Keith Bjerke, president-elect of the Greater North Dakota Association and operator of a 3,000-acre farmstead in Northwood, North Dakota, speaking at forum on "The Implications of Consolidated Land Ownership" from the "Food, Farming and the Future" symposium, held at Concordia College in Moorhead. Bjerke shares his views of large land ownership as it relates to agriculture and the production of food.
Read the Text Transcription of the Audio.
(00:00:00) my life's choices been agriculture My part of Agriculture is production farming, but I don't feel for a minute. That as a production agriculturalists that I can or can't in continue to stand alone. Agriculture is a business is about twenty percent of our national product. In North Dakota, my home state is closer to 60% But the three percent of us that are left in production agriculture have very little voice and very little opportunity to express that voice. If we don't find a way to mold together the other 17 percent and work forward for an agricultural industry that has a way to succeed. Now we've heard some folks. Tell us in the last few hours that that agriculture as we know it today cannot succeed that fundamental business approach to agriculture is dead. That we shouldn't be thinking about profitability or free enterprise or the opportunity for youth start with the future. And to that I say bologna. I know what it's like in agriculture. I didn't start as early as I should have to be successful in agriculture. I know what it means to borrow money and pay nineteen twenty percent interest, but there is a future in agriculture. People will continue to succeed and the world will eat and we have to do it better and the best way by far for us to do it better is to come together and groups like this. Since we have such a tremendous impact in this part of the country since everything that moves not only on Concordia College, but in the Fargo-Moorhead area the states of North Dakota and Minnesota ultimately starts with agriculture. We do need to come together. We need to think about our future as it affects each other and how we can best succeed in that future. And I submit to you that we don't do it by laying down on the job. How we had a in recent years an attempt at cutting production by 50% It was called the pic program. A lot of you have read and heard about the pic program many farmers laid aside 50% of their production acres to whittle away at this horrendous Surplus that we talked about. The pit program got a lot of black eyes because of the way that affected the business Community supporting agriculture. It goes without saying that if I plant only half of my farm I only use half of the fertilizer need half of the equipment hire half of the labor market half of the product and so forth. and for us to embark on a program that that makes that our priority. We'd better be willing and this community to make some substantial changes that 17 percent that group of folks that makes their living on what we produce. And the goods and services that we use. Would have to find new employment a good shareable. Some of this is going to happen. Every day we pick up the paper and this area we find more Auction Sales. Farms are consolidating in size. I submit to you that it's not being Consolidated by insurance companies and by power-hungry corporations. It's being Consolidated by Farmers Family Farmers people that grew up and want to continue on the land. my father farmed 240 acres in the Northwood community I went to college on that farm. In addition to the farming the land he raised some Hogs and we continued that practice. For me to send my four children to college today off 240 acres of land is absolute not economic reality. Something has to change. It's called profit. Now. There's two ways in which we can make profit. One is higher prices. The other is lower costs. There is no magic. It's one of the other. When we examine higher prices, we are pricing ourselves out of the World Market. I don't believe we're here today to continue that debate. I guess it matters little to me whether I get two dollars a bushel from my wheat or four dollars a bushel from my wheat, as long as what it cost me to produce a tweet is somewhat less and that margin of profit is there to operate the business? And farming is a business. It's a business like any other and it's high time. We admit it. It's not a dirty word to say you're in business or say you're there to make a product. That's what makes the world go round. Now, the sociological implications of that. Some would say is very bad that we food is for people not for profit and that we should continue to produce it at a loss so that we can we can make sure that more people can eat better. You know, it isn't the cost of that food that's keeping it away from the people. It's government policy and its transportation problems and it's things around the world over which I as an individual farmer have very little to do it. But for me to quit producing that food in the breadbasket of the world and that area that can do it better than anybody else I think would be a greater sin. I'm good at producing wheat. And I would like to continue I would like to do it at a profit Farm size is the reason for this debate. It's been said that (00:06:16) in a survey that was taken by our State University this spring that the average farmer in North Dakota is by this survey those respondents had to be less than 65 years old. They had to be operating a farm consider farming their primary alkyl occupation and that they'd sold at least 2,500 dollars in farm products in (00:06:35) 1984. Average age of those responding was 45 years old (00:06:42) the most far their most common organization was a (00:06:45) church. I think that's very positive (00:06:48) of all the organizations they could have listed including the Lions Club and and what-have-you. The church came out on top spring wheat was the principal crop produced. It surprised me that livestock was produced on 60% of the (00:07:01) farms and the survey. It Statewide. (00:07:07) You know what happens when you take a course out of production to a livestock producer and increase the price of that feed. Then he gets in the squeeze at the wheat farmer is you know trying to (00:07:19) sell it. the acreage operated by those (00:07:23) surveyed average 1623 Acres 80% were between 500 and 3000. Now the smallest than at 500 rage would be double the size that my dad was able to operate successfully 40 years ago. The debt to asset ratio on the average was 33 percent of those responding in other words for every dollar of assets. There was 33 cents worth of debt interest certainly has a tremendous impact on the bottom line and a farm operation. As interest rates are low. There is more opportunity for more profit as a higher percentage of your gross income goes to pay interest. That's some of the problem one of the interesting things in the survey was that the net figure return to that farm operator was fourteen thousand eight hundred ninety seven dollars on a gross income of a hundred and five thousand dollars. That's about 14% I've been on a computer system since 1964 where I have mailed my records in and gotten accounting done. When the year-end analysis comes we get comparative figures with other Farmers on the system, it would indicate in that system that the farmers net was closer to 10% Then the 14% that this survey found. But you can pick either number you wish ten percent is a little easier to multiply in my head. So I submit to you that at a 250 thousand dollar gross income at 10% return or that