Farm Economy State of the Union Address
Ist of 3 parts: The logical consequences of industrial agriculture

By John Ikerd

On November 9th John Ikerd, Professor Emeritus of Agricultural Economics, University of Missouri, gave the keynote address to the Tilth Producers conference in Yakima, Washington. His talk, "The Family Farm on the Cutting Edge," provides an incisive analysis of industrial agriculture and the emergence of what he calls "the New American farmer."

We've divided his address into three parts, which will be featured over the next several weeks:

Part 2, December 3, 2002: A growing interest among consumers in sustainable farming
Part 3, December 12, 2002: The emergence of a new breed of farmers.


NOV. 27, 2002: American agriculture is in the midst of a "great transition." Agriculture as we have known it, with family farms and viable rural communities, is being rapidly transformed into an industrial agriculture, with factory farms and dying rural communities. Such times of change are times of great risks but also times of great opportunity. There are no guarantees of survival or success. But, an understanding of the forces of change can be quite helpful in coping with the risks of change and in realizing the opportunities. The forces driving change in American agriculture today are the continuing forces of industrialization.

The industrialization of agriculture is not a new phenomenon. The trend toward specialization, standardization, and consolidation-toward industrialization-began around the turn of the 20th century, with the mechanization of agriculture. However, the chemical technologies that emerged from World War II, particularly commercial fertilizers and pesticides, accelerated the industrialization process. Until recently, the most obvious consequence of this process had been larger farms, fewer farms, and fewer farm families. But, farmers and families, real people, were still making the decisions concerning what was produced, how it was produced, who it was produced for, and they considered how their decisions might affect the land and their neighbors.

"For the most part, contractual arrangements determine who makes the decisions, leaving "producers" as little more than landlords, tractor drivers, or hog house janitors, but certainly not with the traditional role of "farmer." The agri-business corporations dictating the terms of these contracts are legal entities but they are not people. They have no families, no friends, no communities, and increasingly, no national citizenship. "

Until recently, the specialization, standardization, and consolidation of farming had been driven by the decisions of individual, family farmers. Farmers freely chose to adopt the new mechanical and chemical technologies, many of which were developed through publicly supported research, because they seemed to promise increased profits. These technologies invariably promised greater production efficiency, which would reduce cost per unit of production, leaving the farmer with a wider profit margin. Increased efficiency generally meant that each farmer could produce more than before, in fact, needed to produce more to justify the new technological investment and to realize the full benefit of the new technology.

However, the "early adopters" were the only farmers to realize increased profits. As more and more farmers adopted a new technology, a new kind of machine or agri-chemical, total production invariably increased, because each farmer now was compelled to produce more. The new technologies allowed farmers to reduce costs per unit, but only if they produced more units. With increased production, market prices invariably fell, leaving even the innovators no better off than before. The later adopters rarely had a chance to recoup their investment before prices fell and profits were gone. In cases where the government supported commodity prices, land prices rose instead, with the same net effect on profits. Eventually, technological adoption was motivated by survival rather than profits, and those farmers who adopted too late didn't survive.

Some farmers had to fail so others could expand-could farm more land or produce more livestock-in order to realize the full benefits of the new technologies. In fact, prices invariably stayed low enough long enough to force enough farmers out of business to accommodate the new industrial technologies. And, after each "technological adjustment" was complete, there was always another round of technology waiting for adoption. Chronic crisis and continuing farm failures have been a necessary consequence of agricultural industrialization.

American farming: In the final throes of the industrialization process


The current "corporatization" of agriculture is but the final stage of the industrialization process. As the new technologies have required larger and larger operations to justify the new investments, capital requirements have exceeded the credit capacity of all but the largest of individual farmers. Many farmers have formed family corporations to enhance their ability to raise investment capital. Increasingly, however, only the "publicly owned" corporations are able to meet the agricultural capital requirements of an increasingly industrial agriculture. Economists now proclaim corporate contracts as farmers' only means of gaining access to the technology, capital, and markets they will need to be competitive in the 21st century. Most of the land and basic production facilities are still owned by individual farmers and family corporations, but production increasingly is carried out under direction of giant agribusiness corporations.

The industrialization and corporatization of American agriculture has been supported by government policies-including government farm programs and publicly supported research and education programs. The overriding objective of such policies has been to increase the efficiency of agriculture for the ultimate benefit of consumers, in the form of lower food prices. The political rhetoric in support of family farming has continued; but government programs obviously have supported continued specialization, standardization, and consolidation, which have ensured the demise of the family farm.

At the signing of the new "Farm Security and Rural Investment Act of 2002," the President said, "The farm bill will strengthen the farm economy...will promote farmer independence, and preserve the farm way of life for generations." These same kinds of claims have been made for every U.S. Farm Bill since the 1930s. Yet, the farm economy has continually floundered and American agriculture has limped from one crisis to the next. And now, independent family farmers are becoming a rarity. This new farm bill will not do any of the things promised. It simply continues the policies of the past, which subsidize wealthy landowners and the agribusiness corporations, at the expense of family farmers. The new farm bill won't promote farmer independence or preserve the farm way of life. It most certainly will not provide for either "farm security" or "food security," nor will it improve the lives of people in rural America

With increasing corporate control of the food system, even those independent producers with lower cost than the contract producers are finding it difficult to compete. The corporations now control much of the new technology, particularly biotechnology, to which farmers can gain access only through contractual arrangements. Large corporate processors increasingly procure nearly all of their raw materials through contracts, thus denying market access, or at least denying competitive markets, to non-contract producers. The corporatization of agriculture is now driven much more by the quest for increased market share and greater market power than for increased production efficiency.

