Article Published in “The Network Quarterly” – Farmers, Consumers, and Agribusiness | 1976
Volume 4, Number 4, Fall 1976, by Roger Blobaum
Probably no other nation had a stronger commitment to a system of family-operated farms and ranches than the United States prior to World War II. The Homestead Act was only one of many laws enacted to carry out the agrarian policies of Jefferson and others who shaped our national institutions more than 200 years ago.
But our country began backing away from this commitment in the 1940’s, and we have seen a growing reluctance to challenge agribusiness and other outside forces changing the basic structure of agricultural production. Family farms are still praised in political campaigns. And farm bills still include preambles citing their many contributions. But the performance no longer matches the promises, and the result has been a steady increase in corporate involvement in agricultural production and the loss of more than three million farms over the past 25 years.
The majority of our policymakers apparently feel that this rural upheaval, even with its heavy human costs, is both desirable and inevitable. But many individuals — farm and city alike—are beginning to question these assumptions and raise critical questions about how our food is produced and how our agricultural system is structured.
I recently came across a statement from a national consumer leader that describes where many urban people seem to be on this issue:
For American consumers food is something that comes from the supermarket. It doesn’t taste as good as they remember it; and its price goes up constantly. The farmer never even enters the picture, as far as most people think. Ask them, and they’re likely to assume their dinner was grown by a family farmer—but that a corporate farmer could grow it more efficiently, probably cheaper and presumably better.
That description of what may well be the prevailing consumer attitude is from Barbara Gottlieb, an organizer of the hundreds of Food Day events held across the nation. They have been set up to set the record straight on these misconceptions and to educate people on the agricultural issues.
Although Barbara Gottlieb’s appraisal is disheartening to anyone living on a family farm, it appears to be accurate. Millions of people in this country have lost touch with agriculture. And family farmers, despite an attempt to educate consumers, appear to be losing the public attitude battle.
Why is it that misconceptions about farming are so widely held? How can a nation blessed with good farmers and so large a share of the world’s resources continue without responsible debate and some decisions on a national food policy? Why does public support for efficient family-type production units continue to dwindle?
I want to begin by discussing some problem areas. All involve public policy decisions, and none can be solved alone by churches, farmers or any other single group.
One problem is lack of awareness of the economic edge smaller farmers have over non-farm corporations involved in agricultural product on. Few realize that family-type farms are more efficient producers or that a number of economic studies, including some by the US Department of Agriculture (USDA), document this advantage.
Many mistakenly assume that farming would benefit from an infusion of “corporate efficiency.” Yet economic studies clearly show that bigness isn’t natural in agriculture, that the point of diminishing returns is reached rather quickly in most production setups, and that one-and-two-person operations are the most efficient units(l).
Even in confined livestock setups family-type operators hold their own. A recent study by Iowa State University failed to turn up any significant economic advantage for large industrialized hog-producing units as compared with smaller swine facilities(2).
Any advantage large corporate operations may have are due mainly to their ability to obtain more capital at lower interest rates, to arrange volume buying and selling, and to avoid or minimize taxes. These have little merit when weighed against the efficiencies of family-type units. It often seems we are determined to do in agriculture what is not in our best interest—to trade off a good efficient Chevrolet for a corporate Edsel.
One reason for confusion in this area is the lack of reliable data on the changing status of farmers. The Economic Research Service, for example, has more than 500 economists and researchers. Yet it provides little information on structural changes in agriculture, and much of what it has produced has been challenged.
Its latest study of corporate involvement in agriculture, for example, is based on a survey made seven years ago (3). The main conclusion is that corporations account for only 1 percent of all commercial farms, that they operate only 7 percent of the nation’s farm land, and that they account for only 8 percent of the farm product sales.
The survey information was gathered by USDA employees in county offices who had little time or appreciation of its importance. As a result the basic data is full of inaccuracies, as documented by Richard Rodefeld of Michigan State University and others.
In an analysis of all farming corporations in one state, using 1968 corporation tax returns filed in Wisconsin, Rodefeld found among other things that the USDA survey had missed 252 farm corporations altogether. He also found that it had underestimated the total number of acres owned by corporations by 37 percent, acres leased by 269 percent, number of cattle fed by 30 percent, number of milk cows by 54 percent, and number of sows by 261 percent.
Dr. Rodefeld also noted that the USDA study identified corporate farming operations on a county-by-county basis, which failed to reflect large and widespread holdings of those operating in several counties or even in several states. Since USDA’s survey procedures in Wisconsin were the same as those used to count corporations in 47 other states, the same degree of error could be expected.
Rodefeld also has developed data showing that family farms no longer dominate farm production and sales and have not since at least 1959, that there has been a clear, uninterrupted 20-year trend toward a corporate takeover of agriculture, and that corporate farm numbers and sales have increased at a rate substantially greater that those of family farms in the only period for which adequate data is available.
