Laugh Tracks in the Dust 12-13-10
December 13, 2010
Most of us, if we’ll admit it, have hopes and dreams about the Christmas holiday. I’m like all the rest, but I have a fantasy dream about a natural Christmas miracle happening across rural America.
Perhaps my fantasy has its genesis from something I saw in the media not too long ago. I read that an esteemed ag economist, in all his ivory tower infinite wisdom, believes farm income is no longer very important in rural America and off-farm income from industrial development and other sources has overtaken the sale of commodities in economic importance.
In my fantasy dream, I see business, political and educational folks measuring ag’s economic importance just as they do the importance of one of the manufacturing and service companies they try so hard to recruit into their towns by giving various tax abatements, incentives, perks, etc.
In my dream I ask a rural county leader how he (or she) measures the success of the manufacturing or service company in the industrial park on the edge of town. The leader answers that he measures the company’s success in the number of employed people, the annual gross wages and salaries paid, and the net profit of the company.
I tell that leader that his analysis is absolutely correct. But then I ask him to apply the same analogy to each and every farm and ranch in his county.
I ask him to consider each farm or ranch as a manufacturing enterprise that doesn’t have four walls and a weekly payroll. I say, “Think of each and every rural acre as an employee who creates a product and produces income. The farmer and his family supply the labor, management, supplemental feed and plant nutrients, and some of the capital. Agribusinesses supplies some resources. Banks supply the rest of the capital. The Good Lord provides the soil and its inherent fertility, the rain for which we pay nothing, and the free microbes constantly at work in the gut and rumens of farm animals.”
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I tell him, “In reality, each acre has a differing ‘payroll.’ Some pay off once a year with a grain or forage crop or a calf crop; others several times per year with commodities such as pigs, lambs, alfalfa hay, and double-cropping; others with every milk check. Regardless of the acre or how it’s managed, the bottom line is how much disposable income per acre does it produce? That’s determined by a combination of both production and price! A poor crop short-changes the disposable income per acre. But, so does a poor price. The disposable income is the profit left to spend after all the expenses, interest, taxes and labor are paid.”
Then, I ask the county leader to apply a parallel logic to his manufacturing factory analysis. Each acre, I tell him, will maximize its disposable income when it’s at full production and that production enters market channels at a price that covers all expenses and leaves profit for disposable income – the more the merrier.
When the county leader still seems skeptical, I use the following example to prove my point to non-rural folks that agricultural profits per acre are important to everyone.
I say, “Suppose an ad in the local paper explains that the local Chamber of Commerce received a windfall rural development grant and is doing a promotion to illustrate the importance of commodity income. Chamber members are loosely hiding a $10 bill on each and every farm/ranch acre in the county and the next Saturday morning, at 9 a.m., anyone in the county can go find the 10 spots and keep them – first-come, first-served. The only rule is that all the $10 bills have to be spent in the county during the Christmas Season. That Saturday every kid in the county, plus all the folks short on income, hustle out early to find those $10 bills.
Then, I say, the next week, building upon the success of the program, the Chamber ups the ante and puts a $50 bill on every acre. This time a much greater share of the county’s population is up at the crack of dawn overturning every rock, clod, log and dried manure patty seeking the $50 bills. The next week, the Chamber ups the ante to $100 on each acre. This time even the bankers, lawyers and businessmen are out there hustling after those $100 bills.
Then I ask the county leader, “What do you think will happen to retail sales, bank deposits, and tax collections in the county?” He agrees with me that they’ll go up substantially, probably by a factor of three to five, thanks to all the dollars being spent and then re-spent again and again in the community.
And, it happens! With all that new wealth from maximizing the disposable income per acre being spent in the county, debts are retired, local businesses do record sales, local sales tax collections climb higher than anyone can remember, charity increases, and the county experiences the most memorable and prosperous Christmas season in its history.
Then, in my fantasy dream, I request the county leader to do the arithmetic for his county and astound himself as to the annual disposable income that agricultural sales in his county could and should generate.
I conclude my fantasy dream with even city folks understanding how farm and ranch commodity production, its price and sale, and its cycling through the economy generates new wealth and earned income for everyone. Average citizens are marching in the streets and writing their legislators clamoring for full ag production and nicely-profitable prices for commodities. They understand that is the best way for them to get widespread prosperity. They really get excited when they understand that this new wealth is annually renewable and sustainable over time.
The only sad part about my fantasy dream is the realization that if an annual cycle of agricultural production falls short, or is sold at too-low a price, the economic die is cast and the lost new wealth and income can never be recovered.
Okay, I’m awake from my fantasy now and you can go back to sleep in your easy chair. In closing, I hope your holiday joy includes much more than exchanging gifts. Exchanging and sharing friendship and love is the best gift of all.
Have a good ‘un.