Continuing the Cycle

Symptom of an underlying trend

The task I was undertaking when this photo was taken wasn’t the most exciting job I’ve ever completed. So it’s no surprise that this probably isn’t the most appealing photo you’ve seen today.  The wooden posts you see above are now stacked in a very nice firewood pile just near my house and the rusted wire has been taken to our local tip. (I think it’s recycled as scrap metal) Yes we were pulling up a fence. Now fencing isn’t rated as an enjoyable job in the farming world. Mostly because it’s one of the few jobs that’s done pretty much the same way now as it was 60 years ago. So it’s still quite a manual task. So while the fence pulling on it’s own was not terribly exciting, putting the task into some historical context definitely makes it more interesting.

Our family business was fortunate enough to be able to purchase the above land late last year when another local family farm was carved up and sold. As usually happens when farm land is sold, it was brought by other nearby farmers including ourselves. While fortunate for us, it was a real pity that the farmer involved and his young family had to sell, as they are now out of our local community & economy. This has meant the  population of this rural town dropped by four and the average farm size got slightly bigger. This isn’t a new occurrence to farming locally, nationally or even globally. For the last 60 years or so, farmers the world over have been doing their job so successfully that they’ve literally been doing themselves out of work. Innovations since WWII including ever bigger and more powerful tractors and implements, improved knowledge & use of fertilisers, better weed and disease management practices, better soil management practices and many other innovations have meant that farm productivity growth has outpaced global population growth for a long time. For the world this is an amazing and wonderful achievement. Cheap & plentiful food has meant massive population increases and economic development. However, for farmers this has meant that their commodity prices haven’t kept pace with inflation for a long time.

I found the above graph in a 2009 economic report put out by the Westpac Bank. The report is looking at the impact of China on global wheat supplies, but it touches on several much broader and far reaching topics. If the prices listed in the graph don’t mean anything to you, think about the broader impacts such a trend has on the rural economies of the world. A downswing in the above graph means that the real income from a fixed amount of grain is decreasing. Of course an upswing means that a farmer is earning more from that same amount of grain. This graph only refers to wheat but the same trends have been at work across broad sections of agriculture for the past ~60 years. If the real prices of your produce are always dropping you can only stay in business by becoming more efficient and/or working more land on smaller profit margins to make money. Production increases of course help in the short term too, but in the longer term they only continue the trends I’m discussing here. Bigger farms mean less people living in rural areas and more urbanisation. These trends have lead more than anything to the shrinking of rural Australia. Moreover, these trends will continue until the above graph plateaus or turns the other way. Rural populations will not stabilize or grow until real farm income rises to support it.

Interesting perhaps, but how does all the above relate to us pulling up the fence? Well, the existing paddocks the previous owner had setup were too small for the equipment that we have. It’s much more efficient in time, fuel, fertilizer etc. to have bigger paddocks. With bigger paddocks you can farm more area in the same amount of time and with the same equipment.  I know that the other farmers who purchased the other parts of the previous owners farm have done similar things to us. So the cycle continues…..

Bonus food for thought for reading this far: See the little bump up in prices down the bottom right of the graph in 07-08. This was the effect that the commodities bubble had on wheat just before the GFC. (Global Financial Crisis) It was this increase in food prices globally that brought about great unrest in various parts of the world & (in part) the other GFC. (Global Food Crisis) It makes you wonder what prosperity agriculture would return to if farm incomes returned to even 1970s levels and also, what unrest this could cause globally?

Jonathan

Web developer turned farmer. Interests include: my faith, my wife, technology, cricket, farming, ice cream & world events.

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4 Responses

  1. Dwain Duxson says:

    I was going to say that whilst it’s boring pulling the fence down, there is a sense of pride once the new fence is up. But I gather there is no new fence going up….Love the graph, spells it out, would be similar with most commodities (with inflation adjusted). Will post on Farm Talk

  1. August 8, 2010

    […] This post was mentioned on Twitter by Matt Boucher and Jim Doolittle, Jonathan Dyer. Jonathan Dyer said: New Blog Post: Continuing the Cycle http://bit.ly/cKvyN3 […]

  2. August 26, 2010

    […] try a career in agriculture over a career in the corporate world. Despite my earlier post about the shrinking of rural Australia, I honestly think that the future of farming can be nothing but bright. The […]

  3. July 15, 2012

    […] I’ve written before about what happens when farm gate prices don’t keep pace with inflation. This is why farms keep getting bigger and bigger, and employ less and less people. But it’s also why farmers are some of the most innovative, resilient and resourceful people I know. They need to be to stay in the game. […]

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