Financing Farming in The U.S.(PDF)
INTRODUCTION
A member of our network asked me to read and comment on a new study, “Financing Farming in the U.S.: Opportunities To Improve the Financial and Business Environment for Small and Midsized Farms Through Strategic Financing.” The report was sent to her by Slow Money.
The report was funded by the W.K. Kellogg Foundation Food and Community Program and was written by Susan Cocciarelli of the C. S. Mott Group for Sustainable Systems at Michigan State University, Dorothy Suput at The Carrot Project and Ray Boshara of New America Foundation.
The report is arguably the most misinformed document I have yet read on the subject of financing food and farming.
I have been quite encouraged by Slow Money’s focus on attracting private capital to build local fresh food enterprises.
Attracting venture capital to profitably preserve rich farmland and to provide fresh food is of great importance. This is one of the reasons that I have promoted Slow Money’s website and effort on this blog.
Dismayed by the possibility that Slow Money might share or promote the recommendations, I am posting some thoughts on the study and the issues that need to be considered for a successful transformation of our local and fresh food systems.
CAPITAL VS PROFITS: THE NEEDS FOR A SOUND BUSINESS MODEL
Attracting private capital is relatively easy for a business that has a sound business model, qualified governance and management, a growing market, is generating profits and has a reasonable expectation of future profits.
Hence, if a company or industry is having trouble attracting capital, the problem is typically not on the capital side. The problem is on the profit generating side and related risks.
Rather than attracting subsidized capital to finance a model that is not working, why not investigate why the model is not working, and change the model?
WHY ARE SMALL FARMS NOT PROFITABLE?
Why are small farms not profitable?
I would argue that the primary reason relates to governmental policies with respect to both agriculture and finance that make it almost impossible for a significant number of small farms to grow and maintain a successful business model.
In the words of farmer Joel Salatin:
Everything I Want To Do Is Illegal: War Stories From the Local Food Front
As Farmer Salatin indicates, there is a war going on and the farmer is right in the middle of the battlefield.
ENGINEERING THE CENTRALIZATION OF AGRICULTURE
Our global and national leadership are centralizing control of our seed, water and food supply by engineering trade rules, laws, regulations and subsidies, which promote genetically modified food (GMO) and ensure the industrialization of agriculture through large corporations.
One of the best descriptions I have ever seen of this process of centralizing control of agriculture is Sir James Goldsmith’s interview with Charlie Rose on the implementation of GATT and the creation of the WTO:
Sir James Goldsmith’s 1994 Globalization Warning
For some of the best quotes on agriculture from this presentation, see: Sir James Goldsmith on Corporate Agriculture.
In addition, government funding of agriculture is designed to support this centralization, even though the results are not economic for taxpayers. For example, while over 20% of the population in Tennessee is on food stamps and almost as many are unemployed and receiving welfare, unemployment compensation or some other form of government subsidy, more than a billion dollars goes to buy food grown primarily out of state and more to pay people not to work while local farm land lies fallow and food stamp servicing jobs are outsourced to India.
Global spraying programs are proceeding globally, which are adding increasing quantities of heavy metals into our air, water, soil and food. (See A Solari Report Special with Clifford Carnicom.) This type of environmental pollution can only proceed with very significant support and funding at the top of the financial and governmental systems. Combined with wind-blown migration of genetically modified seeds and other forms of environmental pollution caused by government policies (such as lax regulation of offshore drilling and oil transport), it leaves fresh food farmers (and fisherman) in an expensive pickle as to how they are supposed to maintain integrity of their land, water and harvest.
Federal government policies promote a food supply that is not healthy, including the food funded by government programs to be eaten by children in schools and other institutional settings. One of the best documentaries on this topic is available on the Internet:
Also recommended are the videos at Jeffrey Smith’s website Seeds of Deception, The combined agenda of the US federal government and a handful of agribusiness corporations regarding food and health are well documented and clear. There is a great deal more documentation on these trends.
Finally, global leadership is managing the financial system to centralize capital and significantly subsidize corporate cost of capital relative to small players. At the heart of this centralization of capital is the non-transparency of government funding supporting and intervention in the financial system and significant invasion of personal privacy.
Yet, the Kellogg reports does not conclude that farmers’ success depends on efforts to role back or change these and other rules, policies, and actions that have resulted in a small farm economic model that is unprofitable. It does not promote real solutions, such as the Farm-to-Consumer Legal Defense Fund. It does not suggest solutions for farmers who find themselves physically harassed by private good squads if they do not use GMO seed and cannot look to federal law enforcement to protect them. Rather, they can look to federal courts to make things worse for them. There is no understanding of the issues of economic warfare so brilliantly described by Franklin Sanders on Revitalizing Local Economies.
