What's So Great About the Way We Farm?

Are there any industries, other than production agriculture, that buy inputs at retail price and sell goods at wholesale price?

A conventional farmer buys seed, fertilizer, chemicals, and equipment at full retail value from a manufacturer.  Farmers utilize those ingredients to grow large quantities of a commodity - corn, soybeans, or wheat among others – and sell their wares at wholesale prices to a manufacturer who will sell a product at retail price to a consumer.

In some instances that grain goes through another cycle of being sold at retail price as feed, put through a hog, cow, or chicken, which is sold at wholesale prices to a processing company and eventually sold at retail price in the grocery store.

I recently read that for every $1 spent at a grocery store, only $0.19 represents “farmvalue.”  The other $0.81 represents “marketing value” made up of labor, packaging, transportation, etc.

Over the past two years, I’ve spent much of my free time studying agriculture.  But the style of farming that I most often read about is much different than the way my father farmed.  In fact, many of the beliefs I hold about agriculture today run counter-intuitive to the way I was raised and taught.

When I discuss what I’ve learned with my peers who currently farm or are involved in the agriculture industry, I’m often met with the message of “good luck making any money with that” or “that won’t work.”  But I keep asking, “why not?”

Consider the basic fundamentals of conventional crop farming of annuals and a perennial forage based system:

Conventional

• High percentage of sales revenues (income) devoted to retail priced inputs (costs)
• Single crop per growing season per acre farmed
• Wholesale price taker on fungible commodity market
• Large capital requirements
• Great exposure to price volatility on both input and revenue sides of profit equation

Alternative

• Low need for retail priced inputs as a percentage of sales revenue
• Multiple “crops” or products per acre per growing season
• Retail price from the end consumer for branded product
• Significantly lower capital requirements
• Reduced exposure to price volatility on both input and revenue side

If they had no idea what industry the above lists were referring to, would any investor in the history of the world ever choose the top list?

If you’re a farmer or farm friend who subscribes to list number one, what I call conventional farming, let me know if I’m misunderstanding the fundamentals above.  Help me to see what I’m missing, before I go full on lunatic tree-hugger and start farming without commercial fertilizer, herbicide, and genetically modified seed.  I’m almost convinced that I can succeed without concrete feedlots, insecticide treatments, or antibiotic-laced feed rations.  And I’m pretty sure I can turn a profit without a million dollar equipment fleet guzzling thousands of gallons of diesel fuel.  I’m here standing on an agriculture thought ledge, is there any reason not to jump?