Information and Farm Policy - USDA

1 EconomicInformation BulletinNumber 3 United StatesDepartmentof AgricultureEconomicResearchServiceCaroly n Dimitri, Anne Effland, and Neilson ConklinElectronicReportThe 20th CenturyTransformation Agricultureand Farm PolicyUnited StatesDepartmentof Report from the Economic Research ServiceEconomicInformationBulletinNumber 3 The 20th CenturyTransformation of agriculture and Farm PolicyCarolyn Dimitri, Anne Effland, and Neilson ConklinJune 2005 AbstractThe structure of farms, farm households, and the rural communities in which theyexist has evolved markedly over the last century. Historical data on a range offarm structure variables including the value of agricultural production,commodity specialization, farming-dependent counties, and off-farm work offera perspective on the long-term forces that have helped shape the structure of agri-culture and rural life over the past century. These forces include productivitygrowth, the increasing importance of national and global markets, and the risinginfluence of consumers on agricultural production.

2 Within this long-term contextof structural change, a review of some key developments in farm Policy considersthe extent to which farm Policy design has or has not kept pace with the contin-uing transformation of American :farm Policy , farm structure, Policy adjustment, structural adjustment,mechanization, productivity growth, global markets, consumer stakeholders, priceand income support, farm Policy history AcknowledgmentsThe authors would like to acknowledge the academic and ERS reviewers of thelarger manuscript from which this report is excerpted. Their comments on thatwork were helpful in preparing this shorter version. We also thank Lou King forhis valuable editorial assistance and Susan DeGeorge for the cover design, layout,and final ..1 Changes in Farms, Farm Households, and rural Communities Across the Century ..2 Longrun Forces Behind the Changes .. Farm Policy in the Context of Sectoral Change.

3 9 Conclusion ..12 References ..13iiThe 20th Century Transformation of agriculture and Farm Policy / EIB-3 Economic Research Service/USDAThe Department of agriculture ( usda ) prohibits discrimination inall its programs and activities on the basis of race, color, national origin,sex, religion, age, disability, political beliefs, sexual orientation, ormarital or family status. (Not all prohibited bases apply to all programs.)Persons with disabilities who require alternative means for communica-tion of program Information (Braille, large print, audiotape, etc.) shouldcontact usda 's TARGET Center at (202) 720-2600 (voice and TDD). To file a complaint of discrimination, write usda , Director, Office ofCivil Rights, Room 326-W, Whitten Building, 14th and IndependenceAve., SW, Washington, DC 20250-9410, or call (202) 720-5964 (voiceand TDD). usda is an equal opportunity provider and Agricultural Library Cataloging Record:Dimitri, CarolynThe 20th century transformation of and farm Policy .

4 (Economic Information bulletin; )1. agriculture United States History 20th agriculture and state United States. I. Effland, Anne B. Conklin, Neilson Chase. III. United States. Dept. of Research IntroductionA common point in the debate over farm programs has been thatcurrent policies were tailored for a time in American agriculture that nolonger exists. The structure of farms and farm households and of the ruralcommunities in which they exist has changed enough over the last centuryto raise questions about the efficacy of policies with roots in an agricultur-ally based economy. How have policies adapted to change in the agriculturaleconomy? How are they similar to Depression-era forms? What are theeffects on farmers and the economy?To answer these questions, we gathered historical data on a range of farmstructure variables and reviewed some key developments in farm Policy . Thedata offer a perspective on the long-term forces that have helped shape thepresent structure of agriculture and rural life, including productivity growth,the increasing importance of national and global markets, and the risinginfluence of consumers in agricultural production.

5 This long-term view ofstructural change provides some insights into the questions now being raisedabout the efficacy and impacts of current farm Policy in the 21st 20th Century Transformation of agriculture and Farm Policy / EIB-3 Economic Research Service/USDAC hanges in Farms, Farm Households, andRural Communities Across the CenturyAmerican agriculture and rural life underwent a tremendous transformationin the 20th century. Early 20th century agriculture was labor intensive, andit took place on a large number of small, diversified farms in rural areaswhere more than half of the population lived. These farms employedclose to half of the workforce, along with 22 million work animals, andproduced an average of five different commodities. The agricultural sectorof the 21st century, on the other hand, is concentrated on a small number oflarge, specialized farms in rural areas where less than a fourth of the lives.

