• TABLE OF CONTENTS
HIDE
 Front Cover
 Frontispiece
 Title Page
 Illustrations
 Foreword
 Preface
 Table of Contents
 Changing economics of agricult...
 Farm marketing in a new enviro...
 Food buying: making decisions
 For additional information
 Credits
 Index
 Back Cover






Group Title: Food : from farm to table
Title: Food--from farm to table
CITATION PAGE IMAGE ZOOMABLE PAGE TEXT
Full Citation
STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/UF00053783/00001
 Material Information
Title: Food--from farm to table
Series Title: Yearbook of agriculture
Physical Description: xxxix, 373 p. : ill. (some col.) ; 23 cm.
Language: English
Creator: Hayes, Jack, 1917-
United States -- Dept. of Agriculture
Publisher: U.S. Dept. of Agriculture :
For sale by the Supt. of Docs., U.S. G.P.O.
Place of Publication: Washington D.C
Publication Date: 1982
 Subjects
Subject: Agriculture -- Economic aspects -- United States   ( lcsh )
Farm produce -- Marketing -- United States   ( lcsh )
Grocery shopping -- United States   ( lcsh )
Genre: federal government publication   ( marcgt )
bibliography   ( marcgt )
non-fiction   ( marcgt )
 Notes
Bibliography: Includes bibliographies and index.
General Note: Cover title.
General Note: "Jack Hayes, Yearbook Editor"--P. xxxvi.
 Record Information
Bibliographic ID: UF00053783
Volume ID: VID00001
Source Institution: Marston Science Library, George A. Smathers Libraries, University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: aleph - 000392374
oclc - 09118447
notis - ACD7318

