Will 'Kervorkian economics' destroy family farms?

EDITOR'S NOTE: The economic health of agriculture has prompted many groups to seek new direction and programs. After working with farmers in south central Minnesota, economist Dick Levins notes some discouraging trends, which he shared with Minnesota legislators on an interim rural issues study committee. This is an edited account of his August 25 testimony in Alexandria, Minnesota. Levins is finishing a senior fellowship at the Institute for Agriculture and Trade Policy in Minneapolis. He can be reached at dlevins@dept.agecon.umn.edu.

One of the things I enjoy most about Minnesota is its longstanding support for family farming. Lately, however, we are challenged with a very different kind of economic thinking, one I call "Kervorkian economics." The New Kervorkianists see that many of our family farms are in trouble. Rather than search for ways to help them, these theorists devise "transition" programs that get farmers out of agriculture. It is as if Dr. Jack walked into the room and said we are all going to die sooner or later, so we might as well let him help us get it over with tonight. Such thinking may bring about cheap grain, but only at a cost of losing family farming as the economic backbone of rural Minnesota. This is simply too high a price to pay.

A look at Swift County
This year I have been working with a wonderful group of Swift County leaders to find ways to strengthen farming in the county. In doing the background research for the project, I learned that we are much farther down the road to losing farming as a foundation for rural Minnesota than I would ever have guessed. Farm sales and government payments for Swift County were $112 million in 1995. They rose to $135 million in 1996. Judging by these numbers alone, farmer income would appear to be a very important part of the local economy. In the past, it was. For example, in 1975 farmers accounted for slightly over 30 percent of total county personal income. Today, things are much different.

In 1995, the contribution of farmer and farm employee income to total personal income in the county was 1.63 percent. Granted, farm income bounces around more than most other types from year to year, but that is a shockingly low number. The three-year average for 1995 to 1997 was a bit higher at 7.29 percent. On the other hand, the farming contribution to personal income in the county was negative in 1993. The corresponding numbers for other southwestern Minnesota counties are much the same.

There is, of course, more to the story than farm income. Farmers pay land rents, buy supplies, pay property taxes, and affect the economy in many ways that are not reflected in farmer and farm employee personal income. Nonetheless, the income and well being of farmers is the crux of the matter when we speak of rural economies. Agriculture has changed so much that we can no longer use the words "agriculture" and "farming" interchangeably. Agriculture includes all sorts of agribusiness activities and landlord income that certainly benefit someone. They don't, however, always benefit rural areas.

We looked closely at land rents and ownership in our Swift County project. Ninety percent of the tillable acres are planted to corn and soybeans. A survey we did of 62 Swift County farmers showed that about 60 percent of the tillable acres in the county are rented, while 40 percent are owned by farmer/operators. The trend is toward more, not less, rented land. Rented acres grew by 29 percent between 1993 and 1998. Furthermore, the older farmers we surveyed talked most often of renting out their land when they retired. The survey also showed that there are many more landlords than farmers associated with the land in Swift County: the 62 farmers rented from 198 landlords.

Absentee landlords
Records kept by the University of Minnesota's Southwest Farm Business Management Association show returns for corn and soybean production on rented land during 1983-1997. For corn, the farmer never once made as much as the landlord. For soybeans, farmers made as much as the landlord in two years and less in every other year. With so many of the farming dollars going to landlords, it is of obvious importance that those landlords live in the county. Otherwise, the only local benefit is likely to be the cost of a stamp to mail a rent check to Arizona! But one out of three landlords in the Swift County survey did not live in the county, and this number is likely to increase as farmers will their land to children who have long since left the county.

Something else that surprised me in the Swift County survey was that one out of three farmers think that large agribusiness interests "don't care at all" about farmers' survival. Only five percent rated agribusiness as "very concerned" on this question. In my 25 years in farm management, I have thought farmers viewed themselves as in partnership with agribusiness. But with a flood of mergers, acquisitions, patent fights, contracting, and other heavy-handed moves, agribusiness is losing its favored status among farmers in a big way. Farmers are in the best position of all to see that what benefits agriculture does not necessarily benefit farming!

Should we all be worried about bigness in agribusiness? I went to Professor Willard Cochrane, President Kennedy's chief agricultural economist, now widely regarded as one of our greatest proponents of family farming. He asked me to imagine that a giant elephant had walked into my living room. "It doesn't matter if it is a good elephant or a bad elephant, it's still going to break something," he said. Size brings about economic power, and that power will be used to foster the ends of global agribusiness, not farmers and the rural economy.

Agribusiness booms
He has a point. The size of modern agribusiness giants defies comprehension. For example, last year Cargill, DuPont, ConAgra, ADM, and Monsanto all had gross sales greater (often much greater) than all 87,000 Minnesota farms put together. DuPont paid more to buy Pioneer than all 87,000 Minnesota farmers combined have ever spent on production costs for any year. And for those who think that there is no money in agriculture, I again remind you that agriculture and farming are not the same thing. Farmers are in a staggering crisis, but the agribusiness story is very different. As pork producers suffered under the lowest prices in a generation, the nation's two largest pork processors found $14 million to reward their CEOs. That's peanuts compared to the $51.8 million compensation package Robert Shapiro, CEO of Monsanto, hauled in for 1997. Meanwhile, the average farmer in Minnesota made less than $15,000 last year.

In all of this, it has become fashionable to blame the farm crisis on failed government policies. Then, in the best tradition of Dr. Kervorkian, we try to abandon public programs altogether. I hope you will not think that way. The public has every right to decide how its food will be produced and who will do it. The Minnesota Legislature has already made a wonderful statement on the value of family farming, and the leaders of Swift County are among the many citizens who have not given up on our family farm tradition. We must continue in that tradition-our rural economy is at stake.