Agriculture

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The Long Term Decline in Agriculture's Share of the Economy

The percentage of people employed in farm occupations in the United States has declined steadily for more than 180 years. In 1820, 72% of of U.S. workers were engaged in farm occupations; in 1840 it was 69%; in 1860 it was 59%, in 1880 it was 57%, in 1900 it was 38%, in 1920 it was 27%, in 1940 it was 17%, in 1960 it was 6%, in 1980 it was 3%, by 2000 it is a little over 2% (rounding to the nearest full percentage point in all cases). The actual number of people in farm occupations has declined from about 2.9 million in 1820 to 2.1 million in 2000. As noted below, about a quarter of these people in farm occupations account for about 97% of U.S. farm production.

Heuristically, this is best viewed as a product of increasing agricultural efficency. When a single farm can feed more people, this frees other people who would otherwise have to be farmers to literally put food on the table, to engage in other kinds of economic activity. Our entire economy depends upon each farm family being able to feed 40-50 other families (of course, this is an average family, as diversified farms that produce an entire diet for a family or community have virtually disappeared).

Small Farms and Big Farms

Most American farms are economically marginal family farms. The 74% of farms (1,507,000 out of 1,912,000 in the U.S.) with $50,000 or less of cash sales of agricultural products a year, produce just 3% of U.S. cash sales of farm products on 31% of U.S. farm acreage. Just over half (50.4%) of U.S. farms produce less than $10,000 of cash sales of agricultural products a year, accounting for 1.5% of total agricultural sales, on 14% of U.S. farm acreage.

Mid-sized farms (those in the $50,000-$499,999 cash receipts range) make up 23% of U.S. farms (438,000)and produce about 40% of U.S. farm production on about 50% of U.S. farm acreage.

About 57% of all U.S. farm production (measured by cash sales) comes from just 4% of U.S. farms (those with cash receipts of $500,000 or more per year, accounting for 69,000 out of 1,912,000 U.S. farms) on 19% of U.S. farm acreage.

While the Soviet Union was notorious for the fact that small privately owned plots were farm more productive than collective farms, in the United States agriculture displays strong economies of scale. The larger the farm, on average, the greater its productivity per acre. The following comparison of farms in particular annual cash receipts ranged, showing average acreage per farm in the category, and cash receipts per acre, makes this point clear:

  • Under $2,500 (average 128 acres) $6.67/acre
  • $2,500-$4,999 (average 115 acres) $31.22/acre
  • $5,000-$9,999 (average 166 acres) $42.85/acre
  • $10,000-$24,999 (average 275 acres) $58.02/acre
  • $25,000-$49,999 (average 481 acres) $74.10/acre
  • $50,000-$99,999 (average 746 acres) $96.16/acre
  • $100,000-$249,999 (average 1095 acres) $145.33/acre
  • $250,000-$499,999 (average 1577 acres) $220.37/acre
  • $500,000-$999,999 (average 2129 acres) $321.81/acre
  • $1,000,000+ (average 3,464 acres) $899.58/acre

Many farms with medium to large cash receipts are "corporate farms", many owned by family groups and many not owned by family groups. But, because every farm is classified as having at least one person in a farm occuption (many, in fact, part time), about three-quarters of the people listed by government statistics as engaged in "farm occupations" operate farms that are only marginal in their crop output, accounting for less than 3% of U.S. production. These farms may have cultural and ecological value, but they are, on average, very inefficient, and in terms of total agricultural production, economic contribution, or contributions to food security, they are irrelevant.

Farm Finances

A collection of links on farm economics are found here.


Farm Income and Government Aid

About half of net farm income in the United States comes from farm subsidies, a policy continued by the 2002 Farm Bill.

Government farm subsidies dominate farm economics. Roughly speaking, they are awarded in proportion to production of eligible crops (90% of farm subsidies go to growers of corn, wheat, cotton, soybeans, and rice), resulting in immense Corporate Welfare for already wealthy farmers while providing little to small farmers. See Farm Subsidy Data and More Farm Subsidy Data and the Environmental Working Group Database. The case of cotton subsidies is discussed here. Cotton is among the most troubling of the farm subsidies because a little less than 26,000 farmers (the top 20% of recipients in the program) receive 93% of the benefits for this non-food crop, with payments averaging more than $60,000 per farm, which makes up a large part of the total farm subsidy program in the United States. Cotton subsidies are currently threatened by World Trade Organization efforts to end them.

About 86% of all government subsidies went to 20% of the subsidized farmers from 1995 to 2002. But, those percentages only apply to subsidized farmers and only 36% of farmers receive all of the crop subsidies. 64% of US farmers receive none. For example, fruit and vegetable producers receive little or no direct subsidies. Thus, 3.6% of the US farmers received 72% of all the government payments. The next 3.6% got 14%, which means that 7.2% of the farms received 86% of all the subsidy payments The farm subsidy factor, in addition to economies of scale, may partially explain why the average farm has grown larger and larger over time.

Forty-seven percent of farm subsidies go to families with adjusted gross incomes of $135,000 a year or more. Source.