Family corporations are not all that different from individuals; their decisions reflect the basic values of the family. Even with "closely held" corporations, with few stockholders, decisions can still reflect the basic social and ethical values of the owners. However, once the number of stockholders becomes large, as in large publicly held corporations, and management is essentially separated from ownership, the motives for decision making become profits and growth. Most of the stock in such corporations is owned by mutual funds and pension funds, and the stockholders are concerned foremost, if not completely, with growth in the value of their investment. A corporately controlled agriculture is fundamentally different from the agriculture we have known in the past.

Who owns the farm? Americans have lost control over
their own food supply.

Americans are losing control over American agriculture. Increasingly, the decisions concerning what will be produced, how much will be produced, where it will be produced, how it will be produced, and who will produce it, are being made, not by American citizens, but by multinational corporations. The people who own the land and do the work may still be Americans, but the decisions are being made by someone else, somewhere else. For the most part, contractual arrangements determine who makes the decisions, leaving "producers" as little more than landlords, tractor drivers, or hog house janitors, but certainly not with the traditional role of "farmer."

The agribusiness corporations dictating the terms of these contracts are legal entities but they are not people. They have no families, no friends, no communities, and increasingly, no national citizenship. The people who work for these corporations are real people and are citizens of some nation-with families, friends, and communities. But, once corporate ownership is separated from management, as in the case of most publicly held corporations, the people within corporations have no choice but serve the economic needs of the corporation for profits and growth. The multinational agribusiness corporations that increasingly control American agriculture have stockholders scattered throughout the world, and thus, have no citizenship.

"Before corporate agriculture abandons America, they will have turned much of rural America into a 'third-world' wasteland. Polluted streams and groundwater, abandoned waste lagoons, eroded and depleted topsoil,
depleted aquifers, rural crime, a de-skilled workforce, and decaying rural communities; these will be the legacies of the corporatization of American agriculture. "

Increasingly, the multinational corporations will find it more profitable to produce somewhere other than in America. Our land and labor costs are simply too high for America to compete with places such as South America, Australia, South Africa, or China in production of basic agricultural commodities-corn, soybeans, hogs, cattle, cotton, rice, etc. We have higher-paying employment opportunities for our labor and higher-valued residential uses for our land. Eventually, the agribusiness corporations, having no commitment to producing in America, will simply move their operations elsewhere-to somewhere that will give their stockholder a higher return on their investment.

In their struggle to stay competitive in global markets, American producers will feel compelled to accept contractual arrangements that result in the exploitation of both land and people. The industrialization of poultry and hog production, with large-scale confinement animal feeding operations, provides a prime example of such exploitation. These operations consistently pollute the rural environment with odors and waste, yield minimum returns at best for laborers and investors, and drive family farming operations out of business. Even so, many producers see contracting as the only means by which they can maintain access to markets. The same basic trend is already well underway in dairy; and with genetic patenting and biotechnology, corporate control of crop production will soon follow.

Rural America: Payig the ultimate cost of industrial agriculture

Before corporate agriculture abandons America, they will have turned much of rural America into a "third-world" wasteland. Polluted streams and groundwater, abandoned waste lagoons, eroded and depleted topsoil, depleted aquifers, rural crime, a de-skilled workforce, and decaying rural communities; these will be the legacies of the corporatization of American agriculture. Americans will fight back with more environmental rules and regulations, but eventually, short-run economic considerations will prevail. Ultimately, however, the corporations will find it cheaper to produce food and fiber elsewhere in the world. And with a global, "free market" economy, there will be nothing to keep them from moving their agricultural operations elsewhere.

We don't need a lot of data, facts, or figures to understand what is happing to American agriculture; it's just plain common sense. In making agriculture more efficient, we have chosen industrial technologies and methods, which have resulted in fewer, larger farming operations, and now, in corporate control of agriculture. In the process, we have lost both the security of our farms and the food security of our nation. These outcomes are the logical consequences of the objectives and strategies we have pursued. We have sacrificed our security for the sake of efficiency. It's not all that difficult to understand; it's just common sense.

Many economists, however, argue that we need not be concerned about becoming dependent upon the rest of the world for our food. They advise, it is only logical that America moves beyond farming in the new global era of economic development, that we have higher valued uses for our land and labor resources. We will be even better fed at a lower cost, they say, because food can now be produced cheaper elsewhere in the world. But in times of crisis, a nation that can't feed itself is no more secure than is a nation that can't defend itself. Perhaps we won't abandon agriculture completely, but we could easily become as dependent on the rest of the world for our food as we are today for our oil. Perhaps, we can keep our food imports flowing, as we do for oil, but how large a military force will it take, how many "small wars" will we have to fight, and how many people will be killed.