Financial Crisis: The Final Harbinger of Bucolic Demise?

Antigo, WI—“I don’t know what its like to be clean,” farmer David Wilson of Grass Point Farms Cooperative chuckles, takes off his American Farm Cooperative cap, shakes and scratches his balding head before replacing it. Not twenty minutes earlier he had gallantly stepped in front of a stream of cow urine in the milking room. The sharp stench of urine dissipates a bit but lingers out of doors. “I’m beginning to think I’m crazy,” he sighs, "because I’d rather do this than earn $10 an hour and come home clean everyday, workin’ some job in town.” David works nearly 20 hours a day, 7 days per week on his family farm of 80 head herd of cross-Jersey cows for an income of less than $20,000—less than he’d make if he worked that $10 an hour job.[1]

The Wilsons are a rare breed of American: debt averse. Their farm is strictly family run: David, his wife Pam, and their 13 year old daughter Michaela. “We’ve never really struggled because we live the life that we live,” Pam shrugs and grins; she’s a jolly countrywoman with eyes that radiate warmth and confidence, “We’re awfully frugal.” Wilson explains that they have been debt free three times, the last for one month this August. For years they used short term debt to finance their operation, for example, to buy feed if there isn’t enough rain during the growing season, or the cost of commodity prices sky-rocket—both conditions Wilson has had to work with the past five years.

But in the contracting financial climate the Wilson family’s debt situation is likely to change. The Wilson’s position isn’t unusual for a small family dairy farm in Wisconsin, according to Dr. Paul Mitchell at the University of Wisconsin Madison Agricultural Economics department. In the past agriculture has been one of the few borrowing sectors where the borrower-lender relationship has remained tight. And agricultural banks like M&I and Wells Fargo, he explains have not had the exposure to bad loans that other banks have had, “The overall access to credit shouldn’t change. There might be a little more paperwork and demonstrations of credit worthiness than you had in years past—they’ll just have to do a little more work to get credit.”[2]

Dr. Costas Lapavitsas at the School for Oriental and African Studies in London disagrees. He explains that as the credit crisis deepens, the first casualties of the distressed credit market will be small and medium sized enterprises.[3]

“Big business can use open markets to obtain finance, it has been. Therefore banks as consumers have turned to individuals and to making money out of derivatives and other financial transactions of the type. Small and medium businesses across the world are facing problems with obtaining finance as a result.” If interbank lending doesn’t pick up soon, no matter how strong a position agriculture banks are in, it won’t matter and credit lines to families like the Wilsons will dry up.

But there is another dimension to the financial crisis that Wilson will have to be concerned about: futures prices. Farmers like Wilsons have been able to turn to derivatives in the form of futures and options to secure prices for their output. Dr. Mitchell explained that farmers have turned increasingly to these markets as prices have become more volatile since the 1990’s. Dr. Lapavitsas associated the rise of the derivatives market with overall price volatility in the market.

He explains that derivatives are “an outgrowth…of what has been happening in finance for the last two to three decades… It’s come out of the instability that has been created in the world of finance because of liberalization…. If you repressed finance… then all that world of financial innovation, derivatives, and everything that goes with it, will have much less reason to exist. There won’t be the price instability, for a start, upon which these things thrive.” Indeed, according to the “Dairy Situation and Outlook” from the University of Wisconsin Cooperative Extension, futures prices for milk and cheese are at historic lows and expected to decline.[4]

In other words, in the future small dairy farms in Wisconsin will continue to dwindle but at an accelerating rate. Small independent farms make up the bulk of the farming sector in Wisconsin, 86% according to the Wisconsin Farm Bureau association. But they also have the least collective dollar output relative to agricultural corporations.[5] It is not just credit constriction that works against small farms, but the nature of the financial market itself which doesn’t allow much room for survival. There are regulatory changes to be made to ensure that families like the Wilsons can continue to live the way they choose.

David looks dreamily out over his green fields in the late afternoon sun. In the distance there is a grove of Pine trees. He leans closer to tell me that this year he is finally going to build his wife and daughter the home “they deserve.” The Wilsons currently live in a wooden version of a double-wide. David planted those pines when he and Pam married, with plans to use them for a house one day. His ability to do so will depend heavily upon the next steps a so far inept Congress and Treasury Department take to reform financial markets.

[1] Interview, David Wilson, Aug 2008.
[2] Phone Interview, Dr. Paul D. Mitchell, 17 December 2008.
[3] Interview, Dr. Costas Lapavitsas, 17 December 2008.
[4] Bob Cropp. “Dairy Situation and Outlook.” 18 December 2008. University of Wisconsin Cooperative Extension.
[5] “Wisconsin Agriculture Farm Facts,”


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Ann is a freelance new media journalist, educated in Finance Economics. She considers herself to be a citizen of the world, though she is American by nationality, and a legal resident of the state of Wisconsin (yeah, go ahead and chuckle). See her other blog: Missing The Bear.
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