0:00:00 - 0:00:22 Analysis here. Uh We'll start with this, this article. You may have heard some scuttle about water restrictions in Idaho and how that's affecting the farms there. I think it's a great example of a few principles that have been trying to help people understand. So let's dive into this. Essentially, there 0:00:22 - 0:00:43 are half a million acres whose water rights are being curtailed by the Idaho Department of Water Resources. And the, the issue here is that a lot of these farms just can't survive without that groundwater. And I wanna dive into it because it's such a wonderful example of so many things that are important 0:00:43 - 0:01:06 for us to understand today that very few people understand. Ok. So first let's go through this article and essentially some facts that I pulled from it are that what's typical is for people to spend around $400 per acre in seed fertilizer and other inputs. Ok. So they spend that much money. So obviously 0:01:05 - 0:01:28 , they need to get that much out to before they can turn a profit. Now, the issue is that this order has come after they've already planted and all that money has been invested, but that that's actually not the only problem. So farmers live in a very tight budget all the time. And there's a reason for 0:01:28 - 0:01:48 that, it has to do with modern farming and how important it is to invest in massive dedicated expensive machines for the operations because it's a, it's a hair thin margin and you need every ounce of automation and efficiency that you can get out of it. That's why they pump the ground with fertilizer 0:01:47 - 0:02:09 instead of doing things like crop rotation that take a lot less money, but they require more time and therefore there's less product. Uh It's also why they're doing things like planting wheat. Uh wheat is not a good crop for Idaho. It's, it's a, it's a water intensive crop. You ha you have to irrigate 0:02:08 - 0:02:33 it in Idaho. It, it won't survive just on rain, but you get a lot more money for wheat than you do barley or rye. It's a lot more money. And so that's why people plant it. The same goes for alfalfa, alfalfa will not survive in Idaho without irrigation. And so, but it gets a lot more money than what you 0:02:33 - 0:02:58 could plant without irrigation, which is essentially rye or barley. People were dry farming in Idaho before there were massive mechanized irrigation pumps all over the place. It can be done, but you can, you can farm a lot less. So, so lower cost crops. I I mean market price, lower market price crops 0:02:57 - 0:03:21 and much lower yields. There are people who, who today there, I'm thinking of one particular scientist who spent his career studying how to effectively plant without irrigation. And one of the things you have to do is put rose uh much further apart than you would in, in modern normal commercial farming 0:03:20 - 0:00:00 . And so essentially this is this is a complex problem and people are looking at this simplistically, I mean, the farmers are pushing back and saying, uh how dare the government curtail our water rights? This is gonna ruin our business, yada, yada, yada and whatever justification they have for that. 0:00:00 - 0:04:05 The fact is that if you're using aquifer water, so something out of a well where you're not close by a river. So it's, it's not being replenished constantly by the river that that is not uh a long term resource. It depletes over time. And actually, nationally we've done a terrible, globally, we've done 0:04:05 - 0:04:25 a terrible job managing those assets because they're great to have and they're useful. But if you're depleting them faster than they regenerate and some of them don't regenerate. That's why a huge portion of California is actually sinking because the aquifer below it has been pumped out uh so extensively 0:04:24 - 0:04:47 that it's, it's not replenished and it's going to dry up anyway. So there's tons of overhead for modern farms. They've got all this equipment, they've got the land itself, they're paying property taxes on that. They've got uh multi decade loans on equipment or their property. They've got mortgages out 0:04:47 - 0:05:07 the wazoo, they've got all these employees and it's not just a question of hiring people, they have to train them, you know, you have to get people to move there and once all that goes, you can't just push a button and get it back. Right. So, here's, here's one, this lady says, Stephanie Mickelson, she 0:05:07 - 0:05:32 says she would only be able to farm 80 acres out of her 7000 without the, the ground water. And so she's growing wheat. Yeah. Well, guess what? And some potatoes, potatoes too. So Idaho is known for potatoes, potatoes have to be irrigated in Idaho. And so um where I live in, in western Montana, we don't 0:05:31 - 0:05:53 have the exact same conditions, but the water situation is similar. And so I know all this because I've, I've run experiments on my own property. You can't grow weed or potatoes without irrigating up here. So, um essentially what's happened is this system has been allowed to develop where people have 0:05:53 - 0:06:13 been optimizing on conditions that are not stable long term, but they've treated them like they are stable long