NEWS for North Dakotans
Agriculture Communication, North Dakota
State University
7 Morrill Hall, Fargo, ND 58105-5665
July 30, 1998
[EDITORS: When using this story, please include byline.]
by Andrew Swenson, Farm Management Specialist
North Dakota State University Extension Service
Farmers have left agriculture in a steady stream since the 1930s, but the huge loss of family farms these past few years has again forced to the fore the question of whether a whole way of life is ending.
It surely is—unless the economic forces driving the trend change, or unless government policy somehow moderates those forces.
This conclusion troubles most people, including me, but it shouldn't shock anyone. The same shrinking we see in agriculture has been occurring in industry after industry. Numerous automobile companies have shrunk to the Big Three. Ma and Pa retailers have been replaced by Kmarts and Wal-Marts. In agriculture, poultry, hog and dairy operations have been the prime examples of this trend. Large-scale contract crop production may be next.
All this is simply the result of our freemarket, competitive economy, which relentlessly pushes producers toward the lowest cost of production. World trade intensifies the competition.
Recently I visited the corporate headquarters of a major seed company and listened to their long-range projections on agriculture. They expect that within two decades there will be onefourth the number of farms that exist today.
Technology is often the force behind "bigger is better," and it is ironic to see agricultural input suppliers sincerely claiming that their new technology will make farmers more profitable. The truth is, production-increasing technology will increase farmer profit only briefly. When oversupply—due to the new technology—drives prices lower, the typical farmer will be no better off than he was before he adopted the technological improvement. His real income won't have changed at all. In fact, only two things will have changed: the benchmark for productivity will be higher, and he'll have fewer neighbors.
That has been the story of agriculture: round after round of new technology bringing increased productivity, leading to lower real commodity prices and, always, to fewer farmers.
One should not blame the chemical, seed and machinery companies for the farmers' plight. These companies, too, are caught on the technology treadmill. They must continually innovate and develop better products, before their competitors do, to remain profitable and in business. The technology treadmill, fueled by the information age, keeps going faster and faster. In agriculture, organic farmers come the closest I've seen to being able to jump off the technology treadmill, but even they are not immune to the price pressures of competition.
It is hard to argue that technology is bad. Consumers benefit from it through lower costs and better products. The U.S. economic system is the best in the world for rewarding innovation—which is why we have so much innovation and one of the world's highest standards of living.
Loss of farms may also be due, in part, to more producers treating the farm as "just a business," not a "way of life"—though even such a way of life, of course, requires good business sense. One rural sociologist has said that the decline in rural areas started when farmers started valuing profit more than neighbors. Treating a farm as "just a business" often leads to expansion out of greed that can uproot and dislocate neighbors and weaken the community.
For the traditional family farm producing traditional commodities to survive, society will need to offset the economic forces that are driving consolidation—which means it will need to decide that the benefits of having food supplied by family farms, and having more prosperous rural areas, are worth the cost. Some forms that these costs could take are higher taxes due to subsidized farm programs, higher food prices resulting from managing supply through restricting imports and domestic production, or reduced returns to industries presently benefitting at farmers' expense.
If it is a national goal to halt this collapse of family farms, I believe farm policy must be targeted much better than in the past. It is somewhat paradoxical that very large commercial producers, whose actions may have contributed to the depopulating of rural areas, should benefit from farm policy. Traditional commodity programs provide land-based farm income support payments that are bid into the land, and though this benefits landowners, it raises the cost of production to the farmer who buys or rents the land. Farmers rent about twothirds of the land they operate.
I believe farm policy should not guarantee cost of production. Such a policy could be very expensive and would make farmers about the only group in the country to be so privileged. Success must still depend on performance. If the goal is to reduce the decline in the number of farms, individual farm operators must still be expected to come and go, to succeed or fail according to their skills, financing and luck.
The past year has brutally shown that the safety net for farmers is inadequate. Consideration should be given to a policy that increases crop insurance coverage at no additional cost to producers. Limiting the crop insurance subsidy to a specific number of acres per family would minimize the expense of the program and reduce incentives for larger farms.
The same concept could be applied to increasing the loan rate on wheat but limiting it to a specific number of bushels per family.
These are not new ideas. If society does decide that it values the concept of family farms more than industrialized agriculture, now is the time for ideas and action, for the curtain is closing.
As one fortyish farmer said when helping line up machinery for a friend's auction this spring, "If farm policy is not going to be changed, let me know now so I can get out of farming and get on with my life."
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Source: Andrew Swenson (701) 231-7379
Editor: Barry Brissman (701) 231-7866