STUDY RECOMMENDATIONS
Rather than address what we need the government to stop doing, the study recommends that farmers seek capital with the assistance and involvement of federal agencies and credit programs. This is financing that will involve farmers in highly complex transactions that will give federal agencies, auditors and enforcement agencies increased powers over them and their operations.
This is not to say that it will not produce a few token efforts and some nice photo ops. It will. Just like recent photo ops of the organic garden at the White House, while a farmer in my county tells me they have been ordered to take rotten soybeans into the elevators for mixing with the good soybeans because federal crop insurance refuses to make good on their insurance policies, presumably to save money.
How is it that a food safety bill will help food safety in this kind of environment? It will not. Rather it will be more rules to control and drive more small farmers out of business, while the government and agribusiness are free to comply selectively.
GOOD DEEDS AS A STEAM VALVE THAT PROTECTS CENTRALIZATION
If the government is promoting the industrialization of agriculture in the US and globally, why would they spend time and money “helping” small farmers. Indeed, if you count up all the time and money spent by USDA, the state extension services and the agriculture efforts of the state universities, and add to that the private foundations, I dare say there are more people helping small farmers than there are small farmers. Indeed, there is an astonishing amount of money financing the study and helping of small farmers, compared to the equity capital available to small farmers.
These efforts are a steam valve. They channel the good hearted people who want healthy food into financial dependency on the people and systems industrializing agriculture. They keep them busy in token efforts in a manner that keeps the main train tracks free to continue to complete corporate control of our seed and food supply.
When I was Assistant Secretary of Housing in the first Bush Administration, I ran into the head of property disposition at the Resolution Trust Corporation, who was overseeing billions of property taken over from the savings and loan industry. For several weeks he had been pounded in the media by housing activists. The week before, the criticism had suddenly stopped. I asked him what had happened. He laughed and said he had thrown them a couple of technical assistance contracts. For $25,000 each, they were no longer a problem. He laughed, amazed at how little it cost in terms of grant money to keep them satisfied.
On the private side, here is a good video on the truth behind foundations efforts:
Continue reading the article . . .
I strongly recommend Naomi Klein’s book Shock Doctrine, including the description of the Ford Foundation in Latin America, to understand their role in channeling activist and citizen concern.
Getting grants and subsidized capital simply provides cash to keep an unsustainable model going. We need to create financially sustainable farms and local food systems. Grants and subsidized capital cannot do that. Changing the rules so that existing farmers can quickly become profitable can do that. And that will attract human and financial capital. Changing the allocation of government credit and subsidies to optimize return on investment to taxpayers can also help do that and will result in far more purchases from local farmers. Finally, bringing transparency to a wide variety of economic and political phenomenon that can result in a healthier culture and economy is also an important part of a transformation.
THE ROLE OF PRECIOUS METALS
One of the greatest challenges in building a healthy economic model for small farmers or small business is the issuance and circulation of sound currency.
All enterprises and households are experiencing significant debasement in the value of our currency. Those who stayed in the dollar have lost extraordinary purchasing power and have by continuing to hold paper, have financed those who centralizing in acquiring a lot more cheap, furthering their centralization. The cost to American households and communities of this paper drain has been devastating:
Positioning Your Assets
Positioning Your Assets: Is Your Community Waving Goodbye to $3.3 Billion?
As an alternative, enjoy a community that has avoided some of this pain by using gold and silver:
If we want fresh food and food freedom, we also need to grapple with how local communities can protect themselves from the financial drain of using a currency that is engineering inflation at the expense of communities globally.
GOOD PEOPLE EVERYWHERE
I agree with the statement that there are good people everywhere.
Indeed, the folks who are centralizing the system delight in spending large amounts of money hiring good-hearted people to work in systems that have centralization as their intention. Those good-hearted people may work in a niche and not see the overall goal. Or they may work in the token efforts designed to channel, fund and keep busy those who are slowly dying on the vine.
I believe those of us who embrace goals of freedom and responsibility, need to step back and say, what is the most effective use of our time and money in the service of creating new and transformative world, starting with a healthy and free seed and food supply?
If we do, we will find that there are many things that we can do both individually and collectively. If enough of us do them, we can achieve real breakthrough results. Although the list of things we can do is long, it does not include the recommendations in “Financing Farming in the U.S.”
