Wednesday, January 20, 2016

New Transparenseed Link...


Not much response, but thanks to those who did.

Memories of a similar time...

I linked to an old Top Producer column from 2004 in my post on Accountable Ag. When checking the link, I read through it, and almost recaptured how I felt twelve years ago. For those of you who did not click through, here is how I saw the world then:

Left behind – and I’m not enraptured 

Being in the middle of groups has a naturally comforting feel. Looking at the ubiquitous newspaper pie charts indicating public sentiment on everything from trade issues to toilet paper, we often are relieved when others agree with our opinion. 
More frequently, however, I find myself tending to the margins – holding positions that are mildly out of the mainstream. On a few issues I seem to have wandered into the fringe. The manly response is to assert loudly that I don’t care about the opinions of the masses; that I am an independent thinker. This is nonsense, of course – we all care about what others think. This separation can occur not only when I adopt unpopular beliefs, but also when mass opinion shifts and I do not. In the realm of popular issues, I am less alarmed. I don’t watch enough TV to keep up with rapidly shifting controversies. Howard Dean came and went before I really had formed a judgment, for example. The situations that perplex me are not spelled out in polls but corporate decisions or organizational policy signals. 
For example, I have been a happy owner of a Case 2366 combine. It is the largest combine I have ever owned and its performance has been more than I hoped, not withstanding the unloading auger-power pole incident which I now admit was not a design flaw. Its capacity is more than enough for our 1350 acres. 
I was stunned to hear that CNH will not be continuing this machine size, only larger harvesters. To me it indicated I was no longer a target market for them. I do not fault their marketing, but all the charts and graphs about where farm size is going don’t begin to have the impact of discovering your operation is too small to be of interest to long-term suppliers. 
Nor am I whining about loyalty. I have to make reciprocal decisions to protect my own business viability as well. Nonetheless it is a sobering wakeup call to my self-serving view of the world to find that agriculture is moving on without me. 
A similar incident occurred at the AFBF (Farm Bureau) meeting recently. It has been a singular privilege to have been active in Farm Bureau at numerous levels, and I have many valued friends in the organization. I am fairly familiar with their policy from my days as a county president. One of these positions was a firm belief that free trade optimizes the outcome for all involved. 
This changed in 2004. The AFBF delegate body approved a blatantly protectionist stance on selected commodities. Although the vote was razor thin, the fact that any majority at all was assembled revealed to me how far from the pack I was. Of course this is just one issue, but added to other subtle shifts lately, I think we are “drifting apart”, to use modern relationship jargon. 
Nor is it a direction I wish to go to in order to stay in the group. Loyalty to core beliefs is often more important than loyalty to groups or individuals. Farm Bureau shrewdly makes it difficult to register my disapproval by binding insurance policies to membership. Finding a new insurance agent when I really like the one I have is another hurdle altogether. So as far as the membership statistics the outside world sees, I remain another happy Farm Bureau member satisfied with policy decisions. 
To be sure, I have the option of mounting a grass-roots campaign to reverse this decision, but frankly, I sense the weight of insurance customers moving in the opposite direction. My best use of time is probably to start pricing a new farm policy. Either way, I am obviously no longer in sync with much of my profession. 
The latest jolt though, was President Bush’s 2005 budget. My position on the political chart has always been in the conservative Republican camp. This is where I thought the guy I voted for was anchored as well. But if planning more tax cuts in the face of $500B deficits, erecting trade barriers for politically powerful industries, attacking sincere dissent as craven disloyalty are the beliefs of conservative Republicans today, then I must be something else. Maybe I’m a liberal…Republican. I’ve heard there may be as many as 6 or 7 of us. 
Now all these perceptions could simply be fusty middle-aged crankiness. Perhaps I am just not well-informed or smart enough to understand my principles are outdated. Regardless, my painfully-acquired intellectual tools and moral compass are all that I have to guide my decisions. CNH, Farm Bureau, and the Republican Party are going where my conscience or circumstances prohibit. I suspect they won’t miss me at all. 
Nevertheless, I shall miss them. 

It is important to note I was mistaken about CNH - I did not know they were simply rolling out Class V and VI combines after the big boys. But not knowing this put a different machine on our farm.

Given the continued and intensified rightward drift of FB and its domination by insurance votes from the south, it may be well past time for me to switch to another insurance company. (Nope - still haven't moved) For that matter, I could be paying way too much for farm insurance for all I know.

Finally, to admit to being even a liberal Republican after the last few weeks makes me queasy. This is the party I should be affiliated with? I don't think I'm angry enough to fit in, and my interest in policy and problem-solving fits poorly with a group fascinated by passion and pessimism. 

Heck, I'm probably embarrassing them!

Tuesday, January 19, 2016

What the heck is Beck's Seed doing?...

I am clearly out of the undergound ag rumor circuit, so I have only caught dibs and drabs of agribiz doings as I speak across the Midwest. And after a certain age, you distill most of those whispers down before acceptance.

But Chip Flory talked about a new Beck's incursion into Iowa recently on AgriTalk Free-For-All, and today I learned they bought a nearby former Syngenta seed processing facility in Paris, IL.  This is really good news for my area, but makes me wonder why Beck's seems to be charging ahead when other seed companies are seemingly cutting back.

I'm not offering answers - just soliciting input.

Did I miss a memo?

Monday, January 18, 2016

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):

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).

Wednesday, January 13, 2016

Accountable Ag...

The longer I watch the WOTUS hysteria roll on, the more convinced I am that farmers want nothing less than blanket immunity from pollution that occurs from their actions. In addition, we adamantly refuse to take any responsibility for anthropogenic climate change or even acknowledge that there are inherent production risks that should be coped with individually like other businesses do - insisting on heavily subsidized crop insurance and other economic guarantees we despise in other industries. We have become a fact-resistant echo-chamber that inhibits new ideas and supports an incredibly boring one-sided discussion of our future.

