How the Tractor Killed the Family Farm
STANFORD GRADUATE SCHOOL OF BUSINESS — To a casual observer, tractors are useful tools that help farmers boost their output. But Matt Rothe has a very different view.
Rothe, the sustainable food program manager for Stanford Dining Services, believes that tractors unleashed a wave of massive changes at his family-run farm, he told members of the student-led Food and Agriculture Resource Management (FARM) Club at the Stanford Graduate School of Business on Dec. 2.
He gave the group a lesson in agricultural economics, using as the main example the 10,000-acre corn farm in Colorado that his family owned for several generations until they sold it to a private equity firm for $11 million in 2009.
Rothe had wanted to take over the farm's operations after getting an earth environmental science degree from Dartmouth College. However, his father explained that the farm, started by their German ancestors, would not remain sustainable for another generation.
"I really didn't understand it at the time, but I do now," said Rothe, MBA '07, who started working on the family farm when he was 12. "I think what's occurred on our farm over the past 100 years is really indicative of what's happened, generally speaking, to family farming and to the food industry. When you look at what's happened to our farm — and the experiences that I've had and we've had — I think you can begin to see some of the issues and why the system is the way that it is."
The story starts with Rothe's great, great grandparents, who moved to Colorado and became tenant farmers on another owner's property, for a time living in a remodeled chicken coop. Eventually, they were able to purchase a farm of their own where they raised a variety of vegetables along with chickens for meat and eggs, and horses to pull the plows.
On an average day, the family first fed the horses and then had breakfast themselves before heading out to work in the fields until noon. After a bite to eat, it was back to work until sunset. "Then everybody went to bed, and we got up the next morning and did it all over again," he recalled. "It's kind of a beautiful system."
Raising a diversity of farm crops carried benefits. Rothe said: "During the year, maybe the corn didn't do so well, but the beans, potatoes, and sugar beets did better. You've got a risk management system built in."
Then, in the late 30s, they bought a tractor, which they considered a "cool piece of machinery that's going to be able to do all of this work. It was going to make our lives so much better, and we were probably going to get rich."
Farmers rarely have much cash on hand, so the family took out a loan to buy the equipment, he said. They hadn't anticipated costs of diesel fuel and maintenance for the new machines, so they bought more farmland where they could plant more corn in order to earn enough to pay off the new debts.
Then they, and other farmers, began purchasing pesticides and fertilizers, which Rothe said were introduced by the U.S. Department of Agriculture as another way to boost yields. Farmers also added mechanized irrigation systems, which allowed them to grow even more corn on overly dry acreage where cattle had previously grazed.
The cycle of buying ever more powerful tractors, irrigation systems, and other new farm tools on credit, and then purchasing more acreage to boost output to pay off the debt, continued until the Rothe's farmed mainly corn, the crop most in demand. They sold their cattle business in the 1980s.
Their crop yields grew. "But in the long term, the price of corn is essentially the cost of producing the corn," he said. "There are no economic profits in commodity corn growing." As an illustration; he estimated that growing corn in the Stanford Stadium for a year might reap 400 bushels worth only about $2,800.
Eventually, the family sold their farm to a regional private equity firm with a familiar-sounding strategy. "They're buying up big farms like this, and then they're buying up big dairies at the same time, and they're basically vertically integrating," Rothe said. "That's how they're managing their risk profile."
Even though Rothe said he didn't have enough capital to take over his family's farm following his father's death, he remains in the food industry. After Dartmouth, he went on to work at Attune Foods, a venture-backed, California-based natural foods company, which makes cereal, granola, and snacks. Then, he became operations director at sustainable livestock company Niman Ranch, which includes a network of more than 650 independent farms.
Since taking over as sustainable food program manager for Stanford Dining Services, which serves 18,000 meals a day on campus, Rothe has worked to raise awareness about healthier eating practices and reducing waste.
He can be spotted raising heirloom breeds of chickens and vegetables on the Stanford Community Farm and is also involved in food education in campus dining halls as a way to encourage students to seek out sustainable foods throughout their lives.
"Students certainly can't go out in the world and make changes," Rothe said, "if they don't know how to make rice."