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Monday, November 21, 2011

Growing Demand For Food Being Met By Larger Commercial Farms


Without a significant change in the number of US farms, productivity has increased substantially over the past three decades.  But how has that occurred.  After studying the agricultural census since 1987, USDA economists have determined the secret lies in who is producing and how it is being produced.

Farm numbers peaked during the Depression, and as mechanization spread from farm to farm and families grew smaller, so did the number of farms.  But since the 1987 Ag Census the number of farms leveled off in the two million range.  The 2007 Ag Census saw an increase in the number of farms, reflecting the popularity of small acreage, rural lifestyle farms.  But the USDA economists writing in the December edition of Amber Waves report those small acreage farms are contributing little to the increasingly large amount of food being produced by US farmers.  They report that operators of large commercial farms have adjusted production practices to remain competitive.  Those include use of biotech seeds, more irrigation, increased contract production, and consolidation of livestock operations.  While those were applauded for increased productive capacity, the USDA economists also indicated there were many criticisms of those practices.

Production contracts, particularly associated with livestock production, have resulted in the growth of large specialized operations for poultry, pork, and dairy farms.  The increased cost of land, labor and capital has caused those operations to seek efficiencies that have promoted the growth of large facilities.  Growth will lower the cost of production, but smaller operations are limited by restrictions on labor and management.  The USDA economists say producers focus on specific production stages in contract operations, which have climbed from 11% of all production in 1969 to 40% in 1987.  In poultry and pork operations, currently production contracts are responsible for 90% and 68% of total production respectively.

The production contracts in the pork industry are said to be the impetus for significantly increasing feed efficiency.  The economists report, “The average quantity of feed required per hundredweight of gain declined 44 percent for feeder-to-finish hog operations between 1992 and 2004. Most feeder-to-finish operations operate under production contracts. Since contractors typically bear the cost of supplying feeder pigs and feed to the farming operation, they have a strong incentive to invest in genetic improvements in the animals and improved formulations to reduce feed costs.”  That compares to a 15% increase in feed efficiency during the same time for farrow to finish operations.

Improvements in farm equipment since 1970 have allowed farm operators to increase their planting rate from 40 to 420 acres per day and their harvesting rate from 4,000 to 30,000 bushels per day.  Such labor savings have also been attributed to the use of genetically enhanced crops, which have reduced time spent on pest control activity.  But the USDA economists say, “And to the extent that GE crops lower the cost of production and increase yields, they put downward pressure on crop prices, which, over time, forces out the least efficient producers, encouraging further consolidation of farming resources and concentration of production.”

The result of such innovations has allowed total agricultural output to increase by nearly 50% over the past three decades, even as resources, such as land, labor, and fertilizer, and pesticides have declined.  Subsequently, price increases for agricultural commodities have lagged far behind both economy-wide price increases and increases in the cost of ag inputs for most of the past 30 years.  Additionally, the USDA economists report that changes in farming practices, more funding for conservation, and other structural changes have resulted in environmental benefits, shrinking the environmental footprint for the average unit of agricultural output.

Structural change in agriculture since 1987 has resulted in a 50% increase in output, but nearly all of the change has come from large commercial operations which produce most of the commodities.  Changes have included greater use of technology, production contracts, and consolidation within the industry.

Posted by Stu Ellis on 11/21 at 12:28 AM | Permalink

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