Trouble Ahead For Small Family Farms

Rising land values and resource costs were pushing small family farms out of business in the early 1980s.

067 small family farms

In the early 1980s the economics of agriculture were driving small family farms out of business.


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American agriculture is in a state of crisis, and the future of small family farms—an institution often considered to be a cornerstone of our society—looks grim.

The signs of trouble are everywhere: in the protest parades of tractors, in the strange combination of high food prices and low farm income, and in the declining number of working agricultural operations. As a matter of fact, while there were 6.8 million U.S. farms in 1935, the total had dropped to 2.3 million by 1974, and that figure is expected to decline to 1.5 million by the end of this year!

Of course, the powers that be in American agriculture have ways of explaining away even such shocking evidence. It is often claimed, for instance, that the statistics just reflect the weeding out of small, inefficient enterprises. And we're constantly told that our farms are producing more

than ever before.

Aren't we, then, just seeing the "economics of size" at work in rural America? Well, maybe. The number of small "noncommercial" farms—defined by the USDA as those with sales of less than $2,500 a year—declined from 2,388,000 in 1949 to just 771,000 in 1974. During the same period, the quantity of small "commercial" farms—operations with sales of between $2,500 and $40,000—shrank too, from 2,893,000 to 1,218,000. Only the large commercial farms—those with sales of over $40,000—increased from 104,000 in 1949 to 477,000 i n 1974.

Among the big farms, the very largest —with sales of over $200,000—multiplied most rapidly, from 16,000 to 63,000! And the large agricultural concerns didn't grow just in number, they increased in size, too: The average U.S. farm in 1940 covered 197 acres, but by 1974 the average had grown to 440 acres.

All in all, it appears that the American farmer has been following the "get big or get out" advice of former Secretary of Agriculture Earl Butz. And economies of scale do seem—at least on the face of the matter—to make good sense. However, the USDA has discovered that the "bigger is more efficient" argument isn't all it's cracked up to be. In fact, Department of Agriculture economist Thomas Miller has reported that medium-sized farms (with gross sales from $20,000 to $100,000) are most efficient! Above the $20,000 threshold, says Miller, there are no important reductions in the unit cost of production. So farms grow beyond medium size not because it's less expensive to produce each bushel of wheat when you're one of the "big boys,"  but simply because the overgrown acreages can produce—and sell—more bushels of wheat.

Now a grower's desire to raise more wheat—or corn, or oats, or soybeans—is understandable, but the course of action that must be taken to do so does have several hidden consequences. For one thing, large-scale farmers—with good access to credit—often bid up the price of available land ... and the result is that small growers cannot afford to buy or lease additional acreage.

Worse yet, as the sales value of the land in an area rises, taxes follow suit ... again putting economic stress on the family farmer. Furthermore, the problems are aggravated because—according to a recent USDA study—federal and state tax laws give special tax benefits to high-income farmland buyers ... and such laws have created incentives for farmers to shift their attention from efficiency and productivity to farm expansion, and to the appreciation of land values as an end in itself.

Even the federal commodity programs—supposedly designed to help growers when crop prices are depressed —accelerate the trend toward fewer, but larger, farms. A USDA report indicates that most price supports don't differentiate between family farms—the natural target of such aid—and corporate farms ... and thus the programs provide the largest amount of assistance to the giant enterprises that produce the most.

And—in a self-perpetuating cycle—the corporate farmers often apply that "bonus" money to underwrite even further expansion! What's more, income support, disaster payment and commodity programs tend to encourage the large-scale, single-purpose farms ... often operations that are bankrolled by non-farm investors, who use highly leveraged debt financing.

As you can imagine, such economic factors often force smaller-scale farmers either to expand, abandon production, or become part-time growers ... and the last two choices—given the limited capital of most family operations—are the ones frequently taken. Well, you might ask, why not? Why shouldn't the most efficient and best-capitalized farmers drive the inefficient little guys out of business?

Aside from the ethics of the situation, the best answer to such questions is simply that our present system isn't working. The fact is that much of America's fabled agricultural productivity is based on large chemical- and energy-intensive monoculture (single-crop) operations. And—as we approach the end of the century—it's going to become more and more difficult, and expensive, to maintain the kinds of farms that we've come to depend upon.

In the USDA's, "Report and Recommendations on Organic Farming," deep concern is expressed about the probable future repercussions of such practices as intensive and continuous production of cash grains, and extensive and often excessive use of chemicals. The report team cites especially the danger of sharply increasing costs (and uncertain availability) of energy and of chemical fertilizers, the steady decline in soil productivity and tilth resulting from excessive erosion and loss of soil organic matter, and the problems resulting from the pollution of natural waters by agricultural chemicals.

Unfortunately, the cost of agricultural land is often so high that many farmers feel compelled to extract every last bushel from their acreage, and that fact encourages practices that destroy the land. As author Mark Kramer points out, "When short-term demand makes the squandering of resources profitable, resources are squandered. Farmers farm as their situations dictate." [EDITOR'S NOTE: Kramer's book Three Farms: Making Milk, Meat and Money from the American Soil (Little, Brown, 1980,) takes a thoughtful look at our agricultural difficulties.]  

The problem, in short, is that we're putting all of our agricultural eggs in one large money-, chemical-, and energy-intensive basket , and in the process we're allowing our backup systems—the family farms—to be swallowed up or abandoned.

When the last drop of oil is extracted from the ground, we may welt not be able (even if there were a rational reason for doing so) to ship a carrot 2,500 miles from producer to consumer. We've encouraged big agriculture (both farmers and marketers) in the name of a search for inexpensive food ... but food is no longer inexpensive. And the average family farm has not seen its income grow despite the higher cost to consumers of its goods.

That's why there have been tractor parades at the Capitol, and that's why we need to be concerned about the future of the family farm.

EDITOR'S NOTE: There is some occasion for optimism, in spite of our current agricultural dilemma. Notably, the Family Farm Development Act of 1980, as proposed by Representatives Richard Nolan of Minnesota and George Brown of California, could aid the small-scale grower.  Another encouraging sign is the positive attention that the USDA has been paying to organic agriculture. And perhaps most important of all is the fact that private parties are beginning to address the problems facing the family farm.