Beyond the commodity mind-set

Be careful what you ask for, the old saying goes, because you just might get it.

Six years ago, during the longest farm bill debate in U.S. history, “free market economy” was the battle cry. The Federal Agricultural Improvement and Reform (FAIR) Act of 1996, better known as “Freedom to Farm,” became law April 4, 1996. Its hallmark was “production flexibility” and producers looked more to the market and less to government programs for production decisions. At least in theory.

Now, on the eve of the next farm bill debate, no one is chomping at the bit to get back into the fray. But free markets haven’t exactly been the savior of farm prices.

“Free markets can be brutal and tend to sweep away old ways of doing things,” observes Peter Goldsmith, a University of Illinois ag economist.

Ditto, says Iowa State University economist Mark Edelman.

“In its purest form, the free enterprise system is not necessarily kind and can be very brutal at times,” Edelman writes. “It does not care who produces what or under what conditions the products are produced. It simply cares about what is produced and whether it can be delivered in the form and time frame preferred by the consumer for the cheapest price possible.”

I call it the Wal-Marting of agriculture. Opponents of the low-cost megastore blame it for the demise of the downtown, but shop there anyway. Likewise, opponents of the changes we’re seeing in agriculture blame the megafarms for the demise of the small farm, but demand cheap food anyway.

Both economists predict major fundamental changes in the world of agriculture. The biggest change, Goldsmith says, is breaking out of the commodity-based mind-set of producing the same crops, lowering costs and looking for ways to improve efficiency.

“Producers have been doing that for a long time and we still see 50 percent of farm income coming from government payments.”

That shift is as brutal as the free market and Goldsmith doesn’t offer any easy answers.

His million dollar question is: “How do you make a business that was inherently static into one that is inherently dynamic?”

Like other industry advisers, Goldsmith is urging producers to grab more of the food chain, to make a product better or more attractive to users or consumers farther down the line.

He tells of a group of New Zealand sheep producers who is doing that right in our backyard, in San Francisco. The group hired a food marketing consultant, one of the farmers quit the sheep business and worked full-time in San Francisco to find out what the end-users wanted, and they created a partnership with a local butcher to custom cut orders.

Why didn’t U.S. producers do that?

“The new economy says you can’t rely on the old routine, on the old way of doing things. You must constantly adapt., much like the other sectors of the economy,” Goldsmith said. “This is exactly what the New Zealand producers did. Rather than producing more sheep or more sheep more efficiently, they worked with end-users to produce lamb that had an advantage in the market.”

Goldsmith says this transition is painful and forces individual farming families to re-evaluate everything they do. But while free markets are sometimes brutal, he reminds producers they can also bring progress, hope and opportunity.