With the current weather we are enjoying it is full tilt “go time” on every farm from Kansas to Quebec. I’m always amazed how even as far north as we are, broader weather patterns tend to dominate the continent and despite the difference in latitude just a few weeks *at the most* separate farm activities even 2,000 kilometres away. One of the most shocking things I see as I peruse the North American agriculture scene online is witnessing field tomatoes being harvested in August in California – green as grass and handled about as gently as a load of coal – when there are vine ripe tomatoes available in all of the lower 48. You will hopefully notice this difference soon as our strawberries come on – the first blossoms are showing!
We’ve already snuck in some early crops and now the big push to plant cool weather mainseason crops like potatoes, greens and onions is on here. Once nighttime temperatures are consistently over 10c we will put in our warm weather friends like tomatoes, peppers, cucumbers and melons. It was a very pleasant 26c here this afternoon but was barely above freezing at 5:30am in our little hollow yesterday morning.
Broadly speaking, plants don’t do a heck of a lot until it’s over 10c at night – they photosynthesize during the day, but at night the real cell division occurs. I am often shocked in the morning when I wake up the greenhouse to see how much our little transplants have grown overnight.
Agriculture in North America ploughs on despite an entirely new paradigm of doubling input pricing, logistical issues and inflation causing consumers to reevaluate their spending priorities. I’d be lying to say it didn’t have me a bit worried. On the whole our business has been successful despite COVID but the gravity of the runaway inflation is giving me pause. For instance: our CSA share sign up is lagging… This is a particular pinch for us because being a foundation of our business, we rely on those subscriptions to keep the lights on this time of year and underwrite our upfront expenses. If you’re interested in our box program or cards I’d especially encourage it right now – it is a great way to save money, secure fresh produce and lock in prices.
Last spring many folks were stuck in the house, sitting on an unusual amount of cash they had nowhere to spend, and I suppose, looking around the internet for ways to spend it. This spring, people are catching up with missed travel opportunities, have the kids signed up for all of the activities they missed and are getting absolutely hosed at the gas pump and grocery store. It makes sense, and we just have to figure things out. We do it all the time.
I first got anxious about inflation in late 2020, not because I have any particular insights into the world of economics, but because Michael Burry was tweeting about it. Who is Michael Burry? If you’ve seen the movie The Big Short, he’s the guy played by Christian Bale: a slightly autistic market analyst/trader who foresaw the 2008 US housing collapse and made a ton of money off of it for himself and others.
His dire predictions were causing so much of ruckus on Twitter that he eventually deleted his account, although in highsight, pumping billions of dollars of free money into the economy in lieu of actual productivity, inflation seems like a foregone conclusion that anyone could have foreseen.
At the time, I hatched a scheme because we needed $300,000 to mortgage our farm (because of the Barndominium and a couple other issues, our place is not of interest to most banks). The idea was a “Super CSA” – I wanted to find 60 people to invest $5,000 dollars and receive $1,200 worth of food for each of the next five years – with the kicker that the food prices would be locked in at 2020 levels. It was meant as a hedge against inflation. Fortunately (perhaps?) my likely unrealistic scheme was thwarted by Morgan’s diligent efforts to find financing and never came to fruition, because National Bank’s business division eventually took us on and I indebted myself to a faceless corporation instead of 60 individuals.
So, now, two years later, the value of your house has doubled, your car is worth more than when you bought it, your new dishwasher *might* come in two months and a 2×4″x8′ stud is back up to $9. Fertilizer, diesel, corn and soybeans (the actual foundation of the economy) are now 2x of what they were a year ago and things are just starting to get interesting. Someone chirped me the other day because the price of diesel was up to $2.45 and we happen to run a diesel truck. Yes it hurts a bit, but no matter how you get around that expense is going to be transferred to every single consumer because everything we eat, wear and rely on for daily life gets to us thanks to diesel fuel – and those prices haven’t even caught up.
Perhaps most perplexing about this is that despite all of these price increases, grocery retailers like Loblaws are posting incredible profits – up 40% compared to last year. They are reporting a distinct trend towards discount grocers and smaller, more frequent purchases. The question for us is: with increased costs of living everywhere, are people going to limit their discretionary spending on local produce? Is buying fresh local food going to become a luxury item that can be dropped to save a bit on the bottom line? Are we moving to a dollar store economy?
