14 ms·

Farm bankruptcies on the rise according to new Fed report

168 points by petethomas 8y ago

empath75 8y ago
So it turns out that trade wars are bad?
- craftyguy 8y ago
  Well, and "depressed prices on farm goods such as corn, dairy and soybeans are also likely leading to a spike in Chapter 12 filings, according to the report."
  - ceejayoz 8y ago
    Losing half the US market for soybeans to a trade war probably played a role in those sorts of price movements: https://www.motherjones.com/kevin-drum/2018/11/soybean-exports-have-crashed-in-2018/ https://www.motherjones.com/kevin-drum/2018/11/soybean-expor... edit: /u/WillPostForFood points out this report ends prior to the tarrifs. My bad. Their effect will be in subsequent reports.
    - rrggrr 8y ago
      The article and other sources report the majority of bankruptcies are in the dairy industry. It’s the result of US-Canadian trade disputes and overcapacity in the dairy industry which precedes the dispute. The CAD-USD exchange rate doesn't help either. A gallon of 2% milk in Canada is about double the price in the US. I think its reasonable to assume that if Trudeau can't bring retail food prices down and resolve this dispute he's going to have to go back to surf boarding and substitute teaching in 2020.
      - blazespin 8y ago
        I wonder how much of that is changing tastes away from dairy and towards things such milk replacements such as almond milk.
      - leesec 8y ago
        > he's going to have to go back to surf boarding and substitute teaching in 2020. Lol, nothing like downplaying the achievements of the literal leader of a country ( one of the most successful possible positions for a person ).
      - goplusplus 8y ago
        Comparing the price of milk and Canada versus the US isn't a 1:1 comparison. Canadians pay much less in taxes to support their dairy industry than Americans due to supply management in Canada (i.e. not producing more milk than needed, paying for that production through subsidies, and then wasting it). So, in-store higher dairy costs in Canada are closer to true production cost than in the states. There are a lot of other factors here too, one being that during the 70-80s American agricultural legislation focused much more on large scale farm operations than Canada and as a result it is much harder for small farmers to get by in the US. Regardless, even with all other factors being equal dairy costs would still be slightly higher in Canada since due to generally higher taxes and higher farm wages.
    - WillPostForFood 8y ago
      The timeframe of the report is 2014 to June 2018. The trade sanctions with China didn’t happen until July, so probably unrelated.
      - ceejayoz 8y ago
        Good point, I missed that. The next report may be a doozy, then.
- jhowell 8y ago
  Not for everyone.
- latch 8y ago
  The article says bankruptcies have "increased steadily" since 2014. It does mention China, and the trade war, but I think when they say "falling commodity prices" they are referring to a longer/broader issue. But it doesn't say why else commodity prices are falling, and I'm be happy if someone enlightened me.
  - caublestone 8y ago
    The value of brand is rising which increases the prices paid by consumers for commodities. This makes people buy less of the underlying commodity and more of the overarching brand. Think about coffee. It’s a commodity. But more people are spending $4-5 on a single cup instead of $4-$5 on a pound of grounds. Spending power does not match price change. A good historical case study is Standard Oil. In an effort to stabilize prices and reduce peaks, Standard oil established last mile delivery for refined oil. People bought Standard Oil at the grocery store. Standard didn’t start buying oil wells until 20 years into the company after they had pressured prices down to the bottom.
    - heavenlyhash 8y ago
      Grains are sold as a bulk commodity. The sale typically takes place at a "grain elevator" where the grain is dumped into a shared storage pool by the truckload. I'm not sure how anything about brands could apply. Any "brand" ends at the grate where you dump the grain. Similar with other ag products. Remember how we just had that E. Coli outbreak in lettuce and nobody had any idea for several days where exactly it came from, so they had to broadcast the warning across the entire nation?
  - FranOntanaya 8y ago
    One issue that was talked about some years ago and has sort of fallen off the news cycle was overcapacity for maritime transport. That could have contributed to it, or maybe it's another symptom of the underlying cause. https://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=1587 https://unctad.org/en/pages/newsdetails.aspx?OriginalVersion...
  - fabianhjr 8y ago
Iamhisalt 8y ago
Canada needs to just go ahead and buy the US’s milk.
chabes 8y ago
So much for that $12 billion in farm aid. Who’s actually getting that money? Big ag?
- duxup 8y ago
  It benefits a lot of farmers actually.... it's just not "enough" for everyone. The whole system seems so propped up by various systems that I'm not sure what a relatively simple one would even look like. Not to say I disagree with incentivizing food production at home altogether.... it's just such a mess.
  - adrr 8y ago
    Doesn't the US spend around $100B a year on farming subsidies from buying crops, to paying people not to farm etc? Not even counting indirect subsidies like requiring ethanol be added to gas.
- bduerst 8y ago
  Why was there a $12 billion farm aid bailout?
  - enraged_camel 8y ago
    China stopped buying soybeans and other produce from the US as part of their retaliation to Trump's tariffs.
nostromo 8y ago
Entrepreneurship is dying in America and it should concern us all. https://www.census.gov/newsroom/blogs/research-matters/2018/02/bfs.html https://www.census.gov/newsroom/blogs/research-matters/2018/... While unemployment and asset prices have recovered in the past decade, business starts have remained at historic lows. When these small businesses die they aren't being replaced by upstarts. I wish we knew why. I'm worried the future will be a small handful of oligopolist mega-corps. You see this consolidation in every industry: banks have consolidated (there are fewer banks now than at any point in modern US history), a few leading tech firms, agriculture, energy, etc.
