Black eyed pea economics


Here’s the numbers. I sent five men out into the field. They harvested 16 cabbage sacks of fresh green black eyed peas. I paid each of the five $60 for their effort. The men harvested the peas as I directed—the way we would harvest them for home consumption—mostly semi-ripe peas for shelling with an occasional snap or green pea in the mix. $60 X 5 = $300.

I'd been told that fresh black eyed peas are selling for $28/bushel. But they’re not. They’re selling for $28 per cabbage sack and right on the sack it says each bag contains 1-3/4 bushel by volume. $28 a sack is what vendors at the produce stands in Luling sell them for. They pay $24 per bag from a man in San Antonio. My guess is that those peas come from Mexico where labor is cheaper. And the men at the produce market rarely if ever sell a whole bag at a time. They’d make no money if they did.

16 cabbage sacks of peas X $24/bag = $384. Not good, but a profit, nonetheless, if you don’t count the cost of plowing, planting, cultivating, hoeing, two applications of chelated iron, one application of liquid Sevin for beetles and grasshoppers, and one application of Malathion for a horrible infestation of aphids that would have wiped the crop out entirely had not we noticed it and worked on a Sunday to spray the damned things. I don’t count the cost because the money is already spent. I have peas in the field and they’re worth no money if I don’t get them to market.

I give Urlit 8 bags to sell and take 8 bags to the produce man in Luling. I leave the peas on credit at $22/bag instead of the customary $24/bag in order to earn the men’s business. A few hours later I call the man in Luling to discover that his pea shelling machine won’t properly shell the peas due to the green snaps in the mix. I pick them up and sort through them, and save the snaps for the milk cow.

The next day only four pea pickers return. Given new instructions on how to pick, no snaps included this time, they pick only 8 sacks of peas. It’s harder to find just-right-for-shelling peas—those that aren’t too green or too dry for an automatic shelling machine. 4 pickers X $60 cost me $240. 8 sacks of peas at $22/ sack sell for $176.

By now I know this equation isn’t working. I tell the men to return the next day and I go to the field to pick alongside the men, thinking perhaps they may have been slacking on the job. To a man, they out-picked me yet we ended up with similar results by the end of the day. It cost more to pay the men than the harvested peas will bring at the market.

I allowed the men to finish the week, harvesting fresh black eyed peas. I knew I’d take a loss but I continued to allow them to work because they all need jobs and money to pay the bills. Basic bills. Rent, car, food, clothing. They have children. Most had been employed in the construction business. That work has died on the vine. None of them get counted in the current unemployment figures. I have a little money at my disposal.

I lost money on their pea picking efforts, mighty as they were. But oddly enough, the men paid their way but in a way I hadn’t anticipated. One afternoon as they were preparing to go home, a rain shower approached. I had square bales of hay in the field and was picking them up as fast as I could, by myself. The men stopped and offered to help. They were hot, tired, and wanted to go home to a bath, a hot meal and a comfortable bed but they stopped to help, nonetheless. Martin hooked a large gooseneck trailer to a pickup. One group helped him load, another of the men helped me load. In less than thirty minutes we picked up 375 bales of hay and made it back to the protective cover of a barn. The first drops began to hit the windshield as the last bales were loaded on the trailers. That night it rained 3.5 inches. The 200+ bales that remained in the field is now worth about $4/bale as cow hay. The hay we got to the barn in prime condition is worth $5.50/bale because it's horse quality hay. The difference: 375 bales X $1.50/bale = $562.50.

So, I have a bunch of sacks of peas. More than the local market can bear. I call a early twenty-something nephew of my wife; he and a friend drive out to shell peas. Both of the young men are unemployed but neither is receiving unemployment benefits, hence neither is counted in official unemployment figures released by the government. They have rent to pay—my wife’s nephew needs to get his car inspected, both have this habit of eating each and every day.

Glen Zumwalt loaned me a pea sheller that works something like a ringer washer. Insert a pea in one end, the rollers suck it through. Shelled peas drop out below; spent husks come out the other end. I’ve heard shelled peas sell for $5/pound, perhaps even more. I’m thinking these young men can shell the peas, rent a stall at an Austin farmer’s market and sell them. They arrive around noon and shell peas until 6 pm. The take at the end: they’ve shelled 16 pounds.

So, if the peas are free, and 10 hours of labor at $7.50 an hour produces 16 pounds of shelled peas worth $5/pound at the market in Austin, it cost me $75 to have the peas shelled and they are worth $80. I pay the young men plus an extra $20 for gasoline and keep the peas for our own pantry. At this rate we may soon have no money, but we won’t be going hungry, good Lord willing.

And someone somewhere, perhaps a number of someones, are eating peas today you probably can’t buy in your grocery store, because the economics of growing and harvesting fresh peas for the market doesn’t work.

Now the question remains: Do I call the men after the current rain event passes to continue picking peas?


Don October 3, 2009 - 12:54pm
( categories: Miscellany )

...farmers grow dope.

I did inhale.

Don October 3, 2009 - 11:57am

Don, if the drug producers couldn't take advantage of the massive profits they get from the inefficient markets that are created by heavy regulation, they'd be out of business in a year or two as well (along with a lot of police, prison guards and lawyers, so don't hold your breath). I think the question comes down to how to regulate the market in a way that benefits the most important players: the farmers.

Here in Ontario, we have milk marketing boards and production quotas. These mean that Ontario farmers that have a quota make a living. Milk is $4/gallon, maybe that's pricier than it would be perhaps without the co-operative system. It is BGH free. The farmers make a good living so it's produced to high standards. The price is what is costs to maintain that sector of the economy and keep it healthy.

