1. The Future of Family Farms By Neil E. Harl Iowa State University
Presented at
Workshop on Rebuilding the Unity of Health and the Environment in Rural America
November 29, 2004
Iowa City, Iowa

2. U.S. agriculture has been through a dramatic transformation over the past 150 plus years—

4. Farms in Iowa—Average Size
Year
1900
1925
1969
2003
Acres
118
156
282
352

5. Source: Agricultural Census, 2002

6. Source: Agricultural Census, 2002.

7. Source: Agricultural Census, 2002.

9. Does not include farms with under $1000 in sales; Source: Agricultural Census, 2002.

10. Does not include farms with under $1000 in sales; Source: Agricultural Census, 2002.

11. Organizational Structure of Farms
1969
2002
Individual or family
77.3%
86.8%
Partnership
9.6%
6.4%
Corporation
3.8%
5.8%
Other
0.4%
1.0%
Source: Agricultural Census, 2002.

12. Changes in Agriculture
The transformation of agriculture can be attributed to:
Genetics
Powered Equipment
Institutional change

13. Genetics

14. Effects of Genetics on Corn Yields
1937 — 40 bushels (open pollinated)
1938 — 60 bushels (hybrids)
1994, 2003 — 200 bushels
bushels

15. The Technology of Power
Substitution of capital for labor
Sets the stage for larger and larger farms

22. A Paradox
Farmers believe they benefit from agricultural technology …but they don’t.
Consumers don’t believe they benefit…but they do.

23. Environmental Concerns
Less tolerance for “cost externalities,” such as air, soil, and groundwater pollution,
Rising concerns about loss of productive farmland to residential and non-farm commercial use.

24. Institutional Change: International Trade
Expected to improve Third World incomes and boost food demand.
Likely to lead to increasing pressure to produce all goods and services in least-cost locations.

25. World Agriculture
Still has a huge capacity to produce, indeed to over produce.
But a series of years with weather problems could boost food prices, which is one way to ration supplies.

26. Fundamental Underpinnings of the Economy
Competition is the most important feature of any economy.
Economic growth is maximized if resources are allocated and income is distributed in accordance with open, competitive, and transparent markets

27. The Deadly Combination
High levels of concentration within an agricultural sector, coupled with…
Vertical integration by concentrated firms…
Yields a proletarian farmer!

28. The Road to Serfdom
Example: An Iowa farmer has a five-year contract to sell hogs to a dominant packer. The replacement contract is, predictably, less advantageous to the farmer. “Sorry, that’s all we’re doing this year.”
If the nearest meaningful, competitive outlet is 900 miles away, the Iowa farmer can—
Go back to the regionally dominant packer and try to negotiate an acceptable contract;
Cease producing hogs (and find another use for the facilities);
Ship the hogs 900 miles with less income; or
Organize enough producers to achieve countervailing power.

29. Consequences of Current Farm Policy
All-out production—
Decreases domestic commodity prices as technology increases output faster than demand increases.
Low commodity prices pressure world prices.
U.S. taxpayers make up much of lost income in this country.
In countries where the government cannot or will not supplement farm incomes, low prices result in reduction of land values and then reduction in returns to labor, forcing farmers to the cities.
U.S. market share increases at the expense of U.S. taxpayers and Third World producers.

30. increase yields and decrease consumer prices,
Summary: Advances in genetics coupled with technological and institutional change will:
increase yields and decrease consumer prices,
decrease emissions of environmental pollutants,
create ongoing controversies about fair farm practices and the ethics of agricultural production,
increase farmer dependencies on global trade agreements,
increase dependencies of developing nations on developed nations.

31. 2006 Budget Proposal Eliminate oil and gas research.
Reduce crop subsidies.
Maintain CRP program.
Cuts to energy efficient research.
Severe cuts to land and water conservation fund.
Support for arctic drilling.