Bigger is better and
three other agricultural myths
by Brian DeVore
White Bear Lake, Minnesota
Perhaps one of the most repeated myths in American agriculture is that larger farmers are more efficient than smaller ones, and thus expanding to mega-size is the only way to compete. However, the economic evidence shows that production-wise small operations are quite efficient, and the main driving force for getting bigger is to maintain access to size-biased markets.
When only yield of one or two crops is considered, larger farms are more productive, simply because they can take advantage of economies of scale to produce thousands of acres of one crop, such as corn. However, when economists look at the total output "sum of everything a farm produces: grains, fruits, animal products, forage, etc." of a particular farm, smaller, more diverse operations win hands down.
U.S. farms of around 238 acres on average net $56 per acre annually, according to the 1992 U.S. Agricultural Census. That figure drops as farm size increases: a 694-acre farm nets $51, a 1,364-acre farm $39 and a 6,709-acre farm $12.
In fact, small farmers worldwide produce from two to 10 times more per unit area than do larger, corporate farms, according to the Institute for Food and Development Policy. An analysis done by the Institute found that the greater total productivity of smaller farms can be explained by many factors. For one thing, smaller farms tend to raise more high value crops such as vegetables and fruits. But they also tend to make better use of the land by utilizing multiple cropping and livestock management strategies. Smaller farmers are more likely to intercrop on the same field, utilize livestock waste efficiently and involve labor that is more personally committed to the efficiency of the operation.
When factors such as quality of land and management, the contribution of the farm dwelling to output and the impact of off-farm employment on output and production costs are taken into consideration, small family and part-time farmers are at least as efficient as larger commercial operations, according to a 1997 analysis by University of Minnesota agricultural economist Willis Peterson.
Using a formula based on the "long run average total cost curve" ("total cost" in this case is defined as out-of-pocket expenses less interest payments and property taxes plus a charge for capital), Peterson examined the efficiencies of farms ranging in size from $2,500 in annual sales to $500,000 and over in annual sales. The larger farms had higher than average total costs, while smaller operations had lower than average costs. "In fact, there is evidence of diseconomies of scale as farm size increases," concludes Peterson.
Mike Duffy would agree with that. The Iowa State University agricultural economist has studied records of the Iowa Farm Business Association (3,000 commercial farmers) for several years. For row crop farmers, the cost of production starts to lose its efficiencies of size advantage somewhere between 400 and 600 row crop acres, says Duffy.
For hog farmers, efficiencies of scale advantages are lost when they market beyond 1,000 head per year, he says.
In case studies conducted by the Land Stewardship Project and the Minnesota Department of Agriculture's (MDA) Energy and Sustainable Agriculture Program, it was found that four farms using sustainable methods were more than three times as profitable on a per-acre basis as their larger, more conventional, neighbors.
One 350-acre southeast Minnesota crop and livestock farm studied as part of a LSP/MDA case study used pasture farrowing, straw-bedding and other low-cost, sustainable hog production techniques to produce pork for about 28 cents per pound. Large factory farms do it for closer to 40 cents per pound.
In Nebraska, data from the Swine Enterprise Records and Analysis Program also indicates that bigger isn't necessarily better. In 1993-94, the most profitable one-third of the operations had 145 sows, compared to 187 for the one-third that were least profitable.
The largest farms lost the most money during 1998, according to an analysis of the records of the Minnesota Southwestern Farm Business Management Association. The largest farms "those with gross income of at least half a million dollars" had a net farm income of minus $12,955. The average net income for all 210 farms in the association was $8,616.
Losing independent family farmers and dirtying the environment are the costs of economic development that creates wage-earning jobs, argue factory farm boosters. For example, a 1992 University of Missouri study found that for every $5 million in new investment in contract swine production, between 40 and 45 new jobs would be created throughout the state's economy.
However a follow-up analysis by University of Missouri agricultural economist John Ikerd found that the creation of those new jobs would come at the cost of three times that number of independent farmers. This is just one example of what happens when the other side of the "factory farming is economic development" argument is examined.
A 1992 University of Minnesota examination of the spending patterns of 30 farmers selected from the membership of the Southwest Minnesota Farm Business Management Association revealed that for livestock intensive operations, the percentage spent locally (defined as within a 20-mile radius of the farm) declined dramatically with an increase in the size of the operation.
During the 1940s, sociologist Walter Goldschmidt compared two rural California communities and found the one supported by diverse, family-sized farms was significantly better off socially and economically, while the town surrounded by large corporate operations had a much lower quality of life.
A University of Minnesota study conducted in 1995 used economic statistics, census figures and interviews with residents of the Green Isle, Minn., area to examine the impact of dairy farming on a local community. The study showed that between the 1970s and 1990s, the number of farmers serving the local creamery dropped from 1,400 to 960. The larger dairy farms (more than 300 cows) that started dominating the area bypassed local suppliers, reducing the need for Main Street businesses.
