The Real Deal: Regarding The Price Of Milk
Scoop Outgoing News
Opinion: Guest Opinion
Date: Tuesday, 4 October 2005
Time: 11:49 am NZT
The Real Deal: Regarding The Price Of Milk
A SPECIAL TO CATHERINE AUSTIN FITT'S REAL DEAL COLUMN
Statement before the Tennessee House Agricultural Committee
Tennessee Capitol, Nashville, September 14, 2005
>From Franklin Sanders, Westpoint, Tennessee 38486
Mr. Chairman and ladies and gentlemen, thank you very much for
the privilege of speaking to you today. I am not an economist
with a degree, but for the last 25 years I have published and
edited a financial newsletter, and I hope that qualifies me to
speak about the economic effects of the Raw Milk Sales Bill.
Six years ago we moved from Shelby County to a farm in Wayne
County with six of my seven children. They all still live and
work on our farm. Four of them are married; we have six grandchildren
and two more on the way.
I brought with me today my son, Justin, and three of my grandsons.
Those little boys milk our goat every morning, and Justin and
I milk our cows. Every day that dawns I give my children and
grandchildren raw milk to drink, and we eat yoghurt, kefir, butter,
and cheese made from that raw milk.
I want to address the Raw Milk Sales Bill from several angles:
1. Economic benefit to small farmers
2. Economic benefit to local communities
3. Benefit to (what I call) the 'New Agriculture'
4. Economic impact on land value in farmers' favour
5. Ability to preserve farming as a way of life
I won't exactly discuss them in that order, because all these
effects are so closely interwoven that discussing one necessarily
involves the other.
DISAPPEARING COMMUNITIES & JOBS
Lawrence County, Tennessee offers an example of the deteriorating
life cycle of small rural communities. The development model
adopted there was the same one promoted by Chambers of Commerce
and governments everywhere: attract new industry to your locality.
New industry brings new jobs and new money, and the area will
prosper naturally. At least, that's what everybody thought a
few years ago.
About 1954 Murray of Ohio moved to Lawrenceburg and opened a
factory. The first generation of country people who went to
work there held onto their family farms and worked 18 hour days.
After a shift at the factory, they'd go home and raise all the
crops and animals they ever had. Owning their own land, they
were able to build up an estate for their children.
The second generation, however, was content to work at the factory
and let the land go. If they stayed, their limited their farming
to raising cattle or trees. Most of the land was sold off to
paper companies. And why not? Couldn't they make more money
working at Murray?
By now the third generation depends completely on their factory
jobs. Murray, as the largest employer in the county, set wage
rates. Most local residents claim that they set them so low
that they have stayed low over the past 40 years.
Meanwhile the rest of the local middle class has nearly disappeared,
aided no doubt by dropping wages and the invasion of WalMart
and other chains. The multitude of restaurants, bakeries, small
shops, groceries, hardware stores, shoe shops, dry goods stores,
dairies, craftsmen and most other small businesses has vanished.
There remain only a few lawyers, doctors, and dentists, and
the few small businesses that have managed to hold on.
In a county once covered with independent freeholders -- self-sufficient
farmers and small business owners -- most people have become
propertyless employees.
What was the sequel? Through fall 2004 Murray teetered on bankruptcy.
In November, Murray declared bankruptcy. In January, 2005 the
company was sold to its largest creditor, and now most workers
expect the final lay off at anytime.
SHORTCOMINGS OF THE INDUSTRIAL DEVELOPMENT MODEL
The industrial development model to promote prosperity relies
on drawing industry into the community from the outside to create
jobs. It aims to draw outside money into the community. Fine,
as long as outside demand remains strong. When that weakens,
however, the community discovers exactly how dependent it has
become on that outside money, and to what extent employment has
been centralised and made vulnerable to forces outside the community.
The industrial development model's failure lies in
(1) centralising employment, and
(2) not building up the local economy from the inside out.
When employment is centralised in one or two large employers
(oligopoly) then the large employer sets the wage rates for everyone
in the community, not just his own employees. Obviously, employment
security becomes dependent on the economic health of those large
employers -- not just for their employees, but for everyone else
in the community through the knock-on effect.
To build up the local economy from the inside out means to encourage
local people to take care of local people's needs. Today, most
food items travel an incredible 1,500 - 2,000 miles before you
buy them. In an age of rapidly rising fuel costs and declining
oil availability, does that make any sense? Why should Tennesseans
buy tomatoes in season from California? Lettuce? Milk? Or .
. . you name it. Most of life's necessities we can raise right
here quite economically, and often with a competitive advantage.
We can grow locally, produce locally, buy locally, and keep
the money circulating locally.
Why don't we?
First, because people have left or been driven off the land or
out of business because they depended on imported jobs. Second,
because the state (with all due respect) has placed roadblocks
in the way of their economic independence and their entrepreneurial
ability. The Raw Milk Sales Bill would make one step toward
removing those roadblocks to prosperity, without costing the
state even one dime...
