A colleague sent me a link to the following video. I found it funny, if not misinformed at times. The irony, of course, is that many people also believe things about organic food that also aren't true. The organic labels causes people to ascribe all kinds of mystical properties to a food. It is also worth pointing out that, at least for meat, "natural" can't be slapped on anything - it has to be "minimally processed", among other things, according to the USDA. In any event - it's good for a few laughs
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The new gentleman farmer
That's the the title of a story in the winter issue of WSJ.Money magazine.
The piece documents the rise of the gentlemen and gentlewomen farmers: folks who made millions elsewhere and who are now trying their hand at agriculture - primarily organic agriculture.
Here are some of the folks jumping in:
It's late afternoon on a Friday, but Lerner, the 58-year-old tech pioneer who co-founded Cisco Systems, is still working, driving her Range Rover around the pastures and barns that make up her 800-acre Ayrshire Farm in Upperville, Va
. . .
The nation is in the middle of an organic-food boom, and in case you haven't noticed, a surprising number of boldface names are becoming part of it. That includes Oprah Winfrey, who is growing kale, carrots and more than 60 other varieties of vegetables, fruits and herbs on her organic farm on the Hawaiian island of Maui, as well as comedian Roseanne Barr, who is growing macadamia nuts and produce on her organic farm on Hawaii's Big Island. Fashion-world honchos George Malkemus and Anthony Yurgaitis—president and vice president, respectively, of designer shoe brand Manolo Blahnik—have a dairy farm in Litchfield, Conn., where the 325 cows are pasture-fed (at least when the weather allows; otherwise, they are given a special diet of high-quality hay and a premium feed)
Are they making any money?
It appears not. Indeed much of their fortunes are being lost (or rather perhaps we should say they are spending their fortunes on a consumption good or experience).
But by Lerner's own admission, she has yet to turn a profit on her $7 million-a-year business, which includes two additional farms in the area, bringing her total acreage to 1,200. And at times, it seems she is consciously running it as a nonprofit entity, especially given the considerable time and energy she devotes to research on organic farming practices.
It seems she is having to make some big changes:
she has taken a series of steps to save money, including farming out some of her operations and making adjustments in her meat-packaging operations. Her biggest step of all, though, is deciding to sell a good chunk of the farm. Indeed, some 600 of Ayrshire's 800 acres are now on the market, replete with the mansion she's restored. The asking price: $30 million. To many, this might be seen as an acknowledgement that Lerner has ultimately failed in her mission. She prefers to view it as the next step in the evolution of her business.
More generally:
But the good intentions of these type-A types notwithstanding, the economics of organic farming are a potential blow to their fairly large egos. These are individuals with scores of successes in life, but experts say that despite the price premiums that come with organic labeling or other likeminded practices, the math doesn't always work out. It is just too expensive to do. For that matter, almost all farming, organic or conventional, is a financial boondoggle when it's outside the realm of factory farming. The median projected income of the American farm in 2013? It's actually a loss of roughly $2,300, according to the U.S. Department of Agriculture. Is it any wonder that—the organic boom notwithstanding—the number of farms in the U.S. has been on a dramatic decline, from a high of nearly 7 million in the 1930s to 2.2 million today?
Although I have been critical of many of the claims of organic agriculture, one shouldn't be too quick to conclude that all organic farming is unprofitable. Indeed, many conventional producers have switched some of their operation to organic because they expect higher profits (i.e., they expect the higher price premiums for organic to compensate for lower yields and higher input costs). But, the ones making money at it typically aren't "gentlemen farmers" or mom-and-pop set-ups.
In terms of profitability, it may matter less whether one is an organic or non-organic farmer as compared to whether the producer uses efficient practices and technologies. For example, here is a study about dairies by some of my former colleagues at Purdue University published in the American Journal of Agricultural Economics. They show that the technology used by organic farms is less efficient than that used by non-organic (organic is about 13% less productive). However, there are differences in efficiency across farms, both organic and non-organic. As they say:
To our knowledge, our research is the first to show that economies of scale also exist in organic dairy production.
In other words, size matters - even if you're organic. Larger dairy farms are going to have lower costs. That's true for non-organic and it is true for organic. Also:
We find that compared to the Upper Midwest, the technology used by farms in the Southeast is more productive. Farms with cows of higher weight also produce more milk. . . .In terms of management practices we find that farms that tend to rent more of their land for either crop production or pasture are less productive. Intuitively, a renter does not have the same incentive as a land owner to invest in the productivity of the land. Farms that raise more of their own feed seem to be less productive. . . .
If gentlemen farmers want to make more money, they may have to stop being so gentlemanly and get down to business.
Does Big Farming Mean Bad Farming?
That was the subtitle of an interesting article in the Washington Post. While I do not agree with all the premises of the article, it does a good job debunking the notion that small size is the same as sustainable.
