How green is our corn?

The great hope in agricultural and energy circles in the U.S. over the last decade has been ethanol -- specifically corn-based ethanol. Full Story
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Amanda

Elk Grove Village, IL

#21 Mar 19, 2008
ByronMoreno wrote:
<quoted text>
Bwahahahaha.
I'm paying for it, so I ***will*** comment on it. I like your logic, though. You've never been a man, so you have no right to comment on men. You have never been to the moon, so you have no right to comment on NASA. You have never died, so you have no right to comment on death. Etcetera, etcetera.
<quoted text>
What I do know is that just about every other industry in the world seems to get by without subsidies. Here's the big gaping hint, since you seem incredibly uneducated on basic economics and therefore - under your own logic - with no right to discuss it. No industry that produces needed goods needs subsidies. None.
<quoted text>
And you are an economically-illiterate leach on society, and it shows.
Let me explain how this works, at least in my own family farm's position. I apologize for the snarky comments earlier. I just signed the loan papers and was reworking the cash flow yet again.

This year, the operating loan we will have to take out is appr.$500,000. That will pay for most operating expenses such as fuel, fertilizer, rent for land, LP, electricity, seed, and so on. Now, that is a private bank loan that must be paid back every year, regardless if you have a crop to sell or not. Yes, on top of that we do get some government help to the tune of $50,000. That money is also a LOAN, which must be paid back at the end of the year. What you fail to see is that 70-80% of these "subsidies" that are paid to farmers are actually government loans that must be paid back with interest at the end of the season. So, we must pay back our money to the bank and to the government each and every year. And that is assuming that we even get a crop. It could be a drought, it could be a flood, it could be hail or insects or just about anything.

Now, I understand that crop prices are up due to the ethanol boom. Don't assume that we are making money hand over fist. Yes, we are profitable for the first time in a while. I will freely admit that. But, as grain prices rise, so does everything else. In one year alone our fertilizer costs rose $30,000 and our fuel and LP and electric costs doubled. So we are paying more to produce the same crop.

And do I even need to mention the cost of machinery and infrastructure? Most of those purchases are on 10 year loans through the bank. We purchased a USED tractor 3 years ago and it was $110,000. Try pricing out a new combine sometime and be prepared to wet yourself when you see the price.(Although the new models do come with bun warmers and cd players, that's a welcome change. I like bun warmers but not $300,000 worth...) Not to mention repairing, maintaining and eventually replacing sheds, grain bins, drying setups, ect. So, we do all of this on a government loan of $50,000 a year.

If you really want to know more about how farm subsidies work, may I suggest visiting your local FSA office. The staff there will be more than happy to give you all the information.

Remember, don't complain about the farmer with your mouth full...
Amanda

Elk Grove Village, IL

#22 Mar 19, 2008
Oh, one more thing. We are not a large corporate operation. We are 1200 acres. Not large by any means.

“You're off!”

Since: Jan 08

Quito, Ecuador

#23 Mar 19, 2008
Amanda wrote:
<quoted text>
Let me explain how this works, at least in my own family farm's position. I apologize for the snarky comments earlier. I just signed the loan papers and was reworking the cash flow yet again.
Okay, and I apologize for being obnoxious about it. But as a small business owner, it really fries me to pay taxes to support someone else's business.
Amanda wrote:
This year, the operating loan we will have to take out is appr.$500,000. That will pay for most operating expenses such as fuel, fertilizer, rent for land, LP, electricity, seed, and so on. Now, that is a private bank loan that must be paid back every year, regardless if you have a crop to sell or not. Yes, on top of that we do get some government help to the tune of $50,000. That money is also a LOAN, which must be paid back at the end of the year. What you fail to see is that 70-80% of these "subsidies" that are paid to farmers are actually government loans that must be paid back with interest at the end of the season.
1) Where do direct payments and price supports (or counter-cyclical payments) come into this? Those are, AFAIK, payouts and not loans.
2) I take it the loans are subsidized. Otherwise, why not just go to the bank. Is this correct?
Amanda wrote:
So, we must pay back our money to the bank and to the government each and every year. And that is assuming that we even get a crop. It could be a drought, it could be a flood, it could be hail or insects or just about anything.
It's a risk. I get that.***BUT*** you can hedge against that on the modern merc exchanges.
Let's take another business with similar risks. I'm on the board of a small company that deals with what I'll call industrial pest control to mask it somewhat (since it is one of only a few companies in Chicago and I don't want to identify it). Every year, the owner has to take out loans to pre-buy all the chemicals, do the marketing, and hire people. All before he signs a single contract (it's a seasonal business with yearly contracts).
Is his risk any less? Yet he is not subsidized, and he can't buy roach futures down at the Merc to hedge.