- pochamago 8y ago
  A few reasons I would guess at: Business startup by necessity has gone down. It's much easier to get hired by an international company in a niche field and work from home now, so people no longer are required to start a business to work in the field of their choice It's more difficult to start something really innovative, related to the slowdown of Moore's Law It's more difficult to start a business in an established field, as licensing laws have come to cover so much more of the landscape. You can no longer just decide to become a barber and hang out your shingle.
  - nomagicbullet 8y ago
    This is the first I hear about the "slowdown of Moore's Law." Do you have any data to share? Thx.
    - teraflop 8y ago
      Moore's law originally stated that the number of transistors per IC would double every 18 months. For a long time this was a remarkably accurate empirical law, but it has slowed down dramatically in the last decade or so. As an individual example: in 1998, Intel's top-of-the-line CPU was the Pentium II with about 8 million transistors. In 2008, they released the Core 2 Extreme QX9770, with about 820 million transistors; this is a 100-fold increase in 10 years, which is almost exactly what Moore's law predicts. Fast-forward another decade to 2018, and Intel's highest-end Xeon chips have something like 7 billion transistors, which is less than a 10-fold improvement in the same timeframe. EDIT: that said, I think it's a real stretch to go from "the slowdown of Moore's law" to a sweeping claim about innovation in general being more difficult. There are a ridiculous number of different fields in which someone could start a business; relatively few of them are dependent on enormous, ever-increasing amounts of computational power.
duxup 8y ago
Historically speaking farming has been a bit of a gamble as far as occupation / running a business. Booms and busts abound. There's a bit of a myth about how farming should be, or was, but it really just had some booms here and there and then busts rather than any real golden age that lasted very long.
- zip1234 8y ago
  It seems like with all of the price/production data out there these days it would be easier to decide what to grow. Or perhaps that data is not accessible to the average farmer?
  - Loughla 8y ago
    Ex-Farmer here who still rents out land to a current farmer. The type and amount of data they have is startling. The issue is there are so many variables that are uncontrollable, or unpredictable in the time frame of a year or an entire growing season. These include weather and climate, and political climate across the world. When a small-time farmer from my neck of the woods can sell directly to China, he has to worry about our politics and theirs, as well as the weather here, there, and at all stops between. So, in other words, it's easier to predict what will be worth more, but no more easy to predict what will grow or what will sell well in 2 years or so. Add in soil conditions and requirements and costs, and you have a complicated picture.
- adrr 8y ago
  That is all industries. Tech during the tech bubble in 2000 and the recession in 2008. Oil and gas along real estate is the same way.
- Loughla 8y ago
  Agriculture was the main driving force of the world economy for eons? It was a stable source of food and income for families and communities for generations. How is that not a golden-age? As for boom and bust - agriculture is like investing. You may not make much in a year, and you may lose money in two or three, but over the course of your lifetime, you accumulate wealth (land) and prosper. The issue, at least in my area, is that property is just prohibitively expensive. I am by no means in a hot area of the country, but the price of an acre of land has almost tripled in the last 15 years. Also - that so much of our food is produced by so few individuals is an incredibly recent development, like less than 40 years recent development. I'm not really sure what all that adds up to, but I'm sure it's something.
gammateam 8y ago
I think I'm going to start learning Mandarin next semester Not because China is more structurally sound, because its not, but the opportunities - partly because of the inefficiencies - seem massive on mainland and greater China I just want to know what people think about anything, out there, from their perspective. I was in Australia and a young blond woman in college was on her social justice kick, talking about how horrible the US must be, and it was funny to me because her perspective was so limited to civil rights abuses and valid healthcare and education inequalities. I told her "yeah but none of that would apply to you". Because she doesn't know about the socioeconomic component, and the heavy correlations to the demographics of socioeconomic brackets, and the history of those demographics, along with the accessibility and strength of legal defense, if you can afford it. and I bet China is the same way or similar, especially if you come to the environment with a bankroll already. < End Tangent
howard941 8y ago
Small solace it'll be but Chapter 12 bankruptcies are a lot more more flexible and the debtors more likely to complete their plans than the Chapter 13 and 11 option afforded the rest of us. See http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-12-bankruptcy-basics http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy... for ex
mrleiter 8y ago
Farming is harsh and without subsidies even more farms would go bankrupt. Prices for goods are low, manufacturing cost is high, margins are ridiculously low. Add the fact that maintaining a farm is hard work, both physically and mentally. I worked on an alp in the mountains for a month, doing everything from cleaning the stables, milking cows, herding them on steep mountainous terrain, cooking, feeding the sick animals. I had a 16h work day; all while earning almost nothing (I did it to know what it means to work in tough situations). My boss and his family hardly had anything left when the month ended. I don't know how to fix this, but it's important.
