I know a lot of you don't take Kunstler seriously, thinking him a Chicken Little -- but in his weekly dispatch today, he poses a pretty scary scenario about farming this year:
Every week, the failure to recognize the nature of our predicament thrusts us further into the uncharted territory of hardship. The task of government right now is not to prop up doomed systems at their current scales of failure, but to prepare the public to rebuild our systems at smaller scales.The net effect of the failures in banking is that a lot of people have less money than they expected they would have a year ago. This is bad enough, given our habits and practices of modern life. But what happens when farming collapses? The prospect for that is closer than most of us might realize. The way we produce our food has been organized at a scale that has ruinous consequences, not least its addiction to capital. Now that banking is in collapse, capital will be extremely scarce. Nobody in the cities reads farm news, or listens to farm reports on the radio. Guess what, though: we are entering the planting season. It will be interesting to learn how many farmers "out there" in the Cheez Doodle belt are not able to secure loans for this year's crop.
My guess is that the disorder in agriculture will be pretty severe this year, especially since some of the world's most productive places -- California, northern China, Argentina, the Australian grain belt -- are caught in extremes of drought on top of capital shortages. If the US government is going to try to make remedial policy for anything, it better start with agriculture, to promote local, smaller-scaled farming using methods that are much less dependent on oil byproducts and capital injections.
Anybody in the readership informed about credit conditions on America's farms, and what the broader economic crisis will do to this year's crop? Sharon?
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It is true that the Federal Government will likely respond to major producers with farm credit subsidies - including outside appropriations if necessary. But they will probably only do so in the presence of a perceived necessity, and mostly in ways that affect larger producers. Smaller farms mostly rely on local banks - and despite the claims that local banks aren't as affected as the big guys, unfortunately, that isn't true - it varies a lot, some banks are well capitalized and in great shape, others have their share of problems, including many in farming areas. What's most likely is another farm crisis, as happened in the 1980s - a lot of bankruptcies and foreclosures in rural areas, and increasing pressure, especially on family farms and smaller farms. The most vulnerable will be farmers who are seeing the fallout from teh collapse of corn prices. I think that farm credit may be a longer term problem, but not an immediate one.
If people are actually unable to get grain on any scale, we will restrict exports - this would have a devastating effect on probably close to a billion of the world's poor - not just the ones we actually feed, but those who are already spending 70, 80 or 90% of their income on food and simply can't bear the cost of grain price increases. But that would probably come when there was compelling evidence of a shortage. And, of course, it will raise food prices, especially prices for meat and milk in the US - for people already struggling. That is, many people will be priced out of parts of the food market - as many already are. If there were real shortages, one could hope that the US would regulate the feedlot system, instead of cutting exports, but I have my doubts about that.
What I personally suspect is likely is that the first and worst victims will be precisely the people that are best adapted to the kind of agriculture most of us want to support - family farmers and small scale farmers that serve local communities. As people are less able to afford the premium for local, organic and sustainable food, and communities raise taxes to compensate for lost income streams, the first agricultural crisis, in my own estimation, will be the local food systems that do the most to improve long term food security and have the least environmental impact - they will not be bailed out, unfortunately. And that means that in the long term, the energy/climate crisis that industrial agriculture exacerbates so badly will probably come back to bite us in the ass.
Sharon
despite the claims that local banks aren't as affected as the big guys, unfortunately, that isn't true - it varies a lot, some banks are well capitalized and in great shape, others have their share of problems, including many in farming areas.
Query: source for this? FWIW, I am somewhat cautious about farm creditors' professions of solvency. There are other ways for banks to die besides subprime - e.g., Alt-A, CRE - and I can't help but wonder if this might be the same for the banks catering to farmers.
Although we don't use credit for crops, we are confronted this year by severe drought. The wheat crop is turning brown. Cattle prices have fallen from $1.05 per pound last year to $.63 per pound this year. Are you paying $1.00 per pound for those t-bones? Cattle feed lots can't get feed because of Ethanol. Land that was usually planted in wheat is now corn; corn, corn as far as you can see. Enjoy your ethanol!
Food, Shelter, Transportation, Security. The basic foundations of a social life.
All are in jeopardy. Once gain, we are setting ourselves up for failure. We're trying to sustain "growth" when growth is unsustainable. We are trying to instigate demand when none exists. We have strung out our institutions and handed our power to the enterprise.
Where will the Monsanto corporation be when the American farmer, who was basically forced into using their terminating GMO's, is down and out? Our industrial farming practices are comical at best, heavily relying on industrial equipment, transportation, and patented products. Not only is it unsustainable, it is reckless vigilantism. The writing is on the wall and we are reckoning for a beating.
I hold a belief that localities will solve their own problems, in time, with or without the help of a social framework. Suburban and rural farmland will bring flocks of unemployed migrant workers willing to trade an honest days work for a healthy helping for the family, but again we are socializing risk and privatizing reward.
However,
every week my optimistic outlook turns more dire as our new president is unable to inspire our government to take any appropriate action and the Demo talking heads follow blindly while the uncooperative Repos squawk at any attempt to reconcile our differences and forage a new common ground. Funding for our programs is and was indeed necessary, but at what cost?
The time has come to put aside the political differences of the old-era and herald a new wave of cooperative support (that doesn't involve any more fucking tax cuts). This isn't hard. Quit meddling in the markets, let the auto companies fail (or, heaven forbid, put a moratorium on all NEW auto sales for a year until they can figure this out), and buckle down the financing to dig people out of this crisis. It's there, or would have been if we hadn't given it all to the incontinent bankers.
Our social support network will collapse under the weight of 40%+ of the American populace needing some form of federal assistance. We have the mobility and the resources to act now - but do we have the political clout, or are we still bickering about providing condoms to high-school kids?
This is a crisis of personal debt and irresponsibility as much as it is federal.
This is an unfolding story but the early signs are there. Here in Australia I am now hearing of fellow farmers being unable to extend lines of credit to account for the higher cost paradigm. This will cause two things. A reduction in acres planted to grains since they require the most credit to produce. It will also force farmers with too much debt to (surprise surprise) sell land and downscale. As Jim correctly calls everyone is going to have to downsize since credit appears to have been the driver of scale in farming. End result. 2009 will see a major drop in output - much larger than the demand destruction you are currently seeing out there.
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