EFFECTS ON HEALTH & LIFESTYLE
The shift from freeholder to employee led also to lifestyle and
diet changes. No longer do they exercise in their work all day,
or eat a diet high in vegetables, home grown meat and eggs, and
raw milk. Rather, they get little exercise and eat a processed
diet weighted down with soy, sugar, refined flour, soft drinks,
and other carbohydrates. Diet and lifestyle changes leave the
third generation with chronic health problems, notably high blood
pressure, diabetes, and obesity. Without insurance furnished
by an employer they cannot afford health care, which keeps them
chained to a job. Their only other alternative is TennCare,
a burden on an already overburdened state.
Over the same fifty years, a people who trained their children
to avoid debt have become addicted to debt. Where once father
and mother laboured their whole lives to pass on a farm or business
to their children mortgage- and debt-free, the children are now
mired to their chins in debt. Not only have they been taught
that no one can succeed in business or farming without constant
borrowing, but the consumer society has also seduced them into
mortgages, car loans, credit card debt, and borrowing of all
kinds. Where once only Daddy worked, now Mama must work, too,
to make the payments, so the children must go to day care.
If they lose their jobs, they lose everything, because they no
longer own anything. How do we know this is so? Drive through
any small town, and look at the host of check discounters who
charge nearly 800% annual interest.
None of this points to healthy, thriving local economies. But
what can be done? We can't compete with China and Mexico, can
we? We can't turn back the clock, can we? Don't farmers have
to 'get big or get out'? Isn't it true that the small farmer
just can't produce economically any more?
None of that is true, not one word of it, and the small farmers
and workers of Tennessee can compete with anybody in the world,
toe to toe, if they are given a fighting chance.
That's where the Raw Milk Sales Bill comes in. It is not a cure-all,
but it can furnish one link in a chain of recovery.
HOW WOULD RAW MILK SALES HELP?
Just this way: Raw Milk Sales could fill in farmers' loss of
income from other sources and raise land values so that farm
use can compete with development use. Raw milk sales can make
the difference between a small farmer staying on the land, or
going broke, and without any cost to the state or damage to existing
interests or markets. Rather, raw milk sales will create a whole
new market and keep cash flowing locally.
Let me explain.
About eight weeks ago at a yearly dinner for a farm credit co-operative,
I heard some of the saddest words I have ever heard, and they
came from the lips of a Southern Kentucky -- farmer. He was
a board member of the co-operative, and he said, "There's no
way a boy can go into farming today without a job on the side
-- that's just the bottom line."
This man was not an armchair farmer or banker or economist.
He was burned red-brown by the sun, and had spent his whole life
working to build his dream: a superb 40 head certified Angus
herd. Yet as much as he loves farming, he can't see how young
Kentuckians and Tennesseans can make a living farming. The economics
are all stacked against them. But raw milk sales offer small
farmer a permanent new source of revenue.
IS FARM REAL ESTATE ECONOMICALLY VIABLE?
Farmers complain -- and rightly -- that they are being driven
off the land by developers. Economically, farm use that pays
$100 or $200 or even $300 an acre every year cannot compete with
development that pays $10,000 an acre for land.
However, Raw Milk Sales can reverse that pattern for small farmers.
The bill before you allows sales of up to 350 gallons of raw
milk per week on farm premises. How would that help? The economics
are astounding.?
350 gal/week @ $5/gal = $1,750/week @ 52 weeks
= $91,000 cash flow to farmer.
In most parts of Tennessee, a milch cow needs about one acre
of pasture. Suppose the farmer can sell his milk for five dollars
a gallon (about 60% of the price of organic milk in health food
stores). At five gallons each per day, seven cows would produce
350 gallons a week on seven acres, generating a cash flow of
$91,000 per year. That means that every one of those seven acres
would produce $13,000 per acre, year in, year out.
Using an interest rate of 6% and a 10 year project life, if the
farmer could purchase that land for $2,500 an acre, the net present
value of that one acre of farmland, used to produce raw milk,
becomes $93,181. [1] Now the net present value of an entire
100 acre farm won't be $93,181 per acre, but the enormous added
value of those raw milk acres will be spread over the rest of
the farm's acres. Obviously, raw milk production use enables
farmland to compete with development use, and in fact yields
far more profits than development.
Critics may say that five dollars a gallon for raw milk is too
high. Fine, reduce that to three dollars a gallon, and the calculation
looks like this:
350 gal/week @ $3/gal = $1,050/week X 52 wks
= $54,600 cash flow to the farmer
Using three dollars a gallon, the $54,600 yearly cash flow makes
that land produce $7,800.00 per acre. Using a 6% interest rate
and 10 year project life and paying $2,500 an acre today, the
net present value of that one acre of farmland used to produce
raw milk, becomes $54,908.
Could small farmers compete with developers, could they make
a living, with Raw Milk Sales? You bet they could.
