Thursday, January 22, 2015

Where does your food come from?...Yuma!

If it's green and it's winter, your food probably comes from the agricultural area around Yuma, AZ.

Whether it's trees, wine grapes, row crops, meat or fish, we've always been fascinated by the business and technical skills required to grow and distribute agricultural products. We've taken many university courses on these topics and have worked in the business, but some of the best learning events we've attended over the years have been those sponsored by growers who do it for a living.

Since we were in Yuma, AZ for a while, and Yuma is the agricultural center of the U.S. during the cold winter months, we made sure we were the first people to sign up for two very popular agri-business seminars offered by local farmers here each year.

The University of AZ Ag Extension is extremely active in the Yuma area. They have been instrumental in developing the best seed sources and farming practices that work in Yuma's unique climate and soils.

Celery is a more recent crop added to the Yuma mix. It is incredibly profitable to grow. We like celery, but it's surprising that it's such a cash crop.

Ed Harrison is a fifth generation farmer in the Yuma area. His family farms 7,000 acres. We also learned the origin of Swastika Bridge bridge, which is only about a mile from where his family homesteaded in the early 1920s.

Some of the fine local produce we picked. The yellow cauliflower and purple romaine lettuce were particularly interesting. The same produce we picked will be in grocery stores throughout the Northeast in two days.

Yuma growers custom plant and pick their products. Different packers like different mixes of produce placed in their specific containers. Everything is done according to the packers' orders.

Most of the equipment you see in Yuma are simple harvest aids. They just transfer products from the field to refrigerated trucks. The pictures below show a rare and expensive piece of equipment. This is a custom processing plant on wheels. The produce is custom picked, measured, cleaned, placed in custom packaging and shipped directly from the field to your local store throughout the U.S.

Where the soil is too sandy for row crops, they just grow date palms. Every date palm tree here was propagated from the original trees brought from Morocco back in the early 1920s. We saw the six remaining Mother trees. They were just out in the field by an ag storage building. You'd think they would be cordoned off with a special plaque of some kind.

And you can bank all of this green as well!

In a multiple choice, which of the following agricultural lands would make you the most money? To make it easier, let's define making money as the land that has the highest Cap Rate and ROI per acre.
  • Ultra premium vineyard land in the heart on Napa Valley's best appellations?
  • America's Garden: The California Central Valley?
  • Fertile, deep, black soil in Iowa's best corn producing regions?
  • Timber land in Northern Idaho where the six most widely used wood-product trees grow like weeds and disease and fire threats are low?
  • Prime citrus growing land in Florida?
  • Low elevation desert land around Yuma, AZ?
Based on the blog topic, you've probably guessed the answer is the Yuma desert. The result is surprising, but true. Rather then lay out a spreadsheet (which would be the most fun for me but not for you), here are the basic facts:
  • Yuma ag land isn't the cheapest to buy or lease (Idaho and Iowa are lower), but the prices matched with the diversity of crop options give it a clear edge over all the others.
  • The Yuma growing season and climate isn't the best due to high and low extremes (California, especially the Central Valley, has much more moderate highs and lows), but it is the only land that can be successfully farmed and kept productive for 365 days out of the year.
  • Water costs aren't the lowest (Idaho wins that one), but water rights established and refined over 100 years make the cost and availability of irrigation among the most cost effective in the nation.
  • Operating costs (equipment, fuel, agricultural inputs, labor) in Yuma are among the lowest in the nation.
  • The diversity of crops that can be grown in Yuma is unmatched. In addition, the nature of the farming allows growers to quickly take advantage of fast moving markets. They can change their crop combinations faster.
It's good to see a farming region where family growers can be extremely successful financially. So why isn't there a mad dash to buy ag land in Yuma and drive prices higher? Mostly it's because the largest growers have been in the region since the 1920s. These families have been working this land and growing their enterprises for four or five generations. Land rarely comes up for sale (when it does, the locals know about it first and scoop it up) and leases are closely held and maintained. That's unlikely to change any time soon.

Wherever you are, support the local farmers.

We spend a lot of time at farmers' markets around the country. That's about as local as most people can get with their food, but while up in Idaho for half the year, we eat foods we grow or forage on our place, eat fish we catch in local streams and lakes, eat lamb and beef that are born and raised on properties that adjoin ours, eat wild game from our land, drink milk from cows and goats raised by neighbors, and so on. It's nice to have a little of that same "ultra-local food from sources you know well" feeling while spending the winter 1,500 miles away from Northern Idaho.

Friday, January 9, 2015

How to Survive a Bus Crash

Yesterday, while participating in an agricultural seminar in Yuma, AZ, we were involved in our first tour bus crash. We walked away from it just fine, but more than half of the riders (23 people) ended up in the hospital with three being airlifted from Yuma to a hospital in Phoenix. Four people were still in serious condition as of today.

The bus carrying us on our tour of the farms tried to make a left turn up onto a dike. I guess the driver was so concerned about the water on the right side of the dike that he cut the corner on the left too tight, losing his rear driver side wheels over the left edge and starting the the slow rollover of the bus down a ten foot embankment.

We were seated on the left side of the bus in the dead center. When he made that left turn, I had a great view of the slow motion wreck. First I told Susan there was no way we'd make the turn and we would get stuck. That was no big deal since there were about six large tractors working the fields around us. Any one of them could have pulled that bus out of the mud.