term. And now that some of the consequences are rising and, and it's being revealed that these are not long term situations, massive changes are happening. So all over this article, it talks 0:06:12 - 0:06:36 about how many farmers are going to go bankrupt and they're going to have to sell their land under pressure um because you can't farm it without the water. And this is against a backdrop of, I believe, I believe farmland went up 40% in price in the last year. That's just in a year. So if you back trace 0:06:36 - 0:06:57 that across multiple years, it's exorbitantly expensive to buy land right now. And if you buy a farm, essentially, there is no way you're ever going to get the purchase price back out of it. So the land is being sold to developers because people want to live in rural areas. And I I know this the last 0:06:56 - 0:07:18 three months I've actually driven through, I don't know, half of the United States or something as far as the number of States I've been through and there are new homes all over the place on what was previously farmland and these were just built in the last four years. So more and more lands being taken 0:07:17 - 0:07:41 out of production and what's that going to do to food prices? So you don't understand until you've grown your own chickens on feed that you produced on your own land. And unless you've tried to do that without machines, you have no idea the level of wealth we have when it comes to food, how little of 0:07:41 - 0:08:09 our time and money it takes compared to what it actually requires in nature without fossil fuels. And uh $60,000 combines, which are only cost effective if you're farming 1000 or more acres and, and so we're really, really delusional about all of this. Go going to Costco and buying a pack of chicken 0:08:08 - 0:08:34 breasts for, for relatively very little money insulate you from an understanding of how all this really works and it's going to change and it is already changing and it's going back to how it used to be and you're going to see the food prices continue to skyrocket. I'm telling you. So, anyway, um that's 0:08:33 - 0:08:58 , that's pretty much that story, but I want to show you this graph. So here's a graph. Maybe I can enlarge this. No, here's a graph um from the, the USDA and this is the number of, of us farms. That's the blue line. The size of the farm is a green line and then the amount of land in the farm, the farms 0:08:58 - 0:09:24 is this orange line. And what I want to highlight to you that you probably don't know because you kind of have to be a farm nerd to know this. You see this, this what this shows is the consolidation of farms as technology increased. What kind of technology? One cheap fertilizer? So that's driven by fossil 0:09:23 - 0:09:49 fuels. And um it, it's applied every year to commercial farms. They pump the land full of nitrogen, for example, in order to get oversized yields, they're unnatural yields. Plus the soil is depleted and they have to make up for that. They're using enormous machines to harvest the land. It used to be 0:09:48 - 0:10:10 , you just had the family tractor, did you know that they don't even sell combines that are tractor mounted anymore. You can buy one, but it's from the 19 sixties. If it's still running, it's a piece of junk. Very old. They don't even sell them in the United States anymore. They sell them in China and 0:10:10 - 0:10:32 India and Brazil, but not the United States. So that, that machine that used machine costs about $7000 right now. And so that's what it would cost you. If you wanna go from harvesting by hand with a scythe and beating out the seeds with these uh nunchuck looking sticks and then winnowing the grain by 0:10:32 - 0:10:58 hand. If you want to upgrade from that to a machine, you have to have a $40,000 tractor, which is a small one and a $7000. Probably gonna break down any second drive across the country to find it, tractor mounted, combine a step up from that would be to buy a very used combine for 30 or $40,000 and you'll 0:10:58 - 0:11:20 never get your money out of it because if you're farming even 100 acres, you'll never get your money out of that. You get about one ton of grain per acre ish. You'll never get your money out. Ok? To make money farming, you have to have 1000 acres depending on what you're doing. Ok? Because then the big 0:11:20 - 0:11:42 machines make sense, but you're still gonna have to mortgage to the hilt to afford them. That's, you know, if you drive through cattle country here, uh about a half hour or so from my house, you see these big cattle ranches, huge 1000 acre plus cattle ranches. They've got irrigation going all the time 0:11:41 - 0:12:04 and then they all have $100,000 plus tractors. Um Which is what you need to handle the hay bales. They have hailing mai uh hay baling machines that they pull behind them. They, they're enormously expensive pieces of equipment to, to buy and then to ma maintain them cost a fortune just to do little things 0:12:04 - 0:12:26 cost you a fortune to get it. Uh kept running. But you don't understand this if you're not in the space, right? So all the farms consolidated as the technology kicked off and then people moved into cities and whatever about around world