Table of Contents
    Front Cover
        Front Cover 1
        Page ii
    Frontispiece
        Frontispiece 1
        Page i
    Title Page
        Page iii
    Illustrations
        Page iv
        Page v
        Page vi
        Page vii
        Page viii
        Page ix
        Page x
        Page xi
        Page xii
        Page xiii
        Page xiv
        Page xv
        Page xvi
        Page xvii
        Page xviii
        Page xix
        Page xx
        Page xxi
        Page xxii
        Page xxiii
        Page xxiv
        Page xxv
        Page xxvi
        Page xxvii
        Page xxviii
        Page xxix
        Page xxx
        Page xxxi
        Page xxxii
        Page xxxiii
    Foreword
        Page xxxiv
        Page xxxv
    Preface
        Page xxxvi
    Table of Contents
        Page xxxvii
        Page xxxviii
        Page xxxix
    Changing economics of agriculture
        Page 1
        Agriculture's vital role for us all (James A Zellner and R. Mcfall Lamm)
            Page 2
            Page 3
            Page 4
            Page 5
            Page 6
            Page 7
            Page 8
            Page 9
        Profile of farming and rural America (Harold F. Breimyer and Lyle P. Schertz)
            Page 10
            Page 11
            Page 12
            Page 13
            Page 14
            Page 15
            Page 16
            Page 17
            Page 18
            Page 19
        Farmers, society share a policy interest (Kenneth C. Clayton)
            Page 20
            Page 21
            Page 22
            Page 23
            Page 24
            Page 25
            Page 26
            Page 27
        How a dime can help us save our resource base (James N. Benson and Chris Risbrudt)
            Page 28
            Page 29
            Page 30
            Page 31
            Page 32
            Page 33
            Page 34
            Page 35
            Page 36
            Page 37
            Page 38
            Page 39
            Page 40
        What farmers buy makes production fly (Paul Andrilenas and Ted Eichers)
            Page 41
            Page 42
            Page 43
            Page 44
            Page 45
            Page 46
            Page 47
            Page 48
            Page 49
            Page 50
            Page 51
        Productivity and the real cost of our food (Lloyd D. Teigen)
            Page 52
            Page 53
            Page 54
            Page 55
            Page 56
            Page 57
            Page 58
        Why and hows of credit, finance (Stephen C. Gabriel and John R. Brake)
            Page 59
            Page 60
            Page 61
            Page 62
            Page 63
            Page 64
            Page 65
            Page 66
            Page 67
            Page 68
            Page 69
            Page 70
            Page 71
        Financial planning and management (Thomas L. Frey and Neal Sox Johnson)
            Page 72
            Page 73
            Page 74
            Page 75
            Page 76
            Page 77
            Page 78
            Page 79
            Page 80
            Page 81
        Getting started in farming is tough (Michael Boehlje and Ron Durst)
            Page 82
            Page 83
            Page 84
            Page 85
            Page 86
            Page 87
            Page 88
            Page 89
            Page 90
            Page 91
        Farm exports: a key to our economy (Dewain Rahe and Reed Friend)
            Page 92
            Page 93
            Page 94
            Page 95
            Page 96
            Page 97
            Page 98
            Page 99
            Page 100
            Page 101
            Page 102
            Page 103
            Page 104
        World economic shifts affect agriculture, all of us (Jim Longmire, Arthur Morey, and John Nuttall)
            Page 105
            Page 106
            Page 107
            Page 108
            Page 109
            Page 110
            Page 111
        Tariffs, embargoes, other trade barriers (G. Edward Schuh and Philip L. Paarlberg)
            Page 112
            Page 113
            Page 114
            Page 115
            Page 116
            Page 117
            Page 118
        Tracing your food dollar back to the farm (Harry H. Harp and John M. Connor)
            Page 119
            Page 120
            Page 121
            Page 122
            Page 123
            Page 124
            Page 125
            Page 126
    Farm marketing in a new enviroment
        Page 127
        The $200 billion job of marketing our food (Alden C. Manchester)
            Page 128
            Page 129
            Page 130
            Page 131
            Page 132
            Page 133
            Page 134
            Page 135
            Page 136
        Links that make up the marketing chains (Edward V. Jesse)
            Page 137
            Page 138
            Page 139
            Page 140
            Page 141
            Page 142
            Page 143
            Page 144
        Who does what in the marketing field (Joseph N. Uhl)
            Page 145
            Page 146
            Page 147
            Page 148
            Page 149
            Page 150
        How markets coordinate decisions (Wayne D. Purcell)
            Page 151
            Page 152
            Page 153
            Page 154
            Page 155
            Page 156
            Page 157
            Page 158
        Grades and promotions in the food system (Mary C. Kenney)
            Page 159
            Page 160
            Page 161
            Page 162
            Page 163
            Page 164
            Page 165
            Page 166
            Page 167
            Page 168
            Page 169
        Timing sales for high returns (Gene A. Futrell and Robert N. Wisner)
            Page 170
            Page 171
            Page 172
            Page 173
            Page 174
            Page 175
            Page 176
            Page 177
            Page 178
        Selecting the best market alternative (V. James Rhodes)
            Page 179
            Page 180
            Page 181
            Page 182
            Page 183
            Page 184
            Page 185
            Page 186
        How to minimize marketing risks (T. Everett Nichols, Jr.)
            Page 187
            Page 188
            Page 189
            Page 190
        Fair treatment in the marketplace (Thomas M. Walsh and Everett O. Staddard)
            Page 191
            Page 192
            Page 193
            Page 194
            Page 195
            Page 196
            Page 197
        Exploiting new marketing opportunities (James L. Pearson and Harold S. Ricker)
            Page 198
            Page 199
            Page 200
            Page 201
            Page 202
            Page 203
            Page 204
            Page 205
            Page 206
            Page 207
            Page 208
        Rules of the game: for market stability (Bruce Gardner)
            Page 209
            Page 210
            Page 211
            Page 212
            Page 213
            Page 214
            Page 215
        Transportation handles the surge in production (William W. Gallimore)
            Page 216
            Page 217
            Page 218
            Page 219
            Page 220
            Page 221
            Page 222
        The challenge of foreign marketing (Robert J. Wicks)
            Page 223
            Page 224
            Page 225
            Page 226
            Page 227
            Page 228
    Food buying: making decisions
        Page 229
        Food patterns: where are we headed? (Betty B. Peterkin and Richard L. Kerr)
            Page 230
            Page 231
            Page 232
            Page 233
            Page 234
            Page 235
            Page 236
        Where to eat: at home or away (Robert B. Resse and Sharon J. Mickle)
            Page 237
            Page 238
            Page 239
            Page 240
            Page 241
        Where consumers buy their food ( Edgar P. Watkins)
            Page 242
            Page 243
            Page 244
            Page 245
            Page 246
            Page 247
            Page 248
            Page 249
        Motivating factors in the marketplace ( Effie Hacklander)
            Page 250
            Page 251
            Page 252
        Family economics and food purchases (Carolyn G. Carter and Frances Cogle Lawrence)
            Page 253
            Page 254
            Page 255
            Page 256
        Personal beliefs, preferences and food ( Merry Jo Davis and Joyce R. Garrick)
            Page 257
            Page 258
            Page 259
            Page 260
            Page 261
            Page 262
        Nutritional needs: Eat for good health all your life (Chung Ja Lee)
            Page 263
            Page 264
            Page 265
            Page 266
            Page 267
            Page 268
            Page 269
        Applaiances and their effect on food buying (Fern E. Hunt)
            Page 270
            Page 271
            Page 272
            Page 273
            Page 274
            Page 275
        How to be a first-rate food manager (Mary E. Mennes)
            Page 276
            Page 277
            Page 278
            Page 279
            Page 280
            Page 281
            Page 282
            Page 283
            Page 284
        Buying food for nutrients it provides (Linda E. Cleveland)
            Page 285
            Page 286
            Page 287
            Page 288
            Page 289
        Food safety from farm to market (Patricia F. Stolfa)
            Page 290
            Page 291
            Page 292
            Page 293
            Page 294
        Consumer guidelines for food safety (Carole A. Davis)
            Page 295
            Page 296
            Page 297
            Page 298
            Page 299
            Page 300
            Page 301
        Let the grade be your guide in buying food (Sara Beck, Elizabeth Crosby, and Martha Parris)
            Page 302
            Page 303
            Page 304
            Page 305
            Page 306
            Page 307
            Page 308
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            Page 311
            Page 312
            Page 313
            Page 314
            Page 315
            Page 316
            Page 317
        Better buymanship: know your labels and standards (Elizabeth W. Murphy and Cheryl Garrett)
            Page 318
            Page 319
            Page 320
            Page 321
            Page 322
            Page 323
            Page 324
            Page 325
        Cost comparision tools to stretch your food dollar (Cynthia Cromwell Junker)
            Page 326
            Page 327
            Page 328
            Page 329
            Page 330
            Page 331
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            Page 337
            Page 338
            Page 339
            Page 340
            Page 341
            Page 342
        Convenience foods: what they cost you (Dianne Odland and Julein Axelson)
            Page 343
            Page 344
            Page 345
            Page 346
            Page 347
            Page 348
            Page 349
            Page 350
            Page 351
        How we waste $31 billion in food a year (William Rathje and EE Fung)
            Page 352
            Page 353
            Page 354
            Page 355
            Page 356
            Page 357
        How consumers can affect the marketplace (Georgia Stevens Neruda, Mildred Brooks, and Karen Brown)
            Page 358
            Page 359
            Page 360
            Page 361
            Page 362
    For additional information
        Page 363
        Page 364
        Page 365
        Page 366
    Credits
        Page 367
        Page 368
    Index
        Page 369
        Page 370
        Page 371
        Page 372
        Page 373
    Back Cover
        Page 374
Full Text


