Shock Moves from the Oil Tank to the Seed Catalog
CR Lawn, 2008
We are in the midst of the deluge now: A financial hurricane the likes of which I never would have imagined. Commodity price fluctuations I have not seen before in my lifetime. Oil, shooting up from $60 to $145 a barrel, then back down in just a few months to $80. Gasoline prices up and down like a yo-yo.
And now, seed prices. I’ve been 30 years in this business and these are the highest increases to us I’ve ever seen. The ethanol boom diverting land to corn production has had a tremendous impact on farm commodity prices including vegetable seeds. Wholesale prices for pea and bean seed are up 30-50%, for corn and squash 20% or more. Even so, wholesalers could not find growers for all crops so several varieties are missing from our catalog. Horrible growing weather this summer has exacerbated the shortage.
With the collateral damage only beginning to ripple out from the broken financial centers to our communities, this is a hard time to have to raise our prices. We are a lean operation and are doing our best to absorb what we can and cushion the blow to you.
“The trouble with the profit system has always been that it is highly unprofitable to most people.” E.B. White, 1944
I’m fascinated by numbers. Thus my passion for tracking Fedco’s sales, analyzing its finances, and dissecting baseball statistics.
Last year instead of buying the Boston Globe and plunging into the sports, I started heading first to the financial pages of The New York Times. The ominous clouds gathering on our economic horizons provided compelling reading.
For 30 years I had held a modest stake in a well-managed infrastructure company that makes things like sealants, coatings and pipeline tape that we all depend on but few think much about. Over the years the shares had gained modestly. Then in the past two they had split and lurched precipitously upward in an unsustainable trajectory.
Meanwhile, attendance at Common Ground Fair, after languishing for years, had unexpectedly set a new record in 2007. Fedco orders pouring in were showing unprecedented increases across the board, with no facile explanation such as Y2K to account for them. Something felt different, like the beginning of the sixties had, like the onset of a sea change, like people were preparing for a storm.
In January, as I studied my stock’s price graph and read of plunging home values, rising foreclosure rates, over-leveraged financial institutions and skewed income distribution, I decided to sell. Good move. Today, only 9 months later, it is worth less than 40¢ on the dollar. So far I’ve been fortunate. Fedco is in the right business at the right time, offering essential goods that foster self-reliance at a time when outside systems are increasingly unreliable. But the rest of the story is still to be told. One way or another this crisis will hurt most of us. Yet it also presents us with unprecedented opportunities to restructure our household economies, restore our communities and rebuild our broken social contract.
Some fundamentals as I see them:
•Pay attention. Storm clouds build long before the bad storms arrive. The rainbow that forms in the east as the sun sets in the west is a sure sign of better weather to come.
•Details matter. Buried within them are the keys to what to do next.
•Diversify. The folks who had all their assets in Bear Stearns, Lehman Bros. or Fannie Mae aren’t feeling too good right now. If you grow nothing but potatoes, don’t be surprised when the Colorado Potato Beetle devastates you. A bad year for tomatoes is usually a good year for broccoli.
•What goes up must come down, and vice versa. Buy low, sell high, but don’t get greedy.
•Don’t panic. The time to sell was yesterday. The time to buy is tomorrow. The time to borrow is almost never. The time to think is now.
•Income distribution counts. An economy, whether a household’s or a nation’s, that depends too much on the wealthy few will collapse when the less fortunate vast majority stop buying in.
•We can’t have both guns and butter. The bills from our ill-advised war on Iraq are coming due. As on our farms, so in our nation, we can invest our resources to build our social and economic infrastructure or we can squander them on non-essentials.
•Strive for transparency and trust. Without them, confidence disappears. Without confidence, the economy and the social contract collapse.
•Let supply and demand work for us. Look what’s happened to the price of gasoline since we collectively decided to stop driving so much! Imagine what could happen if we all decided to stop buying over-processed pseudo foods or stopped going into debt for non-essentials!
Where to go from here? Funny how my conclusions are the very ones that we learn on our gardens and our farms.