Like most current business models, they rely heavily on loans to produce their yearly crops. These mostly happen at planting time, they need loans for seed since they can't save their own, and they need loans for herbicides, pesticides and fertilizers since the soil can no longer support healthy crops. None of these items are getting cheaper, and most farmers just don't have the capital to cover them in the spring.
What's going to happen when they go to get their annual loans and the bank they've used for years is no longer extending credit? Or is extending less credit? Or the bank is gone? A small toy store may be able to skate through a credit disruption and come out just fine when the government TARP money trickles in, but farmers have a much more defined schedule. Waiting around a month or two for government bailout money is not going to be an option.
And, that's just the problem facing farmers this spring. There's a much larger gorilla in the living room, it's being talked about in the Peak Oil community, but mostly being ignored by mainstream America. The recent release of the 2007 Ag Census shows only about two percent of the U.S. population is part of a farm family, and the average age of principal operators of farms is nearing 60 years. Take a second and absorb those numbers. Only 2% of our citizens are involved in one of the more important systems for continued life. And the AVERAGE age is 60. If you'll remember your math lessons, that means roughly half of the farmers are OVER 60. The Census reports that the farmers aged 25 or younger decreased by 30% from 2002. I see these numbers and I think to myself that we are failing to replace our aging farmers. This failure is going to become apparent very soon, and I think it won't be pretty.
Kunstler, admittedly one of the more "Doomer" voices had an eloquent take on this problem.
The net effect of the failures in banking is that a lot of people have less money than they expected they would have a year ago. This is bad enough, given our habits and practices of modern life. But what happens when farming collapses? The prospect for that is closer than most of us might realize. The way we produce our food has been organized at a scale that has ruinous consequences, not least its addiction to capital. Now that banking is in collapse, capital will be extremely scarce. Nobody in the cities reads farm news, or listens to farm reports on the radio. Guess what, though: we are entering the planting season. It will be interesting to learn how many farmers "out there" in the Cheez Doodle belt are not able to secure loans for this year's crop.
My guess is that the disorder in agriculture will be pretty severe this year, especially since some of the world's most productive places -- California, northern China, Argentina, the Australian grain belt -- are caught in extremes of drought on top of capital shortages. If the US government is going to try to make remedial policy for anything, it better start with agriculture, to promote local, smaller-scaled farming using methods that are much less dependent on oil byproducts and capital injections.
This will, of course, require a re-allocation of lands suitable for growing food. Our real estate market mechanisms could conceivably enable this to happen, but not without a coherent consensus that it is imperative to do so. If agri-business as currently practiced doesn't founder on capital shortages, it will surely collapse on disruptions in the oil markets. President Obama at least made a start in the right direction by proposing to eliminate further subsidies to farmers above the $250,000 level. But the situation is really more acute. Surely the US Department of Agriculture already knows about it, but the public may not be interested until the shelves in the Piggly-Wiggly are bare -- and then, of course, they'll go apeshit.