"Meanwhile, economic and social activity in Green Isle declined, retail sales dropped by 81 percent between 1979 and 1989, the public dance hall closed, and the grade school adjourned permanently. Today, a collection of main street stores, feed mills, and a manufacturing plant remain idle," reported the study's author.
One rationalization for allowing factory-style livestock operations to proliferate is the argument that they will help keep large meat and dairy processors in business, and even attract new ones into a state. These processors will supposedly provide markets for all farmers, big and small.
In Killing Competition with Captive Supplies, a special report on how the packing industry uses exclusive, size-based contracts to procure its hogs, LSP documented example after example of family-sized farms being locked out of the market because they didn't have large numbers of hogs to sell.
North Carolina, the second biggest hog producer in the country, increased its hog inventory by more than three million in less than a decade. That growth was accompanied by the construction of several packing plants, but family-sized farms were all but locked out of those facilities. In the fall of 1993, corporate-owned hogs were receiving $51 per hundredweight at North Carolina packing plants, while local buying stations were paying $39 per hundred pounds to independent farmers.
When IBP officials announced in January 1998 that they were closing their packing plant in the southwest Minnesota community of Luverne, they said lack of cattle in the
market prompted the action. Minnesota Department of Agriculture Commissioner Gene Hugoson chimed in with the argument that this was a classic example of why we must not have a moratorium on factory farms, and instead must forge full speed ahead with expanding Minnesota's livestock production to keep the packers here.
But cattle production in the 10 Minnesota counties nearest to the Luverne plant was up "not down" from 1994 (49,600 cattle were raised in those 10 counties in 1994; that number was 51,800 in 1997).
The world simply can't afford to have an agricultural system made up of ecologically sound, family-farm based enterprises, say apologists for the industrial system. Without the factory model of agriculture, not enough food would be produced to feed all those billions of mouths, goes this argument. And so without hyper-productive farming, we would need to plow up every last rain forest just to meet current needs. Such environmental destruction would make the current ecological costs of farming look insignificant indeed. But such alarmist talk is usually fueled by large agribusiness firms that have a vested interest in keeping the status quo.
Dennis Avery, for example, is a strident critic of sustainable agriculture. He writes a regular newspaper column that is syndicated throughout the country and has written a book with a self-explanatory title, Saving the Planet With Pesticides and Plastic. Avery works for a think tank called the Hudson Institute, a fact that is often noted whenever he is published or quoted. However, what is not publicized widely is that the Institute is funded by many agribusiness heavyweights.
In 1997, the Henry A. Wallace Institute for Alternative Agriculture published an analysis of various studies that examined the economic costs of reducing pesticide use. It found that such studies seldom take into account the many crop protection alternatives now available to farmers seeking to reduce or eliminate pesticide use. Several field trials and on-farm research studies have shown that once a sustainable cropping system is established, its yields are comparable to conventional production.
A Cornell University study did a similar analysis and concluded that with our present knowledge of alternative farming methods, chemical use could be reduced by half with only a slight increase in food costs (0.6 percent).
Even if we manage to produce enough food through sustainable methods to keep people&Mac226;s bellies full, they'll die of Escherichia coli (E. coli) bacteria poisoning. At least that's what Dennis Avery thinks, and what he's convinced the Wall Street Journal and Associated Press to report. During the fall of 1998, Avery wrote an article claiming that people who consume organic food are eight times more likely to suffer food poisoning due to the E. coli bacterium.
Avery claimed the information about E. coli was based on a study conducted by the Federal Centers for Disease Control. His claim was dutifully reported as fact by many media outlets. One problem: the Centers for Disease Control has never conducted any studies on organic/natural foods and E. coli (or other food borne pathogens). Avery's claim has no basis in fact.
In the end, it's industrial agriculture that&Mac226;s becoming increasingly unaffordable, according to a study summarized in the Dec. 18, 1999, New Scientist magazine. The cost of cleaning up pollution, repairing habitats and coping with sickness caused by Britain's industrial farming system costs that country more than $3 billion annually, according to the study, which was conducted by the Centre for Environment and Society at the University of Essex. That amount should sound familiar to British economists: it's about equal to the income that country's agriculture produces each year.
Brian DeVore is editor of the Land Stewardship Letter, which is published by the Minnesota-based Land Stewardship Project, a private, nonprofit organization dedicated to fostering an ethic of stewardship for farmland and to promoting sustainable agriculture. DeVore has written about agriculture for Sierra, Whole Earth, Successful Farming, the Des Moines Register and Farm Futures. He was born and raised on a southwest Iowa crop and livestock farm, and served as a Peace Corps volunteer in Lesotho.
Published in In Motion Magazine February 6, 2000.
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