- goplusplus 8y ago
  Also, Americans are used to paying subsidized, artificially low prices for agricultural products. I don't think many of us realize the actual cost of food production.
  - mrleiter 8y ago
    Yes, correct.
- adrr 8y ago
  Why do we need to fix it? There's plenty of farms that do quite well. Just visit any organic farm that is near a city. There's a huge demand for locally sourced organic produce. We're just propping up the failing farms.
- pm90 8y ago
  I'm interested in the question of: how would the global food supply/economy be affected if the US were to halt agri subsidies and let the farmers go bankrupt (it seems to be happening in a twisted way through this trade war anyways so ...). We know the US produces way too much food than it needs. We know that US food is artificially kept cheap due to subsidies. Would higher food prices lead to more starvation in other countries? More hunger in the US? Or would farmers around the world step up and compensate for the deficit? Would it perhaps lead to farmers in lesser developed countries being better supported and lead to economic growth in those countries?
blang 8y ago
Interestingly farm land prices are stable and rising slightly (in Iowa, 2017 numbers) http://dreamdirt.com/blog/iowa-farm-land-land-values-up-2-in-2017/ http://dreamdirt.com/blog/iowa-farm-land-land-values-up-2-in...
- stevehawk 8y ago
  my uneducated thought as a transplant to the midwest - the need for farming hasn't dropped, it's the desire/ability/money to do it that is. Small farmers are going away and corporate farming is taking over.
- mrleiter 8y ago
  > 2017 has been a really good year to sell a good quality farm. Who buys them? Maybe big agro? Or maybe convert it into building-approved land? Report doesn't exactly say as far as I can tell.
  - froindt 8y ago
    Probably most frequently to other farmers. Your neighbors land might come up for sale once in your lifetime. For crop farmers, that's the only way you can expand your farm.
  - bluGill 8y ago
    In iowa it is illegal for corporations to own farms. (with exceptions for seed companies and equipment companies)
    - mrleiter 8y ago
      Interesting, didn't know. Thanks!
wcchandler 8y ago
Honestly the writing has been on the walls for quite some time now. I’ve argued this with a few applications to YC. Farming in America is about to have a hard pivot. I definitely see it going from large-scale, monocultural enterprises to small-scale, mostly independent, polycultural, bio-intensive, sustainable farms. (Sorry for all the buzzwords, not sure of a better all-encompassing term) If you’re looking for something to invest in it’d be AgTech with a focus on these new farmers as users.
- Loughla 8y ago
  Please explain. Because what I'm seeing is a pivot in exactly the other direction. Near urban centers you're seeing more 'specialty' farms like you spell out. These farms cater, almost exclusively, to the wealthy. But out in the breadbasket, there has been an absolute crush of consolidation. Fewer, larger farms are producing the goods. I argue that we're going to see (or rather are already seeing) the wal-martization of farming. Few, HUGE scale producers who work at a scale that is just so much larger than what we have now they can still turn a profit.
  - allcentury 8y ago
    It's this - the margins are so slim on commercial farming that they are in the grocer range (1-7%) and the only way grocers make money is on volume. The one-off farms are great for those that can spend extra but they are not the ones feeding America right now.
  - enraged_camel 8y ago
    I agree. At my local farmer's market, pretty much all the vendors sell their produce at a loss because they can't compete with big agri-business. (They continue to participate though, mostly for fun.)
  - atourgates 8y ago
    Yes. You just described the split perfectly. Small scale production is going for specialty products, at higher prices, to specialty consumers. Think of a local vegetable farm that sells to farmer's markets, or a goat dairy that's making chevre to sell at specialty groceries in a 50 mile radius of their farm. On the other hand, gigantic companies are increasingly controlling land used for industrial agriculture. Near me, a recently incorporated LLC (aka holding company for investors) just paid $171-million for 14,000 acres of irrigated farmland in Eastern Washington [1]. At that scale, there's simply no way that the traditional "small family farmer" can compete with industrial ag. The few that have near me, are large families that essentially operate like a business. They've managed to hold on to their traditional farmland, and then expanded into what are essentially family-owned large-scale industrial ag operations. Good for them, but they're the strong minority. [1] https://www.heraldnet.com/business/big-farm-deal-171m-for-14500-acres-in-eastern-washington/ https://www.heraldnet.com/business/big-farm-deal-171m-for-14...
kevmo 8y ago
For the Chapter 12s that fail, many of these farm owners will end up working the same lands in the same sorts of jobs. They just won't own the capital anymore, and the surplus value of their labor will accumulate in the factory farming companies. All but the largest organizations are currently struggling in America. This tendency towards monopolies needs to be curbed, it degrades food systems and reduces national resiliency. This is particularly dangerous giving the imminent threat of climate change. Bankruptcy is an area of American law that is ripe for use for restructuring debtor-creditor relations to fight back against these trends. The entire Code, particularly Chapters 7 and 12, could and should do more to assist consumer and farmer debtors.
- dmix 8y ago