Census reports used to show how well family farms are doing also are misleading. A Census Bureau report estimated, for example, that Minnesota had only 460 farming corporations and that all except 49 of these were actually family farmers who had incorporated. But Minnesota, like many Midwestern states, now requires farming corporations to file reports. And a summary of reports filed in Minnesota in 1973 showed there actually were 765 farming companies instead of 460 (4). It also showed that 220 of these were general business companies and that they held more than 35 percent of the 532,000 acres controlled by farming corporations in Minnesota.
Similar comparisons could be cited from other states to document these data deficiencies. This should be sufficient, however, to show that there is a lot of sloppy and outdated data around, that it is used by policymakers who fail to evaluate it, and that we should be getting much better information than this from our agricultural research institutions.
Lack of sufficient net income is another continuing problem for smaller farm operations. Net farm income was down as much as $10 million a year from World War II levels in the 25-year period when the nation lost more than 3 million farms. When net income began going up again in 1969, the loss of farms started to taper off.
Five years later net farm income had increased to more than double the 1967 level, a year when more than 100,000 farms went out of business. And during that period of rising income the farm loss rate was cut in half.
The problem of low income is linked to lack of farm bargaining power. Although the nation has large cooperatives and bargaining associations like the National Farmers Organization which have been on the scene for many years, five large grain companies still control export sales and are a strong factor in domestic markets. The polls indicate that farmers see merit in action to assure them cost of production plus a profit. Yet farmers, for the most part, still sell at wholesale prices and buy their inputs at retail.
Many assume that family-type farms would become strong enough to dominate agricultural production if a good level of net income could be maintained. That is not necessarily so. Corporation farms also benefit when times are good and are able to attract even more expansion capital.
It is often suggested that many large companies fail at farming—just like family operations—when farm prices are low. Three corporations—CBK, Ceres Land Company and Gates Rubber Company—are often cited as examples because they had a good deal of publicity when they abandoned their farming operations. A possible fallacy involved in generalizing from these failures is that no one has determined who eventually took over the operation. One large non-farm corporation may simply have replaced the other. That apparently is what happened when Ralston-Purina withdrew from the poultry business.
Some idea of the size of the farming companies involved is seen from the listings in a corporate directory compiled by Al Krebs for the Agribusiness Accountability Project (5). Using company information published in Forbes magazine plus independent sources, he came up with this list of corporations involved in the cultivation of land for the production of crops and livestock: Standard Oil of California, $5.1 billion in revenue, 15th largest US public corporation; Ling-Temco-Vought (LTV), $3.4 billion in revenues, 28th largest corporation; Boeing Aircraft, $3.1 billion in revenues, 32nd largest; Tenneco, $2.8 billion in revenues, 42nd largest. And so on with a list of 24 companies in the top 200 that includes Greyhound, General Foods, Dow Chemical, R. J. Reynolds, Ralston-Purina, Coca-Cola, Gulf & Western, Bank of America, United Brands, Southern Pacific Railway, Getty Oil, Carnation, Southland Corporation, Campbell Soup, H. J. Heinz and Pacific Lighting Corporation.
Another basic problem is that both managerial and financial control of agriculture are shifting rapidly from family-type farmers to corporations, banks and other off-farm companies.” An analysis prepared recently for the USDA emphasized that farmers are increasingly being told by these outsiders what to produce, how much to produce and when to produce it(6). They are losing their independence, not just to other elements of society, but as a price they pay for the capital they need.
Economist Marshall Harris, who cited some 57 studies by researchers at USDA and leading universities in this analysis, concluded the trend is clearly toward property without power for farmers and power without property for corporations involved in agriculture. This is the pattern pioneered in the South in the takeover of the broiler industry by big feed companies and other integrators in the 1950’s.
Possibly even more serious, Harris suggests, is the fact that most people are unaware these dramatic changes are taking place. As he put it, we appear to be drifting toward a situation few thoughtful people really want and doing it with little awareness of where we will end up or what the consequences will be.
Family farmers also face increasing competition from farm syndicates that are formed primarily for use as tax shelters for weal thy off-farm investors. Even oil and chemical companies have gotten into cattle feeding setups as a form of conglomeration to minimize taxes.
Contrast this with the farm feeder who has to make a profit on his operation. He wonders at the equity of a system that permits cattle feeding for tax avoidance purposes and that allows investors to have profits after taxes even when the cattle feeding breaks even or takes a pretax loss.
The latest problem developing in this tax shelter area is franchised farming, which turns hired men into general partners. This approach, according to one financial prospectus, has so many tax advantages that it will make money for an investor “even if all goes wrong.”
Another problem, serious for all of us whether we are farmers or not, is the growing shortage of energy. We cannot continue to farm indefinitely as we do now. If all the countries of the world had a food system like ours, the fossil fuel left in the world would last only 29 years. I believe, however, that this is an area where family-type farmers will respond. And that they will be able to make the adjustments that are necessary better than corporate farms, which usually are much more energy intensive.