As the driver took the turn tighter and tighter I looked at Susan and told her "we are going over, brace yourself".  At first she thought I might be kidding...until she saw the look on the face and noticed me finding some good hand and footholds to ride the way down. 

That was the most interesting part. The whole process took about five seconds. In terms of a crash, that might as well be a 100 years. As the bus began roll over, we had time to think about where we would end up (on the bottom side next to the dirt), how to brace for impact, where other passengers might fall on us, and the fact that we'd miss an excellent lunch that was scheduled for after the tour (not to mention that the vegetables that we picked to take home were rolling all over the place).

Since just about everyone on the bus was a snowbirder who regularly travels in an RV, I figured a lot of other people would have also noticed what was about to happen. Amazingly, the recognition of what was happening and the screaming didn't start until we were half way through the roll and people and bags started coming out of their spots as the right side of the bus was rising above us and those of us on the left started to roll down.

This was when something unusual happened. Somehow, all of the people and their miscellaneous bags came tumbling down from above us, but nothing landed on us. Not even a water bottle. All of the people and their stuff fell onto the people seated in front of and behind us. It was as if a force field of some kind made them all miss us as we braced ourselves to hit the ground at the base of the dike. Sometimes it's just better to be lucky than good.

When we hit the bottom, I bounced into the window I was sitting next to. The safety glass shattered but didn't break. Susan ended up standing on the sides of the seats right above me. Other than a couple of really minor cuts from the shattered glass, neither one of us was hurt. The people around us weren't so lucky. 

As we looked around, there were people trapped under other people and pieces of wreckage with arms and legs sticking out in different directions. Sometimes it was hard to tell what pieces belonged to which people. Since we were in the center of the bus, I knew we would be the last to get out. It took about 25 minutes before we were able to get everyone out. Susan and I were the last ones off. We spent our time trying to make the people around us more comfortable and then helping to unwind them from each other and various pieces of the bus. There were a lot of broken wrists, ribs, ankles and other bones, but surprisingly very little blood. Again, probably thanks to a slow motion crash.

About 12 of us on the bus weren't hurt at all. Since we were fine, we had the "luxury" to feel sorry for the driver, the Visitor Center staff, and the farming family that was giving us the tour. Too many people on the bus that will be recovering from their injuries for a long time didn't have that same luxury.

On the bright side, we became better friends with two families that farm about 8,000 acres throughout the Yuma area. We'll be getting together with them again. We're also still planning to participate in two more Yuma agricultural tours next week. After all, what are the odds of being in more than one bus accident in five days? 

It took us about 25 minutes to clear the bus. At 45 minutes, still no EMT on site. It pays to be able to be your own First Responder.

The bus rolled over onto the emergency exits. Just kick out a windshield and there's an instant emergency exit.

Finally, some EMT units start showing up.

Eventually four helicopters showed up including two Marine Corps emergency teams.

And a prettier view at the end of this day in Yuma, AZ.

Tuesday, January 6, 2015

And So History Repeats

"When you see corruption being rewarded and honesty becoming a self-sacrifice, then you may know that your society is doomed."

There's been scant reporting of the fact that Citibank is now the largest holder of derivatives in the U.S., with $70.3 trillion in holdings (AKA exposure to weapons of mass financial destruction). 

Where history is potentially repeating is in the interesting relationship between Citi and Goldman Sachs. Recall that back in 2008 Goldman Sachs was AIG's largest counter-party to the mortgage-derived credit default swaps that blew up and sparked the 2008 financial meltdown. Goldman would have gone belly up along with AIG had the Government and the Fed, with close to a trillion dollars in taxpayer money, not bailed out AIG and the other big banks. At that time, Henry Paulson was Treasury Secretary. Paulson was the former CEO of Goldman and had been appointed Treasury Secretary in July 2006. Paulson was conveniently placed in position to save his former employer and source of all of his own personal wealth. 

Fast forward to today, and who is the Treasury Secretary? Jack Lew. Jack Lew worked at Citibank up until late 2010, when he was moved into Government "service" as Director of the OMB. After that he was appointed Obama's Chief of Staff. In 2013, Obama appointed him to be Treasury Secretary. Although there is a long tradition of top executives from the big banks gaining choice Federal political appointments, it is interesting that a former Citi executive is now Treasury Secretary at a time when Citi is now the largest derivatives owner in the U.S. and second largest in the world (Deutsche Bank is #1). 

Additionally, Citibank was the primary force behind the legislation passed late last year by the lame duck Congress - legislation that was buried into the controversial budget bill - which allows banks to move their derivatives into their FDIC insured subsidiaries. This legislation is the de facto bailout-in-advance for the Too Big To Fail Banks for the approaching time when the derivatives market, which is larger than it was in 2008, once again implodes. This legislation is what created the odd alliance of opposition between Senators Elizabeth Warren and Ted Cruz. Although approaching it from opposite corners, Warren and Cruz both had it right.  Once again, the establishment Democrats (ie., Obama/Reid, Pelosi) and the establishment Republicans (ie., their Congressional leadership) have aligned with the monied Wall Street interests to the detriment of the the U.S. taxpayer. 

Now it may be just a mere coincidence that Paulson was appointed to Treasury Secretary about two years before Goldman blew up on derivatives and Lew was appointed Treasury Secretary, well, about two years before Citi might blow up on derivatives. You have to ask yourself, why would Citi aggressively push for FDIC coverage of its derivatives exposures if it were not worried about the fermenting risks? By the way, Citi has now moved all of its derivatives into its FDIC-covered subsidiary.

Mere coincidence?