  Sadly most interventions that western governments keep making in the name of the little guy keep benefiting the megacorps, whether by unintended side effects or from flaws in the policy-writing process (ie, countless small political-favours, lobbying, etc). Thomas Sowell wrote a great book about this: https://www.amazon.com/Wealth-Poverty-Politics-Thomas-Sowell/dp/046509676X/ https://www.amazon.com/Wealth-Poverty-Politics-Thomas-Sowell... There have been countless policies since the 1950s intended to offset wealth disparity that have backfired and hurt the poor. For example, the rent control and other "tenant friendly" laws in Toronto and NYC in the 1970s resulted in decrepit urban ghettos littered with arsoned apartment buildings, because the only way a landlord could "renovate" was burn down their own building. Just look at pictures of Harlem in late 1970/1980s... It also created a massive disincentive to invest in new low-income property, as the developers knew they'd make less money targeting the poor. So development went towards upper/middle class housing (resulting in an even worse lack of low-income housing in NYC and to a lesser extant Toronto by the 1990s). Modern rent control laws have attempted to factor these "unintended side-effects" but there are a hundred similar examples in that book. It keeps happening and happening with every clever scheme concoted to help the poor. The only winners of the massive growth in the US gov since the 1970s were consistently large firms, who had their competition wiped out or huge barriers of entry created in their markets in the name of 'progress'. And countless well-meaning socially conscious economic policies usually works for a small group while hurting a much larger group in the process, or works at the beginning then as the side-effects build up it becomes a net-negative...where it would have been better off to let the market function as is.
adreamingsoul 8y ago
I’ve started, invested, and sold several startups and small buisnesses. I was alurred into “stability” by staying with the corporation that aquired a startup I was working for. It was my decision, but now I regret it. I’ve been working tirelessly to transition back into being independent, but now I too have a family to support and the current state of health care coverage in the US is one of the biggest risks I see. Interestingly, I’ve seen more entrepreneurs lately from countries like Canada and Norway who have founders that aren’t as stressed when compared to here in the states. I don’t have any data points to prove my hypothesis, but I often wonder if we are doing a disservice to ourselves here in the US. I guess only time well tell.
- sjg007 8y ago
  We absolutely are. The only workaround has been a spouse who works who carries the insurance or you go without. The ACA actually helped increase entrepreneurship initially. I think it gets harder with a family though vs being single.
nickysielicki 8y ago
I live in Wisconsin. I feel confident saying that this is just an anomaly based on a strange summer weather pattern here in Wisconsin, not anything that indicates some kind of issue with international trade policy or structural issue with farming. We have 68,500 farms in this state [1]. This summer was dry for a very long time, then it was very wet, and then it stayed very warm well into September. I suspect a lot of farmers had issues with moisture in their harvests. The thing about farming is you are taking a huge risk every year with what you invest, and farm equipment isn't cheap. If you make money, you make a decent amount of money. But if you can't make the payments on your machinery, you're basically done for. I think this article was written with the intention of insinuating that this is somehow related to the Trump Trade war, and to be fair, I am sure that made or broke the profit margin for some farmers. But in general, I don't think that's what's going on here, and I think it's cheap journalism for them to play into that. Somewhat related: Checkout "MN Millenial Farmer" on YouTube, it's some of the most relaxing content you'll find online. [2] [1]: https://datcp.wi.gov/Pages/Publications/WIAgStatistics.aspx https://datcp.wi.gov/Pages/Publications/WIAgStatistics.aspx [2]: https://www.youtube.com/channel/UCp0rRUsMDlJ1meYAQ6_37Dw https://www.youtube.com/channel/UCp0rRUsMDlJ1meYAQ6_37Dw
- mitchell_h 8y ago
  Same here in missouri. We had 2 dry summers in a row, then a wet harvest time this year. Hay prices are up over double last year and last year was up from the previous year. Last year for example I would have been happy to buy $25 a 5x5 round bale. This year if you can find them, they're $90-$100. Small squares 2 years ago were $1.25, this year I happily paid $4.
- rmason 8y ago
  I agree with you. Here in central Michigan they've begun construction of a huge cheese plant will purchase 20-25% of the state's milk. Add to that the drastic slashing of the Canadian dairy tariff and people are cautiously optimistic. https://www.freep.com/story/money/business/john-gallagher/2018/08/09/milk-processing-plant-lansing-michigan/933776002/ https://www.freep.com/story/money/business/john-gallagher/20...
- peteradio 8y ago
tracker1 8y ago
I don't think it's entirely surprising. Not to mention desertification without proper grazing and crop rotations. Competition from mega farms. And the practices of organizations like Tyson, where farmers are encouraged to take out huge growth loans "owning" everything that costs money, and not owning the product itself. Add to this what the likes of the farming equipment companies are doing to lock in maintenance costs and ever growing expenses. I think the first thing(s) that should be done is eliminate farm aid to farms that own more than X acres, or are owned by parent companies owning more than X acres of land. Significantly roll back the DMCA. Third, would probably be to re-secure those loans on better terms. It's a national security issue at its' core.
driverdan 8y ago
These numbers aren't meaningful without looking at the bigger picture. What percentage of farms are going bankrupt? 70 farms seems like a very small percentage. How many new farms started?
rcchyssser 8y ago
Hacker news does have a clue about farming. Lol