I guess we’re going to find out. “Sticker shock” is a very real thing. I bought some crop inputs today and they were up 120% over last year – it sort of melted my brain. I got chatting with the owner of the business (Willows) and heard the same thing I hear everywhere: “Demand is incredible, but our margins are getting thinner and thinner”. Everyone in the back end of the food supply chain is essentially in a Mexican standoff: waiting for someone to blink while trying to hold onto competitive prices.
In the meantime, with record profits, the dominant grocery chains can afford to sell produce as a loss leader while drawing in consumers to purchase actually inflated processed food and consumer goods from the middle aisles. I bought a watermelon last week, for instance, that cost $3.50. I couldn’t help myself. Bright, warm sunny day, I knew the kids would freak out for it. The watermelon came from Mexico. Now, it costs $1 to mail an envelope across town but you’re telling me you can ship a 10 lb watermelon across North America and make money for $3.50?
Produce growers are under the gun in this scenario because of the vulnerable nature of produce: it spoils. You can’t just sit on it. So, you have 10, 100, 1000 acres of chard, melons or whatever. If you’re playing hardball with the Westons (or the other two players in Canada’s effective grocery monopoly), you are going to have to take what you can get – best case scenario you have a contract in place from when your inputs were half the price. How this affects us or you remains to be seen. All I know is that I’m weary of raising prices to even begin to compensate for expenses lest we scare off customers – if you’ve read this far in this email, I’d imagine you’d accept it, but more broadly, it remains to be seen.
I post all of this doom and gloom because it is at the forefront in my mind right now as we make decisions about our little farm and I’m sure in your own household as well. We’ve been at this here for nine growing seasons now and the question of “are we going to make it?” seemed to have just about disappeared… but is back again. Something that always stands out in my mind when I talk with those who run successful businesses is the often repeated idea that “yeah we’re doing great – but everything could go to hell in a heartbeat”. The people I see actually pushing the envelope and “going for it” – whether a young company or multigenerational business – seem to all agree that you can’t take anything for granted, and the more you accelerate the more friction you generate.
If you’re fortunate enough to be a homeowner right now, I’m sure the notion to sell out and cash in must cross your mind now and again – very tempting! But where do you go? Out of the frying pan into the fire. LIkewise for us – yes this is uncharted territory. Challenging times – but what else on earth could we possibly do? Failure is not an option.
The worst of it for me personally, is that I feel “inspired” to farm. That is to say in the most literal sense, I am in the spirit: I feel a moving come over me when the weather is just so and God help you if you try to stand in my way of getting crops in. I don’t care if I have a shovel or a horse or a tractor: if that ground is warm and I have two nickels to rub together to buy seed, I am going to farm.
And you can take rest in that because I am far from the only one. I honestly believe the world turns on inspiration. I have much more faith in inspiration than willpower. So many of the wonders of our civilization did not come from coordinated academic research or industrial inquiry, or polls or studies, but rather strange moments of revelation or action. And that goes from the remarkable realities that your toilet reliably flushes to that you are somehow able to read this on a little computer in the palm of your hand. Newton under the apple tree type stuff. Farming is no different. Many of the families in the business of agriculture in fact represent a continuous lineage of growers and herdsmen going back to the Iron Age. They aren’t about to stop doing what they’ve been doing for thousands of years.
And the reason they do it isn’t because farming is some sort of infinite money hack. On the contrary. It’s a great way to live poor and die rich and bless/condemn the next generation to do the same. Rather people pursue and persist in agriculture because they feel very strongly about it. It’s actually very emotional – for better or worse. There’s pride, purpose and a whole lot of money on the table. It doesn’t hurt that most of us are completely unemployable otherwise!!!
Sorry for the long polemic. This is probably one of those examples of telling others what I need to hear myself. But please take heart and ignore the hysteria out there. Yes the world is crazy, it always has been. Anyone with a brain who’s been watching their money closely for over fifty years tells me what we’re saying ain’t nothing compared to the 70’s – with inflation, fuel rationing, the whole nine yards… So let’s just relax, take some time to smell the roses soon to bloom and enjoy some nice meals with our loved ones. We’re looking forward to the season ahead of us.