Scythe & Spade Blog

Lucky To Be An American

by Chas Bonner

Having been consumed by laziness this week, and having an epiphany last week, I sent the email below to about 100 fraternity brothers because we had a recent reunion. And our friends in agriculture should feel better than most Americans, because we are fortunate to be in one of the best businesses in America.

Brothers Zeta Psi:

I, like most in these United States, complain bitterly about our economy, our government, our ignorant citizens, etc. After reading an article recently in Seeking Alpha, it made me realize how lucky I am to be born in America. All the economic shenanigans of the past 3-4 years have not brought us to destruction:

• Other than AIG, most bank loans have been repaid with interest.
• The frozen banking system is again increasing loans.
• The “too big to fail” banking system is slimming down across America and the world. Over 500,000 layoffs in U.S. banks since the crash.
• The Federal Reserve has made a profit of $79BB on most of the assets seized/traded during the crash.
• The US is one of only 3 developed countries that has seen manufacturing employment INCREASE in the past 2 years.
• Fast-growing wage rates in the Orient as well as shipping costs to and from the Orient are reinvigorating our manufacturing sector.
• Our unemployment rate has shrunk more than most developed countries.
• General Motors has gone from a bankruptcy bailout to the largest auto manufacturer in the world in only 3 years. And they are making money.
• More small businesses are being formed than any time in history. Yes, most won’t last, but many will survive and thrive.
• The stock market is up almost 100% from its low.

My biggest concern today is that OUR generation is a bunch of pigs, leaving our kids and grandchildren nothing but debt, unsustainable Social Security and Medicare, infrastructure decline, deteriorating environment, an educational system in the toilet.

While we definitely have problems, we have opportunity as well. Now to re-invent ourselves so the Product Life Cycle Curve---BIRTH, GROWTH, MATURITY, DECAY---does not put us under. Sorry, but I felt compelled to share this with all of you.

Due Diligence for Food Borne Illness

by Brett MacNeil, CEO

We have written several blog entries and Newsletter articles about food borne illness in the last year, not because we are enamored of the subject, but because we are seeing more and more articles in the food press and the popular press, and more importantly, because there are many ways to trace an illness back to the primary source, the farmer or rancher. We are acutely aware of producers who have gone out of business as a result, and we do NOT want that to happen to any of our clients. Remember the sprout producers in Germany and the cantaloupe producer in Colorado?

As our clients know, one of our core competencies is due diligence. We will not buy, sell or rent a farm without some amount of “DD.” We cover soil quality, water amount and quality, water delivery systems, crop histories, regional strengths and weaknesses, etc. In short, we have a lengthy checklist to follow.

Because food borne illness has become such an issue in our nation where no one wants to face any risk, and where the legal system is alerted to any such event, we are asking all our team members to upgrade their knowledge, and be watchful for any issues that might give rise to illness.

One example will paint a picture. We recently looked at a very nice row crop farm for a long-time client. However, we became aware of a nearby underground hot spring, and between the hot spring and the farm is a livestock feedlot. That will take deep due diligence, an increasing focus for Scythe & Spade.

Food Borne Illness: Part III

by Chas Bonner

By now you are asking yourselves “Have we not heard about this before?” Our answer is YES, and we are now repeating ourselves for the third time. We are reminded that “Repetition = Recall,” and we want all of our clients and friends to remember the import of this topic.

In a new study by the Agriculture Department at the University of Ohio, Robert Scharff has estimated that the cost of food borne illness in the U.S. is $78BB, but this is only the medical, mortality, lost time, and suffering cost. What is not included in that figure are some of the “softer” costs, but which are nonetheless there. Not the least of those is the cost to primary producers---YOU---especially if you are the producer of a tainted food. But even if you are in the same product line, you will also suffer.

In an earlier blog, we discussed the alfalfa sprouts e. coli outbreak in Germany that took months to trace to the primary producer. All other producers in that region, and any European producers of sprouts were also hurt. Likewise, the listeria outbreak on cantaloupe grown in Colorado absolutely killed the cantaloupe business all summer, as sales declined over 30%, not just in Colorado, but throughout all growing regions. Finally, there have been several East Coast supermarket chains that have decided not to have multiple suppliers, despite market pricing concerns. They now feel there is so much legal risk to selling food that they want only one supplier, and if any problems, that supplier is passed the “hot potato.”

While you cannot prevent market losses from commodity problems like the cantaloupe or sprout examples above, you can prevent outbreaks of disease coming off your own farm. We cannot overstate the danger of this, as there are simply too many examples of producers going out of business. With our population refusing to take any risks in their lives, and with the propensity to always blame others, farming is becoming riskier.

Exercise due diligence, and if needed, we can help.