168 points by petethomas 8y ago

empath75 8y ago

So it turns out that trade wars are bad?

craftyguy 8y ago
Well, and "depressed prices on farm goods such as corn, dairy and soybeans are also likely leading to a spike in Chapter 12 filings, according to the report."
- ceejayoz 8y ago
  Losing half the US market for soybeans to a trade war probably played a role in those sorts of price movements: https://www.motherjones.com/kevin-drum/2018/11/soybean-exports-have-crashed-in-2018/ https://www.motherjones.com/kevin-drum/2018/11/soybean-expor... edit: /u/WillPostForFood points out this report ends prior to the tarrifs. My bad. Their effect will be in subsequent reports.
  - rrggrr 8y ago
    The article and other sources report the majority of bankruptcies are in the dairy industry. It’s the result of US-Canadian trade disputes and overcapacity in the dairy industry which precedes the dispute. The CAD-USD exchange rate doesn't help either. A gallon of 2% milk in Canada is about double the price in the US. I think its reasonable to assume that if Trudeau can't bring retail food prices down and resolve this dispute he's going to have to go back to surf boarding and substitute teaching in 2020.
    - blazespin 8y ago
      I wonder how much of that is changing tastes away from dairy and towards things such milk replacements such as almond milk.
    - leesec 8y ago
      > he's going to have to go back to surf boarding and substitute teaching in 2020. Lol, nothing like downplaying the achievements of the literal leader of a country ( one of the most successful possible positions for a person ).
    - goplusplus 8y ago
      Comparing the price of milk and Canada versus the US isn't a 1:1 comparison. Canadians pay much less in taxes to support their dairy industry than Americans due to supply management in Canada (i.e. not producing more milk than needed, paying for that production through subsidies, and then wasting it). So, in-store higher dairy costs in Canada are closer to true production cost than in the states. There are a lot of other factors here too, one being that during the 70-80s American agricultural legislation focused much more on large scale farm operations than Canada and as a result it is much harder for small farmers to get by in the US. Regardless, even with all other factors being equal dairy costs would still be slightly higher in Canada since due to generally higher taxes and higher farm wages.
  - WillPostForFood 8y ago
    The timeframe of the report is 2014 to June 2018. The trade sanctions with China didn’t happen until July, so probably unrelated.
    - ceejayoz 8y ago
      Good point, I missed that. The next report may be a doozy, then.
jhowell 8y ago
Not for everyone.
latch 8y ago
The article says bankruptcies have "increased steadily" since 2014. It does mention China, and the trade war, but I think when they say "falling commodity prices" they are referring to a longer/broader issue. But it doesn't say why else commodity prices are falling, and I'm be happy if someone enlightened me.
- caublestone 8y ago
  The value of brand is rising which increases the prices paid by consumers for commodities. This makes people buy less of the underlying commodity and more of the overarching brand. Think about coffee. It’s a commodity. But more people are spending $4-5 on a single cup instead of $4-$5 on a pound of grounds. Spending power does not match price change. A good historical case study is Standard Oil. In an effort to stabilize prices and reduce peaks, Standard oil established last mile delivery for refined oil. People bought Standard Oil at the grocery store. Standard didn’t start buying oil wells until 20 years into the company after they had pressured prices down to the bottom.
  - heavenlyhash 8y ago
    Grains are sold as a bulk commodity. The sale typically takes place at a "grain elevator" where the grain is dumped into a shared storage pool by the truckload. I'm not sure how anything about brands could apply. Any "brand" ends at the grate where you dump the grain. Similar with other ag products. Remember how we just had that E. Coli outbreak in lettuce and nobody had any idea for several days where exactly it came from, so they had to broadcast the warning across the entire nation?
- FranOntanaya 8y ago
  One issue that was talked about some years ago and has sort of fallen off the news cycle was overcapacity for maritime transport. That could have contributed to it, or maybe it's another symptom of the underlying cause. https://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=1587 https://unctad.org/en/pages/newsdetails.aspx?OriginalVersion...
- fabianhjr 8y ago

Iamhisalt 8y ago

Canada needs to just go ahead and buy the US’s milk.

chabes 8y ago

So much for that $12 billion in farm aid. Who’s actually getting that money? Big ag?

duxup 8y ago
It benefits a lot of farmers actually.... it's just not "enough" for everyone. The whole system seems so propped up by various systems that I'm not sure what a relatively simple one would even look like. Not to say I disagree with incentivizing food production at home altogether.... it's just such a mess.
- adrr 8y ago
  Doesn't the US spend around $100B a year on farming subsidies from buying crops, to paying people not to farm etc? Not even counting indirect subsidies like requiring ethanol be added to gas.
bduerst 8y ago
Why was there a $12 billion farm aid bailout?
- enraged_camel 8y ago
  China stopped buying soybeans and other produce from the US as part of their retaliation to Trump's tariffs.