(see part 2)

“You're off!”

Since: Jan 08

Quito, Ecuador

#24 Mar 19, 2008
Amanda wrote:
Now, I understand that crop prices are up due to the ethanol boom. Don't assume that we are making money hand over fist. Yes, we are profitable for the first time in a while. I will freely admit that. But, as grain prices rise, so does everything else. In one year alone our fertilizer costs rose $30,000 and our fuel and LP and electric costs doubled. So we are paying more to produce the same crop.
Try making anything with stainless steel and copper...
But I'm not subsidized.
Amanda wrote:
And do I even need to mention the cost of machinery and infrastructure? Most of those purchases are on 10 year loans through the bank. We purchased a USED tractor 3 years ago and it was $110,000. Try pricing out a new combine sometime and be prepared to wet yourself when you see the price.(Although the new models do come with bun warmers and cd players, that's a welcome change. I like bun warmers but not $300,000 worth...)
Try buying a laser cutter.$500,000 plus. No bun warmers. Or a good CNC machine tool.$250,000 plus. And we're a small business. I have to take out Cap-Ex loans and have no government support. And the price of my goods can drop tomorrow, too, if China starts exporting them.
Amanda wrote:
Not to mention repairing, maintaining and eventually replacing sheds, grain bins, drying setups, ect. So, we do all of this on a government loan of $50,000 a year.
And I do more with no loans, no price supports, no counter-cyclical payments, no direct payments, no payments not to build. Etcetera.
Amanda wrote:
If you really want to know more about how farm subsidies work, may I suggest visiting your local FSA office. The staff there will be more than happy to give you all the information.
Remember, don't complain about the farmer with your mouth full...
Farmers do a valuable job. But the question remains. Why is it we can build beanie babies relying on the free market but can't do so with food?

“You're off!”

Since: Jan 08

Quito, Ecuador

#25 Mar 19, 2008
This is part 1. No idea why topix makes splitting posts so hard.
Amanda wrote:
<quoted text>
Let me explain how this works, at least in my own family farm's position. I apologize for the snarky comments earlier. I just signed the loan papers and was reworking the cash flow yet again.
Okay, and I apologize for being obnoxious about it. But as a small business owner, it really fries me to pay taxes to support someone else's business.
Amanda wrote:
This year, the operating loan we will have to take out is appr.$500,000. That will pay for most operating expenses such as fuel, fertilizer, rent for land, LP, electricity, seed, and so on. Now, that is a private bank loan that must be paid back every year, regardless if you have a crop to sell or not. Yes, on top of that we do get some government help to the tune of $50,000. That money is also a LOAN, which must be paid back at the end of the year. What you fail to see is that 70-80% of these "subsidies" that are paid to farmers are actually government loans that must be paid back with interest at the end of the season.
1) Where do direct payments and price supports (or counter-cyclical payments) come into this? Those are, AFAIK, payouts and not loans.
2) I take it the loans are subsidized. Otherwise, why not just go to the bank. Is this correct?
Amanda wrote:
So, we must pay back our money to the bank and to the government each and every year. And that is assuming that we even get a crop. It could be a drought, it could be a flood, it could be hail or insects or just about anything.
It's a risk. I get that.***BUT*** you can hedge against that on the modern merc exchanges.
Let's take another business with similar risks. I'm on the board of a small company that deals with what I'll call industrial pest control to mask it somewhat (since it is one of only a few companies in Chicago and I don't want to identify it). Every year, the owner has to take out loans to pre-buy all the chemicals, do the marketing, and hire people. All before he signs a single contract (it's a seasonal business with yearly contracts).
Is his risk any less? Yet he is not subsidized, and he can't buy roach futures down at the Merc to hedge.

(see part 2)

“You're off!”

