Wednesday, May 5, 2010
The Economics of Organic Farming
Growing local organic food may be the best path toward economic recovery. It may also be key to building stronger and healthier communities.
“Our [struggling] economy is making a compelling case that we shift toward more local food,” said Ken Meter of the Crossroads Resource Center in Minneapolis. “The current system fails on all counts and it’s very efficient at taking wealth out of our communities.”
Meter spoke at the annual conference of the Midwest Organic & Sustainable Education Service (MOSES) held recently in La Crosse, Wisc.
The bank bailouts have stabilized the crisis but they haven’t addressed wealth in local communities, he said. It’s likely that change may come through food because it is the third largest household expense (12.4 percent or $6,133) and $1 trillion nationally. The average consumer spends $49,638 per year with housing the largest expense (34 percent or $16,900), transportation number three (17.6 percent or $8,753) and insurance number four (10.8 percent or $5,336.
“Everyone needs to eat and a local food economy forces us to think differently,” said Meter.
Meter shared figures from his study of southwestern Wisconsin where 106,000 residents earn a total income of $2.7 billion. However, 30 percent of the people live below the poverty line. Out of 6,804 farms, 586 farmers sell less than $10,000 per year while 11 percent sell more than $100,000. Only 382 farms sell directly to consumers and 133 farms are organic. Such disparities result in lop-sided and unfair policies that need to be changed to meet everyone’s needs, Meter pointed out.
The past 40 years have seen rising sales and new markets for farm products, he said, but the expense of running these operations is mounting faster than the income. In fact, there has been a steady decline in income every year since 1969 except during the OPEC crisis in 1973-74. That’s the year former Secretary of Agriculture Earl Butz ramped up production and sold wheat to the Soviet Union.
However, overproduction eventually led to the farm credit crisis in the 1980s, which resulted in much pain over family farm foreclosures including over 913 farmer suicides in Wisconsin, Minnesota, North Dakota, South Dakota and Montana. For example, since 1969, farmers in southwestern Wisconsin made $166 million less despite the fact that they doubled their productivity. Meanwhile, they spent $429 million more equipment and chemical inputs.
“A community-based system of agriculture is all about relationships,” said Meter who predicts that “over time, communities will choose organic food...because they know the farmer is taking care of the land.”
Meter believes that in general, community-based organic farms make four major contributions: good health and nutrition for the population; a fair distribution of wealth among farmers; connections between people since food is so central to American and ethnic cultures; and the capacity for farmers, not corporations, to decide what foods to produce.
Government subsidies keep the industrial food system afloat because farmers are paid to produce below cost, said Meter. In southwestern Wisconsin, it took $434 million to raise $404 million in produce per year. Subsidies amounted to $21 million, which left a $10 million loss. Farmers made up this loss in off-farm income (89 percent of farm family income), renting out land, and other money-making ventures. Since 2002, 53 percent of farmers reported losses after subsidies, according to the Bureau of Economic Analysis.
“This is not a healthy farm economy especially since $135 million in food is purchased outside the region,” said Meter. “We need to cut down that $135 million by sourcing food locally.”
As it is, the national average of buying local is only .8 percent and the effect is insidious. Wisconsin made $2 billion less on its farm products than it did in 1969. In 2009, it made the same income—adjusted for inflation—as it did in 1932.
“This is a startling reality the general public is not thinking about because it is so far removed from farms,” said Meter. “These are losses in the breadbasket of America! This is not a lucrative way to farm.”
Meter believes that if buyers commit themselves to invest in organic and locally-grown agricultural products, farm income would change. However, people would have to understand how such a strategy would benefit them and their community at the same time. It would require a sense of community or ownership over a place where people were unified on the basis of trust, mutuality, and support and not just a shared geography.
For example, if people in southwestern Wisconsin bought just 25 percent of their food from local sources, all production costs would be offset and create $33 million in new farm income.
“It is not a trivial thing to source food through local people,” said Meter. “That helps fund communities and their schools.”
Meter cited several examples where farmers have been able to invest in local and organic production AND make a difference in their communities.
Organic Valley started out in 1988 with $0 in sales and last year it made $532 million.
“This is a stellar example of a farmers cooperative where the price is fair and farmers work to make it good for all” said Meter. “It is strong, sensible thinking.”
Black Hawk, Iowa, created 475 new jobs in fruits and vegetables totaling $6.3 million in income for the community.
Will Allen started out with earthworm compost and has reduced Milwaukee’s cost of garbage dumping significantly.
A factory shut down in Viroqua, Wisc. and moved its operations to another state. City leaders confronted the company and asked what it would do for the community. In response, the company ended up selling its 100,000 square foot building, which allowed the city to create a regional food processing center, a fitness center, a bakery and cafeteria. The building is now 96 percent occupied.
In Eau Claire, Wisc., farmers, the hospital food service, distributors, and truckers teamed up to create the Food Buyers Co-op.
In Burlington, Vermont, a bakery-to-school program was developed where 2,000 extra artisan loaves were sold for $4 with $2 going to the bakery and $2 going to the school. It created a new profit margin for the bakery.
Such arrangements break down self-interest motives to help move everyone in the community forward, said Meter.
In Northfield, Minn., Home on the Range Poultry created a Latino/Anglo cooperative on quarter-acre sites where they raise chickens. There are 30 to 40 sites and the company owns its own processing center.
“The food systems of the future will also involve rethinking our habits of getting our food cheaply,” concluded Meter. “Such change can build wealth in our communities.”