Our new motto as an industry: Nothing Is Our Fault. To be fair, this rather juvenile intransigence has worked pretty well, even as we brag about being the best farmers in the galaxy. But it is taking an increasing toll.

  • We are neutralizing the economic tools that select within our ranks the best-performing farmers. If we are shielded from dealing with the costs of lobbing economic externalities to the public purse via farm policy, we actually penalize producers who do work to minimize the effects of their actions on those around them - from noise to nitrates. We've all grumbled about or been run over by slash-and-burn competitors whose presence next to you impacts other producers, soil health, and community life quality, and yet at the same time railed against any effort to make the consequences of bad actions fall at the feet of the perpetrators. While I believe this will eventually be corrected, it will take decades and require heavy lifting to rebuild the resources we now abandon at the altar of personal freedom.  At the same time, we are enabling such operators to expand at our own expense.
  • Just like the Republican Party, we have made team loyalty the highest ethic. I had my epiphany in 2004, but this November may be a watershed moment for ag conservatives as they step into the voting booth. If parroting the party line  - or Trumpisms - takes precedence over moral judgment and economic rationality, we need to abandon, at least in our own minds, any pretense of principle. We believe in apparent short-term gain. Period. Worse still, from my perspective we are bad at calculating what that gain actually is.
  • Our insistence on being counted as victims is not simply a cognitive dissonance challenge as we strut about looking down at everyone who doesn't farm, it also prevents us from innovating answers to the real problems that we struggle with. Why work on soil erosion if nutrient runoff is really caused by climate change [which doesn't exist]? (I have had this argument seriously posed to me, BTW) But posing as hapless dupes or helpless pawns to avoid responsibility is an exhausting and humiliating deception that erodes our self-respect and ravages our heritage of self-reliance. Great-grandpa would be aghast.
Personally, I have been reluctant to put this train of thought into words. It is part of the reason I found blogging more a chore than before. It will only test the few friendships I cherish within the business. It seems high-handed and preachy, not to mention self-aggrandizing. So for these past few months I have assumed my simmering resentment against what I see as the hijacking of our professional ethics by right-wing know-nothings a temporary aberration of our history.

I still think that, but it has dawned on me as I listen to the the increasingly strident language of outraged entitlement in our industry, that those other times in history when we veered from the path of reason and compromise were not corrected solely by the passive passage of time, but by real people offering real resistance to something they believed wrong and harmful.

And like Obama, I don't have many f***s left to give. [Pardon the language but it strikes me as the most apt]

That said, it is not enough to simply find fault, or shout in anger. I'm a frickin' engineer/farmer - we try to fix things. So here is a different approach/mindset for our business that I think offers all of us a chance to regain our self-respect.

I call it Accountable Agriculture. Here is what it means.
  1. On my farm, it's my fault. All of it. My farm is my responsibility. Not USDA. Not Mother Nature. It is my job to manage the risks of weather, markets and economics of production. This is how I earn my living. Conversely, I claim no right to decree what rules are right for other farms and producers. 
  2. The impact of my actions shall be benign beyond the boundaries of my farm. If my spray drifts, you will get an apology for unprofessional performance and compensation to make you whole without anger or hassle. If my P & N pollutes your water, I will find an answer. Moreover, I will not support blanket absolution for our industry when we overreach into your property by irresponsible production practices.
  3. I have a duty to sustain not just fertile fields, but clean water and clear air. I use natural resources to produce and I take care of all those assets.
  4. I am equally indebted to those who walked this land before me and those who follow. For the extraordinary privilege of living this life, I deserve to be judged by my payments on those debts.
  5. My commitment to these principles is the same on every acre I tread, whether owned or rented. This level of performance is not without cost, so I will probably not be the absolute highest bidder for every field. This is a relatively cheap promise, since owners who demand the top dollar usually aren't worth the anxiety load. There has to be some "economy" in those "economies of scale".
  6. Regardless of how agriculture strives to offload the costs of accountability, we cannot escape them over the long haul economically or ethically. Accountable agriculture thinks in terms of decades and generations, not USDA fiscal years.
  7. I don't want to tell you my story. Accountable agriculture is measured by works, not words.
  8. I choose my policy and political positions by balancing what is fair not just for me but for the rest of America. I know farming is a tiny part of our population and economy, but like other tiny industries, we still matter, and so do they. I respect others who serve their professions with integrity and diligence - including government.
  9. My professional standards are informed by my faith, but not defined by religious dogma. Additionally, my position in our national and global culture does not grant me any relief from full accountability. I had no hand in being born white and middle-class, after all. 
  10. This is my path. You may have a better idea. I'd like to hear about it, and how it's working for you. Fair warning: I have no compunctions about stealing your best ideas if they make more sense than mine.
This post could fairly be seen as just another rant by a fringe wacko. No problem. It has been tremendously liberating to compose however, and I don't plan in inflicting it ad nauseum in the future.

Feel free to comment/criticize. I don't care to argue, however. Nobody changes their mind anymore.

Monday, January 11, 2016

Transparenseed 16 - still trying...

I'm struggling to keep promises. 

  • TV takes more time than I thought.
  • Twice weekly AgriTalk Free-For-Alls (Tues/Fri) 
  • Land purchase details
  • Close out old year and plan 2016
  • More speeches than I anticipated
  • Tweeting/following timeline (@jwphipps)
  • Trying to get back to Incoming
  • Transparenseed 16
  • Woodworking!
I changed Transparenseed to a public DropBox file you can check whenever you want. 

Please encourage others to send in info.  I'll be emailing past players.

Thanks for you help.

Is this what retirement is supposed to look like?