Tuesday, December 11, 2007

It's all about land...

At the recent Illinois Farm Bureau (or improbably, IAA) Annual Meeting the University of Illinois and its management of farms which have been bequeathed to the school riled up the members yet again.

As the University Trustees have shifted farms to competitive rents the outcry has crescendoed. These quotes from friends of mine are especially telling (via IFB FarmWeek - but not yet posted on their website.)
  • Jim Reed, Piatt County Farm Bureau delegate, pointed out local agribusinesses and communities suffer when large scale farmers who don't live in the community rent university land. "As for rural development, this [competitive bidding] procedure is devastating.," Reed said. "They economic downfall should definitely make people reconsider what they donate to the university"
  • "The gift of land to the University (of Illinois) is a long term investment, "said Terry Ferguson, DeWitt County Farm Bureau delegate. "We need to have full consideration of how that asset will be handled long term."
These are widely shared sentiments, but curiously unrealistic. One reason is few farmers really understand how important agriculture is (or more to the point, is not) their own county. As I have blogged before, producers should look at some rural income numbers to understand where they fit in the local economic scheme.
For example, in Piatt County (IL) here are some numbers for 2004* ($M):
Non-Farm Income (earned in Piatt Co)** 147
Farm Income 22
Transfer Payments (SS, Fed pensions, Medicaid) 72
Government (all levels) 34

* I used 2004 because farm income was negative in 2005 (the latest available)
** Like many rural counties Piatt has an enormous amount of income earned by residents outside the county as well: $243M in this case. Much of this may be from UI employees. Talk about biting the hand that feeds...
Given this data, I don't find any reason to support the idea renting to someone outside Piatt County would "devastate" the county. Furthermore, I would bet some Piatt County farmers farm in other counties. Is Jim suggesting residence requirements for renters?

Besides, all those acres are getting seed, fertilizer, etc. Hence some locality is enjoying an upsurge because their LSF (large scale farmer) is being successful. It would appear the better strategy is to make sure your community raises as many of its own LSF's as possible, if keeping your fertilizer, LP, fuel, etc. retailers vibrant is your highest goal.

Regardless, like virtually all rural counties, Piatt County economics are about old people, government and services - not agriculture. One of the true disservices of IFB is the reluctance of their economists to share real economic numbers with members.

OK, secondly, Terry confuses me as to whom the land has been given. Obviously the UI Trustees are under the impression that a deed in their name means they get to exercise the rights of ownership - not the delegate body of the IAA. I tend to agree with them.

It will be interesting to watch the IAA manage land that has been bequeathed to them. I would also love to hear the attorney who advises them on the responsibilities of trusteeship.
I also wonder if the IAA support of farm subsidies might be their larger problem. I am sure the U of I folks aren't crazy about seeing themselves prominently listed in the EWG subsidy database. Cash rents are the obvious answer to this public relations embarrassment.

I can understand people not liking the brutal competitive environment we now find ourselves in. Nonetheless, I cannot support special rules for a privileged few. And neither do legal property rights.

One farmer I discussed this with reasoned if they weren't going to manage it "right", the UI should sell the ground. This would be the ideal solution IMHO, but often prohibited by the bequest. But it is amazing how many of us want to run the farm after we're - umm, part of the farm.

Similarly, many renters seem determined to find ways to "domesticate" their landowners by rules and regulations that prevent landlords pursuing the their own goals.

[Update: In another conversation with a comrade here, he pointed out the UI trustees should be bound to follow the advice of their own ag economists who are pushing for widespread adoption of variable cash rents to allocate risk and reward "fairly" between owner and operator.

That's one way of looking at the dichotomy between the trustees and the profs. Another is the academics are out of touch with the motives and ownership philosophy of a significant number of landowners.]

Yet more reasons why farmers need to take even enormous risks to own as much of this primary resource as possible.

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