Scythe & Spade Blog

Blog #8 - 1/29/10

by Chas Bonner

Sustainability is a word seen increasingly in all literature, and it is becoming a real factor in agriculture. For the past 2 days, the Idaho Farm Expo was held in Caldwell, Idaho. Roger Martell and Chas Bonner visited the show for about 3 hours, and both were surprised (no, shocked) at the number of exhibitors in the sustainable supplement field. Out of approximately 40 exhibit booths, fully 7 were biological, pro-biotic, organic, natural, and/or environmental. Not one booth was an exhibitor of simple N-P-K type products.

Although we are not extolling or advising that this is the way agriculture should go, we can readily see the movement in that direction. Not only are petro-chemical fertilizers, herbicides and pesticides becoming very expensive and likely to remain so, they are also suspect in many agricultural problems like water run-off, nitrous oxides in the air, and trace elements in animals. In short, we advise awareness and ability to move quickly.

Blog #7 - 1/21/10

by Chas Bonner

After a long conversation with a colleague in California, after reading countless headlines and articles about what is wrong in America, we look forward to reporting on at least one positive aspect in our country.

The full year report from NCREIF (National Council of Real Estate Investment Fiduciaries) just arrived in our office. Despite the fact that 2009 saw a financial loss in commercial real estate (including industrial, office, retail) in excess of <26%>, farm land across the nation saw positive cash income of 5.50% and land appreciation of 0.78%---far less than prior years, but nonetheless positive.

However, as the analogy goes “It is a recession when your neighbor loses his job, but a depression when you lose your job.” Many farmers saw no income and no appreciation in their land this past year, and therefore gain little consolation even though the national averages were positive.

NCREIF is considered “the Bible” of real estate valuations since it has been in existence for 20 years, is based upon thousands of properties managed by tax exempt institutions (pension funds, insurance companies, university endowments, etc.), and all properties must be appraised annually. There are other organizations that also report on incomes and values such as the USDA, each of the Federal Reserve Banks, and others, but in our opinion, the most consistent and rigorously gathered is NCREIF.

Since past is prologue, and since we are reporting on positives in this blog, let’s try to look into the future. We believe the supply and demand picture in agriculture should continue to improve on a long-term basis: 1) There are more mouths to feed on this earth; 2) the supply of arable land is decreasing; 3) as incomes improve, caloric intake increases, especially meats; 4) food use as fuel continues to increase in spite of temporary setbacks; 5) although productivity of farmland continues to increase, it does so at a decreasing rate.

All seems to spell a good outlook for our farming future. And people like Bill Gates, George Soros, Jim Rogers and other famous investment gurus seem to agree as they too are buying agricultural properties around the world.

Blog #6 - 1/15/10

by Chas Bonner

SUSTAINABLE: In years past, that word was normally used in context of activity, stress, work, etc. Today, one cannot escape the word on almost a daily basis, but the normal context today is with respect to energy, housing, lifestyles, businesses, and yes, agriculture.

Despite how one may feel about sustainable agriculture, it is here to stay. There is more focus on sustainable practices that will not degrade water, soils, fertility, and food production. It is no longer optional. Waste is not only expensive, there are fewer agricultural inputs to waste.

To us at Scythe & Spade, the question is “How can we turn SUSTAINABLE into a positive?” For years it was assumed that being sustainable was simply being “organic” or “green” or “bozo.” In truth, it is maximizing the utility of each input---reducing water use by watching irrigation recorders, improving the productivity of wells, pumps, and irrigation systems, knowing soil types and the needs of those soils, changing amounts and types of fertilizers to suit the soil, cropping according to soils and water, and cultivating and harvesting in a manner least harmful to the land. Surprisingly, one of the words added to Webster’s Dictionary 2 years ago was “locovore,” meaning one who ate locally grown foods---part of sustainable agriculture.

Then we look at the ability to capitalize on the sustainability push. For instance, we have a close associate in California who, about 30 years ago, converted all his farming to organically grown crops----grapes, almonds, and figs. He is very scientific about it, utilizing owl houses throughout vineyards and orchards to minimize rodents, irrometers to measure moisture, manure vs. petro-chemical fertilizer, and berry vines around the fields which are host to predaceous insects which attack the damaging insects.

The best part of this added expense of farming? The PREMIUMS. Last year, his premium on organically grown grapes was almost 100%, for the almonds over 20%, and figs were slightly over non-organically grown.

We naturally ask “How long can these premiums last?” When one sees that organic food consumption has grown over 20% per year for 6+ years (with exception of 2008 which slowed), that WalMart issued an edict 3 years ago that 10% of the food sold through their stores will be organic (hard to meet), that most supermarkets now have a dedicated “organic” section, and that buyer institutions are asking questions about sustainability, premiums might last for a long time.

In short, how can we turn lemons into lemonade?

Blog #5 - 1/8/10

by Chas Bonner

The RIME OF THE ANCIENT MARINER by Samuel Taylor Coleridge in 1797:
      "Water, water everywhere, nor any drop to drink."

We in agriculture are increasingly aware of the importance of water, especially in areas requiring irrigation. According to an in-depth 2009 study undertaken by several major private sector corporations, and reported on by McKinsey & Co., world usage of water by 2030 will be 160% of availability, assuming no changes in supply or usage, and agriculture uses an estimated 71% of that water. Without major changes, it is evident that a crisis is looming. Maybe the Ancient Mariner will be proven right.

However, many changes are now being studied and implemented, especially in the developed world, and especially in the U.S. For instance, genetically modified seeds have been a large contributor to increased yields of corn, yields that have grown an average of 2% per year over the past 10 years in the U.S. By contrast, in Europe where genetically modified corn is not allowed, yields have stagnated over that same period. GMO will become a necessity, as will new forms of fertilizers, pesticides, and herbicides.

Further, new methods of irrigation can dramatically reduce water use. Many state and federal programs are available that incentivize irrigation improvements via tax credits. In the past, water has been relatively “free,” which invariably leads to increased usage. Today, with water, pumping, and delivery costs increasing, water usage is diminishing.

Because Scythe & Spade operates in the Intermountain West, water law, water accounting, water trades, and water usage have become part of our core competencies. Prior to managing or acquiring a farm, we not only investigate water rights and history, we check out the entire distribution system including turn outs, wells, pumps, panels, pipelines, ditches, sprinklers, etc., implement and/or suggest necessary remediation, and track improvements.

Water management and usage is fast becoming one of the largest operating cost of any farm in the West, and as a result, in-depth knowledge of the subject is a prerequisite to cost efficient farming.

Our goal is to render the Ancient Mariner wrong.