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Past Month's Moccasin Telegraph

March 2011

3/31/11

At least March wasn't as crazy as last year. Although, we're still very much feeling the effects of those events, both good and bad...

The good; I'm getting regular feedback that our camelina oil label definitely kicks ass! The artist, Murphy came through on that one...

The oil content issues; we're still in the thick of that. It's good, though, live & learn, etc... And we're going to be pressing oil again next week, and I bet the knowledge base continues to expand. Plus we're developing our filtering system, and nothing is ever as simple as you'd think, it seems. But that's probably good too! If it was simple...

We're definitely feeling the effects of the bison harvest thing going away, though. Last year we missed the booking income. I'm still getting calls and e-mails, usually multiple per day from people wanting buffalo. In fact a week or two ago I could have sold fifteen buffalo in one day. Telling all those people NO gets really tiresome. Last year, although the bookings had gone away, we were still handling quite a few robes & skulls from the prior season. Now that's over too, though, so it's a good thing our oil sales are starting to kick into gear. Although we've still barely scratched the surface. We have it in the bulk of the Montana health food stores; Bozeman, Missoula, Kalispell, Great Falls and Billings. And soon we expect to have it in a fair number of other outlets in Washington and Idaho, and then Portland, and Denver and Boulder and...

So that's partly what this month's column is about; direct marketing of sustainably produced agricultural products, versus the industrial ag model. In this case, hauling your grain to the elevator and seeing what the discounts happen to be on any given day.

I recently had a quite striking experience with that. It'd been a while since I hauled grain to the elevator, but had a bit of leftover winter wheat and with wheat at record price levels... Well, for one thing the Farmer's Market crowd isn't too interested in buying $10/bu wheat to feed their critters. And really, for that kind of price, just hauling it to the elevator is a pretty attractive alternative (or so I thought!).

So, I stopped in at the Belgrade elevator to check the price on winter wheat, three weeks ago today in fact. And, it was $8.60-something per bushel! Given all the rain last summer, I knew mine was lower protein, so I'd be facing some discounts, but still...

Was I ever surprised when I hauled in in, the following Tuesday. In basically four business days, the price had dropped to $6.80 and change. Good grief!! I wondered if it was dyslexia kicking in again or something, but no... The futures market had dropped precipitously. So yeah, I suppose I should have been monitoring the markets more closely, and if we were talking multiple semi-loads I would have been, but still, in four days...?!

I've discussed this with a fair number of people since. Invariably the first question is "why?". Why did it drop that much, that quick?

The events in Japan, is the "simple" answer. And yes, I suppose there could be some justification there. Uncertainty in global markets and all, you know... But, I still believe my initial diagnosis is more accurate. And that is that this was/is BULLSHIT!! And, that's not just based on disgust. Not completely, anyway.

I studied grain futures markets quite a bit in college. And, still run into some of my old Ag Econ professors from time to time. Basically, what it boils down to is that futures traders don't make money off static markets. Things have to go up and down. So oftentimes, these market variations are only loosely based on reality; actual events. They'll seize on (or fabricate) any excuse for prices to go up or down. If they just stay static, well then the futures traders aren't making any money, and of course we can't have that...

Unlike financial derivatives, grain futures are supposedly at least somewhat based on actual grain supplies. I grew cynical about this not long after college, & haven't followed it much since, but grain futures contracts used to be limited to amounts that at least had some relation to reality (actual grain supplies). Still, I was struck with the similarities to the financial market meltdown of a year or two back. In fact Matt Taibbi nails it as usual in his recent article "Why Isn't Wall Street in Jail?" The answer; because the Goldman Sachs of the world are so intertwined with their alleged regulatory agencies that they basically have free rein. So even if their actions cause unmitigated chaos in the global economy, as long as they're raking in the bucks; so what? So even if that article is quite lengthy (and somewhat depressing), I highly recommend you read it.

