California farmers to destroy 420k peach trees following Del Monte bankruptcy

He switched to almonds and walnuts, which are less labor intensive and have better management on the processing side. But they are an export-heavy market and have also been hammered by the strong dollar. Inflation-adjusted crop prices are near all time lows while costs are at all-time highs. Farming is a hard business!

Although in this particular situation clearly the consumer surplus wasn't enough to keep consumers buying Del Monte products.

https://en.wikipedia.org/wiki/Economic_surplus

If we measure consumer surplus as a percentage, how would it compare to business profits as a percentage?

Edit:

  Nobel laureate William Nordhaus studied the historical data of the U.S. economy and concluded that innovators and corporations capture only a tiny fraction of the total social value they create. Consumers capture ~98% of the value in the form of surplus. Producers capture ~2%.

How did you determine this? Do you expect every single venture with forethought and planning to "succeed" (however you define that)?

Is it not prudent to assume that when the farmers made the decision to plant those trees, they did so with the best available information and "forethought" they had?

Have a conversation with someone who grew up in communist USSR/Russia sometime... It definitely isn't cool.

If we had govt controlled food supply, we'd never have the likes of hot sauce (sriracha, pace, etc) and would likely never have seen a lot of options form. For better and far, far worse.

Also which government? Because there are at least 3-5 relevant ones here, maybe more.

No. A government shouldn't do this unless canned peaches are especially important for national security or something like that.

Edit: I thought you had adapted this to what's described in the TFA, but seems like it's an actual excerpt.

Deflation is an opportunity cost to running a business. If you can earn x% from sitting on your money, then any business activity must earn more than x% before you consider the investment. The easiest way to raise the return on investment to match the opportunity cost is to sell at a higher price, but remember, you have deflation, so you can't pass on the cost to the consumers. Supply must shrink until the price is high enough to justify production again.

Reducing the supply of products also shrinks the demand for labor that is used in the production process, leading to more unemployment with sticky prices or reduced income with flexible prices. Reduced income means people have less money to buy products, which means producers see a lack of demand and reduce production even further. The downward spiral feeds itself.

Deflation is bad because it has acute symptoms. Inflation is the least bad option, because it's a manageable slow burn. Of course with acute symptoms you will see more action towards fixing the problem, whereas with a slow burn humans tend to drag it along forever.

That's exactly what I'm thinking. There are few crops where someone might want to lock in a 20 year contract. It's a major gamble for all involved. It's a gamble for the distributor because tastes might shift in 20 years (almost certainly a big part of why Del Monte went bankrupt) and it's a risk for the farmer because it's not clear that another distributor will look at these farms and think "You know what, I can pick up where that company went bankrupt".

> Where will they get their peaches?

Will they get peaches? That's really the question. They might just decide it's too unpopular and the price would have to be too high to support selling peaches.

Del Monte was a big reason why peaches are available. Similar to how Dole is a big reason we have bananas year round. If Dole goes bankrupt, we likely won't see bananas on the shelves. And we know this because there's more than just 1 variety of banana in the world. We have access to only 1 because there's only one distributor of bananas in the US.

We are moving into an era of private equity doing fast turn around profits on everything. The old way of business thinking that you can have a 20 year contract is likely dying. 1 year contracts are going to be much more likely because that's where a lot of the investment is going. And Del Monte is the poster child for why a business would shy away from doing a 20 year contract.

As I said, trees take a long time to bear fruit. It's not typical that a farmer will cut down a tree in their orchard in response to market pressure as that tree represents a huge investment.

If that were the case, then why are there so many peach trees currently? Why hasn't the entire orchard been replaced with olive trees?

Do you actually have farming experience?

I'll admit my experience is more with vineyard than orchards, but at least for grape, this isn't true. You only cut down old, unproductive vines, and market demand is not a factor. You never know how much you will produce YoY, so basically you try to only produce what your domain can handle. (The english translation for the following will be rough i realize).

On the "planting" side, you're wrong: a limited stock of "rootstock" (if this is the correct translation of "porte-greffe") is produced each year. As those are specific to a certain type of soil and take time to grow, you don't produce a ton each year. And vines "rootstock" are _a lot_ easier to grow than other trees (you have a mother-vine that you don't prune, you bury its branch in the soil, and over a year it will develop roots). My guess is that for orchards, your rootstock should take 3-4 years, so it isn't that easy.

Has canned fruit actually lost popularity? Or did the grocery stores decide that the shelf space had a higher profit margin pushing something else?

The last couple of times I tried to get canned fruit for a recipe I had to actively hunt for the particular cans of fruit I needed (I needed to hit 3 different grocery stores).

I haven't tracked peaches recently, but I can tell you that canned apricots have been a bit thin on the ground for at least a couple of years.

That first fruiting you are looking at something like 2 or 3 lbs of fruit. Full grown you are looking at about 20 lbs of fruit yearly.

You can push up maturity by using a dwarf root stock and get to full fruiting in 6 to 8 years.

It's an extreme case, but that same sort of pattern has happened repeatedly throughout history. Keeping some amount of farming economically sustainable is important. You don't necessarily need direct public subsidies, but you definitely want to avoid long periods where prices are too cheap to make farming of important crops not economically viable.

You put 10% down (say $10,000) and the bank lends you $90,000 based on the lien they have on the hummer.

No different than a leveraged buyout - PE firm buys a company with cash down and takes on debt for the rest of the purchase using the assets of the company as collateral.