THE NEW AGRICULTURE
Over the last thirty or so years a revolutionary approach to
agriculture has arisen all over the world. It is coming to Tennessee,
in fact, it's already here, and it will change everything about
the way we farm. My short hand name for it is 'The New Agriculture,'
although other names are 'permaculture' or 'sustainable agriculture.'
It embodies low input costs, healthy products for niche markets,
and small scale vertical integration (sales from the farmer directly
to the consumer).
LOW INPUTS
The New Agriculture is environmentally friendly, relying on minimal
input costs. For example, it relies more strongly on composting
than on petrochemical fertilizers, more on natural weed and pest
control methods than on herbicides and pesticides. Most importantly,
it relies on feeding meat and milk animals their natural food,
grass, instead of much more expensive grain. You can read about
the New Agriculture in publications like The Stockman Grass Farmer
or Acres USA, or find it in government agencies such as Appropriate
Technology Transfer for Rural Areas (ATTRA).
HEALTHY PRODUCTS FOR NICHE MARKETS
The New Agriculture produces clean, wholesome food that does
not rely on hormones or antibiotics or herbicides or pesticides.
Vegetables are raised organically. Animals are not raised in
crowded factory settings that create environmental problems,
but are allowed to range free and feed on grass. The resulting
healthier product is more expensive to produce, but enjoys an
immensely strong demand from its niche 'health food' market.
One New Agriculture farmer I know in north Alabama who raises
primarily chickens charges over two dollars a pound while grocery
stores charge less than a dollar a pound, and his customers drive
one to three hours to buy his chickens.
SMALL SCALE VERTICAL INTEGRATION
The New Agriculture relies on direct marketing from the farm
to the consumer to capture those profits that would usually go
to distributors and processors. New Agriculture farmers are
not trying to capture a share of existing markets, but are creating
all new markets of their own, where before neither customers
nor producers existed.
NO FAVOURS FOR RAW MILK
Those in favour of raw milk sales are not asking favours from
the state. We are asking for no subsidy, no tax exemption, no
administrative bureaucracies, nothing that would cost the state
a penny.
Rather, the Raw Milk Sales Bill would benefit all Tennesseans.
It would enable a host of energetic, productive, innovative
Tennesseans to make themselves independent and self-supporting
by serving their local communities.
The Raw Milk Bill does not ask to grant anyone special, new privileges,
but would only restore a farmer's ancient common law right to
sell his own produce. That's why farm commodities sold on the
farmers' premises are already not subject to sales tax: those
sales are not a privilege but a right, and by the Tennessee Constitution,
the state can only tax 'merchants, peddlers, and privileges.'
[2]
The Raw Milk Sales Bill is about restoring freedom. The Freedom
to trade without government interference, the freedom to enjoy
wholesome, clean food, the freedom to make a living, the freedom
to farm and earn a decent living, the freedom our forefathers
walked across the mountains to gain for themselves and their
children.
THE OLD AGRICULTURE HAS FAILED
The old agriculture has failed. Because we don't have Raw Milk
Sales, the Tennessee countryside looks like a graveyard, filled
with the tombstones and ghosts of dairies past -- the crumbling
silos and rotting milk barns that dot every road. Why are they
there? Because dairymen couldn't make a living farming. Because
the old agriculture made them uncompetitive.
PRESERVING THE FARMING WAY OF LIFE
Everybody is in favour of farming, just like everybody loves
motherhood and apple pie. But a lot of sentimental nonsense
is blathered around about the family farm and farming as a way
of life. Here's the truth of it:
My family and I moved from urban Shelby County to rural Wayne
County six years ago. I have seven children, and six of them
-- four boys and two girls -- live and work together on our farm,
as one family. Of those six children, four are married with
children of their own.
What I have learned in the last six years is that there is an
enormous difference between farming and urban people that can
hardly be overstated. No other way of life can bring up men
of such responsibility, initiative, resourcefulness, honesty,
kindness, generosity, independence, courage, and self confidence.
In the 1930s the world famous Tennessee writer, scholar, and
professor Andrew Lytle wrote an essay called 'The Small Farm
Secures the State.' His meaning was this: the small, independent
farmer must be the pattern, model, and backbone of society, or
a republic of free men such as ours cannot long exist. There
is no other way to raise them, certainly not from a rootless
urban proletariat that, no matter how prosperous, can never feel
that loyalty to country that working and caring for its soil
brings.
Gentlemen, for Tennessee's sake, for your sake, for your children's
sake, for freedom's sake, I urge you, pass this Raw Milk Sales
Bill. Help give us back our farms. Help give us back our lives.
Help give us back our freedom.
FOOTNOTES:
1 Using 6% discount rate, 10 year project life, and $13,000
yearly revenue generated. http://www.investopedia.com/calculator/NetPresentValue.aspx.
2 Tennessee Constitution, Article II, Section 28.
[ends]
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