December tends to be a good time for looking back at and evaluating the year that has gone, and that is also true for farmers. It’s been a tough four years since 2020, and we’ve had droughts, flooding, fires and of course “plague”.
2023 seemed like a good candidate for a return to a semblance of normalcy, but instead we ended up with a societal case of “Long Covid”. One obvious symptom was the feverish inflation that infected the economy. And the “cure”, in the form of higher interest rates, is having numerous side affects for many sectors of our society — including agriculture.
Like most people, farmers became accustomed to easy access to “cheap money” after years of low interest rates. Investment is easy when it doesn’t cost anything. It’s much harder when you have to pay it all back with significant interest. Over the last ten years, investors bought up farmland and planted hundreds of thousands of acres of nut trees, driving up the price of farmland dramatically. Covid shut down the export of those nuts, cratering the price paid to farmers.
With the economy in China now in a full blown recession demand for nuts is not coming back any time soon. The boom is over, and with interest rates now much higher, so is the frenzied market for land sales that it created. Much like the housing market, land is overvalued and no one can afford to buy anymore. But with crops prices much lower, farmers cannot afford to hold onto their land forever and will eventually have to sell it for less than they think it is worth.
Inflation has also hit farmers hard, raising the cost of everything we need to grow our crops. But inflation has hit organic farmers particularly hard, as consumers have understandably looked for ways to cut their spending. Organic food costs more. The resulting fall in demand has led to falling prices paid to farmers along with an overall drop in sales. Not only are we selling less, but we are selling less for less. Less multiplied by less.
Another result of inflation is that less and less of the fresh organic produce is most supermarkets sell is locally grown — or grown in California at all. More and more of it is now grown in Mexico, where just about everything costs less, especially the hourly wages paid to workers. And because the Dollar has appreciated relative to the Peso, every box of produce shipped to the U.S. makes more money for the grower than if it had been sold locally in Mexico.
It can be hard to tell anymore whether a head or Lettuce or a tomato is grown in Mexico or California. That’s because many farmers now operate in both countries, and pack or re-pack their Mexico-grown produce here, in a box with a label with a California address on it.
Substituting Mexican-grown produce for California produce allows a supermarket to pay dramatically less for the “same” item. They can then sell it for less…or sell it for the same price, and pocket the difference.
Locally grown and organic food costs more for a reason: it costs more to grow it. But I wouldn’t recommend paying more for organic produce from Mexico. If I have a choice between organic from Mexico or locally grown, non-organic food from California, I buy local every time. I have nothing against Mexican farmers, but I have zero faith in their government or the ability of organic certifying agencies to maintain their integrity in the face of massive corruption.
I’ve gone off on a bit of a tangent with this discussion, but I’ll bring it back around. Terra Firma’s primary goal through the last decade and longer has been to grow healthy organic food for our CSA subscribers — you. We’ve all been through some tough times together lately, and we hope you’ll stick with us as we all try to navigate 2024 and the new normal that it presents us with.
For those of you getting an early start on holiday travel, this may be your last CSA box of 2023. For everyone else, next week will be our final delivery of 2023 and will follow our normal schedule. We will resume deliveries on January 10th and hope to see you back then.
If you’re staying in town for the holidays and want to load up on extra items to get you through early January, make sure to check out our Holiday Box offering on the web store. Alternately, you can order extra items a la carte.