Since: Jan 08

Quito, Ecuador

#26 Mar 19, 2008
Trying to re-write this, because Topix erased my second post...
Amanda wrote:
Now, I understand that crop prices are up due to the ethanol boom. Don't assume that we are making money hand over fist. Yes, we are profitable for the first time in a while. I will freely admit that. But, as grain prices rise, so does everything else. In one year alone our fertilizer costs rose $30,000 and our fuel and LP and electric costs doubled. So we are paying more to produce the same crop.
Try building anything out of stainless steel or copper. Yet I get no subsidies, loans, or anything of the sort.
Amanda wrote:
And do I even need to mention the cost of machinery and infrastructure? Most of those purchases are on 10 year loans through the bank. We purchased a USED tractor 3 years ago and it was $110,000. Try pricing out a new combine sometime and be prepared to wet yourself when you see the price.(Although the new models do come with bun warmers and cd players, that's a welcome change. I like bun warmers but not $300,000 worth...)
Try a laser cutter.$500,000 and no bun warmers. Or a good CNC machine.$250,000. And we're a small business.

Yet no loans, subsidies, price supports, counter-cyclical payments, or payments not to build.
Amanda wrote:
Not to mention repairing, maintaining and eventually replacing sheds, grain bins, drying setups, ect. So, we do all of this on a government loan of $50,000 a year.
And I do more with no loans.
Amanda wrote:
If you really want to know more about how farm subsidies work, may I suggest visiting your local FSA office. The staff there will be more than happy to give you all the information.
Remember, don't complain about the farmer with your mouth full...
No doubt that farmers do a necessary job. But if the free market can supply us with everything from beanie babies to natural gas, why should food be immune from the laws of economics?

“You're off!”

Since: Jan 08

Quito, Ecuador

#27 Mar 19, 2008
I apologize for the multiple posts. Topix is acting screwy.

“You're off!”

Since: Jan 08

Quito, Ecuador

#28 Mar 19, 2008
Amanda wrote:
Oh, one more thing. We are not a large corporate operation. We are 1200 acres. Not large by any means.
Not to be cruel, but should you exist as a farm? You don't see small car companies (with a few VC exceptions like Tesla), because scale is crucial. And you don't see people offering to subsidize small family car makers, do you?

While there will always be a market for smaller farms, especially among foodies willing to pay for local produce, I have to wonder if a shakeup is in order if such subsidies are necessary.
Amanda

Elk Grove Village, IL

#29 Mar 19, 2008
ByronMoreno wrote:
<quoted text>
Not to be cruel, but should you exist as a farm? You don't see small car companies (with a few VC exceptions like Tesla), because scale is crucial. And you don't see people offering to subsidize small family car makers, do you?
While there will always be a market for smaller farms, especially among foodies willing to pay for local produce, I have to wonder if a shakeup is in order if such subsidies are necessary.
Well, actually it depends on whether your operation is grain or livestock. Not that prices for milk or pork bellies are great right now, but they can be an asset. The question is not cruel, we get it a lot. Like I said before, it's more of a calling. You really have to love the land to do this year after year. I can't tell you how many times I've thought about quitting, only to come back the next season to sit in a tractor and get callouses on my nether regions. In our family half work outside jobs to provide when the crop fails, and it has. And to provide health insurance. It costs a lot to insure this place, as we are pretty high on the accident scale. Not us personally, just the industry in general. Did you know that farmers have the highest rates of suicide in the US? Probably from looking at the $300,000 combines.(I know, I should leave it alone...)

But seriously, we've seen so many of our friends sell off and leave. Which is why we've accumulated almost 500 acres in rented ground in the past 5 years. Which means we are right on the cusp of being profitable. We can survive, but smaller guys are getting out. It's really sad.
Randy

