The end of the American farm?

Farming is an increasingly expensive lifestyle choice in the United States. As the nation turns to cheaper imported foods, smart farmers are selling their land to developers, but not happily.

Most Americans could not care less if farming and ranching disappear, as long as they get their

burgers and fries. America will waddle on. The U.S. economy no longer needs agriculture and is rapidly outgrowing it. Voters support urban positions over rural interests. Taxpayers are tired of paying subsidies to farmers while surplus food sits in subsidized storage facilities. Suburbanites are fed up with the odors, dust, and toxins from the old farm down the road. No one is buying the farmer's sob story anymore. Instead, they are buying imported food.

American culture is no longer rural. Just like other rich countries, America has created alternate lifestyle choices in and around cities, and the population has flocked to them. Furthermore, in this stage of its economic development, the United States offers varied rural lifestyle choices. Family farming is not the only form of rural living available to the American population. People can live near cities and still have the ranchette of their dreams. As America develops further, information engineering and other new industries will enable a return to a rural lifestyle for many people if they desire it. It is already happening.

Part of the attachment to family farming comes from the "small is better" bias held by many Americans. There may or may not be some truth to this notion elsewhere in the economy, but it no longer applies to farming and ranching. Today, the only people who argue in favor of "saving the family farm" are former or current family farmers who have been or are being pushed out of business because they cannot compete with their larger, more profitable neighbors. Small, mom-and-pop operations cannot compete with larger firms, so family farms have become an expensive lifestyle that America cannot afford; it is an inefficient use of resources that is becoming a hobby that leads to bankruptcy.

Large-scale American farms and ranches will outlive family farms, but they will not survive indefinitely. Those big fish will feed on the little fish, but eventually they will fall prey to leaner, meaner foreign fish. The high costs of producing food in America, compared with the costs in poorer countries, are pushing American producers out of business as foreign competitors develop enough to serve the same markets. Foreign firms with lower cost levels will increasingly be able to underbid American producers. As a result, American agricultural firms will lose their profitability and be forced to shift into some other industry with better prospects. This is not a bad thing. This is life in a competitive world.

Abandoning Agriculture

Small, rich European countries were the first to be forced to face the end of their agriculture. Switzerland, Belgium, and the Netherlands are examples of countries that have nearly abandoned agriculture. They had no choice. They did not have much land, so their populations' food demands had outgrown their ability to produce long ago.

As the production of various food products was given up and reliance on imported products increased, the countries were able to pay for the imports with their incomes from the sale of other, more valuable products that were produced domestically. A lot of Swiss farmers found that making cuckoo clocks (and other manufactured goods) during the cold winters rewarded them with higher incomes and more-comfortable lives than did tending to snow-bound livestock. It was not difficult to convince many of those farmers to make the switch. Other Swiss farmers may have decided that they liked the rural life, but they now support their farming addiction by running winter ski resorts or other tourist businesses.

A few large European countries are also well on their way toward the end of agriculture. In 1995, Germany's agriculture minister said that the government was planning to in crease aid to rural Germany in order to develop commercial alternatives to the shrinking agriculture sector. Tourism and care for the elderly were alternatives to farming put forward by the ministry.

It must have been a shock to many farmers to hear the agriculture ministry recommend tourism over farming, but the message could not have been clearer: Get ready, the real world is coming.

Less Farming, More Food

Some people worry that leaving agriculture behind and shifting to imported commodities may cause Americans to miss a meal or two. But the United States has been importing an increasing amount of food for years, and Americans' waistlines are growing, not shrinking.

