Farming Magazine - February, 2013

COLUMNS

Opinion: Concierge Agriculture

Coming soon to a mini farm near you
By Martin Harris Jr.

Unless you've successfully avoided recent discussions of the national health care question, you already know that the medical profession's response to relatively new patterns of government management of "parity pricing" for medical services has been different from the response of the agriculture profession to relatively old patterns of such management for commodity production.

To oversimplify, doctors have begun to reject patients, close services, retire early, shift from private practice to institutional employment and so on, rather than accept below-cost-of-operations government reimbursements, while farmers have long made do with off-farm household income, less-than-full-cost-recognition accounting and unpaid family labor.

With government encouragement, the food and fiber industry counts inflation-based increases in land values as returns on assets; doesn't reject overall returns on farm business assets as fiscally unacceptable; and doesn't count "free" (actually taxpayer-funded) funding of land management expenses as costs that the farmgate commodity price would, under more normal accounting, honestly reflect.

However, the two professions have, in one instance, responded to the cost-price squeeze similarly. In medicine, the new catchphrase is "concierge medicine," while in mini farming the older catchphrase, "community-supported agriculture," has had exactly the same meaning: when your service or product end user buys a membership, they get a better transaction template and result than nonmembers.

In basic concept, function and funding, there's not much difference between "concierge ag" and "concierge med." Both arose as the same common-sense response to the unworkable aspects of a government-imposed price structure ignoring product and service cost realities: the medical professional deals with government reimbursement schedules directly, while the mini farm professional competes in a commodity price environment indirectly shaped by the "floating parity" commodity prices administered by government.

Just as with private clubs and similar organizations, members get better "deals" than nonmembers. Unlike totally private clubs, both doctors and growers do business with nonmember wannabe purchasers who accept end-of-the line status after paid members have enjoyed their purchased-via-membership higher priority of service and/or price.

Long before the "concierge" or "community-supported" labels were invented, American business had already adopted the general principle. Most large retailers have long offered "buyers' club" status, indistinguishable in principle from what's now called "concierge" in (mostly small-scale) medicine and "community-supported" in (entirely small-scale) agriculture. And airlines sell frequent flyer lounge admissions.

What is distinguishable is the underlying nature of the two professions, both structural and economic. The smallest medical office today requires credentials, staff, insurance and facilities, which create a demanding cash flow situation. In contrast, anyone with a few square yards of land can grow produce in his spare time with no credentials, minimal equipment, no staff and no insurance, and sell the surplus to neighbors or strangers, a comfortably low cash flow situation enabling easy entry, scale change, product mix change or exit.

Perhaps because of these contrasting structures and economics, private practice medicine hasn't significantly been a no-earnings-needed avocation. In contrast, what little USDA data we have on farm income show that the smallest operations depend on the highest percentages of off-farm household income, although the data aren't broken down between off-farm active earned and passive unearned - think Scott and Helen Nearing, exposed postmortem as living on comfortable inheritances while writing profit-generating books about living off the land, or Joel Salatin of Polyface Farm, doing quite well on the paid lecture circuit.

In that underlying economic context, it's understandable that medical practitioners trying to stay in private practice would seize on the "concierge" concept as a way to balance the books, and it also explains why some mini farmers would similarly seek out the "community-supported" concept. The labors of unpaid volunteer candy stripers in metropolitan hospitals or the large-scale, profit-seeking efforts of producers, handlers and retailers are exceptions to the above simplification, but don't discredit it.

Political reality underlies an interesting point about the politics and economics of medicine and food. Both sectors are subject to constant consumer complaint over retail price; both involve a tiny cohort of service or product providers to a near 100 percent of population, half of whom vote for any politicians promising retail price control; and both are therefore under severe economic pressure, even as real-term costs have fallen for consumers.

In agriculture, consumer food costs are at all-time lows. In medicine, per capita spending is up, but qualitative changes in services and equipment are such that no rational consumer would go back to the cheaper, less effective remedies and outcomes of even a few decades ago. In medical services, the predictable outcome has been that no one demanding service would be turned away, with both providers and other consumers shouldering the charity cost. In food spending there's similarly been huge growth in "free food" (taxpayer-supported), but one unexpected outcome was the substantial growth in the "food spending away from home" restaurant category. Until recently, it was combined with "food consumed at home" and presented by the Census Bureau as one number: about 22 percent in 1950, subdivided into about 9 percent home and 4 percent away today. An argument could be made that in both food and medicine, a small but increasing percentage of consumers now recognizes the prices as low enough to enable above-minimum spending so as to obtain better and prompter medical care or better food products and customer service.

Eighteenth-century English economist Adam Smith saw it all coming. Most famously, he correlated price and sales with demand and supply, but he also wrote of constant productivity gains resulting from supplier competition, so that product and service quality would improve over time while price dropped.

He wasn't quite so clear about the role of time - hired labor or consumer wait - in the price/productivity/quality equation, but the argument could be made that it's a major component of the interest in buyers' club arrangements. In recent history, retail clubs have been price-based: buy a membership, get discounts.

A more sophisticated concept first showed up in the 1937 invention of the chrome wire shopping cart: consumer "rents" a temporary membership by voluntarily doing the work of the grocery clerk, enabling both lower checkout prices and lower labor costs, resulting in improved profits for vendors. This is similar for self-service patrons of all-you-can-eat buffet restaurants, where patrons have displaced expensive waitstaff so profitably that management cares little how much each feeder consumes.

It's the inherent logic underlying grower acceptance of pick-your-own consumer labor. And just so for modern CM and CSA longer-term memberships: consumers pay up front for faster access, custom service, and better service and goods availability, all of which are time-savers (and productivity improvers) captured in dollar terms.

What's it worth to know your inoculation or beef cuts will be there for you when you arrive, with no waiting in line or product/service unavailability? Buyers' club membership purchasers have decided that their time and convenience gains are worth the annual dollar cost, and vendors, both medical and agricultural, see value in the cash flow improvement, consumer reliability and efficiency of service or product flow to the consumer. All productivity gains Adam Smith would have warmly endorsed, even though the "concierge" label would surely have baffled him.

The author is an architect and former farmer.