Elgin, IL

#30 Mar 19, 2008
ByronMoreno wrote:
No doubt that farmers do a necessary job. But if the free market can supply us with everything from beanie babies to natural gas, why should food be immune from the laws of economics?
It is not immune. You are complaining because the free market price of corn went up, due to the economic law of supply and demand. Demand for corn is up, that is why the price went up. As to natural gas, it has gone way up as has oil. US metal industries used to have tariffs. Those are gone, that gives you cheap metal prices, so why are you complaining about your metal prices? If you think food prices are high now, just wait until there are no more family farms. When agriculture is controlled by a few mega-corporations, they can cut supply and drive up prices artificially. It works for the Arabs with their hand on the oil valve. It will also work when they buy up enough of US agriculture. Corn-produced ethanol is just the beginning, eventually it will be made out of other crops as well, like switch-grass. The infrastructure will be there when the time comes. Ethanol does reduce pollution in some areas, that is why there is a special blend for the Chicago area, it is required by the EPA. I think the US govt should do more to encourage ethanol and other forms of domestically produced energy because it would reduce deficit trade balance and improve the domestic economy.
Amanda

Elk Grove Village, IL

#31 Mar 19, 2008
ByronMoreno wrote:
I apologize for the multiple posts. Topix is acting screwy.
Yeah I noticed that. I lost a whole post on your responses, but I've gotta run. I'll get back with you tomorrow if that's okay. Kid's sick and I've got to get to the implement dealer to get parts, lots of expensive parts. I hate spring.

Thanks though for the intellectual conversation. And I really do mean that, most people see us as Ma and Pa Kettle chewing on the sheaf of wheat without any knowledge of the outside world. Thanks!

“You're off!”

Since: Jan 08

Quito, Ecuador

#32 Mar 19, 2008
Randy wrote:
<quoted text>It is not immune. You are complaining because the free market price of corn went up, due to the economic law of supply and demand.
What is free market about the ethanol debacle?
Randy wrote:
Demand for corn is up, that is why the price went up.
And that is another cost we need to add into the ethanol calculus.
Randy wrote:
As to natural gas, it has gone way up as has oil. US metal industries used to have tariffs. Those are gone, that gives you cheap metal prices, so why are you complaining about your metal prices?
You have to be kidding.
Randy wrote:
If you think food prices are high now, just wait until there are no more family farms. When agriculture is controlled by a few mega-corporations, they can cut supply and drive up prices artificially.
No, they can't. Even if such an oligopoly somehow happened, they simply don't work that way in a fixed supply situation. Add in foreign competition, and their power is minuscule.
Randy wrote:
It works for the Arabs with their hand on the oil valve.
Big difference. The oil they don't sell today is still in the ground. If you don't plant crops, you can't get the season back.

Plus OPEC is a tiny group. You'd need to have almost all US food production be under one roof to even get close as a comparison.
Randy wrote:
It will also work when they buy up enough of US agriculture. Corn-produced ethanol is just the beginning, eventually it will be made out of other crops as well, like switch-grass. The infrastructure will be there when the time comes.
That's nonsense.
Randy wrote:
Ethanol does reduce pollution in some areas, that is why there is a special blend for the Chicago area, it is required by the EPA. I think the US govt should do more to encourage ethanol and other forms of domestically produced energy because it would reduce deficit trade balance and improve the domestic economy.
*sigh*

How does it do this? Where do you think we are getting the energy from to make ethanol?

“You're off!”

Since: Jan 08

Quito, Ecuador

#33 Mar 19, 2008
Amanda wrote:
<quoted text>
Yeah I noticed that. I lost a whole post on your responses, but I've gotta run. I'll get back with you tomorrow if that's okay. Kid's sick and I've got to get to the implement dealer to get parts, lots of expensive parts. I hate spring.
Thanks though for the intellectual conversation. And I really do mean that, most people see us as Ma and Pa Kettle chewing on the sheaf of wheat without any knowledge of the outside world. Thanks!
And you. My wife's uncle is a farmer, and my maternal grandparents are from downstate.

Full disclosure, I've been affected by retribution tariffs overseas. The WTO allows foreign governments to put tariffs on US products until the US reduces farm subsidies. Since my company is from a farm state, I get hit. SO not only do I pay taxes for subsidies and more at the grocer's, I earn less money, too. When you are making payments on a $1,000,000 Cap-Ex line, your sympathy goes down.

Beyond the fairness to taxpayers, I have a real issue outside our borders. I travel in non-developed parts of the world frequently. Our subsidies give our farmers an unfair advantage in the world, to the detriment of poverty farmers. It's one of the first things people mention to me over there, and they have a pretty compelling case.

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