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Equipment costs cut into farmer's profits

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Thursday, Feb. 2, 2012 3:09 PM
Increasing costs for farm tractors and equipment, such as these in the yard of Southwest Ag Inc. in Gem Village, are increasingly placing them beyond the reach of small-scale farmers in Southwest Colorado.

Some in the food and agriculture industry are sounding the alarms. The future of our food is in jeopardy, they say.

“I don’t know what the answer is, but something has to change or we’re not going to be able to eat,” Durango hay farmer John Boughman said. “If people can’t afford to farm, where will we get our food?”

News headlines often raise the issue of rising food costs and the pressure it puts on the nation’s struggling families. But local farmers say a deeper, more behind-the-scenes problem could jeopardize the nation’s access to healthful food produced by small, local farming operations.

Even as more Americans, and Durangoans, are turning to farmers markets and roadside produce stands for locally grown, often organic foods, farmers continue to find their costs far outstrip the value of their harvests.

Local farmers, ranchers, officials and farm-equipment suppliers interviewed for this story said that for most small and mid-size farming operations, a tractor no longer earns its keep. That is to say, over the expected lifespan of most farming heavy equipment, the food the equipment produces no longer nets enough cash for a farmer to pay for the equipment before it needs to be replaced.

Bottom line: Planting, growing and bringing the food that’s on your table to market came at a net loss to the family that did the work.

“Most of the farmers in our local market have another full-time job,” said Rich Hillyer, part-owner of Southwest Ag, a local farming-equipment retailer. “That’s been the case for a long time.”

Boughman echoed the sentiment, saying it’s almost impossible to be “just a farmer” anymore.

Even at today’s high prices for some types of produce and hay, “you’re not making it unless you have a really large farm,” said Ben Wilson, sales manager for Witt & Sons Irrigation.

A whole host of issues are playing a role in a growing epidemic of small farms going broke, officials and agricultural workers said.

Land costs have risen drastically during the last decade, farmers and ranchers said. Equipment costs alone have risen more than 30 percent in just three years, said Hillyer and Wilson. Gas costs have risen. Tax policies and local land-use rules and regulations also can create hurdles for farmers.

Even new air-quality rules posted by the U.S. Environmental Protection Agency will cost farmers, Hillyer said.

To meet the requirements of the regulations, a $60,000 tractor today will cost $75,000 next year, Hillyer said.

“It’s scary,” Hillyer said.

The farmers have been surviving the only way they know how, several people said. They’re taking on debt. They’re borrowing to pay for the land, equipment and seed.

“The only thing that saves the farmer now is installment payments,” said Kent Ellison, a hay farmer in Arboles.

It’s a disaster waiting to happen, said Evert Oldham, area director for the U.S. Department of Agriculture Rural Development office in Aztec.

“You end up with these required massive capital investments and no profits after you pay all the debt service,” Oldham said.

One bad year, one flood or crop infestation could begin a farmer’s downward spiral to watching the death of his life’s work, he said.

“Our food security, stability and sustainability depend upon us returning to a smaller-scale system,” Oldham said. “It’s not about going back to the good ole’ days, but the food system model we’ve had for the last 40 years is a proven failure.”

With food-contamination scares increasing in numbers and gas and energy costs soaring, people like Oldham say they question the wisdom of recent decades’ scaling up of food production operations into larger and larger commercial farms.

“There comes a point when consolidation makes you so fragile that it’s not sustainable,” Oldham said. “We cannot risk that with our food.”

But reversing the food system’s path, which Oldham says looks remarkably like the path the recently bailed out banking industry took to in recent decades, won’t be easy.

Food will inevitably cost more, but there would be long-term health-care cost savings, Oldham said.

Though Jim Dyer, director of Healthy Community Food Systems, knows a struggling family who needs cheap food today might find it hard to adopt that long-term view.

In the end, Dyer said, semantics will matter.

“People want cheap food, but I think we need affordable food,” he said. “There’s a difference.”

Affordable to Dyer means fair prices for the producer, the consumer and everyone in between. Getting there will involve fixing more than a broken food system. Working wages also must be addressed across the board.

“We have to also start talking about living wages to deal with this in the longer term,” Dyer said.

And a problem this big cannot be fixed overnight, Dyer said. It starts with people feeling entitled to a say how their food is moved, grown and what it costs, he said. Right now, “everyone owns the system but us,” Dyer said.

Solutions will come if people are taking ownership in area food systems, playing a role in organizations working to find a solution, supporting their local farmers and keeping a closer eye on the trends surrounding the commodities that keep us fed and healthy, locals in the agriculture industry said.

In the meantime, Ellison said, “buying a farm is a good deal for people who need a write-off because it’s a good loss.”

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