It makes a lot more sense if you think of it in steps - negotiate buyout agreement with owners, close purchase with cash and take ownership, then as CEO have the company take on debt and use the loan proceeds to close the deal.

Just like if you went to a dealership and negotiated a deal where you purchased the hummer for $10k, they transfer ownership to you, then you go to the bank and get a loan using vehicle as collateral then pay the dealership the loan proceeds to close the deal.

Where I think you’re confused is the “how do they take a loan on an asset they don’t own?”. The answer is they don’t. It’s multiple steps and they own the company they use as collateral.

You find a bank that thinks there it can make money from interest payments or collecting the asset.

it really is that simple. If self driving trucks were a good bet, banks would be happy to loan entrepreneurs money to buy them.

There is no fire sale of land. There is enormous demand for land, especially productive agricultural land which is essentially traded as a fungible commodity.

> The farmers may have mismanaged their risk, but I’m fine with compensating farmers that end up with worthless trees because of a leveraged buyout.

Even then, why are you paying them to destroy productive trees instead of e.g. buying their peaches and donating them to food pantries or stocking the cafeterias at government facilities?

> If these farmers were forced to sell their land, some giant ag business would end up with the land.

That's just cynical speculation. If they sell the land it goes to anyone who wants to buy it. You're also assuming that the ones getting the money aren't already some giant ag business.

No thanks. The most wonderful strawberries I ever tasted were wild ones picked on a disused Welsh railway line, probably a centimetre or so in size.

The Sunnyvale farmers market was a different story though. Two of the vendors gave out samples. One of them tasted like Safeway strawberries. The other gave out these small strawberries that were really sweet, and this vendor had a lot more business even though their berries were $1 more expensive. However, the ones that the vendor actually sold were much bigger than the sample strawberries. I was suspicious, but bought them anyways. Sure enough, when I tried them, they tasted like Safeway strawberries. My takeaway from this experience is that America sells bad produce less so due to supply reasons and more so that Americans just have poor taste in produce.

Been to Maui once, and this was pretty much my exact experience as well. Thought I was the only weird one to do that. I only slowed down though until it got really bad before stopping. Wish I was smarter to stop earlier ::face-palm::

"Apple cider is raw, unfiltered, and often unpasteurized apple juice, resulting in a cloudy, dark appearance and rich, tart flavor. Apple juice is filtered to remove pulp, pasteurized for a longer shelf life, and often sweeter. Cider is usually seasonal and refrigerated, whereas juice is shelf-stable"

Europeans consistently visit a gas station and conclude this must be all there is to eat in America.

Um: My dad grew up in Iowa, so I'd be there seeing family every so often. Years ago it struck me how many Iowans I saw there were ... not svelte.

Iowa is a gigantic field corn, soybean, and pig farm with a few colleges, windmills, and one “city”. Commodity crops, not vegetables.

The one thing Iowa is known for is “loose meat sandwiches”, which is a Sloppy Joe with no tomato based sauce. Cuisine is not on the menu there ;)

I've observed the same thing; But my theory is taste in food is shaped by how recently a families lineage transitioned to processed foods and industrialized agricultural practices. e.g. I've observed a deterioration in taste in South Asia over the past 20 years, which I attribute to the same effect.

https://en.wikipedia.org/wiki/Grafting

Asking as a person who buys about 4 lemons per year.

I've personally noticed shavings multiple times on the lip (especially with cheaper non KO/PEP products). La Croix cans are notorious for this.

I actually read his whole book. Most of his "patterns" are kind of quaint and twee, the sort of things that seem superficially attractive to people with no real domain knowledge. Highly overrated.

This is a very extreme solution, and eliminates many of the benefits from horizontal integration even when the benefits are passed onto customers. Consider:

- insurance companies

- banking

- utilities

It’s also hard to implement. What counts as a supplier? Is Google the sole supplier for search functionality? If 4 suppliers provide 1% of demand, and one supplies 96%, does that comply? If there’s only one company offering some new service (e.g. driverless cars), do they immediately get broken up?

Selling it as fuel is maybe some added revenue in the short term but really just doesn't make sense. Now if you were getting a premium (lumber, specialty hardwood, etc), then processing and selling could make sense

Another casualty of what happens during the shift from independent, family-run farms that often sold to grower's cooperatives to much larger, scaled-up operations that focus on wringing every last dollar out of efficiency and standardisation.

I can't speak to the fruit business, but let me assure you: people are starving, the cost of living crisis is a political weapon, SNAP is unfunded, and this nutrition is, as in Grapes of Wrath times, succumbing to the market, not to the lack of need.

People are hungry, there's just no $$$ in feeding them.

Shame.

Efficient usage of sodium hydroxide feels like a compelling use case for consumer grade at-home thorium MSRs - we've got to get the DoE in on this now.

https://oroville.lakesonline.com/Level/

You can see the water level there for Lake Orville which is the source for the California aqueduct system that feeds part of the Central Valley and the 20 million living in Southern California. Given that non-residential accounts for 92% of all the water use California is never in any danger of not being able to provide water to residential. That would require 20 years without rain and that also assumes we don't build new reservoirs.

California is the size of a country. The North is in an area more like the Pacific Northwest than any desert.

We just lived through a worst case scenario that lasted 3 years and only on the 3rd year of that did we even bother to start water restrictions. For the past two years we've been full to 100% and having to let it go in the spring.

I did a ton of research on this cause I own a property supplied by this system.