Comment by Aurornis
17 hours ago
A situation like this bring out many comments that reveal a very low understanding of basic economics (and a low rate of reading the article).
Del Monte went out of business because there wasn't enough demand for the peaches. The company that purchased their assets is continuing to buy 24,000 tons of peaches, but the previous unsustainable business was buying a lot more. It's the excess fields that need to be repurposed to growing something that the market will absorb.
The reason the trees are being destroyed is so they can grow something else on the land. Something that comes with a sustainable business model for the current market demands. Yes, the trees are technically going to waste, but if we had forced the peaches to be grown and canned (as many comments are suggesting) then that would be a different kind of waste as they'd sit in warehouses while the land, resources, and labor were used to produce something people weren't buying instead of being used to produce foods they were buying.
In the article you can even see that the farm lobby was so powerful that they got the USDA to pay for the tree removal. The comments talking about farmers not being organized enough or powerful enough must be unaware of how powerful the farm lobby is and how much money they're able to secure from the government every year.
> Del Monte went out of business because there wasn't enough demand for the peaches.
Things are often more complicated than that. Del Monte was founded a long time ago and fruit trees take a long time to grow. As a result, as the originator of those trees, you're at a disadvantage because you have to pay for many years of maintenance and interest on capital before the trees bear fruit, and are then sitting on a load of debt from the unproductive years that you can't service if the market price is low after the trees are producing.
But bankruptcy (or new ownership) clears the old debt, and then you're left with a productive asset that might not have been worth the cost to create at current prices, but could easily be worth the cost to continue using now that growing the trees is a sunk cost, which requires a much lower market price to be sustainable.
> In the article you can even see that the farm lobby was so powerful that they got the USDA to pay for the tree removal.
That sounds a lot like a cartel acting through regulatory capture to limit supply.
Like if destroying the trees to grow something else was more profitable than continuing to sell the produce then why does it require a government subsidy?
> Like if destroying the trees to grow something else was more profitable than continuing to sell the produce then why does it require a government subsidy?
Because why pay for something when you can get someone else to pay for it?
"The industry has captured the government and is doing a corruption" is the thing consistent with the theory. The non-corruption/capture reason for the government to pay for it is supposed to be what?
> if we had forced the peaches to be grown and canned (as many comments are suggesting) then that would be a different kind of waste as they'd sit in warehouses while the land, resources, and labor were used to produce something people weren't buying instead of being used to produce foods they were buying.
Worse, the price would have to be lowered to bring up sales, which could put the other peach farmers into bankruptcy as well.
If you try to force production and sale hard enough, the sale price can even go negative.
If your warehouse is full of peaches nobody wants, you might be forced to sell them for negative dollars to take them away. It's either that, or you pay to have the waste management company dispose of them. So the price effectively goes negative from trying too hard to force something to happen.
If you turn all them peaches into high proof alcohol they take up significantly less space...
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Super-contango
>Worse, the price would have to be lowered to bring up sales, which could put the other peach farmers into bankruptcy as well.
We run into something similar every year here in India. One recent example [1] This year it is the Middle East crisis. Last year it was probably a glut because there was shortage the year previously.
[1] https://www.ndtv.com/india-news/video-offered-rs-4-per-kg-ma...
Oh no. Lower costs for consumers? Oh the humanity!
The big thing I fear about this sort of destruction is that it takes a very long time for tree bearing fruit to start turning a profit. That means someone that wants to plant new trees needs to do so with the notion that they won't get any sort of return on investment for a decade.
My fear is that institutional farming does not have the long term fortitude to ever start growing a tree bearing crop. Once these trees are destroyed, they are gone for good regardless how the demand shifts.
A downturn of 2 or 3 years or crazy political maneuvers which kill off exports puts access to these fruit in jeopardy. And once they are out of the diet, it's very hard to get them reintroduced. That's a big part of the reason why the US has such a limited fruit diet in the first place (the other being that many fruits are very hard to ship).
It's so weird for you to be fearful of something when you don't know how farming works. Every year farmers cut down a bunch of trees and plant new ones in response to costs and market demand. So what. This is routine and seldom makes the news.
Canned fruit, like what these farmers were producing, has been losing popularity for years. You can't force consumers to like it.
> Every year farmers cut down a bunch of trees and plant new ones in response to costs and market demand
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.
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No, not typically. And I know this because I grew up around farmers and farmers that had orchards. Trees would be cut down and replaced, usually if the tree was sickly. But not because this year plums are doing better on the market.