The alarmists are starting to worry about the future, but their view is limited and isolationist. For example, according to a panel of experts at the 1995 national meeting of the American Association for the Advancement of Science, energy shortages, exhausted land, scarce water, and a doubling in population will combine to radically change the American diet by the year 2050. The panel said that American lands are already pushed nearly to the limit of production and that crop yield increases are not going to keep up with population growth. These experts predicted that by the year 2050 arable American farmland would decrease to 290 million acres from the present 470 million. They also said that water will become less available for agriculture, forcing a shift of farmers to regions where rainfall is plentiful, and that the United States will cease to be a food exporter. The new diet, they said, will have less meat and dairy products, more grains and beans, and a sparser variety of vegetables. They concluded that, by then, Americans could be spending up to half their income on food instead of the present 13%.

The shortcoming of all these predictions is that they ignore food imports. The experts suffer from the "America must be self-feeding" bias. It is time for these people to wake up and smell the (imported) coffee. America has' not been completely self-sufficient in food supplies since the days of the Boston Tea Party. U.S. imports of food commodities have increased constantly and will continue to do so.

Some people fear agriculture's loss of economic importance. But the decline of agriculture is a national phenomenon. Even in the Midwest, where agribusiness remains a powerful economic force, manufacturing is the main engine of the region's economic boom. Figures on farming's recent success hide a problem: Farmers themselves did not fare so well because the ratio of prices they received to prices they paid is at an all-time low. Agriculture's poor profitability is its downfall. There is no plot against farmers. No one is doing anything to purposely hurt agriculture. Agriculture in America is simply losing its economic competitiveness as other industries develop and offer investors a better return.

So, what do farmers - the group with the biggest investment in agriculture - want? Surprisingly, many want the government to quit helping them through federal commodity programs, price-support loans, cash deficiency payments, federally subsidized storage, and other programs. Studies reveal that farm programs are not improving the profitability of agriculture as an industry - they just improve the bank accounts of selected people. And, unfortunately, many of those lucky people are not farmers or ranchers. One study found that farm payments tend to be based on land ownership, not land stewardship. In Kansas City, for example, the largest recipient was a real estate investment group.

Loss of subsidies would have a greater relative effect on small farms than on large operations, according to U.S. Department of Agriculture economists. The biggest impact of a loss of federal subsidies would be in the Corn Belt and the Northern Plains, which together get half of federal outlays. But this weaning process is a good thing. Good farmers want bad farmers out of the way. That is why so many farmers want an end to government meddling.

The number of American farms is shrinking, but those that remain are more productive. In 1994, USDA economists described this as a long-term structural trend that is likely to continue into the next century. In fact, farm numbers have been declining for over 60 years. The economists report that the decline in the number of farms continued steadily into the early 1990s at a rate similar to that of the mid-1980s. Census of Agriculture figures showed a total of 1.9 million farms in 1992, down from 2.7 million in 1969 and 2.09 million in 1987, a drop of about 33,000 farms per year. If trends continue, the number of farms will fall by around 39,000 a year between 1997 and 2002, then the rate will begin to slow.

Is this decline in farm numbers something to fear? No, it is an improvement in the efficiency of America's economy. Is it a scary thing? Yes, it is very traumatic for those farmers and ranchers facing the end of their small businesses. But the demise of a family farm is no more important than the end of a family business of some other sort. All small businesses are important to their owners, but insignificant to the economy. America will still be all right.

Are Factory Farms the Enemy?

Protesters claim that large-scale or "factory" farms are threatening rural communities. The fight in American agriculture is a rural-vs.-urban clash. It is a producer-vs.-environmentalist clash. It is a big-vs.-little clash. It is a public-vs.-private clash. It is also a clash between fact and opinion. For example, two rural Sociologists - from the University of Missouri and Iowa State University - said that farmers raising commodities are "getting the short end of the stick." Large food companies are getting a 20% return on their investment, but even the top third of family farmers only make 3%-5% on their investment.

The decline in family farms, these sociologists said, goes beyond agriculture and is really a question about the food system and the socioeconomic fabric of rural America. "Will consumers," they asked, "have a better quality, more available, more wholesome food system under a corporate, integrated model than what they've enjoyed under the family farm?" The sociologists are so busy worrying about the institution of family farming that they ignore the bottom line: There is no "rural America" anymore, and the people trying to hang on to the outdated version of farming are simply holding on to a bad investment.