International Agricultural Trade

The United States is not unique in providing large farm subsidies. Europe and many other nations also provide large subsidies to farmers. Indeed, one of the important arguments for farm subsidies is to create a level playing field with subsidized foreign competition. This link discusses the subsidy situation in Canada. The situation in Mexico is addressed here. But, because most undeveloped countries can't afford massive subsidies for their farmers, the artificially low prices of good exported from US and EU farms often cause severe economic hardship for farmers in these countries. For example, the impact of U.S. cotton subsidies on African cotton farmers, which were held on June 18, 2004 to violate WTO trading rules, is described here.

Tariffs in the agricultural area have also been among the slowest to fall in a general worldwide trend towards free trade. Some commodities, like sugar, have been particular sensitive politically.

Cooperatives in Agriculture

Cooperatives are more widely used in the agricultural area than any other part of the U.S. economy. Electrical service, farm supply companies, and farm product distribution companies are often owned by cooperatives of farmers.

Agriculture and Water in the American West

In the Western United States fresh water resources are scarce. The vast majority of Western water resources are devoted to agriculture (80%+ in most river basins). Typically, Western states allocate water rights on a first in time, first in right principal (subject, of course, to exceptions and definitions that keep water lawyers busy). If your predecessor in interest used 1000 units of water in 1834 for irrigation, then you are entitled to that 1000 units of water out of the total supply before anyone whose predecessor in interest used water after that date is entitled to use any water. As the example above implies, water rights are generally transferrable. A key issue in developing the traditional framework in water law (in addition to the issues posed by new users described below) is an increasing understanding the relationship between ground water and aquifers (which was at first unregulated) and surface water (which was traditionally regulated with a system of water rights).

One result of this system is that historically new users, like industrial facilities, pay far more for their water than far less economically productive users in irrigated agriculture, who receive their water for free as a result of their existing water rights. Urban users of water pay tens times a much per gallon as agricultural water users for water.

For example, in Colorado, 90% of water goes to agriculture, 7% to residential users, 2% to industrial uses, 1% to "stock water" and less than 0.5% to commercial users. See Colorado Water Conservation Board Drought Facts.

Urban development in the American West is bringing new demands on water to the table. The two biggest demands that municipal water users in the arid West place on water are lawn watering (54% of residential water use goes towards landscaping) and watering golf courses (1 golf course used the same amount of water as 750 residential households, which is more than 2,000 people). Major industrial and commercial users (factories and car washes mostly) use a significant share of the rest of urban water. Other domestic and commercial uses (dish washing, showers, drinking, toilets, etc.) are a fairly small share of total water use in urban areas in the arid West. As cities in the arid West have grown rapidly (cities like Los Angeles, California; Phoenix, Arizona; Albequerque, New Mexico; Las Vegas, Nevada and Denver, Colorado), their water providers have constantly looked for ways to divert water from existing uses to new urban uses (i.e. to "grab water"). Recent drought conditions in much of the West have forced municipalities to encourage their resident to rethink their use of water for landscaping purposes (e.g. with Xeriscaping) and to generally improve water conservation. Efforts to buffer supply issues with resevoirs have also been proposed. Generally speaking, progressives have favored conservation, while conservatives have favored new resevoirs.

Urban residents have also come to the American West with new views on their priorities for water use. For example, historically, allowing streams to be full enough to perserve fish habitats and canoe on was not considered a beneficial use of water entitled to recognition with a water right. But, in many Western states the tourism value of fishing and canoeing exceeds the economic contribution to the state that comes from irrigated farming, the dominant use of water in the West. For example, in Colorado, agriculture contributes $700 million of net income each year to the state's economy, while boating, fishing and hunting contribute $1,050 million of net income each year to the state's economy.

Agriculture and Land Use

Roughly 41% of the land in the United State, by area, is used in agriculture. Another 28% of owned by the federal government, and a significant proprtion of the remainder is in state and local parks or is simply undeveloped vacant land.

A major environmental concern is the widespread use of agricultural land to foster sprawling commercial, residential and industrial uses.

Agricultural Health and Safety

"Of more than 41 million uninsured people in the United States, one in five lives in rural areas. They are older, poorer, and less healthy than people living in urban areas. The 2002 occupational fatality rate in agriculture was 22.7 per 100,000 people employed, compared to 12.2 in construction, 11.3 in transportation, and 23.5 in mining." Source

Politics and History

The Great Depression and the "Dust Bowl" that accompanied it, provoked a New Deal response (of the Democratic Party) that still defines agriculture policy in the United States today. The system of government payments to farmers that still define agriculture policy today, were put into place then. The rural and farm cooperatives that characterize most agriculture related businesses were established then. The soil conservation districts (there is one in almost every county in the United States) and agricultural extension service that provides scientific guidance to the farm community, is a depression era invention.

Until the 1960s, rural areas also had advantages in the political arena that no longer exist. Until the case of Baker v. Carr in 1962 (see Key Court Decisions), most had a system similar to that of the U.S. House and Senate, where counties received certain legislative representation in the state legislature regardless of their population. (In much the same way today at the federal level, Wyoming gets two Senators, just as California does, even though California has more than 80 times more people than Wyoming). This status quo and the polical culture and generation of political leaders that had adapted to this rural bias of the electoral system is just starting to falter going into the 21st century as urban interests begin to re-examine their interest in historical pro-agriculture and pro-rural political compromises.