nostromo 8y ago

Entrepreneurship is dying in America and it should concern us all. https://www.census.gov/newsroom/blogs/research-matters/2018/02/bfs.html https://www.census.gov/newsroom/blogs/research-matters/2018/... While unemployment and asset prices have recovered in the past decade, business starts have remained at historic lows. When these small businesses die they aren't being replaced by upstarts. I wish we knew why. I'm worried the future will be a small handful of oligopolist mega-corps. You see this consolidation in every industry: banks have consolidated (there are fewer banks now than at any point in modern US history), a few leading tech firms, agriculture, energy, etc.

pochamago 8y ago
A few reasons I would guess at: Business startup by necessity has gone down. It's much easier to get hired by an international company in a niche field and work from home now, so people no longer are required to start a business to work in the field of their choice It's more difficult to start something really innovative, related to the slowdown of Moore's Law It's more difficult to start a business in an established field, as licensing laws have come to cover so much more of the landscape. You can no longer just decide to become a barber and hang out your shingle.
- nomagicbullet 8y ago
  This is the first I hear about the "slowdown of Moore's Law." Do you have any data to share? Thx.
  - teraflop 8y ago
    Moore's law originally stated that the number of transistors per IC would double every 18 months. For a long time this was a remarkably accurate empirical law, but it has slowed down dramatically in the last decade or so. As an individual example: in 1998, Intel's top-of-the-line CPU was the Pentium II with about 8 million transistors. In 2008, they released the Core 2 Extreme QX9770, with about 820 million transistors; this is a 100-fold increase in 10 years, which is almost exactly what Moore's law predicts. Fast-forward another decade to 2018, and Intel's highest-end Xeon chips have something like 7 billion transistors, which is less than a 10-fold improvement in the same timeframe. EDIT: that said, I think it's a real stretch to go from "the slowdown of Moore's law" to a sweeping claim about innovation in general being more difficult. There are a ridiculous number of different fields in which someone could start a business; relatively few of them are dependent on enormous, ever-increasing amounts of computational power.

duxup 8y ago

Historically speaking farming has been a bit of a gamble as far as occupation / running a business. Booms and busts abound. There's a bit of a myth about how farming should be, or was, but it really just had some booms here and there and then busts rather than any real golden age that lasted very long.

zip1234 8y ago
It seems like with all of the price/production data out there these days it would be easier to decide what to grow. Or perhaps that data is not accessible to the average farmer?
- Loughla 8y ago
  Ex-Farmer here who still rents out land to a current farmer. The type and amount of data they have is startling. The issue is there are so many variables that are uncontrollable, or unpredictable in the time frame of a year or an entire growing season. These include weather and climate, and political climate across the world. When a small-time farmer from my neck of the woods can sell directly to China, he has to worry about our politics and theirs, as well as the weather here, there, and at all stops between. So, in other words, it's easier to predict what will be worth more, but no more easy to predict what will grow or what will sell well in 2 years or so. Add in soil conditions and requirements and costs, and you have a complicated picture.
adrr 8y ago
That is all industries. Tech during the tech bubble in 2000 and the recession in 2008. Oil and gas along real estate is the same way.
Loughla 8y ago
Agriculture was the main driving force of the world economy for eons? It was a stable source of food and income for families and communities for generations. How is that not a golden-age? As for boom and bust - agriculture is like investing. You may not make much in a year, and you may lose money in two or three, but over the course of your lifetime, you accumulate wealth (land) and prosper. The issue, at least in my area, is that property is just prohibitively expensive. I am by no means in a hot area of the country, but the price of an acre of land has almost tripled in the last 15 years. Also - that so much of our food is produced by so few individuals is an incredibly recent development, like less than 40 years recent development. I'm not really sure what all that adds up to, but I'm sure it's something.

gammateam 8y ago

I think I'm going to start learning Mandarin next semester Not because China is more structurally sound, because its not, but the opportunities - partly because of the inefficiencies - seem massive on mainland and greater China I just want to know what people think about anything, out there, from their perspective. I was in Australia and a young blond woman in college was on her social justice kick, talking about how horrible the US must be, and it was funny to me because her perspective was so limited to civil rights abuses and valid healthcare and education inequalities. I told her "yeah but none of that would apply to you". Because she doesn't know about the socioeconomic component, and the heavy correlations to the demographics of socioeconomic brackets, and the history of those demographics, along with the accessibility and strength of legal defense, if you can afford it. and I bet China is the same way or similar, especially if you come to the environment with a bankroll already. < End Tangent

howard941 8y ago

Small solace it'll be but Chapter 12 bankruptcies are a lot more more flexible and the debtors more likely to complete their plans than the Chapter 13 and 11 option afforded the rest of us. See http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-12-bankruptcy-basics http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy... for ex

mrleiter 8y ago

Farming is harsh and without subsidies even more farms would go bankrupt. Prices for goods are low, manufacturing cost is high, margins are ridiculously low. Add the fact that maintaining a farm is hard work, both physically and mentally. I worked on an alp in the mountains for a month, doing everything from cleaning the stables, milking cows, herding them on steep mountainous terrain, cooking, feeding the sick animals. I had a 16h work day; all while earning almost nothing (I did it to know what it means to work in tough situations). My boss and his family hardly had anything left when the month ended. I don't know how to fix this, but it's important.

