Friday, September 12, 2014

Intensive Agriculture

I was asked by John G Kent ( @kent_johng ) why intensive agriculture is so bad?  Isn't there an economy of scale?

Big Ag. entices farmers to join the intensive farming band wagon.  A really big tractor is $300,000 or more.  How can a farmer afford such a monster machine?  Add in a combine and a few big implements are your talking big money that depreciates quickly.  Once you start down this road, to keep up, you need to re-invest every year in the lastest "must have" gadget.  There is no end.

I have previously Blogged about the huge debt being carried by farmers, primarily by Farm Credit Canada ("FCC") but also all the major banks and Credit Unions too (see Frighening Farm Finances and FCC: The Farm Debt Trafficker and FCC: A Plot to Kill Supply Management? ).

The documentary Food Inc. tells the story of one chicken farmer who got onto Big Ag's debt treadmill and eventually lost her farm (see Blog posting Chicken Factory.

We now have the lowest interest rates in hundreds of years.  Europe has now implemented negative interest rates, then came back and made them even more negative in the last month.  What's the probability that interest rates will keep dropping more and more?  All sane persons are getting themselves ready for rising interest rates.  FCC specializes today in FLOC's (Farm Line Of Credit), so that farmers only have to pay the interest on their loans (ie. they can postpone repaying the capital "forever", until FCC suddenly changes their mind, and demands repayment of capital, starting next month).  When farmers are up to their eyeballs in debt, barely able to pay just the interest, what will happen when they suddenly have a problem, or FCC suddenly wants repayment of the capital?

Ooops!  There goes the farm, just like in the 1930's and again in the 1980's, thousands of bankrupt farms.

Debt is risky.  Very risky.

That isn't enough.  All that capital requires energy.  If you haven't noticed, energy is pretty expensive today.  As Peak Oil continues to affect the world, and Shale Gas & Oil is exposed as another Wall St. scam rather than the source of energy independence that it is currently sold as, energy will get more and more expensive and unaffordable.  What happens to that $300,000 monster tractor when you have trouble affording to fill it up with diesel fuel?

Chemical fertilizers are made from natural gas for the most part.  Shale gas and the 2007 recession helped drop natural gas prices to rock bottom.  Again, what's the chance that natural gas is going to get more expensive in the near future, especially as Shale Gas wells rapidly deplete over the first 5 years of their life, unlike traditional gas wells that produce for many decades?  As natural gas prices go up in the near future, so will the cost of chemical fertilizers.

Some fertilizers like phosphate and potash are mined.  Mining is very energy intensive as well.  Just like Peak Oil, there is a growing awareness of Peak Mining.  Those mined "essential" minerals for intense agriculture are going to get more and more expensive, so the crops produced via that intense farming method will get less and less affordable.

Is energy really that big of an effect on the price of food?  Look here:

The data is from the United Nations FAO (Food & Agriculture Organization).  It appears that the red curve (North Sea Brent Crude prices) can be used to predict the FAO Food Price Index.  Do you see the correlation?

Pollan says that the energy for intense farming that is needed to put food onto grocery store shelves is now 10 times greater than the energy that is in the food on the shelves.  For the first time in human history, our food supply system operates at a significant energy deficit.

That is the Intense Agriculture effect.

Intense Agriculture causes unaffordable food.

Intense Agriculture skims off huge profits for the trans-national Big Ag mega corporations.

Intense Agriculture is not sustainable.

Recently there was a snowstorm in Calgary.  One farmer who had 16" of snow dumped onto his fields was working night and day to save his crop before the snow hit.  He got 10% of his crops off the fields, while 90% is still suffering under the snow.  His neighbours were likely suffering the same fate, so they couldn't come to help him.  That's the danger when you are responsible for  4,000 acres.  As long as everything is predictable and goes according to plan, you can manage.  If something unexpected or outside your control happens (eg. weather or PEDv virus for pigs), you will have a total disaster.  The government will have to insure or bail out the intense farmers when disaster strikes, or risk losing the country's food supplies.  Intense agriculture is high risk.  When things go well, the intense ag. farmer makes a very handsome profit.  When things go bad, the citizens get stuck with the bill (ie. high moral hazard).

I could go on, but I think you get the point.

The alleged benefit of "economy of scale" is only so big, and only works to a certain size.  Unlike Big Ag.'s alleged economy of scale, continuous improvement ("CI") is more powerful, and repeatable over much longer time periods.  Humans have been at CI for 300,000 years.  Small Farming can, and does use CI.  Intense, Big Ag. can and somewhat does use CI, but it's hard work, so they would rather spread more chemical fertilizer, buy the newest pesticide or GMO invention, or borrow money and buy the neighbour's farm, or buy some more machinery; rather than perfecting the small details, and reducing risk.

Bees understand that a colony can only grow so big.  The personal relations between society's members, or within families get strained the bigger you grow, and the more complex your operation.  The number of interactions grow exponentially, getting astronomical as you get bigger and bigger.  Many things grow exponentially, rather than linearly as you get bigger.

That's why once the hive grows so big, it splits into two smaller hives that go their separate ways.  Big Ag and intense farmers haven't yet learned that lesson.  

We are all at risk until they do.

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