The Last Roundup

American agriculture is heading for the last roundup. The rural countryside is heading into the final stage of its economic development. Looking out across that countryside, many will find it impossible to imagine the United States without farms and ranches. Especially at this point in history, when American agriculture leads the world in almost every way, it is startling to think that the country will not need farmers or ranchers for much longer. But it is true.

To understand and appreciate the changes, we need to place farming into context. We need to strip away the romance and nostalgia surrounding agriculture and see it for what it is: a business. It is a type of business that has limited potential for long-run profits because of its competitive nature. The whole world can do it. In America, the cost of doing it has risen to the point where it is not very profitable compared with alternative types of businesses. Thus, the people, money, and other resources invested in agriculture currently will be forced to leave for greener pastures.

In the transition, America's green pastures are going to have a bumpy ride. Prices of farmland increased 6.4% nationally in 1994 and increased again in 1995 and 1996. An economist in Ohio said that the price protection provided by federal farm subsidies, combined with high production, has farmers feeling good. Demand for farmland is high, with urban dwellers contributing to the price pressures because of desires to escape the cities.

Unfortunately, demand from city folks will grow slower than the rate at which farm subsidies will be reduced in this era of tight budgets. Less cash income (or subsidy payments) from farming makes farmland less valuable. For example, land values in Kansas could plummet 53% if Congress completely eliminates farm subsidy programs, according to an official with the Kansas Wheat Growers Association, quoted in the Wichita Eagle. Citing a Kansas State University study, the official told a Senate committee that even a 30% cut in the programs could reduce the state's land values by 9%. He said that small towns and rural communities would be hurt.

In the long run, however, city folks will ride to the rescue. A growing number of Americans are using telecommunications to bring their high-salaried urban jobs into rural America. In one example, using a Small Business Administration grant of $680,000, a Nebraska business developer set up two telebusiness centers with the aim of ending the exodus of rural Americans from the region.

It is ironic that many farmers and ranchers retiring in the future will be thankful for the flood of city folks into rural America. At the end of a farmer's career, virtually all of the money he or she has been able to accumulate is in the form of farmland. Thus, the farmer needs to sell to get the money into spendable form. If it were not for buyers from the city, many farmers would not get anything near the price they expect for their land.

That irony is lost on many Defenders of the Farm. Several groups, such as the American Farmland Trust (AFT), still strive to preserve the nation's farmland. They hate the fact that the United States is losing at least 1.4 million acres of farmland per year to development. AFT says that, more important than the acreage figure, much of the land being lost tends to be the most productive and nearest to consumers.

But it should surprise no one that the land closest to consumers is consumed first! So Defenders of the Farm have in many cases become Defenders of the Farmer. For example, in some places where the economic pressure to develop farmland is strong, the AFT has created a "Purchase of Development Rights" program to help farmers reap some of the development value of their land without selling to developers. In other words, when the value of land is too high to justify farming it, AFT will buy it at market prices so that land can sit idle instead of being developed into something useful. This is an example of shooting yourself in the foot.

People on the other side of the fight over land haven't exactly got the story figured out either. In 1995, a Des Moines Register columnist argued against sweeping laws to protect prime agricultural land. He noted that, although

"vanishing croplands" has always been a popular headline, we are paying farmers to take land out of cultivation. He said that residential developments like the one he lives in near Des Moines have resulted in "urban forests" that support a wide variety of wildlife. Who would have believed it years ago - someone in Iowa defending urban sprawl because it was a source of wildlife habitat?

Clearly the end of agriculture in America is near, but some people refuse to see the signs and are hurting themselves in an effort to resist the inevitable. A classic example of this comes from reports that retiring farmers are passing their livelihoods on to young enthusiasts through a growing number of programs that match retiring farmers with younger ones in order to keep alive a family farm and a way of life. The idea of "matching services" was developed in 1990 by a think tank in Nebraska and has spread to more than a dozen states across the country. Yet, all the analysts agree that these programs are not going to change the face of agriculture because most farmers will always choose to sell out rather than commit several years to a transaction that requires working closely with a stranger.

