Transcript The Future of Family Farms By Neil E. Harl Iowa State

The Future of Family Farms
By
Neil E. Harl
Iowa State University
Presented at
Workshop on Rebuilding the Unity of Health
and the Environment in Rural America
November 29, 2004
Iowa City, Iowa
U.S. agriculture has been through
a dramatic transformation over
the past 150 plus years—
Farms in Iowa—Average Size
Year
Acres
1900
1925
1969
2003
118
156
282
352
Percent of Iowa Farms with 2,000 acres or more
1.6%
1.4%
1.2%
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%
2002
1997
Source: Agricultural Census, 2002
1992
1987
1982
1978
1974
Percent Change in Sales by Sales Categories, 1997-2002
50%
45%
40%
30%
20%
12%
10%
0%
-10%
-8%
-10%
-13%
-20%
-14%
-15%
-16%
-18%
-19%
-22%
M
$1
>
99
to
$9
99
,9
99
,9
$5
00
to
$2
00
50
to
$4
99
,9
$2
49
$9
to
$1
Source: Agricultural Census, 2002.
99
99
9,
9
99
$5
0
to
$4
9,
9
99
$4
0
to
$3
9,
9
99
$2
5
to
0
$2
0
to
$2
9,
9
$1
4,
9
99
9
$9
to
$5
.5
to
to
$4
$2
,9
9
,9
9
9
9
,4
9
0
,0
0
$1
$1
$2
$1
-26%
-30%
<
-25%
Owned and Rented Land in Iowa, 2002
80%
70%
60%
50%
40%
30%
20%
10%
0%
Owned
Source: Agricultural Census, 2002.
Rented
Hours per 100 Bushels in U. S. Corn and
Soybean Production
60
50
40
30
20
10
0
1949
1959
1969
Corn
1979
Soybeans
1982
1998
Farms and Sales for Iowa by Sales Class, 2002
30%
25%
20%
15%
10%
5%
0%
$1 to
$2,499
$2.5 to
$4,999
$5 to
$9,999
$10 to
$24,999
$25 to
$49,999
Farms
$50 to
$99,999
$100 to
$249,999
$250 to
$499,999
Sales
Does not include farms with under $1000 in sales; Source: Agricultural Census, 2002.
$500 to
$999,999
> $1M
Distribution of Iowa Farms Receiving Government Payments
and Payments Receivied, 2002
30%
25%
20%
15%
10%
5%
0%
$1 to
$2,499
$2.5 to
$4,999
$5 to
$9,999
$10 to
$24,999
$25 to
$49,999
Farms
$50 to
$99,999
$100 to
$249,999
$250 to
$499,999
Payments
Does not include farms with under $1000 in sales; Source: Agricultural Census, 2002.
$500 to
$999,999
> $1M
Organizational Structure of Farms
1969
2002
Individual or family
77.3%
86.8%
Partnership
9.6%
6.4%
Corporation
3.8%
5.8%
Other
0.4%
1.0%
Source: Agricultural Census, 2002.
Changes in Agriculture
The transformation of agriculture
can be attributed to:
• Genetics
• Powered Equipment
• Institutional change
Genetics
Effects of Genetics
on Corn Yields
• 1937 — 40 bushels (open pollinated)
• 1938 — 60 bushels (hybrids)
• 1994, 2003 — 200 bushels
• 2004 ---- 220 bushels
The Technology of Power
• Substitution of capital for labor
• Sets the stage for larger and
larger farms
A Paradox
• Farmers believe they benefit
from agricultural technology
…but they don’t.
• Consumers don’t believe they
benefit…but they do.
Environmental Concerns
• Less tolerance for “cost externalities,”
such as air, soil, and groundwater
pollution,
• Rising concerns about loss of
productive farmland to residential
and non-farm commercial use.
Institutional Change:
International Trade
• Expected to improve Third World
incomes and boost food demand.
• Likely to lead to increasing
pressure to produce all goods and
services in least-cost locations.
World Agriculture
 Still has a huge capacity to
produce, indeed to over produce.
 But a series of years with weather
problems could boost food prices,
which is one way to ration supplies.
Fundamental Underpinnings
of the Economy
• Competition is the most important
feature of any economy.
• Economic growth is maximized if
resources are allocated and income is
distributed in accordance with open,
competitive, and transparent markets
The Deadly Combination
• High levels of concentration within an
agricultural sector, coupled with…
• Vertical integration by concentrated firms…
• Yields a proletarian farmer!
The Road to Serfdom
Example: An Iowa farmer has a five-year contract to sell hogs to
a dominant packer. The replacement contract is, predictably,
less advantageous to the farmer. “Sorry, that’s all we’re doing
this year.”
If the nearest meaningful, competitive outlet is 900 miles
away, the Iowa farmer can—
• Go back to the regionally dominant packer and try to
negotiate an acceptable contract;
• Cease producing hogs (and find another use for the
facilities);
• Ship the hogs 900 miles with less income; or
• Organize enough producers to achieve countervailing
power.
Consequences of Current Farm Policy
All-out production—
• Decreases domestic commodity prices as technology
increases output faster than demand increases.
• Low commodity prices pressure world prices.
• U.S. taxpayers make up much of lost income in this
country.
• In countries where the government cannot or will not
supplement farm incomes, low prices result in reduction
of land values and then reduction in returns to labor,
forcing farmers to the cities.
• U.S. market share increases at the expense of U.S.
taxpayers and Third World producers.
Summary: Advances in genetics coupled with
technological and institutional change will:
• increase yields and decrease consumer prices,
• decrease emissions of environmental
pollutants,
• create ongoing controversies about fair farm
practices and the ethics of agricultural
production,
• increase farmer dependencies on global trade
agreements,
• increase dependencies of developing nations
on developed nations.
2006 Budget Proposal
 Eliminate
oil and gas research.
 Reduce crop subsidies.
 Maintain CRP program.
 Cuts to energy efficient research.
 Severe cuts to land and water
conservation fund.
 Support for arctic drilling.