6 These highly productive and mechanized farms employ atiny share of workers and use 5 million tractors in place of the horsesand mules of earlier days. As a result of this transformation, agriculture has become increasinglyefficient and has contributed to the overall growth of the from farms has grown dramatically, allowing consumers tospend an increasingly smaller portion of their income on food and freeing alarge share of the population to enter nonfarm occupations that havesupported economic growth and development. As a part of the transforma-tion spurred by technological innovation and changing market conditions,production agriculture has become a smaller player in the national and ruraleconomies. While the more broadly defined food and agriculture sectorcontinues to play a strong role in the national economy, farming hasprogressively contributed a smaller share of gross domestic product (GDP)and employed a smaller share of the labor force over the course of thecentury (see box, Farming s changing role in the Nation s economy ).

7 Overthe same period, the share of the population living on farms alsodeclined (fig. 1), as did agriculture s central role in the rural economy; whilefarming-dependent counties once comprised most of the rural economy,only 20 percent of nonmetro counties were considered farming-dependent in2000 (fig. 2). The altered role of farming in the overall economy reflects changes at thefarm and farm household level. Since 1900, the number of farms has fallenby 63 percent, while the average farm size has risen 67 percent (fig. 3).Farm operations have become increasingly specialized as well (fig. 4) from an average of about five commodities per farm in 1900 to about oneper farm in 2000 reflecting the production and marketing efficienciesgained by concentration on fewer commodities, as well as the effects offarm price and income policies that have reduced the risk of depending onreturns from only one or a few crops.

8 All of this has taken place with almostno variation in the amount of land being farmed. Farm households have adapted as dramatic increases in productivity havereduced the need for household labor on the farm, and as alternativeemployment opportunities have developed in nearby rural and metroeconomies. Although measures of off-farm work and income have variedover the century, making comparisons over time difficult, about a third offarm operators worked off the farm for at least 100 days in 1930 (theearliest such data are available) (see box, Off-farm income/work ). By2 The 20th Century Transformation of agriculture and Farm Policy / EIB-3 Economic Research Service/USDA190041 percent of workforceemployed in percent of workforceemployed in agricultureAgricultural GDP as a shareof total GDP, percent194516 percent of the total laborforce employed in agricultureAgricultural GDP as a shareof total GDP, percent 19704 percent of employed laborforce worked in agriculture Agricultural GDP as a shareof total GDP, percent2000 percent of employedlabor force worked inagriculture (2000) Agricultural GDP as a shareof total GDP (2002), percentSource: Compiled by EconomicResearch Service, workforce employed in agricul-ture, for 1900-1970, HistoricalStatistics of the United States;for2000, calculated using data fromCensus of Population.

9 AgriculturalGDPas part of total GDP, calcu-lated using data from the Bureauof Economic s changing rolein the Nation s economy3 The 20th Century Transformation of agriculture and Farm Policy / EIB-3 Economic Research Service/USDA1970, more than half of farms had off-farm income, and by 2000, 93 percentof farms earned off-farm income. Off-farm work has played a key role inincreased farm household income; while farm household income was oncebelow the national average, in 2002 it exceeded the national average bynearly $8, the farm population and rural population have dwindled as a share of the Nation's overall populationFarm share of total populationRural share of total population010203040506070 Sources: Share calculated by Economic Research Service, usda using data from Census of agriculture , Census of Population, and Census of the United 1 Year193030 percent of farmersworked off farm for anaverage of 100 days194527 percent of farmers worked off farm197054 percent of householdshad off-farm income 200293 percent of householdshad off-farm incomeSource.

10 Compiled by EconomicResearch Service, usda , usingdata from Census of Agricultureand Census of the United income/work4 The 20th Century Transformation of agriculture and Farm Policy / EIB-3 Economic Research Service/USDAF igure 2 Nonmetro farming-dependent counties, 1950 and 200020001950 Nonmetro farming-dependentOther nonmetroMetroSource: Economic Research Service, usda . Farming-dependent counties are defined by ERS. For 1950, at least 20 percent of income in the county was derived from agriculture . For 2000, either 15 percent or more of average annual labor and proprietors' earnings were derived from farming during 1998-2000 or 15 percent or more of employed residents worked in farm occupa-tions. Metro/nonmetro status is based on the Office of Management and Budget (OMB) June 2003 20th Century Transformation of agriculture and Farm Policy / EIB-3 Economic Research Service/USDA010020030040050001,0002,0003 ,0004,0005,0006,0007,000 NumberAcres per farmAs the number of farms declined, their average size increasedFigure 31900102030405060708090022000 Number of farmsAverage farm size(acres per farm)Source: Compiled by Economic Research Service, usda , using data from Census of agriculture , Census of Population, and Census of the United 4As farms have become more specialized, the number of commodities produced per farm has decreasedCommodities per farm190019301945197020020123456 Note.