goplusplus 8y ago
Also, Americans are used to paying subsidized, artificially low prices for agricultural products. I don't think many of us realize the actual cost of food production.
- mrleiter 8y ago
  Yes, correct.
adrr 8y ago
Why do we need to fix it? There's plenty of farms that do quite well. Just visit any organic farm that is near a city. There's a huge demand for locally sourced organic produce. We're just propping up the failing farms.
pm90 8y ago
I'm interested in the question of: how would the global food supply/economy be affected if the US were to halt agri subsidies and let the farmers go bankrupt (it seems to be happening in a twisted way through this trade war anyways so ...). We know the US produces way too much food than it needs. We know that US food is artificially kept cheap due to subsidies. Would higher food prices lead to more starvation in other countries? More hunger in the US? Or would farmers around the world step up and compensate for the deficit? Would it perhaps lead to farmers in lesser developed countries being better supported and lead to economic growth in those countries?

blang 8y ago

Interestingly farm land prices are stable and rising slightly (in Iowa, 2017 numbers) http://dreamdirt.com/blog/iowa-farm-land-land-values-up-2-in-2017/ http://dreamdirt.com/blog/iowa-farm-land-land-values-up-2-in...

stevehawk 8y ago
my uneducated thought as a transplant to the midwest - the need for farming hasn't dropped, it's the desire/ability/money to do it that is. Small farmers are going away and corporate farming is taking over.
mrleiter 8y ago
> 2017 has been a really good year to sell a good quality farm. Who buys them? Maybe big agro? Or maybe convert it into building-approved land? Report doesn't exactly say as far as I can tell.
- froindt 8y ago
  Probably most frequently to other farmers. Your neighbors land might come up for sale once in your lifetime. For crop farmers, that's the only way you can expand your farm.
- bluGill 8y ago
  In iowa it is illegal for corporations to own farms. (with exceptions for seed companies and equipment companies)
  - mrleiter 8y ago
    Interesting, didn't know. Thanks!

wcchandler 8y ago

Honestly the writing has been on the walls for quite some time now. I’ve argued this with a few applications to YC. Farming in America is about to have a hard pivot. I definitely see it going from large-scale, monocultural enterprises to small-scale, mostly independent, polycultural, bio-intensive, sustainable farms. (Sorry for all the buzzwords, not sure of a better all-encompassing term) If you’re looking for something to invest in it’d be AgTech with a focus on these new farmers as users.

Loughla 8y ago
Please explain. Because what I'm seeing is a pivot in exactly the other direction. Near urban centers you're seeing more 'specialty' farms like you spell out. These farms cater, almost exclusively, to the wealthy. But out in the breadbasket, there has been an absolute crush of consolidation. Fewer, larger farms are producing the goods. I argue that we're going to see (or rather are already seeing) the wal-martization of farming. Few, HUGE scale producers who work at a scale that is just so much larger than what we have now they can still turn a profit.
- allcentury 8y ago
  It's this - the margins are so slim on commercial farming that they are in the grocer range (1-7%) and the only way grocers make money is on volume. The one-off farms are great for those that can spend extra but they are not the ones feeding America right now.
- enraged_camel 8y ago
  I agree. At my local farmer's market, pretty much all the vendors sell their produce at a loss because they can't compete with big agri-business. (They continue to participate though, mostly for fun.)
- atourgates 8y ago
  Yes. You just described the split perfectly. Small scale production is going for specialty products, at higher prices, to specialty consumers. Think of a local vegetable farm that sells to farmer's markets, or a goat dairy that's making chevre to sell at specialty groceries in a 50 mile radius of their farm. On the other hand, gigantic companies are increasingly controlling land used for industrial agriculture. Near me, a recently incorporated LLC (aka holding company for investors) just paid $171-million for 14,000 acres of irrigated farmland in Eastern Washington [1]. At that scale, there's simply no way that the traditional "small family farmer" can compete with industrial ag. The few that have near me, are large families that essentially operate like a business. They've managed to hold on to their traditional farmland, and then expanded into what are essentially family-owned large-scale industrial ag operations. Good for them, but they're the strong minority. [1] https://www.heraldnet.com/business/big-farm-deal-171m-for-14500-acres-in-eastern-washington/ https://www.heraldnet.com/business/big-farm-deal-171m-for-14...

kevmo 8y ago

For the Chapter 12s that fail, many of these farm owners will end up working the same lands in the same sorts of jobs. They just won't own the capital anymore, and the surplus value of their labor will accumulate in the factory farming companies. All but the largest organizations are currently struggling in America. This tendency towards monopolies needs to be curbed, it degrades food systems and reduces national resiliency. This is particularly dangerous giving the imminent threat of climate change. Bankruptcy is an area of American law that is ripe for use for restructuring debtor-creditor relations to fight back against these trends. The entire Code, particularly Chapters 7 and 12, could and should do more to assist consumer and farmer debtors.

