Agriculture’s Futures: America’s Food System

101 Pages·1987·4.366 MB·English

by  Dr. L. Tim Wallace (auth.)

Agriculture's Futures
L. Tim Wallace
Agriculture's Futures
America's Food System
With 16 Figures
Spri nger -Verlag
New York Berlin Heidelberg
London Paris Tokyo
Dr. L. Tim Wallace
Cooperative Extension
University of California
Berkeley, California 94720
Cover: Kansas Cornfield by John Steuart Curry, 1933, oil on
canvas. Wichita Art Museum. Roland P. Murdock Collection.
Library of Congress Cataloging in Publication Data
Wallace, L. Tim.
Agriculture's futures.
Bibliography: p.
Includes index.
I. Agriculture-Economic aspects-United States. 2. Agriculture
-United States. 3. Agriculture and state-United States. 4. Food in
dustry and trade-United States. I. Title.
HDI761.W274 1987 338.1'0973 86-31390
The material contained in this book was published originally as a special issue of
the Springer-Verlag journal Applied Agricultural Research, Volume I, Number 4,
November 1986.
© 1987 by Springer-Verlag New York Inc.
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ISBN-13: 978-0-387-96482-9 e-ISBN-13: 978-1-4612-4730-2
DOl: 10.1007/978-1-4612-4730-2
Preface
Agriculture is more than farming. It is a highly spe The entire system is increasingly consumer
cialized, internationally industrialized, and produc driven, with market power shifting to the retail
tive food and fiber system. Its many components outlets as they respond to consumer preferences
have an interdependent future, the sum total of rather than to urgings from food manufacturers.
which is the industry's future. The production sector is still primarily a response
The complexity of agriculture extends through mechanism adjusting cost structures where pos
out the economy, making it increasingly vulnerable sible in line with "given" market prices. Keys to
to political, social, and institutional forces. Al profit and survivability throughout the system lie in
though one can summarize the future of agriculture product/service differentiation, superior manage
more than is done here, to do so would lose the ment (finance in particlar), use of relevant technol
scope of the different parts of the industry that re ogies, and effective communication of all kinds.
late to each other. Awareness of these interrela This book has the goal of increasing public un
tionships will be the analytical focus within the derstanding about our food and fiber system by
U.S. food and fiber system for at least the next de sketching its complexity and interdependence
cade. Not recognizing these interrelationships is without too much simplification of the major issues
key to understanding why production agriculture is bearing on agriculture's future or without losing rel
in such a financial bind today, why consumers are evance, casting the whole in a manageable analyt
upset about food quality and food safety, why gov ical framework without blocking inquiry into possi
ernment programs to "help" agriculture are by and bilities for future development. A list of suggested
large failing, why the governments of other nations readings is provided for students who desire to
are upset about our agricultural trade policies, why pursue particular links in the system for greater un
environmentalists and many farmers are confused derstanding.
about the "right" long-run course for using the na
tion's natural resources, and why the education and
research establishment has such trouble antici L.T. Wallace
pating the "next" round of emerging technical, in Berkeley, CA
stitutional, or political issues. September 1986
Contents
Preface .......................................................................................... v
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Overview........................................................................................ 1
The Farm and Food System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Industrialization of U.S. Agriculture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Shift of Work from Farm Firms to Nonfarm Firms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
From Self-Sufficiency to Specialization and Interdependence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Changes in Processing and Distribution ............................................................. 3
The Transportation System and Product Flows ........................................................ 4
World Markets and the Increasing Complexity of Coordinating Supply and Demand ........................ 4
The Changing Role of Government..................................................... .......... .. 5
Politics and the Food System ...................................................................... 5
Future Prospects ................................. : . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
u.S.
Macro Forces Shaping Agriculture .............................................................. . 8
Growing Sensitivity to Macroeconomic Events ............. , ......................................... . 8
Dimensions of Farm Financial Stress ......................................................... r •••••• 9
Financial Status of Farmers ........................................................................ 10
Financial Status of Farm Lenders ................................................................... 11
Farm Solutions: The International Dimension ........................................................ . 14
Change in Monetary and Fiscal Policy ............................................................. . 14
Tax Policies ................................................................................... . 15
Agricultural Policies ............................................................................... . 15
The Changing Structure of Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 16
Recent Evolution in Farm Structure ................................................................. 16
Family Farm Survival-Is It an Issue? ............................................................... 19
The Future of Cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 19
Impact on Farm Families . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 20
Implications for Rural Communities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 21
Policy Implications .............................................................................. 22
Concentration, Conglomerates, and Multinational Firms in the Food Marketing System .... . . . . . . . . . . . . . . . . .. 22
Outlook ........................................................................................ 24
Farm Production Inputs: Future Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 26
Land .......................................................................................... 26
Water ......................................................................................... 27
Labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 27
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 29
Financial Capital ................................................................................ 29
Transportation ................................................................................... 31
Energy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 32
Technology and Productivity-Future Courses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 35
Productivity and Technology Evaluation ............................................................. 35
Sources of New Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . .. 37
The Relationship Between R&D and Economic Growth/Productivity .................................... 38
Policy Issues Concerning Public and Private Research ................................................. 38
Property Rights: New Ideas, Secrecy Needs, and Profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 39
Biotechnology: Genetic Engineering ................................................................ 40
Potential Changes in Agriculture Through Biotechnology ............................................... 40
Technology in Food Processing .................................. ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 42
What Is a New Food Product? ..................................................................... 42
Quality Control, Cost Reduction, and Productivity .................................................... 43
Meteorology and Climate Change .................................................................. 44
viii Contents
Consumer Demand and Food Marketing .............................................................. 46
Consumer Expectations, Tastes, and Preferences ...................................................... 46
Changes in Demand ............................................................................. 47
Business Firms Beyond the Farmer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 48
Food Manufacturers .,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 48
Food Retailing and Wholesaling. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 49
Merchandising's Role in the System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 51
International Agricultural Trade ..................................................................... 54
An Historical Perspective ......................................................................... 56
Future Agricultural Trade Policy ... , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 58
Future Solutions ................................................................................. 60
Federal Farm Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 61
Why Government Policy? ......................................................................... 61
Historical Policy Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 62
The Stage for Future Agricultural Policies ............................................................ 64
Policy Alternatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 64
The Role of Government in Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 68
Economic and Political Guides to the Future ......................................................... 58
Characteristics of Government's Future Role ......................................................... 69
Coalitions Between Farmers and Nonfarmers ......................................................... 70
Past and Present Goals ........................................................................... 70
Policy Problems and Remedial Strategies ............................................................ 71
Credit and Agricultural Finance .................................................................... 71
Food Safety Issues ............................................................................... 73
Tax Policies and Tax Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 74
Federal or Private Sector Insurance Programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 74
Market Orders .................................................................................. 75
Public Education and Research .................................................................... 77
Natural Resources and the Environment ....................................•.......................... 78
Natural Resource Issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 78
Wildlife and Agricultural Issues .................................................................... 79
Policy Tools and Resource Policy .................................................................. 80
Future Water Issues .............................................................................. 81
Soil Conservation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 83
Air Issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 84
Toward a Sustainable Agriculture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 85
Suggested Readings ................................................................................ 87
Index ............................................................................................ 90
Introduction
This book addresses the future of the U.S. produc vice, and other state extension services. Additional
tion/food system. Beginning with an overview of materials were taken from "Project 1995," a report
the current "state of the agricultural art," it iden sponsored by the Farm Credit System; Texas
tifies the major macroinfluences shaping agricul A&M's "The Farm Credit Crisis: Policy Options
ture's future. The changing structure of production and Consequences" package headed by Ronald D.
agriculture, selected input industries, and techno Knutson; and numerous research and extension re
logical influences are then reviewed in order to see ports from other states.
what the potential supply side of the eternal food Specific author recognition should be made of
equation might be. Demand, the equation's other the following:
side, is searched for domestic and international
market opportunities and matched with the con Chapter 1. Overview: A.C. Manchester (ERS,
sumption/retailing/distribution sectors. A portrait USDA); B.F. Stanton (Cornell University).
of farm price and income policies and the role of Chapter 2. Macro Forces Shaping U.S. AgricuL
government in helping resolve some of the present ture: R.D. Knutson (Texas A&M); J.B. Penson
and anticipated agricultural dilemmas follows. A Jr. and D.W. Hughes (Texas A&M); M. Duncan,
glance at the impact on the environment through M. Borowski, M. Drabenstott, and K. Norris
use of natural resources marks the end of the cur (FRB-Kansas City); D. Padberg (Project 1995).
sory trip through the system. Chapter 3. Changing Structure of AgricuLture: N.
At any moment the food and fiber system is a Dorow (North Dakota University); papers from
resolution of many forces beginning with one's the USDA 1986 Outlook Session; R.C. Powers
basic food needs and climaxing in the interactions and D. Hobbs (University of Missouri); P. Farris
between government policies and individual man and J. Connor (Purdue University).
agement decisions. Since each force influencing the Chapter 4. Farm Production Inputs: Future
system has a future, predictions about the system's Changes: D. Padberg (Project 1995); H.R. Ro
future depend on predictions about each compo senberg (University of California, Berkeley); J.
nent's future. Although there is opportunity for Brake (Cornell University); M. Boehlje (Univer
compounding prediction error, there is also a need sity of Minnesota); O. Doering (Purdue Univer
to contribute knowledge and insights about "what sity).
might be." Chapter 5. TechnoLogy and Productivity Future
It is to that goal that this text is dedicated. Courses: w.B. Sundquist (Un~versity of Minne
Beyond merely informing the reader, another pur sota); B.R. Eddleman (Mississippi State Univer
pose is to push the reader past being fully comfort sity); M. Phillips (Office of Technology Assess
able within a limited base of knowledge and experi ment, Washington, D.C.); L.J. Butler (University
ence into a broadening awareness of future possi of Wisconsin, Madison) and A.A. Schmid (Mich
bilities. In an era of geometrically expanding igan State University); W.S. Greig (Washington
scientific knowledge, growing international human State University); W.L. Decker (University of
need, and rapidly expanding human population in Missouri).
geographic areas of limited economic opportunity, Chapter 6. Consumer Demand and Food Mar
societies are faced with making choices about their keting: B.F. Stanton (Cornell University); A.C.
collective futures. This issue touches on many in Manchester (ERS, USDA); J. Schaffer and J.I.
terrelationships within the complex food and fiber Stallman (Michigan State University); J.M.
system which might aid in making those decisions. Connor (Purdue University); L.G. Hamm and
Many of the materials presented here were ex C.R. Handy (ERS, USDA); B. Marion (Univer
cerpted or rewritten frqm leaflets prepared for a sity of Wisconsin, Madison); w.F. Mueller (Uni
Cooperative Extension Project entitled "The Farm versity of Wisconsin), and W.T. Boehm (Kroger
and Food System in Transition," sponsored by Company).
ECOP, Michigan State Cooperative Extension Ser- Chapter 7. InternationaL AgriculturaL Trade: J.S.
x Agriculture's Futures
Hillman (University of Arizona); V.L. Sorenson Madison); L. Tweeten (University of Oklahoma);
(Michigan State University); D. Hathaway (FRB, H.E Breimyer (University of Missouri); W.D.
Kansas City, February 1986). Rasmussen (USDA); and R.J. Hildreth (Farm
Chapter 8. Federal Farm Programs: R.D. Knutson Foundation).
(Texas A&M); A.L. Frederick (University of Ne Chapter 10. Natural Resources and the Environ
braska), and R.E Spitze (University of Illinois); ment: L.w. Libby (Michigan State University);
E. Learn and A. McCalla (University of Cali Council for Agricultural Science and Technology,
fornia, Davis); R. Bevins and A. Womack (Uni Report No. 95, September 1982; J. van Shilf
versity of Missouri). gaarde (University of Colorado); J.D. Rhoades,
Chapter 9. Role of Government in Agriculture: K.D. Frederick, and A.V. Kneese (RFF); C.L.
H.D. Guither (University of Illinois), J.P. Mar Infanger (University of Kentucky); S. Batie
shall (Virginia Polytechnic University), P.W. (VPI); J.S. Shortie and D.J. Epp (Pennsylvania
Barkley (Washington State University), and D. State University); G.M. Johnston (ERS, USDA);
Padberg (Project 1995); B.L. Flinchbaugh (Uni Robert Peyton (Agricultural Sustainability
versity of Kansas) and M.A. Edelman (Iowa Project, University of California, Berkeley), L.T.
State University); C.R. Burbee (ERS, USDA) Wallace (University of California, Berkeley), and
and C.S. Kramer (Michigan State University); R.R. Carriker (University of Florida).
J.R. Skees (University of Kentucky); D. Trechter
(ERS, USDA); w.J. Armbruster (Farm Founda And to Myiesha Bradford a special thanks for her
tion) and E.V. Jesse (University of Wisconsin, help in preparing this manuscript.
Overview
Abstract and Credits. This section production inputs through food man istics and Trends," and B.F. Stanton,
presents an overview of the U. S. food ufacturing to retailing and final con "What Forces Shape the Farm and
and fiber system. The industrializa sumption, is discussed. Food System." Both sources were
tion and internationalization of agri Prime contributors to this part were from papers sponsored by ECOP,
culture are emphasized. The system's Alden C. Manchester, "The Farm USDA Extension, Michigan State,
interdependency, from obtai n i ng and Food System: Major Character- and other universities.
The Farm and Food System The Industrialization of U.S. Agriculture
The farm and food system is one of the larger Since the early 1800s the farm and food system has
sectors in the U.S. economy. Centered on farming, been continually industralizing. In 1810,84% of the
it reaches backward through a chain of farm supply labor force was in agriculture, and these workers
stores, banks, tractor dealers, and fertilizer distrib produced about 72% of the gross national product
utors to manufacturing plants and industry-ser (Fig. O. Economic industralization has consisted of
vicing facilities. Extending forward are all the activ a series of "revolutions" beginning with mechani
ities that move raw food and fiber from the farm to zation and the ensuring factory system. The next
the dinner table, restaurant, or clothier. On the change was in energy sources, moving from depen
food side, processing, transportation, and distribu dence on man and animals to water power; later, a
tion are major parts of the system that require dramatic shift to petroleum, electricity, and gas
inputs ranging from tin cans to paper bags. On the made possible previously undreamed-of changes in
fiber side are all the activities that link the cotton production and transportation technology. In 1850,
boll or sheep's fleece to the fabric or clothing con about 6% of power in the economy came from
sumers buy. water and mineral fuels, 79% from work animals,
Many people define and measure the farm and and 15% from human workers. By 1980, over 90%
food system in relation to the activities of U.S. of the energy came from mineral fuels and water
farms. However, in order to put food on the table power, less than 6% from animals, and about 3%
and clothes on our backs, the system requires more from humans.
nonfarmers than farmers. Farmers and hired farm Concurrent with developments in power sources,
workers are only 13% of the total work force in the the revolution in materials used in the food system
entire system, and farming contributes only 11 % of also made a major impact on the technologies of
the end value of food and fiber products. production, processing, storage, transportation,
Many firms supply specialized services to and communication. The first changes occurred in
farmers such as pesticide applicators and grain metallurgy, then in chemicals, and mQre recently in
combine operators. Other, more general services electronics, nuclear energy, and irradiation.
include financial services, insurance, legal and tax An equally significant change took place in busi
help. Manufacturers of physical farm inputs, pro ness organization. Up to the middle ofthe 19th cen
cessing, and distribution also form a major compo tury, almost all businesses were single-unit enter
nent of the system. These firms contribute 8% of prises, with one individual or a small number of
the value of food products and employ about 7% of partners operating a store, factory, or transporta
the workers in the system. tion line from a single office. These firms per
Almost all food is processed. Food processing formed a single economic function, producing a
contributes 12% of the system's total output and single line of products or trading at only one level.
employs 7% of the workers. The manufacturing of Businesses began to emerge in the latter half of the
textile products, leather products, and tobacco 19th century, when it became profitable to combine
products adds another fO% to the system's output the operations of several previously separate units
and employs 16% of the workers. Distribution ser under a centralized management. The process of
vices contribute 39% of the value of the system's dividing and recombining firms continues in all
products and account for nearly half of its workers. phases of the system.
2 L. T. Wallace
Percent acres, about a quarter of all the cropland. No
100 longer required to produce animal feed, these acres
were used for producing human food. With fewer
animals to care for, 8% of total farm labor man
hours were freed for other uses.
80
.. Much more feed, seed, and livestock are pro
duced on one farm and used on another, increas
p,~"" ingly passing through the hands of nonfarm firms
60 ................ 01 ,.boc 10= '" '9.,""urn on the way. For example, much feed is mixed by
commercial feed processors rather than on farms
where it is grown or used; most seed is produced by
or for specialized seed companies; and cattle
......................
40 feedlots arose by separating cattle raising from
cattle finishing.
Most farm inputs are now purchased rather than
..... ...
.. produced on the farm itself. Between 1910-14 and
20
1980, whereas total inputs used in farming in
..
Percent of GNP from agriculture ••••••
..... creased 19%, those purchased by farmers more
........
than doubled (224%), and nonpurchased inputs
O~~~~~~~~~~~~-L-L~~~~ were about halved (decreased 48%). Intensive use
1810 20 30 40 50 60 70 80 90190010 20 30 40 50 60 70 80
of purchased inputs has increased farmers' vulnera
Fig. 1. The industrialization of farming. bility to rising prices and interruptions of input sup
plies. Examplesinc1ude the rapid oil price in
creases and supply shortages of 1974 and 1979 and
Increased productivity in farming met the needs the run-up in real interest rates (interest rates
of a rapidly growing economy by using less of the higher than inflation) during 1975-82. Productivity
total work force. The share of labor used in farming of all farm inputs increased about 180% since 1870
declined from 84% in 1810 to 50% in the early (Fig. 2).
1880s, 40% by 1900, and about 3% of the total work
force in 1985.
Surprisingly, the farm and food system of our From Self-Sufficiency to Specialization
frontier society has much in common with today's and Interdependence
highly specialized, industrialized system. Although
the technology of production and processing have The industralization of farming had already begun
changed, the basic functions continue: (1) inputs by 1869 when 23% of the farm output of food
for farm production must be supplied; (2) crops and products was consumed on the farm where it was
livestock are produced; (3) raw farm products are produced. By the end of World War II, home con
processed and preserved; (4) assembly, whole sumption had dropped to less than 1%. In terms of
saling, and distribution occur; (5) retailing of food total expenditures for food, nearly a third was
products is provided; and (6) food is prepared for home-produced by farm and nonfarm families in
consumption. What has changed most is the time 1869, dropping to only about 4% in 1985.
and effort spent in performing these functions and The number of farms in the U.S. peaked during
the degree to which all of us rely on one another to the Great Depression and has been declining ever
obtain our food supply. since (Fig. 3). The biggest share of the decline,
from 7 million farms in 1935 to 2.3 million in 1985,
was in part-time and subsistence farms. The decline
The Shift of Work from Farm Firms to of commercial farm numbers has not been nearly as
Nonfarm Firms sharp. Technology is the most important factor
bringing about larger farms and increased special
Much of the work and many of the functions for ization in farming mostly because it has helped
merly performed on"farms have shifted to nonfarm lower costs for larger farms.
firms. The most dramatic shift is probably in power Specialization is the rule. Fertilizers and agricul
inputs. The virtual disappearance of horses and tural chemicals are produced in specialized plants,
mules from American farms freed up 90 million stored, and distributed to farmers through an inte-