Outsourcing is Just the Beginning
One thing rich people do is hire others to do stuff for them-detail their vehicles, watch the kids, manage their portfolios. Farmers are no different, I think. We just haven’t had the misfortune to be rich. Until now.
I know-many will take umbrage at the use of the r-word. But many of us, by luck and/or endeavor, are arriving at that surprising state, at least according to U.S. income distribution statistics.
Don’t panic-we’ve been here before. Go to any small town in the Midwest and research the history of the grandest homes. More than a few will have been built by farmers who made it big in the 19th and early 20th centuries. In fact, speculation in land particularly propelled many sod-busters into genteel status.
Adding nearly $30 billion to net farm income in one year will produce some big winners. And businesses serving farmers will see their own boom. In the process, a few of us will wonder if something has been lost.
We cling to outdated images in farming. The public’s desire to support producers who display old-fashioned virtues fosters our hanging onto our fathers’ value set. One cornerstone of that code has been self-sufficiency. We all admired the man who could gap a set of points or dehorn a steer. In theory, real money could be saved by doing it yourself. For the most part, this was true, I think.
Specialization. Professional services were hard to come by in rural America, and expensive to boot. Access to materials and know-how were limited at best. Being able to do for yourself was a huge competitive edge.
However, as Alan Greenspan points out repeatedly in his recent book, The Age of Turbulence, we had no idea how specialization was going to change our world. Indeed, his rather convincing argument is the ongoing global economic expansion arises largely from increased labor specialization.
The same math that makes shipping rims and tires to China just to be mounted works for aspects of farm production. Specialized workers can often achieve spectacular gains, especially since the technology they employ is even more intricate.
The jack-of-all-trades has not been a winning business model for industrial agriculture lately. Given the ever more complex nature of our work, farmers have been turning to outside sources for more services. Scan the pages of this issue. There are references to hiring advisers, technicians, consultants-the list is long and growing. In fact, there are often days when industrial agriculture resembles nothing so much as general contracting.
Much-improved incomes may boost this outsourcing trend, but they could also speed the emergence of a new business organization. Consider what happens when an agronomy consultant has one large client who expands to account for, say, 80% of his business. At some point, both client and consultant may consider merging, and what was once an outside service is now in-house expertise. It is not inconceivable to imagine this occurring with mechanics, electricians, accountants and others.
Aggregate knowledge. My bet is with Greenspan-a team of specialists is likely to mean even greater profits. Agriculture will invent its own version of the corporation, welding needed skills together and capturing the efficiencies.
It will all seem reasonable decades hence, but in the meantime, I expect serious laments about the loss of multifaceted expertise. Much the same grievance can be heard in the loss of long crop rotations.
Perhaps most telling is the reluctance to develop the required interdependence that is part and parcel with economic efficiency. Modern producers must constantly balance a web of relationships, managing people more than stuff.
Oddly, the cranky, independent farmer has likely been battered more by government assistance that negated his just rewards for frugality and compensated his neighbor’s profligacy than the march toward specialization.
Regardless, our industry is moving to favor those who can assemble collections of real wealth: competent people who can work together.
John Phipps, johnwphipps@gmail.com, is a sixth-generation farmer from Chrisman, Ill. He is the TV host of “U.S. Farm Report.” For local station listings, log on to www.agweb.com.
