The Economics of Farming: Farming as Big Business

The Fall of the Family Farm and Rise of American Agribusiness

Farmer looking at stem from soybean crop
Farmer looking at stem from soybean crop. Getty Images/Cultura RM/Matt Hoover Photo

American farmers approached the 21st century with many of the same issues they encountered in the previous century. The most important of these issues continued to be overproduction. As has been true since the nation's founding, continuing improvements in farming technology from farm machinery to better seeds and fertilizers to effective pest control had made farmers more and more successful in growing and producing crops, but not making money.

While farmers as a group have generally favored holding down overall crop output to shore up prices as a conceptual strategy, they have also generally balked at the idea of cutting their own production.

 

The Rise of the Agribusiness

Just as an industrial enterprise might seek to boost profits by becoming bigger and more efficient, many American farms have too grown larger and have consolidated their operations to become leaner. In fact, American agriculture has increasingly become an "agribusiness," a term coined to reflect the big, corporate nature of many farm enterprises in the modern U.S. economy. Agribusiness includes a variety of farm businesses and structures: from small, one-family corporations to huge conglomerates or multi-national firms that own large tracts of land or that produce goods and materials used by farmers.

 

The Effect of Big Farming

The advent of agribusiness in the late 20th century has meant fewer but much larger farms in the United States.

Sometimes owned by absentee stockholders, these corporate farms use more machinery and far fewer farm hands. The evidence is in the numbers.

In 1940, there were 6 million farms averaging 67 hectares each. By the late 1990s, there were only about 2.2 million farms averaging 190 hectares in size. During roughly this same period, farm employment declined dramatically, from 12.5 million in 1930 to 1.2 million in the 1990s, even as the total U.S. population more than doubled.

In 1900, half of the labor force were farmers, but by the end of the century only 2% worked on farms. Nearly 60% of the remaining farmers at the end of the century worked only part-time on farms. Nearly all held other, non-farm jobs to supplement their farm income. Today, the high cost of capital investment -- in land and equipment -- makes entry into full-time farming extremely difficult for most people.

 

The Family Farm of the Past

As these numbers demonstrate, the American "family farm" -- rooted firmly in the nation's history and celebrated in the myth of the sturdy yeoman -- faces powerful economic challenges. Urban and suburban Americans continue to rhapsodize about the neat barns and cultivated fields of the traditional rural landscape, but it remains uncertain whether they will be willing to pay the price -- either in higher food prices or government subsidies to farmers -- of preserving the family farm.

 

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