In 1996, a Republican Congress motivated by free market principals, passed "Freedom to Farm" legislation inteded to reduce government support for farmers and to reduce the influence of government on the economic decision making of farmers. But, the 2002 farm bill introduced new, more generous subsidies designed to be "counter-cyclical" much like the original farm subsidy programs.

Rural America has also seen a dramatic political realignment. Coming out of the Great Depression, rural voters, who were a major beneficiary of the New Deal, were a core democratic party constituency that rivaled labor unions in importance. Over time, however, the economic issues relating to farming have developed bipartisan fuzziness. Neither the Republican, nor the Democratic party, are defined by a clear farm policy, in the way they are by issues like gun control, abortion, affirmative action, tax issues, and social welfare spending. Republicans have tended to mute their general free trade inclinations in looking agricultural tariffs, and have not complained as vocally about farm subsidies as they have about subsidies for the urban poor. Democrats were willling to include broad exemptions for farmers in the 1960s from a collection of new environmental laws, like the Clean Water Act, and have rarely objected to estate tax breaks for farmers, despite their general committment to Federal Gift and Estate Taxation. The notion that Republicans are the party of small business (strongly held by most strong business people, regardless of the facts), which most farmers identify as being, has muddied traditional Democratic support for workers (whom farmers traditionally viewed themselves as being).

In the face of this muddy landscape on economic policy, social issues have lead to a mass rural exodus from the Democratic party to the Republican Party. George W. Bush won almost every rural county in the United States, many decisively, in 2000 (despite losing the popular vote). Rural voters are disproportionately conservative leaning Christians in their views on social issues from gun control, to abortion, to gay rights. As a result of these issues, and the lack of a clear distinction on economic issues (as well as a growing identify as small business owners rather than as workers), they have sided with the Republicans and against the Democrats.

Future Prospects

Political Prospects

Democrats are now faced with a dilemma. As the now decisively urban party, do they try to regain the trust of rural voters (an approach exemplified by Colorado's U.S. Senate candidate Ken Salazar), or do they work hard to advance the issues of their urban constituents vis the rural interests represented largely by their opponents? Also, given the historical trend which shows no sign of stopping, should Democrats invest more resources in courting a demographic that is almost certain to decline in numbers in the next few decades. The trend, it seems, has been the later approach.

While Democrats like John Kerry and Howard Dean have taken pains to make clear that they are not opposed to private gun ownership in its entirety, or to banning any of the traditional uses farms have had for their rifles and shotguns, few Democrats have embraced the very stong anti-gun control position taken by the National Rifle Association, a group which has a strong following in rural America.

A Democratic policy towards farmers has become a corollary to its policies on other issues like Trade, Immigration, Labor and the Environment, rather than a policy of its own. Democrats tend to value the open space that farms help preserve for environmental reasons, but also see threats to habitats, food security issues posed by pesticides and herbicides, and the noxious fumes that come from feedlots as higher priorities than the economic interests of farmers. When Democrats look at farm economics, it is more likely to be from the perspective of the migrant immigrant farm worker than from the U.S. farmer. In trade agreements, protection for farms among Democrats, is typically justified under the rubric of labor and environmental concerns, rather than in its own right.

Urban Democrats are increasingly asking why children in their urban public schools are funded at $6,000 per year per child, while rural schools that have low student-teacher ratios because their populations are so sparse and they have refused to consolidate, receive $15,000 per year per child, mostly in state funds, to allow their schools to remain small and local.

Many Democrats (as well as figures such as conservative scholar Brian Riedl at the Heritage Foundation) now mentally classify government payments to farmers as Corporate Welfare.

Democrats have had a difficult time building a tent big enough on social issues to encompass both married lesbians from Boston and conservative Pentecostal farmers from rural Alabama.

Economic and Policy Prospects

Minor shifts in federal farm subsidy policy could dramatically impact large farmers of the handful of crops that are heavily subsidized. A first possible step in this direction was indicated by the American Jobs Creation Act of 2004, a corporate tax bill, which, as an aside, has largely put an end to tobacco farmer subsidies "buying out" $10 billion in existing commitments, in a change that is seen by many as likely to dramatically decrease domestic tobacco production.

But, so long as other countries (particularly the European Union countries) maintain heavy trade protections and government subsidies for their own farmers, the "level playing field" justification for keeping U.S. subsidies of its own agriculture industry, so great that $58,000 out of $70,000 of a typical North Dakota soy bean farmer's income comes from the government, is likely to continue to be a strong argument.

Another key issue is how changing Energy situations will impact the Economy and agriculture in particular. A shortage of oil, for example, as we approach Peak Oil could lead to increased demand for Biofuels such as Ethanol which could greatly boost the agricultural economy in the long term.

Links

See also dKosopedia:Projects:Analysis:The Record of George W Bush:Agriculture

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