Families and business firms around the world are buckling under rising costs of food and willing workers. You’re fortunate if your farm can plant and harvest on time with family help, or part-time workers such as a retired neighbor or two.
September 21, 2021 Management and retail sales websites are buzzing with concern over shortages of food, basic industrial supplies — and capable workers. Example: A few days ago, Bloomberg posted a detailed feature, “Your Food Prices are at Risk as the World Runs Short of Workers.”
The scramble for capable help is just one reason we’re constantly encouraging a strategy of making your farm resilient.
Here are other reasons we’re wary of a “brittle” farming operation operating on big debt, tight margins and heavy dependence on purchased inputs. Such farms are not resilient against weather stress, price volatility, regulatory shocks, resistant weeds, soaring fertilizer prices, pandemic mandates, labor scarcity, political clashes that cripple export demand… and on into the night.
An opening section of the Bloomberg article warns that
“…the global food ecosystem is buckling due to a shortage of staff. Supplies are getting hit and some employers are forced to raise wages at a double-digit pace. That’s threatening to push food prices — already heated by soaring commodities and freight costs — even higher. Prices in August were up 33% from the same month last year, according to an index compiled by the United Nations’ Food and Agriculture Organization.”
On Sept. 21, the OECD warned of nearly 4% consumer inflation for 2022. The Paris-based Organization for Economic Cooperation and Development includes 20 leading global economies. Its advice to central banks and national governments: Curb inflationary policies, such as excessive public spending and debt creation.
Our family enterprise, Renewable Farming LLC, markets WakeUP with a “resilient” strategy: Our manufacturing and marketing is entirely staffed here on the farm by three generations of our family. Maximize sales volume while maintaining rigid quality control. We focus on personal, highly responsive service.
We have one vulnerability: Since all of our formulations are food-grade and biologically based, we’ve encountered higher ingredient costs the past several years. Sales volume has helped offset thinner margins until now, so until now we’ve been able to hold the line on retail costs per gallon.
We’ve also diversified into retailing other products which WakeUP enhances, such as Vitazyme and the line of biologicals created by Biodyne USA and Spraytec. WakeUP is designed to enhance the performance of foliar and in-furrow yield boosters. We’ve diversified geographically, opening up opportunities in southern states, such as helping improve citrus production.
We’re concerned about the vulnerability of our main customer base: Midwest corn-soybean farms. Examples: farms 2,000 acres and up which depend totally on GMO seed and related weed control chemicals, heavy NPK applications, fungicides and insecticides.
Some of these large farms also depend on seasonal and full-time employees. A farm owner in our eastern Iowa region hired one of our highly capable young friends, who asked for a starting salary north of $65,000 plus health insurance for his family. He got it. We hear some farmers complain, “Can’t hire good help.” They’re often remembering what used to attract help: $15 an hour, but few other benefits.
We see no embarrassment in downsizing acres to stabilize net profit against contingencies — such as sharply higher rent. Our farm is in a garden spot of rich Midwest soils: Black Hawk and Grundy County, Iowa. A farm not far from us recently auctioned for $22,000 per acre. One of our WakeUP clients cringed at that. He worried: “Already, my landlords are calling about higher rent for 2022.” Relying more on acres you own is a way of de-leveraging risk against an expanding array of uncertainties.
“Higher retail food prices” are headline news, but that doesn’t necessarily translate to higher corn prices. Higher labor costs amplify operating expenses through the entire food-processing chain.
Too much lecture, already. Strategic opportunities for 2022 and beyond: