Iowa Agriculture—Beyond 2002

Agriculture in the United States and in Iowa will undergo substantial changes over the next few years. The direction these changes will take depends on decisions being made now. Some of these changes will occur even if we choose to ignore the situation.

The changes will spring either from policy choices made by consensus or from the ongoing deterioration and concentration in agriculture's production, processing, and retail sectors. As a state and a nation, we have to ask what we expect from agriculture and how we can best achieve the results we seek.

For much of the 20th Century agriculture was called upon to produce cheap, bulk commodities used for domestic processing of our food and fiber and for export. In addition, agriculture was expected to use less labor to produce these commodities so the labor force would be freed up for other activities supporting the economic development of the nation's towns and cities.

Over the years U. S. agricultural production capabilities have become the envy of the world. For example, corn yields have increased almost one and half times in the past 50 years. Iowa corn yields averaged 56 bushels per acre in the 1950s and 137 bushels in 2001. At the same time, the amount of labor needed to produce 100 bushels of corn plummeted from 53 hours during the 1945-1949 period to less than 2 hours in 2001.

Spurred by the rise in production and the decrease in labor requirements, agriculture has been able to provide a bountiful supply of low out-of-pocket cost food for U.S. citizens. Since 1950 disposable income has risen an average of 7 percent a year. In 1950, Americans spent 20.5 percent of their disposable income on food. In 2000, the amount of the disposable income spent on food dropped to its lowest level, just 10.5 percent.

Such accomplishments show that U.S agriculture has succeeded in meeting and greatly exceeding expectations. However, as we begin the 21st Century it is apparent that there are some serious flaws in our agricultural system.

One of the major problems is the growing dependence upon direct government payments. These subsidies, authorized under various farm bills and emergency programs, are designed to offset low commodity prices and help support farmers' income. The payments now comprise a significant portion of net farm income. For example, during the1990s direct government payments made up 55 percent of the net farm income in Iowa. Farmers today have come to rely heavily upon these payments and feel that they could not farm without them. As one Illinois farmer was quoted as saying, "… to be a viable farmer you have to have government support…."

The distribution of the direct government payments also has become a point of contention with many people. Because the payments are made based upon commodity production, the farmers producing the highest volume receive the biggest payments. For example, in Iowa, 49 percent of the payments went to the top 10 percent of the farmers between 1996 to 2000.

A second serious problem with today's agriculture is its impact on the environment. By its nature production agriculture will always cause some disruption in natural systems. However, with the type and intensity of current farming practices and the high concentration of some production operations, the undesirable environmental impacts have accelerated. The environmental damages include air and water quality problems. In Iowa there are continual examples of environmental problems caused by agricultural practices. Recently the largest fish kill in the state's history occurred. More than 15 miles of a stream had all aquatic life eliminated. The U.S. Environmental Protection Agency has declared 157 of Iowa's streams and lakes impaired, and in the summer of 2001 over 50 percent of the state's beaches were closed to swimming at least some of the time.

Another serious problem in U.S. agriculture is the chronic financial hardship faced by many farmers. There are numerous reasons for these financial problems, but a major one is the nature of today's production system. Farmers basically pass money through the farm. They produce much more but they also spend a great deal more to reach those production levels, and as a result their net income is essentially flat. Meanwhile the cost of living is increasing as lifestyles change on the farm. For decades the solution has been to increase farm size in order to make enough money to maintain a desired lifestyle. It is a myth that bigger farms are more efficient. There are economies of size but these disappear more quickly than most people realize. After the initial economies of size are achieved, the cost per unit of production remains relatively flat.

As one farm increases in size, another farm or farms must go out of business. We can bring some additional land into production, but for the most part the supply of arable land is fixed. If one person is going to farm more, someone else is going to farm less. The result is continuing financial stress and upheaval among the state's rural population.

Modern agriculture has been highly successful at what it was asked to do; produce cheap, bulk commodities using as little labor as possible. But, that success has come at a price, and in many cases with hidden costs that are just now being recognized. Farmers have increased their reliance on government programs at the same time environmental quality has decreased, and we are still losing farms, especially the midsize ones. In addition, there appears to be no additional benefits to society from continuing down this path.

The landscape will continue to shift for American agriculture. Changes are already occurring in production agriculture, the agribusiness sector, and in the endpoint retail sector. A common theme is the disappearance of midsize operations and the increasing concentration of activities in the hands of a few entities.

Agricultural leaders and policy-makers are currently failing to consider the potential implications of these changes. Some see these changes as inevitable. Consequently they see no point in worrying about the results or trying to influence them. Change will happen and we are powerless to combat the 'economic' forces of the market at work.

But, few things in life are inevitable. The agriculture we will have depends on our choices at several points: the farm level, the local and state level and the national level. In today's global economy, worldwide choices also influence the shape of our agriculture but we have less control over these elements.

At the macro level, we can choose from three alternatives. Each alternative will have dramatically different effects on Iowa's agriculture.

The first choice is to simply maintain the same course we have been following. We can continue to produce cheap, bulk commodities while trying to preserve some semblance of the midsize family farm influence in production agriculture.

This approach will perpetuate a high level of direct government payments and the associated problems mentioned earlier. We will continue to move towards a two-tiered farming system with many small lifestyle farms and a few large, commercial farms. Government regulation will remain the primary means available to maintain some environmental integrity.

Unfortunately, this is the approach we have chosen if we merely use the farm bill to tinker around the edges of agriculture (i.e., slight changes in the target price, loan rates and so forth). Overall policies will promote large-scale commodity production with a few smaller government programs included to placate some people's wishes for beginning farmers, small farms, and the "family farms".

A second approach would be to admit that the only thing we want from production agriculture is a constant supply of cheap, bulk commodities. These commodities would then be fed into the market system that sees price and convenience for the final consumer as its only goals.

This approach will encourage research and support only for large farms. A proponent of this course of action suggested that the ideal size of an Iowa farm is 200,000 acres. Using that measure, we could reduce the number of farms in the state to 165. Some agree that this would make them much more manageable for regulatory purposes and that it would be easier to monitor their performance.

There are advantages to openly adopting the "large farm" policy. All programs dealing with anything other than how to produce crops could be eliminated. The funds for social and environmental programs for agriculture could then be redirected towards helping people leave farming. Job training, relocation, and other programs to help the displaced could be offered to rural populations.

A third approach would be to decide that we want more than just cheap, bulk commodities from agriculture. Instead of expecting only food, feed, and fiber from farming we could broaden our expectations. Farming could be called upon to help create energy, medicines, and industrial products. Most importantly, farming could be thought of as providing a service, not just a product.

The concept of farming offering a service is a departure from the current view but it is not entirely radical. Farming can provide conservation services, environmental and recreational services, as well as aesthetic services. If we acknowledge the value of these services and expand our expectations of farming, we can greatly enhance the capacity for many people to earn a living from farming. It could, in fact, be argued that with these additional expectations we have too few farmers---not too many.

This approach would also require a rethinking our research agenda and other activities. We would need to conduct more research to increase our understanding of natural processes and how to manage them to achieve our goals. Increasingly, public and private agricultural research is being merged. This fails to take into account their very different objectives. Private research deals with making money and selling products; public research ostensibly should be for the public good. If all we want are cheap, bulk commodities, our research should be geared that way. But if we want more than that from farming, we need to support research that generates some benefits for the public.

Our preference is for the third approach. We think the current approach is the worst because it is cruel. It gives farmers a false hope that if they can hang on just a little longer, the situation will get better. It provides cheap commodities for the public, but at the expense of the farmers who have to become wards of the state. This destroys farmers and their communities bit by bit. If we only want cheap commodities from farmers we should admit it and redirect public funds. We should stop paying lip service to the goals of "saving the family farm," and helping small and beginning farmers.

The third approach says that we are in control of our destiny and we want more than cheap commodities from farming. We will support farming practices that do not destroy our environment and recreational sites. If we don't care about environmental quality, we can spend as much money as we want on economic development but the only people who will move here are those fleeing from someplace worse. The best and the brightest will go elsewhere and our children will follow them.

These are just a few of the reasons why we favor the third approach. The bottom line is that it allows us to shape our future. Our current policies are giving us record government payments, decreasing environmental quality and increasing farmer pessimism. We think we can do better. As Iowans we will not do better by saying farming and agriculture are of decreasing importance to the state. In our view, we are engaged in agriculture first because of the natural resources with which we have been blessed. How we use those resources and what we want from farming are going to determine the future face of Iowa. The choice is ours, but the time to decide is slipping away.