Trouble Ahead For Small Family Farms

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

| January/February 1981

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.

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