I was quite struck with the contrast at a Small Business Opportunity Workshop, primarily for agricultural producers at MSU last Saturday. I participated in the farming-oriented breakout groups (as opposed to the livestock-oriented ones), and the vibe was overwhelmingly toward sustainable, direct-marketed ag products. In fact one of the most striking presentations was from David Oien, proprietor of Timeless Seeds, from our old stomping grounds up in Conrad. David basically started out with a 280 acre farm (miniscule for that area), and has built his operation into a multi-million dollar venture marketing healthy foods nationwide! I'd like to think that's where BiOmega3 is headed...

The production emphasis was definitely on sustainable, organically-oriented crop rotations to increase diversity, provide weed competition and break up disease and insect cycles. In fact I was tickled to be able to mention our luck with interseeding red clover, and how it has remarkably suppressed cheatgrass here on the Rockpile Ranch!

Or, you could "Quell the Uprising" with SUPREMACY herbicide.

I came across the ad for that in an ag magazine last evening, and have to say I find it quite offensive. And it's not just me; my wife reacted even more negatively and a few other people I've discussed this with since have reacted similarly. You'd really have to see the print version, it's noticeably worse than that web page. It's made to look like a poster from back in the 1800's or something. I'm surprised they didn't include the phrase "Let them eat cake!" somewhere. That's basically the mindset.

The more disturbing thing is that I'm sure their ad people know their target demographic quite well. I'd joked in the past that someday we were going to see a herbicide named "INVINCIBILITY!", but somehow this "SUPREMACY" tangent is worse. Luckily, I didn't pick up on that vibe at all at Tester's workshop.

You're far better off working with nature, in my (and many others) experience. This idea of CONTROLLING things to meet your ends... That's fundamentally flawed, in my opinion.

Getting back to my original story, though, the check for the grain I'd hauled in showed up yesterday. I'd complained to grain buyers I know years ago that the quoted price was all but irrelevant, the bigger factor was what the discounts were on any given day. They snorted, but I was right, and they're still full of it.

So, in this case my discounts were as follows:

  • Dockage- .3% (really not too bad), <$.06>
  • Test Weight- 56.5#/bu (should be 60, this is not surprising, it stood out there in the rain for a month or two after "normal" harvest dates) <$.12>
  • Protein- 9.2% (no surprise here, this hadn't gotten the clover treatment, although my wife just said this is perfect for baking cakes!) <$1.75>
  • Sprout- 6.7% (again, standing out in the rain for way longer than normal) <$.70>
  • Falling Numbers (no kidding...!) <$.30>

The price had actually gone up four cents (!) by my pricing deadline, the day after I hauled it in, so that means my net price was $3.97 per bushel.

I'd like to know what other business you could quote someone a price, and then basically pay them less than half of that!!

None come to mind offhand. In fact I'd say that's not a sustainable business model at all. I've discussed this with a fair number of people since. Several of them fellow farmers, one of whom said his blood pressure surges every time he drives by the elevator anymore. Incidentally they sold their (~15% protein) spring wheat directly to a flour mill for ~$14/bushel this fall! Others said they're basically over raising generic wheat and barley, and going more toward lentils and other pulse crops, as well as oilseeds like camelina and safflower. Others have told me, and I quote; "this isn't any fun anymore".

It's becoming more clear all the time that direct marketing is a vastly preferable alternative. You get to set your own price. If it's too high, well... it won't sell. Now we're talking ag economics! Supply and demand, etc. Forget all the derivatives and discounts and all that crap!

Value-added, sustainably produced healthy agricultural products. Now there's an emerging market! Except wait... that's been going on since the dawn of time!! The other model, "industrial" ag...

I'm even more over that, now. And, the snow is going to melt one of these days, and I'll get to see how our winter wheat and camelina came through. I'd spread some screenings in front of the chicken coop while cleaning camelina last fall, and just today noticed it's coming up! The chickens are as thrilled as I am!! When camelina gets an early start, it competes remarkably well. In fact we won't even have to use any SUPREMACY!! I'm over that mindset also...

 

 

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