Wednesday, October 01, 2014

Guest Post from MK: Organic / Local is doing great, and so desperately needs help

It's hard to follow the logic of the author here.  A summary, offered by MK, to get us through:

Highlights: - Organic food is now a $35B business and farmers' markets have grown 76%. 

Therefore, they obviously need $52M in federal cash. With numbers like that they need help.

Vilsack says more organic farmers are needed to revitalize the rural economy.  And the rural economy must be in deep manure, because in February Obama tripled the subsidy to local/organic/pious/yogic food to $291M. Who can live on that? 

Plus, people love it! Some (rich, white) people anyway: "“It’s a really nice bump for us because we’ve been getting chump change for research,” said Mark Kastel, co-founder of the Cornucopia Institute, an organic research and advocacy group. 

Still, Mr. Kastel said that given the growth in the organic business, with about $35 billion in sales in the United States last year, he wished "there was more money to study organic practices."


W.E. Heasley said...

The Locavore's Dilemma: In Praise of the 10,000-mile Diet, Desrochers and Shimizu, 06/2012.

Anonymous said...

Loved this line: "But local farmers still struggle to market their food."

The "local farmers" are laughing at you. Because they have trucks now!

It's clear the author has no clue. If you know any "local farmers" who sell at farmers markets, at least in large metro areas, then you know how well they do.

My guess is that the USDA is concerned with how large agribusiness can get into the lucrative farmers markets game without looking like large agribusiness. And give money to left leaning "organic research and advocacy groups".

What a scam.

John Thacker said...

I believe that the author's logic is something like:

"No matter how much they sell, it's inconceivable that farmers and farm businesses would actually pay for research themselves. Public good, externalities, let's subsidize!"

August said...

As long as we have a USDA, this is better than them spending it on more of the same crap. Conventional Ag is shot through with subsidies- they use a lot of inputs and it will become cost prohibitive eventually. If the subsidies went away, conventional ag would be cost prohibitive now.

There are people doing their own research, but it is quite frustrating seeing billions of dollars going to the wrong research. Small farmers, environmentalists, etc- the more they actually try to do things on their own, the more likely they are to stop liking the government very much.

I have not been able to get very far convincing most people via explaining libertarian or economic principles- I have seen how raw milk, or wanting to put in a grey water system, or hatred of Monsanto (and Obama appointing one of their hacks) led various people to stop being interested in government solutions and start being interested in freedom.

Hasdrubal said...

You missed the opening part: There are massive ecnonomies of scale in food production and distribution, somebody (therefore the government) needs to figure out how to apply those efficiency gains to small scale producers!

August said...

The 'massive economies of scale' exist because government exists. The corporations get really big to make MC=MR (marginal cost= marginal revenue) The big corporations can distribute a huge portion of C, which is directly caused by government, over billions of transactions while people who want to start a small farm can't. This is a gigantic barrier to entry, not an economy of scale.

John Thacker said...


Honestly, I don't think so. From what I know of New Zealand (and to a great extent Australia), they have much, much less farm supports and so forth than the US, but are equally well dominated by large producers.

I'd love to see what happened if we eliminated the government intervention in farming, but I don't think that it would remove the economies of scale.

August said...

Don't forget to put costs like lawyers into your thought process. The big corporations can fill an office building with them; a small business starting up is lucky if it can hire one by the hour. This is applicable across the board. It dawned on me back in the 90s while trying to convince some guy to stop protesting Walmart- or at least stop advocating stupid regulations. The costs generated by these regulations become barriers to entry for anyone who tries to compete with Walmart.
Now we have 'too big to fail' the ultimate in proving my point. A political atmosphere in which being to big to fail is actually a thing, means, at the corporate level, there is incentive to get as big as possible.

Hasdrubal said...

August, let me give you an example or two.

Friends of mine recently got a robotic milker. With 20 head of cattle, it would have been prohibitively expensive but with 200 head it pays for itself fairly quickly. It produces a marginal (but not trivial) increase in output due to better tracking and tuning for individual animals and a tremendous quality of life improvement for the people running the farm. But, you need a pretty big farm to have the revenue stream to pay for it.

Second, look at the shipping container. It's far more efficient to move things around in consistently sized lots: Transportation capital can be standardized, shipping costs are consistent, you have an entire industry based around moving just those things from point to point. Small, local distribution, requires far more man hours per item transferred making it much costlier. At the local farm level, you get the farmer filling up his pickup with produce and taking it to market, adding his opportunity costs to the transportation costs. It works for $200 a plate boutique restaurants willing to pay a couple dollars per tomato, but it really doesn't work for places with price sensitive consumers like Perkins.

Both of these situations are true regardless of the subsidies or regulations involved.

August said...

You are mistaking what I am saying for an argument against economies of scale. This is not an argument against economies of scale- this is an argument that in the current environment we cannot know what the correct economies of scale are because of government interference. The robot milker company, the shipping container company, etc... they are bigger too, because of the distorting effects of government.

I don't know how much bigger. I just know government costs are part of C and they are mostly the sort of costs that can be distributed across a lot of transactions, which gives the larger corporations advantage, especially since they can also lobby and get even more from the government.