dmix 8y ago
Sadly most interventions that western governments keep making in the name of the little guy keep benefiting the megacorps, whether by unintended side effects or from flaws in the policy-writing process (ie, countless small political-favours, lobbying, etc). Thomas Sowell wrote a great book about this: https://www.amazon.com/Wealth-Poverty-Politics-Thomas-Sowell/dp/046509676X/ https://www.amazon.com/Wealth-Poverty-Politics-Thomas-Sowell... There have been countless policies since the 1950s intended to offset wealth disparity that have backfired and hurt the poor. For example, the rent control and other "tenant friendly" laws in Toronto and NYC in the 1970s resulted in decrepit urban ghettos littered with arsoned apartment buildings, because the only way a landlord could "renovate" was burn down their own building. Just look at pictures of Harlem in late 1970/1980s... It also created a massive disincentive to invest in new low-income property, as the developers knew they'd make less money targeting the poor. So development went towards upper/middle class housing (resulting in an even worse lack of low-income housing in NYC and to a lesser extant Toronto by the 1990s). Modern rent control laws have attempted to factor these "unintended side-effects" but there are a hundred similar examples in that book. It keeps happening and happening with every clever scheme concoted to help the poor. The only winners of the massive growth in the US gov since the 1970s were consistently large firms, who had their competition wiped out or huge barriers of entry created in their markets in the name of 'progress'. And countless well-meaning socially conscious economic policies usually works for a small group while hurting a much larger group in the process, or works at the beginning then as the side-effects build up it becomes a net-negative...where it would have been better off to let the market function as is.

adreamingsoul 8y ago

I’ve started, invested, and sold several startups and small buisnesses. I was alurred into “stability” by staying with the corporation that aquired a startup I was working for. It was my decision, but now I regret it. I’ve been working tirelessly to transition back into being independent, but now I too have a family to support and the current state of health care coverage in the US is one of the biggest risks I see. Interestingly, I’ve seen more entrepreneurs lately from countries like Canada and Norway who have founders that aren’t as stressed when compared to here in the states. I don’t have any data points to prove my hypothesis, but I often wonder if we are doing a disservice to ourselves here in the US. I guess only time well tell.

sjg007 8y ago
We absolutely are. The only workaround has been a spouse who works who carries the insurance or you go without. The ACA actually helped increase entrepreneurship initially. I think it gets harder with a family though vs being single.

nickysielicki 8y ago

I live in Wisconsin. I feel confident saying that this is just an anomaly based on a strange summer weather pattern here in Wisconsin, not anything that indicates some kind of issue with international trade policy or structural issue with farming. We have 68,500 farms in this state [1]. This summer was dry for a very long time, then it was very wet, and then it stayed very warm well into September. I suspect a lot of farmers had issues with moisture in their harvests. The thing about farming is you are taking a huge risk every year with what you invest, and farm equipment isn't cheap. If you make money, you make a decent amount of money. But if you can't make the payments on your machinery, you're basically done for. I think this article was written with the intention of insinuating that this is somehow related to the Trump Trade war, and to be fair, I am sure that made or broke the profit margin for some farmers. But in general, I don't think that's what's going on here, and I think it's cheap journalism for them to play into that. Somewhat related: Checkout "MN Millenial Farmer" on YouTube, it's some of the most relaxing content you'll find online. [2] [1]: https://datcp.wi.gov/Pages/Publications/WIAgStatistics.aspx https://datcp.wi.gov/Pages/Publications/WIAgStatistics.aspx [2]: https://www.youtube.com/channel/UCp0rRUsMDlJ1meYAQ6_37Dw https://www.youtube.com/channel/UCp0rRUsMDlJ1meYAQ6_37Dw

mitchell_h 8y ago
Same here in missouri. We had 2 dry summers in a row, then a wet harvest time this year. Hay prices are up over double last year and last year was up from the previous year. Last year for example I would have been happy to buy $25 a 5x5 round bale. This year if you can find them, they're $90-$100. Small squares 2 years ago were $1.25, this year I happily paid $4.
rmason 8y ago
I agree with you. Here in central Michigan they've begun construction of a huge cheese plant will purchase 20-25% of the state's milk. Add to that the drastic slashing of the Canadian dairy tariff and people are cautiously optimistic. https://www.freep.com/story/money/business/john-gallagher/2018/08/09/milk-processing-plant-lansing-michigan/933776002/ https://www.freep.com/story/money/business/john-gallagher/20...
peteradio 8y ago

tracker1 8y ago

I don't think it's entirely surprising. Not to mention desertification without proper grazing and crop rotations. Competition from mega farms. And the practices of organizations like Tyson, where farmers are encouraged to take out huge growth loans "owning" everything that costs money, and not owning the product itself. Add to this what the likes of the farming equipment companies are doing to lock in maintenance costs and ever growing expenses. I think the first thing(s) that should be done is eliminate farm aid to farms that own more than X acres, or are owned by parent companies owning more than X acres of land. Significantly roll back the DMCA. Third, would probably be to re-secure those loans on better terms. It's a national security issue at its' core.

driverdan 8y ago

These numbers aren't meaningful without looking at the bigger picture. What percentage of farms are going bankrupt? 70 farms seems like a very small percentage. How many new farms started?

rcchyssser 8y ago

Hacker news does have a clue about farming. Lol