Size, as they say, isn’t everything. As shorthand, the big-equals-bad equation is convenient. But it obscures an inconvenient truth: Plenty of small farmers do not embrace sustainable practices — the Amish farmers I know, for example, love their pesticides — and some big farmers are creative, responsible stewards of the land. “Tony’s is a fantastic operation,” says Helene Murray, executive director of the Minnesota Institute for Sustainable Agriculture. “And he just happens to grow a lot of corn and soybeans.”
and
Thompson’s farm is not organic as he once dreamed it would be. Indeed, after studying the scientific literature, he finds himself mostly comfortable using genetically modified seeds. The rewards inherent in herbicide-tolerant soybeans outweigh the risks, he says. While he does have some concerns about GM corn, he says, “the prevailing technology is a good path, maybe the best available at the moment. This will change. We will learn.”
Still, Thompson has many tools to improve his farm’s environmental sustainability.
In my experience, Thompson is not all that unusual as a farmer - most are continuously trying to find ways to make food more abundant while making sure they leave healthy vibrant farmland for their kids.
The Roots of the Organic Food Movement
In the September issue of Townhall magazine, I discuss the roots of the organic food movement and the misconceptions people often have about organic. Here's how I started the piece off:
What do Michelle Obama and Chuck Norris have in common?
There is probably an answer that would make a superb addition to the hilarious list of Chuck Norris jokes. The less humorous, bipartisan response is they both support the organic food movement. Norris recently wrote that we should “eat local and organic, period,” and, of course, Obama planted an organic garden at the White House.
At the risk of finding myself on the receiving end of one of Norris’ roundhouse kicks, I suggest prudence before rushing out to join Walker, Texas Ranger at Whole Foods.
I don’t have a problem with people eating organic food. My family often does so. What troubles me are bad arguments for buying organic.
The article goes on to ask the question:
If these folks are right, then exactly what political positions are endorsed when the grocery basket is piled high with organics?
Then, I get into some of the particular beliefs people have about organic that often don't match up with the facts. Here's one tidbit:
The best science suggests the vast majority of us have nothing to fear from food pesticides. But even if you remain fearful, I suggest focusing your angst (and your budget) on those foods where pesticide exposure is most acute: strawberries, apples, and the like. Paying a premium for organic gummy bears or organic corn flakes is surely one of the most foolish ways to try to cut cancer risks.
Most overpriced items in the grocery store
Yesterday I received a phone call from a producer for a major cable news station asking if I'd be willing to come on a show and talk about this story that appeared in Business Insider entitled: "5 Of The Most Overpriced Items In The Grocery Store".
After reading the story, I gave the following response to the producer (slightly edited here for the blog). Although it would have been nice to have a little air time, I'm happy to report that they decided not to run with the story, at least as it was originally premised.
The story equates “overpriced” with the “percent markup”, which is pretty shaky. There are a lot of good reasons why the percent mark-up may vary across products that has little to do with being “overpriced”. For example, differences in demand for convenience and other characteristics, differences in costs of packaging, storage, transportation, etc. will cause differences in the percent markup.
Nonetheless, let’s play along.
1) Bottled water. On the surface, it does seem crazy that there is a 4000% mark-up for bottled water. But, part of the reason for the high percent is that the price of water is REALLY cheap to begin with (so the percent will look very high though the actual dollar mark-up in absolute terms is small). More importantly, how valuable is convenience to you? A lot of people are willing to pay an extra buck to have more convenient water and not have to fiddle with refilling and refrigerating a re-usable water bottle. Who am I to say that an extra $0.50 or $1 isn’t worth it to the person whose paying for it? If it were really the case that bottle water sellers were ripping us off, why doesn’t some entrepreneur enter the market and start selling cheaper bottled water and corner the market? The fact is that most of the cost is in the packaging, transportation, etc. When you buy bottled water, you’re paying for packaging and convenience.
The same arguments apply even more forcefully for pre-cut produce. Who cares if pre-cut carrots and onions are marked up 40%? I’m not having to do the work! That’s an extra $1-$2 I’m definitely willing to pay. And if someone else can figure out a way to do it for less than 40%, you can bet they’d have my business. Competition – in the long run- will eventually drive down prices to their approximate costs.
2) In general, I would characterize something as “overpriced” if people have mis-perceptions; if they believe they’re getting something from a product that they’re not actually receiving. Two of the examples in the story potentially fit that criteria: name-brand spices and brand-name cereal. One way to know whether you’re being fooled by marketing is to do a blind taste test. It is often the case that our brain is more powerful in influencing how we think something tastes than our tongues. So, with a neutral friend, try it out: can you REALLY taste the difference? If not, you may be over-paying.
3) In this light, there are a number of products that many people have “incorrect” beliefs relative to what scientific studies say – thus, they may be paying a premium for characteristics that they’re not actually recieving. One example is food with a "natural" claim. A “natural” label is pretty vacuous, and I've previously touched on those issues here and here. Another example is organic food. People believe a lot of things about organic foods that just aren't true: that they’re pesticide free, that they support small farms, that they are more nutritious, etc. I’m not saying there are NO benefits to organic, only fewer benefits than most believe. A lot of the same arguments apply to local foods. Chapters 5 and 9 in The Food Police have all the details and citations.