The Canadian Wheat Board provides our wheat producers with steady prices and ensures we get high yield and high quality.

Keeping farmers on the land has environmental benefits well beyond just getting your food locally. Farmers here participate in watershed protection programs because it keeps their soil healthy and erosion at bay. As an avid canoer and kayaker I appreciate this immensely. We have healthy fish runs and diverse wildlife because of the co-operation of farmers and their stewardship.

Time to use that famous American democracy to voluntarily organize your state to get a production quota system in place that keeps you on your land. Maybe have a look at how the Swiss do it. Such systems never completely isolate you from market conditions; stupid farmers will still go under (like my sister's friend who inherited 160 tiled, drained and highly productive acres and ruined it in a few years). However, by organizing yourselves into an economic entity that can't be pushed around you can extract a bigger share of the economy around you and make a living.

ssclift October 3, 2009 - 12:40pm

What happens when the producers are numerous and the buyers are few? A. a buyer controlled market.
What happens when the producers are few and the buyers are many? A. a producer controlled market, a monopolistic market.
What happens when the producers are numerous and the buyers are numerous as well? A. an economic definition of classical market condition.
What happens when the producers are few and the buyers are few as well? A. ??? a deep depression?

Historically (since WWII) the agricultural sector has been economically factored into a subservient economic position through a governmental policy favoring cheap foods over economic income for production of foods. Through the 60's and 70's, people spent less than 10% of their incomes (averages) for food. This was accomplished through subsidies, quotas, and retiring lands from production. The national agricultural policy (The Farm Bill) acts to distort the economic market for production as well as income. Never before in history have so few fed so many, and still most cannot make a livelihood for their efforts. Large scale corporate operations exercising efficiencies of scale are the sole survivors of the economic devastation politically wrought by corporate controlled Washington. Paradoxically, considering the investments required, incorporation is the only feasible answer to the administration or management of land anymore. When the large corporation fails, eating will become a problem.

Arnie October 4, 2009 - 4:41am

and accurate. I have only one point of contention. When you say:

Paradoxically, considering the investments required, incorporation is the only feasible answer to the administration or management of land anymore. When the large corporation fails, eating will become a problem.

I think, well they are going to fail so what's plan B?

I did inhale.

Don October 4, 2009 - 7:50am

The corporation serves as a continuing entity that holds the capital invested in an enterprise as well as being a continuing entity that is responsible for whatever incurred debt that is necessary for efficient operation of an enterprise, in agriculture, both can be quite large.
IIRC during the 80's, land prices became elevated and banks were loaning based upon that value. Those exposed as sole proprietor when markets subsequently failed basically lost everything, whereas those which were incorporated did not present that risk to the banks and were more able to obtain financing and thereby survive.
The difference between "family" corporations and large agricultural corporations is difficult to draw but can be delineated maybe by the source of capital, one coming from familial savings and retentions, the other from non-agricultural incomes e.g. professionals, corporate entities investing earnings, etc. Many times the size of operations are similar but becoming more likely very large from outside resources invested.
There is also the matter of experienced management, the family corporation mostly from personal experience, the large corporation relies upon hired management experience, there being a qualitative difference in interest. The large corporation relies heavily upon hired help for its management which may or may not be interested in long term interests. Unfortunately, these are the entities that now own and control the production now and are primarily answerable to short term demands.
As long as familial corporation can operate, they do have an advantage in that their structure does reduce the risk in financing (lower costs) and can provide the most efficient management over the longer term. The large corporation is more at risk to markets consisting of few buyers, the large corporation becomes less flexible as its size grows.
What plan B? underground greenhouses?

Arnie October 4, 2009 - 8:47am

and I kind of skirted this point earlier this year when I bought some of your hay. The last time I bought hay at the local feed store(New Braunfels), I paid 9.75/square bale. I haven't bought any in a while, but I suspect that it has gone up.

Are these guys really making nearly a keystone(50% margin), or are you selling way below market value? I realize that the dynamics of your customer base are different i.e. they probably wouldn't go to an "urban" feed store unless they were in dire need, but I'm still trying to get a feel for the vast differences in price.

BTW was going to call and chat this morning, but we got 4 inches in a little under 4 hours and ended up spending the morning and early afternoon clearing a flooded garage. I'm now prepared for the next 4 inches we're supposed to get this evening.

______________________________________________________
Distrust anyone who wants to teach you something.

OldLakeRat October 4, 2009 - 3:45pm

They pay me $5.50/bale. I don't know and don't ask what they then resell it for.

This has been quite an unusual year. A drought caused a scarcity, local in nature, so many were charging excessive amounts of money for hay. I on the other hand understand the other side of the equation because I too raise animals and I know that if I charge too much, I kill my own market. Those that buy hay from me will be forced to sell or slaughter their animals.

And then there's this Depression thing going around. The only thing in shorter supply than hay is the money with which to buy hay.

I didn't ask around when I set the price. I just decided that was fair--enough for me to make a little money--and cheap enough that my customers can afford to buy it.

So far, it has worked out OK.

I did inhale.

Don October 4, 2009 - 3:58pm

for the clarification. So in essence, you are a wholesaler, but also sell at wholesale prices to the public. Makes sense to me. Some might think you're leaving money on the table, but to offer a good quality product at a fair price does a hell of a lot to build a loyal customer base and ensure repeat business...and the cash flow that comes along with it.

______________________________________________________
Distrust anyone who wants to teach you something.

OldLakeRat October 5, 2009 - 10:03am

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