Monday, November 12, 2007

You call that big?...

The injection of enormous new profits into agriculture should be the answer to the survival of small farms, right? I'm not so sure.

We're just beginning to grasp that the economies of scale for industrial ag are over the horizon. From new module-building cotton pickers, to Class MMDXVL combines, fewer actual people are needed to reap those higher profits.

While smaller agrarian farms will flourish, the middle cannot hold, I believe. It cannot occur overnight, because of land ownership patterns, but the trend to consolidation is immune to government policy. The economics are simply too powerful to tolerate irrational business models.

Proof #16 - This announcement from EU dairy giant Danone:
Danone is mulling the creation of several giant dairy farms around the world in order to secure supplies amid rising milk prices.

The farms could be similar to that run by Al Safi, its partner in Saudi Arabia.

Al Safi runs reputedly the biggest dairy farm in the world, situated 40 kms from Riyadh with a herd of 32,000 cows imported from Europe and the US. Danone uses milk from the farm to produce yogurts. [Via the always excellent, but gated]
I will be in Las Vegas this week talking to the top of our dairy industry at the Elite Producers Conference. Those guys can teach the grain industry a few things, I'll bet.

I'll let you know what they are thinking about the next decade.

Update: Check out the new dairy-focused blog by Chris Galen. (He's a newbie, so I'll let the "udder" pun pass this time.)

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