether the wealth of its economic boom can reach the majority of its 700 million farmers, who make up approximately 56 percent of the total population. The benefits that the rural population has received from the economic reforms of the past two and a half decades, while significant, were largely achieved in the 1980s, and now the countryside lags badly behind the urban sector. A survey we conducted in 17 provinces, among 1,962 farmers and other respondents, confirms one fundamental cause of the widening rural-urban income gap: most Chinese farmers still lack secure and marketable land rights that would allow them to make long-term investments in land, decisively improve productivity, and accumulate wealth.

Farmers in China face multiple threats to their land rights from local government and village officials. The most prominent threat is land expropriation or acquisition through eminent domain to satisfy demands of industrial growth or urban expansion. Despite a series of central laws and policies, in practice, farmers who lose their land typically receive little or no compensation. Closely related as another source of insecurity of land rights is the persistent "readjustment" or "reallocation" of farmers' landholdings that is administratively conducted by village officials. Today, such land-related problems are the number one cause for rural grievances and unrest in China, which reported 17,900 cases of "massive rural incidents" of farmers' protests in the first nine months of 2006.

China adopted a Property Law in March 2007 that aims to strengthen the security of farmers' land rights, and the next key step will be full implementation of the law. We calculate that securing rural land rights would bring more than half a trillion dollars of value to farmers. Implementing the property law requires major institutional and legal measures on several fronts that China must tackle in the immediate future. [More]

As Hernando de Soto compellingly argued in The Mystery of Capital, being able to prove you own something may be the single most powerful economic tool. It's also one of the easiest to take for granted.

One of the keys to the success of world agriculture is extending this power to all farmers. Nothing would guarantee the food supply for the world more rapidly than this basic freedom.

Really bad timing...

I have been posting about the animal rights movement and its possible impact on livestock production in the US. We have also been reporting on the ongoing pet-food contamination uproar (see this week's USFR).

What if the two issues began to overlap?

If you think of dogs and cats as members of the family, you might figure you could collect damages for pain and suffering if they were to die because of wrongdoing.

The law in California and many other states sees things differently. Pets are treated as personal property, like cars and computers.

But that could be changing, as contaminated pet food is believed to be responsible for the deaths of dozens of dogs and cats nationwide.

"You'll see a lot of pressure on legislators to remove liability barriers, to not see these animals as property but as entities like humans," said Jon Katz, the author of several books on the changing relationship between dogs and people. [More]

Once companion animals achieve "family" status, it could conceivably raise all animals' legal position, just by comparison. Not necessarily to companion status, but some vague slightly less non-human category. I don't want to seem Cassandra-like, but if we see hundreds of thousands of lawsuits over the pet food, those attorneys won't have to look far for their next targets.

To date, we have somehow managed to differentiate between companion animals and food animals.

The twentieth century has most certainly borne witness to the exploitation of animal resources upon a scale far grander than ever before. The most striking development - as animal rights activists are keen to point out - is the way in which the cleft between ourselves and agricultural animals has grown as these animals have been increasingly accorded the status of `machines', through the development of the intensive farming methods deemed necessary to meet ever-growing human food demands. Yet whilst the divide between ourselves and food-producing animals has continued to expand, our identification with and dependence upon the smaller, more cuddly species that we keep as pets has also grown. We increasingly keep pets to satisfy our emotional, rather than material, needs and seem to gain tactile comfort and trust from them which might not be found elsewhere in our modern lives. This development has led the birth of small animal medicine and the pet food industry, both of which have done increasingly booming business since 1945. However, even the seemingly innocuous family pet that lurks in our homes, gardens and public parks can be potentially detrimental to our health. For example, pet animal excrement is not only an environmental nuisance, but can also harbour unpleasant infections, such as toxoplasmosis and toxocara, which can seriously threaten human health. Pets can also expose people to a variety of bacterial infections and cause severe allergies. Rigorous animal management and veterinary controls greatly minimise the risks that pet animals pose to human health. Yet again providing evidence of the efficacy of the modern veterinary regime in reducing the potential risks posed by our intimacy with and exploitation of other species. [More]

I'm not sure that separation can persist. And this further convinces me that petting zoos are a really, really, bad idea for animal agriculture.

It may also be useful to speculate where this greater attachment to animals arises. Is it because we have fewer children? More money? A new perspective on how religion applies? An all-living-things-together attitude? A response to the trauma of our lives? A lack of human contact?

My uneasy guess: All of the above.

We're not the only farmers doing well...unfortunately...

Say what you will about the old Taliban, but those guys ran a tight drug ship. Oh sure they oppressed the heck out of women especially, and the population in general, but they really put the clamps on the opium trade.

Our record is somewhat less effective...

But the most mind-boggling datapoint to me is a 2006 World Bank estimate that opium production in Afghanistan now accounts for at least one-third of the country's GDP.

Hardly a surprise that we've failed to locate bin Laden. Hell, we apparently can't even find almost half a million acres of opium. [More]

The popularity of harsh authoritarianism in lawless countries is hardly surprising. People who feel threatened sometimes feel the trade off of freedom for safety is worth it. Something similar may be happening under our noses.

“Wait a minute,” Specter interjected. “The Constitution says you can’t take it away except in case of rebellion or invasion. Doesn’t that mean you have the right of habeas corpus unless there’s a rebellion or invasion?”

Gonzales continued, “The Constitution doesn’t say every individual in the United States or citizen is hereby granted or assured the right of habeas corpus. It doesn’t say that. It simply says the right shall not be suspended” except in cases of rebellion or invasion. [More of a very scary interview with your Attorney General and mine]

When any American loses a basic right, we all do.