War two. And by the by 1970 that had dropped off. What this means 0:12:25 - 0:12:47 I want you to think about this is that if you're less than 80 years old, you do not remember the way it was. Now the number of farms here this climbed with the population. This is just population growth. You see the the farm size stayed the same. This is just more people being born and, and turning land 0:12:47 - 0:13:12 into farms. But eventually the lamb was all taken and technology made it possible in the post war era to consolidate those farms to the point where people alive today. Don't remember those tractor pulled combines running the land. They don't remember family farms. No one alive experienced that hardly 0:13:11 - 0:13:34 anyone. I should say. I'm sure there were some holdouts. Ok. The, the size of the farms skyrocket. This does not tell the story because it says average farm size. I happen to know from my own research. The median farm size is much larger than 100 acres. I think. I uh sorry, 450 acres. Uh I think it's 0:13:34 - 0:13:55 , it's 1000 or more, but don't quote me on that. I don't remember, but it's, it's higher than the average, much higher. Ok. But now I want to transition to talking about this decline here. This seems like a subtle thing, doesn't it? And I from other research, it's 2% per year very constantly since around 0:13:54 - 0:14:21 1960. It's been about a 2% decline in the, the number of acres farmed per year in the United States. So now I wanna take you to, um, this spreadsheet, we gotta do some math. I've done it for you. So let's look at the cumulative effect of a 2% decline per year. Now, the way I did this, I, I just said 0:14:21 - 0:14:42 year one through 20 and this is where it is right now. It's about at 880,000 acres being farmed in the United States today, but you could go the, the opposite direction and take this backwards as well. And what we're gonna see is the same story we see when we project it forward, you're gonna see a massive 0:14:41 - 0:15:09 decline in the percent of farmed land. And it's very simple to understand when you have a lot less supply and a lot more demand because there are more people, guess what happens to the cost of food and guess what happens to the availability of food? Now, inflation is a complex problem. But what I'm trying 0:15:09 - 0:15:38 to tell you is the, the reduction in the number of acres farmed is absolutely a principal component of food inflation today. And it's going to get much worse because people, farmers can't afford to buy farmland. They'll never get their money out of it. Existing farmers are constantly uh tempted to sell 0:15:38 - 0:16:01 out their land to house developers for much more than they could ever make doing farming. Um I, I know personally, I know a couple who owns an enormous cattle ranch, they have less than 1000 head of cattle, which is a lot, uh more than more than 600 less than 1000. It varies what the size of the herd 0:16:01 - 0:16:31 is. They make maybe $100,000 a year on their cattle. Maybe their land is worth well over $15 million. Now, that couple, they happen to be older, they have a few kids and essentially there's this mix of kids who don't want to farm and kids that aren't capable of taking over the business. But for the most 0:16:31 - 0:00:00 part, people in this situation, the kids aren't interested in busting their hump all the time to just make $100,000 as a family because they're all working the land. So, right now there are three adults in their family working the land and they combined to make about $1000 100,000 a year on it. Now, 0:00:00 - 0:17:10 that land's been paid off. It's multigenerational in the family. They have an old junkie house that they're not interested in fixing up. It's tiny, uh is very outdated and they don't care. So they don't have to pay a lot of property tax. Um They're not improving their house. They're, they're, they're 0:17:10 - 0:17:36 fine, they're not interested in selling out. But what do you think the next generation is gonna do? And as more and more of these houses or farms come out of production, you're just gonna see this accelerate. OK. This is a huge change in not very many years. So there are some principles that are illustrated 0:17:35 - 0:17:56 in this situation. What we think of as long term situations. They're not, they're short term situations. And in a complex system, people overspecialize, they assume things are always gonna be how they are now and then they invest massive inputs under that assumption and then conditions change and then 0:17:56 - 0:18:16 they're in big trouble. So the solution is to not overspecialize or if you're going to realize that it's only gonna be good for far fewer years than you thought. And that's, that's important and we could talk about a million different things. I mean, just a random thing to pluck out of the air, uh, for 0:18:15 - 0:00:00 , for, for several decades. It was a really good idea to be a, a doctor and now most doctors are telling their Children not to follow in their footsteps. It used to be something that, that for a while. If your father or mother was a doctor, maybe you'd be more inclined to get into the, the business, 0:00:00 - 0:18:54 but not so much anymore. Insurance and