20 Feb 2012

Profitable urban agriculture?

This story prompted me to write this to the Economist:
I regret to inform you that Sweet Water Organics has a photogenic, but unprofitable, operation. I visited their Milwaukee site in September last year when I was speaking at a conference devoted to leveraging Milwaukee's freshwater resources into continuing economic growth. Although SWO has captured the heart of politicians and pundits, it is a heavily-subsidized operation that has not been able to compete on a sustainable basis with traditional "dirt" farmers. SWO does not suffer from overregulation or subsidized competition; it suffers from using too many gee-whiz technologies in a market where consumer purchases are decided on a penny-per-pound basis. If you're looking for reasons for business success or failure in the US, then I suggest you spend (even more) time on the dead hand of government regulations that destroy innovation and profitability across multiple industries and the rent-seeking that changes tax revenues into extraordinary profits for industries with effective lobbyists.
Bottom Line: Urban agriculture needs to be price competitive, not a political plaything.


Josh said...

Though I agree with your Bottom Line, I do think you've shot yourself in the foot a bit. In the case of SWO, it has to play on an uneven level with traditional "dirt" farmers (really just gigantic corporations operating in oligopoly/opsony). You do correctly point out the impact of lobbyists, but lump a generalized "government regulations" in there. If there were fewer government regulations of these industries, they might have an even tighter grip.

Also, the food industry isn't just on a penny-per-pound basis; there is much more to marketing, etc. when selling directly to consumers.

David Zetland said...

@Josh -- SWO can't compete with small dirt farmers, let alone mega-corporations. I reckon that farms would be about half their current size without gov't subsidies, most of them run by sharp folks who know how to meet the market. The productive advantage of dirt means they would dominate urban farmers (who pay more for water, land, labor, etc.)

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