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?
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> Canned fruit, like what these farmers were producing, has been losing popularity for years. You can't force consumers to like it.
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.
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If you don’t trust farmers to make the decision, who do you think should be making it?
> That means someone that wants to plant new trees needs to do so with the notion that they won't get any sort of return on investment for a decade
Peach trees take 2-3 years to bear fruit specially with grafting.
Stone fruit (like peaches) are all typically grafted. And that 2 to 3 years is when the trees first fruit, not when you get a full harvest from the tree. The 10 to 20 years is when the tree is fully mature and producing it's max amount of fruit.
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.
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TFA mentions 20-year contracts between Del Monte and farmers. That seems to have worked so well that we have too many peach trees. Like, to me the present situation itself should assuage your fears. Are you thinking another processor/distributor won’t come along in the future with long-term contracts? Where will they get their peaches?
> Are you thinking another processor/distributor won’t come along in the future with long-term contracts?
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.
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I don’t know about peaches but ‘round my way the cider apple farmers spank the living daylights out of their high density dwarf trees. They get grubbed up and replanted in under a decade. Fruit trees have a naturally short lifetime but mega yield modern species are something else — the arboreal equivalent of a 40 day broiler.
Ironically, there’s a century year old perry tree at the top of the valley.
> Del Monte went out of business because there wasn't enough demand for the peaches
They appear to have gone out of business because of massive debt from a leveraged buyout, combined with other issues.
https://www.linkedin.com/pulse/when-private-equity-overcooke...
That doesn't change the fact that there isn't enough demand for canned peaches. If there were enough demand for peaches the farmers would sell the peaches, rather than destroy the peach trees.
The wholesale buyer is in bankruptcy, unable to pay the interest on debt inherited from the leveraged buyout.
Somebody really good at the economy needs to explain to me how a PE firm buys a company using the company it’s buying as collateral for that financing, and then somehow, that acquired company is the entity that debt is attached to.
Imagine if us poors could buy a Hummer EV financed against itself and then the truck had to self-drive for uber to pay its own payment, under penalty of being put in a crusher. Oh and you get paid by the thing for the privilege of being bought.
> The comments talking about farmers not being organized enough or powerful enough must be unaware of how powerful the farm lobby is and how much money they're able to secure from the government every year.
Most people don't realize how powerful farmers are in the US. We (rightly!) complain about Wall Street and bank bailouts when they happen, but I'd wager that we've given significantly more money to farmers over time, through bailouts (like this one) and regular subsidies.
Maybe that's a good use of tax dollars, maybe not. It feels bad, but I'm not an economist.
(And before anyone says that farmers are much more sympathetic characters than bankers, remember that "farmers" in the US overwhelmingly means gigantic corporate farming conglomerates; the individual family with a few hundreds or thousands of acres of land and hearts of gold is sadly increasingly uncommon.)
I would much rather there be a surplus of food production (driven by subsidies or whatever) even if it causes inefficiencies given that the alternative is significantly worse.
Regular surpluses can cause famines. This is what happened in East Africa in the 1980s. Cheap grains from elsewhere (Europe, US) caused farming to become unprofitable. Domestic/regional traditional farming of grains largely ceased as farmers moved to the cities. This happened very quickly, so consolidation and mechanization of farming to become competitive never happened. When cheap imported grains became unavailable in the 80s, for various reasons, it was too late. (The war in Ethiopia is often cited as the immediate cause, but people have always managed to farm through wars, usually at least enough to avoid the Ethiopian situation.)
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.
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Farmers provide food, banks scalp the interest between you and the government. They aren't the same at all. Farmers, even if they are megacorps are indispensable. Banks on the other hand serve basically no function in the modern era of financial activity.
Farmers switching from peaches to elsewise due to a lack of buyers represents a bailout?
Paying farmers to make the transition from peaches is a bailout
> Del Monte went out of business because there wasn't enough demand for the peaches.
Maybe if grocery store peaches weren't a fibrous, tasteless representation of a real fresh peach, they'd still be in business.
Del Monte sells mostly canned peaches and those plastic snack packs so they’re picked a lot riper than fresh peaches at the grocery store.
The peaches have similar problem with fungal diseases like bananas. The best tastiest varieties can't be mass grown anymore.
I find good stone fruit to be very fragile, and hence the economics probably don't support their sale outside of the stone fruit's season and an acceptable radius to where they grow. Peaches/nectarines/plums are easily one of the worst returns on investment when I buy fruit, and this is within a days' drive to California and PNW.