everything else is just tearing that apart as far as a profitable uh, profession. Plus it's almost impossible to do if, if you're a white male, but that's a, that's a different story. So if you have some kind of opportunity, the thing is to get in there and get 0:18:54 - 0:19:14 everything you can out of it as fast as you can because it could change tomorrow. If this is a warning call for anyone that's in a particularly lucrative career right now, don't leverage up your debt, don't increase your, your spending to match your earning. Don't assume that you're gonna be doing what 0:19:14 - 0:19:34 you're doing now, 10 years or 20 years from now, take, take that money and do something valuable with it because tomorrow you might not have the job. And the question is what would you do then? So, um, these farmers they thought they had a pretty good gig. You know, they go out and they buy the $100,000 0:19:33 - 0:19:56 pickup truck and life is good until someone turns off the water. And it takes a certain degree of wisdom and honesty to say, hm, a large percentage of my farm relies on groundwater. What would I do if they turn that off and have a plan and maybe run some experiments to say, to discover because you have 0:19:56 - 0:20:16 to, the knowledge isn't around anymore. We go back to this graph. The knowledge is not around anymore and they, they probably don't even know. I, I would guess that and I have some people who are close to farming in Idaho. So correct me if I'm wrong, I would guess that farmers in Idaho have no idea that 0:20:15 - 0:20:41 they could plant rye on their land and never ever have to water it. Even once you plan it in August at the end of August and then it handles itself from that point on. If you co plant it with a legume like uh Austrian field peas, you don't actually ever have to fertilize it either. Now, the yields are 0:20:41 - 0:21:08 not astounding but it's doable. And then you say, well, I can't pay my mortgage on rye. Ok. Well, maybe you, you could pay your mortgage on, on some mix of uh rye and meat because there are farm animals that will eat that. And, and now all of a sudden you're looking at something very different than the 0:21:08 - 0:21:28 just plug and play. I grow potatoes like every single other person in this county. And we have this, this co op and I really don't have to do any of the heavy lifting. I just drive around in my tractor and pay the bills and life is good. It's a lot harder cause you have to be a lot smarter, right? And 0:21:28 - 0:21:51 you have to have way more initiative, critical thinking, all these things. And i it's like I saw on social media the other day, someone said is, are what, what careers are safe today. What's a good thing for my kids to get into? And the answer is there isn't any career that's safe anymore. It's things 0:21:50 - 0:22:13 have gotten complicated enough, there are opportunities in many careers, but it's not enough to just have a title anymore. You actually have to be smart, you have to work very hard, you have to be creative and very, very few young people today are equipped for that. And so what you're going to see is 0:22:13 - 0:22:42 the resurgence of the old school family farm. You're gonna see a farm that mostly produces for self sufficiency and people living there in exchange for their work, maybe a couple bucks on the side, but nothing even close to minimum wage, just kind of a stipend and most modern people are not interested 0:22:42 - 0:23:08 in that kind of life. They're not, but that's what is going to start happening more and more. It's a reversal of this. It's a reversion to the mean because you know, this blue line, you see this blip that that co occurs with the industrial revolution and then with the mechanization of farms, the farms 0:23:08 - 0:23:36 consolidate. But there's actually a pattern here if we went. If the graph continued to the left, what you'd see is that this has pretty much been how things have gone for a very long time. This is the historic norm is that each family has about 100 and 50 acres. And if you can't afford 100 and 50 acres 0:23:35 - 0:23:57 , you're working for someone who can. And that is a historic norm. It dips a little because of the onset of machines instead of horses. So you don't need as much land. I you probably don't know this, but about half of the historic for farm was dedicated to growing feed for the horses that worked the 0:23:57 - 0:24:24 farm. So fun stuff anyway, back to the principles. So don't assume that long term situations are long term. They might be completely coupled to the surge in cheap energy that, that from the post war period and that's a limited thing. It's not sustainable and it's going away. Um Yeah, I mean, I already 0:24:24 - 0:24:50 said what these other points are here. Pretty much everything in living memory is a historic and unsustainable blip. It's, it's, it's short term in terms of the conditions and a very significant point here, the culture that was allowed to grow or fe kind of festered during that time under those conditions 0:24:49 - 0:25:18 , it's just as short term and unsustainable. Almost everything that we think about even right and wrong, I mean, the status quo for sure, but even right and wrong how we live