that you pay taxes on before you pay your principal and your taxes and your Social Security would be $25,000. Today when students graduate from Concordia College for NDSU most of them go out and start an occupations at $25,000 or above. and I said, but that's not in these times and unreasonable return Sometimes we tend to get confused about gross income and net income. Please don't be confused at a farmer that grossest $250,000 a year has that kind of money to go to town and buy these high price combines and tractors and cars doesn't work. That way we have to pay the fuel bill and the fertilizer barrel and the labor Bill and and so forth down the line and the expense area until we end up with the same wages. So to speak that those of you outside of production agriculture (00:10:14) put in the bank (00:10:15) then we pay our taxes and and our depreciation and our principal payments (00:10:23) on (00:10:23) that So make sure that when we're talking we're talking net income. It's very important. Twenty percent of those respondents had a negative net income or was a 24 percent over 20% anyway. and these are unfortunately some of the farmers that we read about in the papers and see the auction sale bills for And it's a terrible thing to see a farm be sold a farm that's been in the family for three generations. A lot of Blood Sweat and Tears go into operating that farm 365 days a year and it happens way more often in the last few years and of us care to see now. I'm not here to advocate. Ownership of land by land magnets, but I am here to Advocate that we do need an economic unit something that allows us to be as absolute competitive as possible. I would tend to support the premise of Governor Freeman that part of our solution is going to be continuing to export around the world. And I would be willing to take less. For some of my product to increase part of that market share, but I cannot continue to write the price of my product down below what it cost me to produce it simply can't be done and have a viable business. So here's where the basic business attitude comes to life. Now we have been asked or in fact required to write our assets down in the last five years by nearly 50% land in my area that would sell for about twelve hundred dollars an acre in 1980 now would sell for $600 an acre. If I had borrowed eight hundred dollars on that land and I hadn't paid off those 200 you could imagine where the banker would feel when he has more invested in non-farm that I do. As a farm operator and trying to own part of the unit. I can continue to write that asset down to zero matter. I could I could go that far but that's about as far as I can go after the land is worth zero and my variable costs are still above what my market price is then it's somebody else's turn. That's where the 17-percent come to play. Now if wheat is going to sell for two dollars and forty cents a bushel and my variable costs those costs outside of land are in excess of two hundred two dollars and forty cents a bushel. I can't write it down any further, then it's time for this nation and this Workforce to determine whether or not they're willing to take their cut. And the next round of Labor negotiations that John Deere and Tenneco now and and I am see and all these folks that provide us with goods and services instead of the Union's requesting a 10% increase may have to take a 30 percent cut. They have to take a 50% cut like I did. You see I can't continue to pay a hundred thousand dollars for a Tracker. And continue raising those variable costs. if my end result continues to decline Again, I submit to you that this population this country of ours is not looking for another depression. And I don't believe that short of that. We're going to have the willingness throughout this land to write down the variable costs. I submit to you that those folks that are in business for a profit providing those variable costs are going to be led Kicking and Screaming to the well. If we don't do something about this disparity between market price and variable costs. Two ways to approach that problem. One is to artificially set market prices put them somewhere above these costs to do that. You need to have strict production controls. Because to do that someone has to make up the difference. If the real price for wheat in the world is two dollars a bushel and we're going to get four dollars for it back in the farm. Mr. Taxpayer, you're going to have to pay that of the two dollars. If that's the plan now to limit your liability. Then we're going to have to say we're only going to produce half of those Acres or some such figure so that we don't continue to glut the bins and and make it to profitable out here. So we're going to have all this land going out of production. Some of which should never been put in production in the first place, wholeheartedly support the conservation Reserve being talked about whether it's 70 million Acres or 90 million Acres, there's some debate but there is land being farmed today. That should not be farmed. Good place for the government to start this to buy some of that land back out of production. Shouldn't be there. Place number two then that you can address the price issue. Is to make your operation as efficient as it can be. And some would say that we have done that over and over again and we can't do it any better. Let me tell you my situation Red River Valley Farm highly productive. Farm program 1985 30 percent set aside to grow wheat to be in a farm program. So again round numbers Thousand Acre wheat base, you have to have 300 acres of land sitting idle those 300 acres are a drain on my cash flow. They increase the cost of my wheat on my farm by nearly 30 percent. In other words of I raised that Thousand Acres of wheat, I could economically sell it for nearly thirty percent less and have the same return when I'm done. You say well what in the world are you going to do with 30% more wheat when the world is already swimming and wheat? And I know that's a problem. I know we're not going to do it with $4 week. We're not going to produce and sell more weed around the world at 40% but both the speaker last night and this morning hit on a very key issue. Set an expanding economy around the world eats more and eats better. They were very much in agreement on that one point that what we do to help the rest of the world improve their local economies is long-term. Very very good for American agriculture. And I submit there in lies the key. We don't need to send foreign aid all over this country to build guns and bullets and and defense operations. What we need is to improve the standard of living around the world and make them hungry. An American agriculture is back. Not able to produce what this world wants. There are so many folks out there without a full belly. It just makes you ill and here we have this abundance in this ability in his god-given right and and ambition in this country to fix it and we haven't got the political strength to do anything about it. And it really bothers me. And we can do something about it groups. Like this can do something about it and we need to do it together, but let's not put our head in the sand and think that the Family Farm is some unit of 200 Acres. with an old age tractor that's going to be economical and pay his own way. Because it ain't going to happen. And if we ask these folks to do that then we better be willing to pay the taxes to give them a living. Because they can't do it on their own. And to me that's a bigger burden than this country has the ability to take care of.