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Economic realities.

Economic realities….

The drive into the Quemado Valley on the road that heads north out of Eagle Pass, Texas offers a puzzling array of pastoral images. Snaking along the high bank of the Rio Grande River on a bluff about 200 feet above the water, the road winds for twenty miles through typical Texas desert scrub brush. The grassless, rocky land is dominated by thorny brush, consisting primarily of mesquite and huisache. One of the first scenes to appear as you descend into the valley is a series of beautiful green alfalfa fields. The lush fields extend for miles to the bluffs and small hills that ring this verdant river valley.

River valleys are very special places in agriculture. The Quemado Valley was formed over millions of years by the erosive action of flowing water against uplifted rock. The soil on our farm consists of a silt and loam mixture that was deposited by the periodic flooding of the adjacent river. Beneath our topsoil is a deep layer of gravel that allows any rain or irrigation water to quickly drain off. The combination of nutrient rich topsoil and excellent drainage creates the best possible growing environment for trees and vegetables.

Past the alfalfa fields, there is a very large cattle feeding operation. The availability of irrigation water from the Amistad Reservoir keeps the grass green, and the numerous cattle grazing on the ample feed always present a picture of good husbandry. We are grateful that we have a local feedlot, as it is a great source of manure for our pecan trees. The feedlot has been through a number of ownership changes through the years, reflecting the boom and bust economics of both cattle and grain prices. As a business enterprise, the feeding of cattle for weight gain operates on the thin margin between two dynamic commodity prices, and either a sinking cattle price or a rising grain price can quickly make the venture quite unprofitable.

Soon enough, the view gives way to the images that will haunt us for years to come. We find in front of us the abandoned pecan orchards that dot the Quemado Valley. Hulks of rotting trees stand like ghosts in long lines, slowly decaying from the top down. The grayish brown color of the broken limbs and trunks contrasts strongly with the vibrant green undergrowth and the blue sky. A dead tree takes many years to break down and decompose, and these orchards serve as a daily reminder to all that failure in agriculture is often closer than one thinks. Some of the trees have new growth from the base, as the rootstock sends out sucker branches and desperately tries to cling to life. Confronted by this picture, one is forced to contemplate why someone would grow trees to a mature, producing state, and then discontinue the care, including summer irrigation, that is necessary to sustain the life of the trees.

The answer to this question has many different components, but the main reason why these small orchards are in their current state is found in the economics of small scale agriculture in America today. Many years ago, local markets existed for the sale of food produced in a given region, and supplies, or agricultural inputs, were purchased from locally owned businesses. A pecan grower who produced a superior quality nut could expect to get a higher price in the local market for his crop. The market forces that determined the supply of food, such as weather and crop acreage planted, were known to the local grower, and he could react accordingly to further his economic advantage. When the grower needed supplies or a piece of equipment, there were any number of local merchants with whom he could negotiate an advantageous price. Fast forward to 2004, and we find a vastly different picture.

As one drives across a large state like Texas, through big cities and small, rural towns, it is easy to see who the “winners” are in the game of economic survival. There is a certain pattern of retail stores that is repeated endlessly along the roads that connect the populations. Typically, there is a big box retailer, a large food supermarket, and some combination of national specialty retailers supporting certain niche markets such as auto parts and electronics. Although the square footage of their retail stores may be different, all of these stores have one common trait: they are part of a national or even international chain of stores. The common thread that has allowed these businesses to continue to grow is that they are very efficient in how they purchase their goods, and this efficiency is defined in terms of the total transaction cost, with low price being a predominant factor. As these retailers grow, they need to have suppliers who can provide large quantities of goods to a majority of their stores. Dealing with a handful of large, integrated suppliers is much more cost efficient than dealing with a large number of small suppliers. It is this equation that has sadly left many family farms with only one option, that of selling their goods to brokers and middlemen, the grim reapers of the agricultural world.

It might seem as though these efficiencies in the retail food market would be duplicated in the farm equipment, seed and chemical businesses, and that the small farmer would be a beneficiary through competitive local prices in his yearly purchases. The reality is a far cry from this rosy scenario. By its very nature, farming is spread over vast areas of land, and there are few places where there are large concentrations of farmers. Many years ago, farm equipment dealers had stores or agents in every small town, and in fact there might be three or four different tractor dealerships in each farming community. The push towards maximum corporate efficiency over the last decade has lead to a process of eliminating the less profitable dealerships, and combining other dealers into larger units where possible. Decades of merger and acquisition activity in the farm equipment manufacturing business has resulted in a handful of behemoth corporations, and for many types of critical equipment, such as mechanical cotton pickers, there are only one or two manufacturers left. The end result is that the farmer today does not have a very competitive market from which to procure his equipment and supplies.

Given all of these dynamic forces, it is fairly evident that the decline of the American family farm is irreversible, and that the only hope for small scale agriculture is through change and a different approach to the enterprise. There are a number of ideas that offer hope, but none of them are guarantees for success. For some, like us, the growth of markets specializing in organic products offers the possibility that at some point in the future we might have a profitable enterprise. In some states, such as Vermont and California, there is already a large, growing organic community. In Texas, this community is just beginning to grow, and we will do all we can to see that it takes root and thrives!

Written on Tuesday, 30 November 2004 00:00 by Bob Ackerley