Food-
From Farm
to Table


1982 Yearbook of Agriculture
United States Department
of Agriculture






The 1982 Yearbook of Agriculture


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Food
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United States Department of Agriculture







































It takes big investments to stay in
farming, more to get in-










































but some still do it.


A young Maryland farmer checks
out (top) new equipment on display at
a county fair. Equipment is a big and
necessary expense for farmers. A trac-
tor can cost as much as a small home;
bigger things-like combines-well
over $100,000. Yet there are still some
young families, like Wilmer and Ra-
mona Minisee (left), of Niles, Michi-
gan, who are doggedly determined to
get started in farming, bucking a na-
tional trend of generally declining farm
populations.



























Farming 80's style

Today's farmer relies a lot on electron-
ics. Norman Martella (above) of Sali-
nas, CA installs a device on his tractor
to monitor his lettuce seed planter.
Above right, "Buster" Finneman of
Beach, ND uses 2-way radios to coor-
dinate his fleet of six combines, while
a computer in a feed mill in Mabee,
MS controls the blending of a complex
recipe of feed for young chickens (top
right). Right, laser-guided earthmovers
level fields to provide uniform distribu-
tion of irrigation water.








"Double Cropping", plant and
animal versions

Soybeans growing in grain stubble
(right) were planted just behind the
harvester (below). Such "no-till" farm-
ing permits two crops on the same
plot, reduces energy consumption, and
protects the soil from erosion.









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truce f-n
These calves (above), posing with
their biological mother, all were pro-
duced by transplanting embryos from
that cow (left) into surrogate mothers.
Because the offspring carry the charac-
teristics of the biological parents,
breeders can increase many fold the
calving potential of genetically supe-
rior cows.















Mechanization and
specialization-

Mechanically harvested green peas (far
left) on this Wisconsin farm will be
canned and ready for supermarket
shelves within hours. The same is true
for these California tomatoes (below)
which could end up as canned whole
tomatoes, stewed tomatoes puree,
sauce, juice, or a main ingredient in
catsup or spaghetti sauce. Special to-
matoes are bred for special purposes.
These "peeler pears" (left), named for
their shape, were developed especially
for ease of peeling. They are canned
whole or in big chunks and draw pre-
mium prices.



































-but room for hand work

But it's not all machines down on the
farm, as these workers can attest.
Above and right, lettuce and oranges-
particularly oranges destined to be
sold as fresh fruit-are still largely
gathered by hand. Far right, Jenny Rif-
fel of Stockton, Kansas, shovels
smooth a truckload of wheat before
tarping it and hauling it to a grain ele-
vator.


