And, finally, there is the problem of passing farms intact to the next generation and raising the capital needed to help young people get started.
One of the few bright spots is an increasing number of fanning openings expected over the next few years. A study by Marvin Julius, an Iowa State University economist, identifies what he calls a “human cycle of farming” with new farm openings rising and falling over the years.
An unusually large number of people started farming in the 1940’s, he found, and they are now beginning to retire. For the next few years, he said, there should be a steady level of nearly 2,000 entry opportunities per year in Iowa. This pattern should be present in other states as well. This breaks the sequence of a constantly decreasing number of entries typical of American agriculture over the past few years and sets the stage for a new cycle of young farmers.
The move in Congress to raise the estate tax exemption also has promise. Some call for increasing the exemption substantially. President Ford has called for deferred tax payments. Others have called for substitution of a tax credit to ease this problem. However it’s done, relief is needed to help keep these family farming units intact.
Financing these young farmers is another challenge, however, and a land-bank program that seems to be working in Canada suggests one way to deal with the beginning capital problem. The Saskatchewan government established the program to provide a market for farmers who want to sell out and retire, to help beginning farmers acquire an adequate land base and to provide them with lease agreements plus an option to buy on favorable terms.
The Minnesota Legislature has just approved a bill patterned on the Saskatchewan plan, and similar legislation is being considered in other states. A bill proposing a plan of this kind also is under consideration in Congress.
What happens if the problem of starting out new farmers and keeping production in the hands of family-type farmers fails? what are the social and economic consequences of corporate domination of agriculture?
One answer is suggested in a classic study by Dr. Walter Goldschmidt, an anthropologist who examined Arvin and Dinuba, two California towns that were comparable in nearly every respect. The main difference was that one was surrounded by family-type farming units and the other by large corporate farms.
The study concluded that communities surrounded by family-type farms were better places to live and raise families th3n those dominated by large-scale corporate farms. That included such factors as more retail business, more small businesses, longer teacher tenure, more churches, more schools, less absentee ownership, fewer landless laborers and better community facilities. Goldschmidt recently told a Senate committee that similar studies should be made to show the impact of agribusiness on rural communities. “I am convinced that the results of the earlier study will be sustantiated,” he said. “Corporate farming creates an urbanized and impoverished rural community.”
There is no evidence that the structural changes I have described have brought us better communities, more efficient food production, or better or cheaper or more varied food. Nor is there evidence that we contribute to a more human and self-reliant society or enhance family life by reducing farmers to the status of corporate employees or driving them off the land and into the cities.
Senator James Abourezk (D-SD) summed up the likely consequences quite well when he pointed out that the nation has already been vertically integrated in many basic economic sectors, with disastrous results for the consumer and the myth of competition. Now that same noose is closing on the the food industry, he suggests, it creates a situation where the initial victims will be those who work and live on the land. And the final losers will be all of us as we are victimized at the marketplace.
The American people have never been asked to decide whether they want their food produced by two or three million smallerfarmers or whether they want it produced by the same kind of corporations that now have an iron grip on petroleum, steel and other basic industries. But that kind of decision making can be set in motion, if more people take these issues—and others like them–to the people in their churches and conferences and see that they are discussed as fully as possible. More people need to help move this great country toward the development of food and agricultural policies that are sound and that serve all the people.
1. “The One-Man Farm.” Economic Research Service Report No. 519. culture. August 1973.
2. Muhm, Don. “Big Hog Units Show Few Cost Advantages.” December 28, 1975. Des Moines Sunday Register
3. Coffman, George W. “Corporations With Farming Operations.” Economic Research Service, US Department of Agriculture. Agricultural Economic Report No. 209. June 1971
4. “A Position Paper on the Minnesota Family Farm Act.” A report prepared by the Minnesota Department of Agriculture. February 1975
5. A. Krebs. “Agribusiness Directory 1975.” Food Task Force, Consumer Action, 26 Seventh Street, San Francisco, CA 94103. $5.00 (This is the newest edition).
6. Harris, Marshall. “Entrepreneurial Control in Farming.” Economic Research Service, US Department of Agriculture. Report No. ERS-542. February 1974.
7. “More Farming Opportunities in Iowa.” Wallace’s Farmer. March 27, 1976.
8. Goldschmidt, Walter. “Small Business and the Community.” Republished in “Corporation Farming,” hearings held by the Subcommittee on Monopoly, US Senate Select Committee on Small Business, 1968.
Rodefeld, Richard. “A Reassessment of the Status and Trends in ‘Family’ and ‘Corporate’ Farms in US Society.” Congressional Record 19:82 (May 31, 1973).
John R. Messer, Minister of Agriculture, Province of Saskatchewan. Address to annual convention of National Farmers Union, Milwaukee, March 13, 1974.
“Beliefs and Values in American Farming.” Economic Research Service Report No. ERS-558. August 1974.
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Roger Blobaum is an agricultural consultant whose clients include the National Catholic Rural Life Conference .