The good sense and bad bank balances of American farmers and ranchers will win out over their hopes and dreams. As farms in Montgomery County, Maryland; Fresno County, California; and elsewhere in America continue to be shoved to the outer reaches of the county, and the urban sprawl continues to spawn new regulations with which to check growth, farm families are having a hard time figuring out how to fit in and maintain their way of life. They want to maintain something that they enjoy and do well, but they are bright people with families to protect, so they must do the prudent thing. As painful as it might be, the prudent thing is to manage their portfolio of assets with their head, not their heart.

As a nation, the United States must do the same. Americans can still listen to country music, but they have to drive their pickups into town. They must learn to let go of farming and ranching. In the short run, this means eliminating the subsidies that delay the inevitable development of the nation out of agriculture and into more-profitable industries. In the long run, this means becoming citizens of the world, dependent on others for food commodities while Americans produce the marvels and the know-how for the future.

America has to do these things to remain competitive, but the nation has shown that it can do anything to which it sets its mind. The first step is to accept that farming, although it enabled America to move into its dynamic future, is part of a proud past.

Job well done.

RELATED ARTICLE: A Cornucopia of Imports

The United States was once the breadbasket of the world. Now it is the shopping basket. Even if the farms of the heartland were abandoned, Americans would still eat well, says author Steven C. Blank in The End of Agriculture in the American Portfolio.

"America used to be called on to carry a big part of the load when it came to feeding the world, but now other countries are ready to contribute to world food markets," Blank notes. "New food exporters are busting out all over the world," such as the Philippines, Peru, India, Vietnam, and Turkey.

Already, North America gets much of its out-of-season fruits and vegetables from the Southern Hemisphere, where the winters and summers are reversed. "Shipments of Chilean fresh fruit entering through the port of Wilmington, North Carolina, increased 50% during 1995," Blank points out. "Even Californians, living in the state that leads the country in fruit and vegetable production, eat fruit from Chile all winter. And for some products, America depends on imports year-round. For example, bananas, coffee, and cocoa do not grow very well in North Dakota, but all are consumed there thanks to foreign suppliers."

The key to this booming world food business is capital investment, notably by U.S. investors. "There is tremendous potential for favorable returns on that investment," says Blank. "For example, China has attracted a total of $10 billion in foreign capital into its farm sector. The money has gone into nearly 4,000 projects in forests, agriculture, animal husbandry, and fishing."

By investing in foreign agricultural sectors, Americans are strengthening the bonds with trading partners around the world and securing food supplies for the future, Blank argues.

Source: The End of Agriculture in the American Portfolio by Steven C. Blank. Published by Quorum Books, Greenwood Publishing Group, Inc., 88 Post Road West, P.O. Box 5007, Westport, Connecticut 06881. Telephone 1-203-2263571; Web site www.greenwood.com. 1998. 218 pages. $59.95.

RELATED ARTICLE: What About Food Scarcity?

Will the world's agricultural systems really be able to support a growing U.S. demand for imported foods? One doubter is Lester R. Brown of the Worldwatch Institute. He has warned of global food scarcity as agriculture's most important resources, land and water, dwindle.

See his article, "Food Scarcity: An Environmental Wakeup Call," in the January-February 1998 issue of THE FUTURIST.

About the Author

Steven C. Blank is a cooperative extension economist in the Agricultural and Resource Economics Department at the University of California, Davis. Telephone 1-530-752-0823; e-mail sblank@primal.ucdavis.edu.

He is author of The End of Agriculture in the American Portfolio (1998, Quorum Books, telephone 1-800-225-5800, Web site www.greenwood.com, $59.95), from which this article was drawn.