DEERFIELD — Farmers from throughout the region sat down late last week with the head of the Federal Reserve Bank (FED) of Boston to discuss many of the challenges facing the area’s agricultural economy, including the impact that weather changes, inflation and tariffs have on the local farming business.
The discussion with the Boston FED’s President and CEO Susan Collins and First Vice President and Chief Operating Officer Karen Pennell took place during tours at Clarkdale Farm in Deerfield and the Franklin County Community Development Corporation (CDC) in Greenfield last Friday.
Bar Way Farm owner Peter Melnik discussed some of the financial challenges associated with being a local dairy farmer, explaining that while the state economy might run on a quarter-to-quarter, or year-to-year basis, farming is a longer game. He noted that farms might be fruitful for years and then see annual losses for the years that follow.
“In the ’80s, we bought a brand new bucket loader, and we paid 18% interest — I think people would flip out now, but it could go there again,” Melnik said. “They might farm through it, so you have to remember those things and not complain about it when it’s 4% (interest) and you’re hoping it’s 2%, … right now, if it’s stable and it stays there, and you can plan, it’s OK. It’s when it goes from 6% to 10% and looks like it’s going to go to 11%. That’s when it starts to get tricky.”
He continued, “Same with our markets — when they strap on a tariff, and I’m not being political or anything, but when those things start … if there’s, too much milk in New Zealand, it can affect my price, which is mind-boggling. It’s really hard.”
With weather and economic conditions among the most crucial — and least predictable — factors affecting a farm’s success, Melnik said he has looked for ways to stretch his resources further. His farm has partnered with a firm in Boston to build a methane digestor that converts cow waste to 1 megawatt of electricity per hour. He added that he has also used cow manure to make and sell compost.
When Collins asked the farmers what, if any, impact tariffs have had on their livelihoods, Clarkdale owner Ben Clark responded that tariffs burden the farms in a subtle way, noting that he hasn’t had to buy any expensive internationally manufactured equipment since the tariffs were implemented.
Clark added that assistance from community banks and state grant funds has helped ease financial burdens on his business.
“I fortunately bought a piece of equipment from New Zealand, just the year before [tariffs] were placed, so I’m very glad about that, but I do know someone, another grower, who had a new packing line that came in, and he was hit with tariffs. It was a little over triple what he was expecting to pay,” Clark said. “We have great local banks and our regional banks that come through with them … I think that’s something that we are really fortunate to have and they’re really committed to lending locally.”
From Clarkdale, Collins and other Boston Fed officials drove to the Franklin County CDC on Wells Street in Greenfield where they toured the Western Massachusetts Food Processing Center.
After the tour, Boston Fed officials joined Franklin County CDC representatives such as Executive Director John Waite, along with other farmers from across the county. Joe Czajkowski, who owns the Joe Czajkowski Farm in Hadley, explained to Collins that the state’s regulations governing food safety, along with laws that disqualify farms from tax exemptions if they exchange crops with nearby farms, the local agriculture has seen a decline in profit.
“The test to get into heaven, I think, is that you treat your neighbor like yourself. If you help your neighbor when they have too much or too little, it shouldn’t be punishable. The same thing with value added — bringing your product to the next level by adding convenience to it, which is what people want and the cafeterias want and the schools want — that’s punishable too. You lose your [agriculture] exemptions, and that’s unfortunate,” Czajkowski said. “Farmers are only getting 14 cents out of the consumer’s dollar, and here they are losing billions of dollars, and there’s roadblocks for them climbing the food chain. The law shouldn’t make farmers be treated as serfs.”
When Collins responded that the Federal Reserve had little to no control over some of the state regulations Czajkowski mentioned that increased interest rates have seen the largest growth of all his expenses over the last five years.
In response, Collins noted that there are inflationary consequences to adjusting interest rates, which have to be balanced into the equation.
“Certainly interest rate environment, that policy is a key influencer, not the only because of markets and a variety of other things,” Collins responded. “It’s challenging when you think about the trade-offs. We have a very long horizon based on our mandate from Congress for price stability and maximum employment and bringing inflation back down, to have an environment where you can have more predictability in terms of how prices are going, so you have kind of stable economic growth and an environment where you can hire; that’s what we’re trying to get back towards.”
As the panel concluded, Collins thanked the local farm owners for sharing their financial struggles, adding that by bringing different voices together, the Federal Reserve can make better-informed decisions.
“One of the things that the Fed does do in areas where we don’t have an ability to actually shift policy interest rates, clearly, we have a role in is by convening and bringing people together,” Collins said. “The governor’s conference focused on rural issues and bringing different experts together can actually help to focus attention on what some of the opportunities are as well as what some of the challenges are. Those are some of the things that we can do, and one of the many reasons that we want to hear from all of you.”