The Sustainable Farm

1
The Sustainable Farm
Rod Hewlett Dean, College of Business and
Graduate School Minot State University North
Dakota Farm Bureau Annual Meeting 2004
2
The Farm As An Enterprise

• Are their two ways to view farming?
• As way of life.
• As an enterprise.

3
No!

• Lets look at the evidence that these two
  propositions way of life and as an enterprise
  are two sides to the same coin.
• During the 1930s and 1940s the future of
  Capitalism and Democratic societies were in doubt
  the Socialist movement was sweeping the globe.
• During this period, the Austrian School of
  Thought defended free society, free markets, and
  Capitalism as the only way to improve the human
  condition!
• The Austrians promoted the Classical Liberal view
  of small government and free people that own and
  control property as the best mechanism to advance
  society Modern Liberalism is now the socialist
  movement that government should have a larger
  role in owning or controlling the mechanisms of
  production in order to stabilize society.
• Modern Liberalism has been discredited and is
  being rejected.

4
Market Based Tests

• The Austrians F. von Hayek, L. von Mises, J.A.
  Shumpeter and others made a keen observation that
  still fits today
• Price and profit are market indicators and a
  source of market knowledge.
• But do we listen to the knowledge and the
  indicators? No!

5
The Evidence

• I would add two other indicators to the
  Austrians market test for farms in North Dakota
• Do the children of farmers choose to stay on the
  farm?
• Do markets reward farms with capital?
• The evidence
• Farm commodity prices remain low and unstable.
• Farm profits and cash-flows remain volatile and
  at risk
• Farm communities continue to depopulate placing
  the way of life at risk.
• Government agricultural subsidies are at risk due
  to record deficits and growing debt.
• Capital is in the form of loans that must be
  repaid out of low cash-flow discouraging children
  to buy the farm, ownership capital only flows
  to the most profitable agricultural ventures.

6
Gain 5 or more (Green)
Net Domestic Migration Rates Per 100 Persons in
the United States by County 1990 to 1999
Gain 0-4.9 (Aqua)
Loss 0-4.9 (L. Purple)
Loss greater than 5 (D. Purple)
7
Rural Transformation

• Drabenstott (V.P. of Federal Reserve Bank of
  Kansas City) points out
• only 6.3 percent of rural Americans now live on
  farms and most farm families get most of their
  income off the farm.
• In the 70s, we began to transform rural America
  through the promise of manufacturing. The
  inexpensive and available land, labor, and lower
  taxes in rural settings seemed ideally suited for
  this shift.
• However, structural changes in the U.S. economy
  emphasizing services along with relocations of
  manufacturing facilities to low-cost and low
  regulation India, Mexico, and China ravaged this
  rural manufacturing strategy.
• Drabenstott cites statistics that support this
  claim, In total, nearly 200 rural factories
  closed their doors last year.Factory closing
  represented fully 45 percent of total mass
  layoffs at rural factories, compared with only 25
  percent at metro factories.

8
The Trends (Population)
Based on projections from North Dakota State Data
Center at NDSU
9
The Challenge

• Global competition is changing the way we live
  and compete in the U.S. and this is true on the
  farm too.
• According to the November 6-7, 2004 China Daily
  newspaper (Vol. 24, No. 7669)
• In 2003, the annual income of a farmer in
  China was 2,622 yuan (US 315) on the average.

10
The old model
11
On The Production Front

• First in nation ( of total)
• Spring wheat (47)
• Durum wheat (60)
• Oats (15)
• Barley (43)
• Flaxseed (95)
• Navy beans (46)
• Pinto beans (56)
• Dry edible peas (53)
• Oil sunflowers (59)
• Non-oil sunflowers (48)
• Canola (90)

• Second
• Lentils (26)
• Honey (16)
• Third
• Rye (8)
• Sugar beets (17)
• Fourth
• Potatoes (6)

12
The new model
13
Value Added Markets

• Nutriceuticals we are selenium rich and it
  differentiates our products!
• ND product is health food.
• Create end item products made of ND products
  the farmer enterprise.
• Organics grow what the new generations wants to
  eat and market with a premium.
• Alternate forms of energy production bio diesel
  and ethanol.
• bio-polymer or bio-mass products soy bean car
  doors, the new plastic, - meets the need of
  Green Consumers and lessens dependence on
  foreign oil. Meet the 21st century manufacturing
  needs with North Dakota farm product.
• Processed food product from North Dakota fields
  and enterprises - ND Farm production and
  manufacturing.
• North Dakotans in control of the farm and the
  enterprise.
• The new North Dakota the real source of
  economic development wealthy farms, rich urban
  communities, stable farm environment the
  children can stay on the farm and want to.

14
Crafting a high return future with what we
already know and understand - agriculture

• Corporate Farms
• Controlled by North Dakotans.
• Allows outside capital buy-in.
• The living farm.
• Intergenerational transfer.
• Attracts knowledge to the farm to grow and
  expand.
• Limits liability.
• We need low-cost and dependable transportation of
  product in and out of the state - multimodal.
• Supportive higher education research for farm
  products!! Science, business, engineering, and
  market development.
• We need to be in the food and beverage processing
  business on a global scale but with new
  products that garner profits, sustainable good
  prices, and compete on a knowledge basis where ND
  farmers can win.