our lives is so today is so intertwined with cheap energy. It's not even funny and so few people can see it, so few people can 0:25:18 - 0:25:44 see it. Even our ideas are right and wrong. And when you get back to the land and you see what it takes to grow a chicken, a heritage chicken that doesn't need a store feed takes about six months from birth to butcher. And you have to process that thing with your own hands and you have to keep away predators 0:25:43 - 0:26:03 and you live in a place where there are predators because most, you know, obviously there's not the, the only Cougars the subdivisions have to worry about are the old lady types. Um, you know, you're not gonna have a grizzly bear walking down main street in, in most of the places where people live. So 0:26:02 - 0:26:24 when you have to deal with all of that, you start to see how expensive it is just to feed yourself and your family and everyone's working on borrowed time and borrowed money and people just don't get it. The switch is flipping. I'm not even saying it's going to, it's flipping now. And you probably are 0:26:24 - 0:26:50 not gonna notice it until the rug gets pulled. But the rugs getting pulled all the time. If you look at COVID, most of the things that happened were not new problems. They were just the, what it took for normal people to notice the problem and then they reacted, those, those problems have been going 0:26:49 - 0:27:12 on for a very long time. It's just no one cared because it didn't change their day to day life. And then all of a sudden something happens and it crosses the threshold into their daily life. I'm telling you, it is electricity prices go up as more controls on travel are implemented. All these things where 0:27:12 - 0:27:37 they're already in the works. It's a knob that's already turning so nothing extreme. I'm not saying uh some new crop disease that gets launched by our enemies. I'm not saying some act of God where we get a freeze in the middle of July across corn country or, or any of those things that I also believe 0:27:36 - 0:27:59 are going to happen. Just the normal things that are already happening and you could plot them on a gra and see that they're increasing or decreasing as that continues. Just that stuff. Just the normal stuff. You are going to see significant shifts in what you think are long term unchanging conditions 0:27:58 - 0:28:27 . And you should start to ask yourself, I said years ago, how is your life going to change when you have to pay $7 a gallon for gas or $10 a gallon for gas. And people said, oh, this guy's nuts, that's never gonna happen. Well, guess what, guess what it already has and people who anticipate future conditions 0:28:26 - 0:28:52 and, and make changes so that they're robust to them are much better off when it happens. So, what are you going to do when the cost of food increases by another 30%? And maybe it takes 18 years, maybe it takes three. What are you going to do if your food budget doubles again? Because I'm pretty sure 0:28:51 - 0:29:17 I'm not the only one who's paying basically double for food versus pre COVID. What are you going to do? So I can tell you what, what we're doing is that we've, we've had a confluence of life choices, you know, good choices, beget good choices. They, they, they, they flow together and combined into outsized 0:29:17 - 0:29:42 positive e effects. We're in a place where we can investigate uh more and more of our own food production. And my personal goal is to, to be able to feed the animals that we have without buying any feed from the store that's really difficult to do. And it's, it's difficult any place in the country. It's 0:29:41 - 0:30:08 really hard where I live. So what are you going to do? And more and more people are going to reach the point where the only tenable option they have is to go somewhere else where there is someone who's done the work because this idea of, I live in a, in a townhouse in the suburbs and, uh, if things fall 0:30:07 - 0:30:31 apart, I'm gonna chuck some seeds in the ground. Good luck, buddy. You have no idea what it takes to process grain and grain really is the key to survival. Uh, you can't feed animals very well in the winter time without grain. Uh What are you gonna feed them and to, to, to harvest? And that's probably 0:30:30 - 0:30:53 your main calorie source too, to harvest grain. It takes a lot of work as I alluded to earlier in this. Ok. Well, I don't want to drone on more about this. I'm sure we all have things to do, but you get the point. You've got to pay attention to these things. Now, on the plus side, I'm gonna say, I bet 0:30:53 - 0:31:11 they're gonna be a bunch of farms available to purchase in Idaho. So that might be something that you wanna think about. And if you can get them for a song because it's a distressed sale and you don't plan on growing irrigated potatoes and wheat, you're gonna go the smart way and have some animals and 0:31:10 - 0:31:32 feed them rye. Then uh you know, reach out, I can share some information with you. But uh yeah, that, that might be a huge opportunity. So sometimes when, when, as things fall apart, there are also some opportunities and one person's bankruptcy might be your lucky day. So anyway, take care.