The Changing Organization of U.S. Farming
by Erik O'Donoghue
, Robert Hoppe
, David E. Banker, Robert Ebel, Keith Fuglie
, Penni Korb, Michael Livingston
, Cynthia Nickerson
, and Carmen Sandretto
Economic Information Bulletin No. (EIB-88) 83 pp, December 2011
Innovations in farm organization, business arrangements, and
production practices have allowed farmers to produce more with
less. Fewer labor hours and less land is used today than 30 years
ago, and practices such as the use of genetically engineered seeds
and no-till have reduced machinery, fuel, and pesticide use. Likely
aided by shifts in government policies and the use of new risk
management tools such as contracts and crop insurance, U.S.
agricultural productivity has increased by nearly 50 percent since
1982. Future innovations will be necessary to maintain, or boost,
current productivity gains in order to meet the growing global
demands that will be placed upon U.S. agriculture.
What Is the Issue?
If global population and energy demands grow as expected, and if
prices continue to fluctuate-or even undergo larger swings, which
might cause farmers to underinvest in capital-intensive
technologies- current productivity gains will not keep pace with
the increasing demands placed upon U.S. agriculture. Recognizing
where to devote limited resources to ensure that continuing
innovation takes place to meet these future demands requires
understanding how production, managerial practices, business
arrangements, and productivity interact.
What Did the Study Find?
Over the past 30 years, a series of inter-related changes in
input use, business arrangements, farm structure, and production
practices combined to expand output without increasing the use of
total inputs. Moreover, by allowing farmers to increase U.S.
agricultural production through increased productivity instead of
expanded land and chemical use, many of these innovations helped to
limit the impact of agricultural production on the environment.
- Use of two major inputs, land and labor, has decreased over
time. From 1982 to 2007, land used in agriculture dropped from 54
to 51 percent of total U.S. land area, while farming used 30
percent less hired labor and 40 percent less operator labor.
Meanwhile, new technologies (such as precision agriculture)-often
requiring new or advanced management techniques- have been
increasingly adopted by farmers.
- Farmers have altered how they manage their risk, including a
heavier reliance on contracting (the value of production under
contract increased roughly 10 percentage points between 1991 and
2007) and a shift of production to farms organized as partnerships
and corporations (from 34 percent of all farm product sales in 1982
to 43 percent by 2007), allowing risks to be spread over a wider
set of stakeholders. Federal crop insurance has also become a major
risk management tool (farmers insured 100 million acres in 1989; by
2007, over 270 million acres were insured).
- Larger farms receive the bulk of commodity payments while most
conservation payments accrue to smaller farms. Overall, payments
are smaller yet make up a larger share of gross cash farm income
for smaller farms, which often rely heavily on off-farm income,
while larger farms receive larger payments that make up a much
smaller share of their gross cash farm income. Over the past three
decades, government policies have shifted from a concentration on
supply management to focus on income support, with a growing
emphasis on environmental concerns-most recently via working-land
- Despite declines in the use of land and labor, agricultural
productivity has maintained a linear growth pattern. Driven by the
increased use of technology, production practices have changed. For
example, the use of no-till increased from 5 percent of all planted
acres in 1989 to 23 percent by 2004, and pesticide use has declined
on many crops. Many of these changes have also lowered labor
requirements, which have allowed some farms to increase the size of
their operations. Although production has shifted dramatically to
larger farms over the past 25 years, 97 percent of all farms remain
family farms, generating more than 85 percent of the total value of
U.S. agricultural production.
How Was the Study Conducted?
This study drew upon data from various sources. The National
Agricultural Statistics Service (NASS) and the Economic Research
Service (ERS) jointly design and administer multiple surveys
annually, known collectively as USDA's Agricultural Resource
Management Survey (ARMS), which covers U.S. farming operations and
their operators in the 48 contiguous States. The ARMS Phase III
1996-2008 surveys provided detailed information on farm business
organization, contracting, operator demographics, government
payments, and production practices.
The census of agriculture provides comprehensive historical data
on consolidation and specialization trends. Data on trends in
government payments came from the U.S. and State Farm Income series
(the sector accounts) maintained by ERS. Various NASS publications,
such as the Acreage reports, provided additional data on
genetically engineered crop adoption and other crop production
practices. National Resources Inventory (NRI) data provided land
use estimates, and administrative data concerning program payments
are from the agencies issuing them.