> Del Monte went out of business because there wasn't enough demand for the peaches
How did this happen? It takes a long time before a peach tree seedling gets to the point where it can bear a significant amount of fruit. I'm going to guess about 10 years. Given that kind of delay, how did they get into a situation where there was this much over-production?
delays between increasing capacity to produce and bringing production to market naturally lead to cycles of over and under production. https://thesystemsthinker.com/balancing-loops-with-delays/
The new crop will be grapes of wrath
The works of the roots of the vines, of the trees, must be destroyed to keep up the price, and this is the saddest, bitterest thing of all. Carloads of oranges dumped on the ground. The people came for miles to take the fruit, but this could not be. How would they buy oranges at twenty cents a dozen if they could drive out and pick them up? And men with hoses squirt kerosene on the oranges, and they are angry at the crime, angry at the people who have come to take the fruit. A million people hungry, needing the fruit- and kerosene sprayed over the golden mountains. And the smell of rot fills the country. Burn coffee for fuel in the ships. Burn corn to keep warm, it makes a hot fire. Dump potatoes in the rivers and place guards along the banks to keep the hungry people from fishing them out. Slaughter the pigs and bury them, and let the putrescence drip down into the earth.
There is a crime here that goes beyond denunciation. There is a sorrow here that weeping cannot symbolize. There is a failure here that topples all our success. The fertile earth, the straight tree rows, the sturdy trunks, and the ripe fruit. And children dying of pellagra must die because a profit cannot be taken from an orange. And coroners must fill in the certificate- died of malnutrition- because the food must rot, must be forced to rot. The people come with nets to fish for potatoes in the river, and the guards hold them back; they come in rattling cars to get the dumped oranges, but the kerosene is sprayed. And they stand still and watch the potatoes float by, listen to the screaming pigs being killed in a ditch and covered with quick-lime, watch the mountains of oranges slop down to a putrefying ooze; and in the eyes of the people there is the failure; and in the eyes of the hungry there is a growing wrath. In the souls of the people the grapes of wrath are filling and growing heavy, growing heavy for the vintage.
Amazing. I hadn't read the book in years, but immediately could remember the style.
Edit: I thought you had adapted this to what's described in the TFA, but seems like it's an actual excerpt.
Wow. That's really applicable, nearly a century later.
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For those who might not understand the problem: deflation in combination with sticky prices makes it look like there is a glut of products for the supplier. Deflation also makes it harder to earn an income from work rather than sitting on your money, making it harder to buy foods.
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.
Wow. What a powerful text. Where is it from?
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While SNAP is gutted
Great point, hoping whatever replaces them uses less water. Ag pulls ~40% of California's water and it feels like 3 out of every 4 years is a drought
Is wood that useless that they need to be paid to remove it ?
There might be not enough demand to match the capacity they contracted and invested to can, but surely there is some demand. You'd think someone would buy out some of the contracts and the canning capacity at a discount and continue some sort of operation.
> A situation like this bring out many comments that reveal a very low understanding of basic economics (and a low rate of reading the article).
And a very low understanding of basic biology. A bunch of rotten fruit is _exceptionally valuable_ in many parts of the world. There's a million things you can do with it, alcohol, fertilizer...
edit: me right now I'm in a position where I could really use truckloads of rotten, inedible peaches if I could get them for free. Trying to figure out the most economic way to get a rather barren place some soil.
If rotten fruit was exceptionally valuable, then people would be paying exceptional amounts of money for it instead of wondering where they can get truckloads of it for free.
Right? It's not exceptionally valuable. It has some nonzero value doubtful that matches the cost to collect it and get it to the people who want it.
> A bunch of rotten fruit is _exceptionally valuable_
> right now I'm in a position where I could really use truckloads of rotten, inedible peaches if I could get them for free.
These two statements contradict each other. If you are pushing to get something for free (and seems like you wouldn't pay for them, or wouldn't pay much for them, instead opting to do without), then they are absolutely not exceptionally valuable from the sell side.
I would pay for it - I meant this in the context that people here are getting paid to destroy value. Also don't get the downvotes, improving soil efficiently in large quantities is an interesting question a lot of tech people (being city people) never have to care about.
Someone needs to put them in tanks for long time and make something very valuable like this:
https://en.excaliburshop.com/catalog/item/8951/fleret-merunk...
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