The Business - Agriculture

FTLComm - Tisdale - Friday, April 19, 2002

For many years we have heard the lamentations that without the appropriate consideration by government family farms will become a thing of the past. The facts of the matter are that we are well into the post family farm era. Canadian and American agricultural policies are determined to keep the price of food low, but have no desire to maintain large, costly and often antigovernment voters living in rural communities. Times up!

Yesterday Kevin McIntyre
told us about the dramatic changes that have occurred in the economy but on the farm economy as margins have grown so thin that as he explained, there was little point in people attempting family farm operations.

Last week I began looking into the trend around Tisdale in farming and discovered some rude realities. When I asked some very knowledgeable authorities about the "careful" farmers I have seen to have kept their debt level low, operated their farm simply and using the best practices available, by keeping the acreage at that two to three section level, it was explained to me that this sort of farm was not making a living for its owner. When I asked about the number of farm wives who have other jobs and assist in supporting the farm, my source explained that most were getting low paying jobs and their heroic efforts were merely prolonging the agony of a nonprofit farm operation.

Over the years I had noticed that continuous low prices for production and continued increase of input costs was putting the farmer under a lot of pressure, now I realise that the small farms are now gone or going. The two and three section operations were just hanging on and dependent upon outside income and the break even farm is now over three thousand acres of cultivated land.

I discovered that what I thought were big farms, those operations with between four and five thousand acres of planted fields, were making money and earning a living for the owners.

What disturbed me was the plans by some farmers to begin operating a planted crop of 15,000 acres. To me this did not seem economically viable and that is what lead me to look into this issue and hence this story.

Keep in mind that this story is site, or location, relative so in other soil and field size conditions these factors will not apply. The same cost factors apply, but the solution will have to be different.

Last spring as the awareness that the farm economic crisis was really intense, I wrote a story suggesting that there was a solution and it involved farmers putting their resources and equipment together to form large enough economic entities to handle the cost of production, while faced with having to sell their products in the world market place, unassisted by government while the prices are depressed because of the involvement of foreign government in the agricultural industry.

It seems that I was not the only one to realise this solution, because the first large scale agricultural business has now taken shape in the Tisdale area with a father and son farm combining with a couple of neighbours and together they have assembled the 15,000 acre operation with leased, rented and their own land.
The question is how will such an operation work and why would it be economically viable? The size of tractors and field equipment has not changed as about 72 feet of cultivator is about the limit so what factor is pushing "bigness". To understand this, my source walked me through the farm process of today and on this page is all you need to farm. You develop the fixed assets, the bins and storage system, shops for the equipment and these machines are the basic units of agriculture.

There are approximately twenty days in the spring when the window is open to get the crop in the ground and another twenty days at the end of the growing season to harvest the crop. You match the seeding process with the harvesting process and the tractor and air seeder balance off against the combine. One big tractor, with a big air seeder and a big combine. Each of these units are close in value, around a quarter million a piece. These machines will each do about two hundred hours of work per year and you will need to trade them off judiciously before they need repair or replacement.

With continuous cropping and zero tillage the one factor that will have to be figured into the operation is the application of chemicals. To farm here you need to apply about thirteen dollars of chemical per acre.

Now as you look over this kind of farm operation you realise that this kind of farming depends on very very close management of the margin. Really small amounts of money per acre can make it profitable or a loss.

If you are doing the 3,000 to 4,500 acre operation, one tractor, one combine, one air seeder and a truck gets the job done. But you will have to depend upon custom spray operators to put the chemicals on and that will cost you $3.50 an acre for most, or $6.00 for aerial application.

Now here is where the big operation gets the advantage. With four tractors, four air seeders, and four combines you can use one or two trucks and a common infrastructure of storage and handling. But, you can utilise a high wheel sprayer like the commercial one shown at the top of the page. These machines are about the same cost as a tractor or combine but figure in the large acreage and that slim application cost becomes the factor that makes money.
No one is expecting the market to change, prices will remain relatively close to what they are now so the viability of agricultural business depends on cutting the production margin to produce a modest profit.

You will note that there is no talk here of value of rural life style, or working on the land and all the good things we know about, this is just cold economics and sadly that is what it has come down to.

As I listened and learned about this process, I pointed out that the elevator companies went through their huge process of destroying the wood elevators and going to the terminals so that they could reduce their cost input price by needing fewer workers, wouldn't this big agriculture system fail because of the need for farm labour?

My source smiled and said "Labour's nothing." In this equation of four million dollars in equipment and infrastructure the 1,200 hours to do the work at minimum, or even higher, wages is just such a small factor that it just doesn't make that much difference. With a horde of semi-retired, or landless skilled farmers now available, who have been forced from their land, they are a ready pool of skilled workers and their debts mostly met by the sale or rent of their land, means that they will work willingly for modest wages as that will do for them, providing them with between $2500 and $4,000 for the summer's work and they'll get by.

An average year with this style of agriculture will work, a bumper crop will be a nice touch and with a poor crop this large agribusiness will have the capital and credit to get by for a year. Economy of scale and so-long family farm.

Timothy W. Shire