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After the field, a diverse journey
begins.
After harvest, farm products journey
many ways and in many forms, across
the nation and the world. For most
grains, the first trip is a truck ride
from the field to a local elevator.


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Xu.,!..


Buyers and sellers, far from the
farm ...

These people at the Kansas City Com-
modity Market are buying and selling
grain. They, and others like them all
over the world, are setting the price
for grain-higher or lower. Thus, many
basic farm decisions, like whether a
Kansas farmer will plant more or less
wheat next year, or whether an Illinois
farmer will sell corn or feed it to hogs,
are made in other states and even in
other nations.


~































L ... .work in a world-wide arena.

', ,A Grain prices depend on world markets.
This barge (far left), being loaded
on the Columbia River between
Washington and Oregon, will go to a
Pacific port for shipment to Japan.
There it will feed Japanese livestock.
kI These animals in turn will provide the
meat for school lunches (left) and the
Japanese equivalent of the popular
American burger dispensary (top).







































Farm groups woo foreign buyers.

Farmers don't set their prices, but they
have learned to promote their prod-
ucts. Here a group of Oregon wheat
growers are hosting a group of poten-
tial buyers from Japan-part of an an-
nual attempt to increase the Pacific
northwest's share of the world wheat
market.









































Fresh vegetable marketing: a race
against the clock.

"Sell it or smell it!"-that's always on
the mind of the fresh fruit and vegeta-
ble grower. This wholesale market in
Faison, NC (top left) serves about 400
area farmers who truck in their fresh
produce-squash, beans, bell peppers,
and egg plant-to be auctioned off to
the highest bidder. Buyers bid on
truckload lots (below left) for shipment
around the country. The next stop for
these perishable items is usually a
food distribution center, like this one
in Jessup, Maryland (above). Here,
buyers convene daily to select fresh
produce and truck it to supermarkets
and restaurants in cities and suburbs
(left).


































Direct and Indirect avenues to the
consumer.

Truckloads of ripe oranges go into this
Florida plant (top); cans of frozen con-
centrated orange juice leave it. The
whole process is orchestrated from this
control panel. Right, fast-food ham-
burger chains are among the largest
beef buyers in the country.
But sometimes there is no process-
ing and no middleman. Far right,
farmers unload their watermelons for
sale directly to consumers at this
Washington, DC, Farmers Market.


































Farmers' markets: The ultimate
buyer meets the initial seller.
Many produce growers sell directly to
the public, eliminating intermediate
steps in the marketing chain. Some
farmers' markets are elaborate affairs
like this one that sets up several times
a week in a Washington, DC, stadium
parking lot; others are no more than
stands by the side of the road operated
by a single farm family.


I TuP


XXVII




- '- -- j


Everything under one roof-

Modern supermarkets are the largest
retail outlets for food. All food items-
fresh meat and produce, dairy prod-
ucts, canned goods, dry food items,
beverages-can be found under one
roof. Many times they are accom-
panied by such non-food materials as
drugs, cosmetics, housewares, and
clothes-all for one-stop shopping
convenience. Many such markets have
butchers on duty so shoppers may or-
der custom-carved USDA inspected and
graded meats.



























Supermarket shoppers have more
than just different brands to
choose from.


Here, Janice Johnson (far left) com-
pares a cake mix with a ready-made
cake at a Maryland supermarket.
Many modern markets offer unit
pricing (top) and automated checkout,
using an electronic sensor to read the
universal product code on each item
(left).



.41
















N--


XXXI














































"No Frills" Marketing gains
appeal.

In an effort to trim costs and attract
bargain-conscious shoppers, many su-
permarket chains are offering no-frills
stores. Here, food items are shelved in
their shipping container and customers
are expected to bag their own grocer-
ies. For the cost-conscious it's an
alternative to the traditional super-
market.








Foreword





farmers power today's world! Without skilled farmers and the food they raise,

we would be a sorry lot indeed-half-starved or worse, grubbing for anything
Swe could find to eat and devoting nearly all our time to this dismayingly difficult
effort.

Such a prospect isn't pleasing. Fortunately, of course, we in the United States will
continue eating well, for less than a fifth of our average family incomes. Thanks to
modern farmers. And thanks as well to the work of millions of the Americans who
help farmers do their job, and see that food gets to our tables in the form we want
and when we want it.

Farmers and supporting activities and industries make up an agricultural system in-
tertwined with the general economy. This system generates about 20 percent of the
Nation's gross national product, and employs 23 percent of the U.S. labor force. Yet
only 3 percent of the labor force is engaged directly in farming. Where just 10 years
ago one farmworker (farmer, family labor, and hired help) supplied enough food and
fiber for 47 people, an American farmworker now supplies enough for 78.

Total agricultural output has more than doubled in the past 50 years, though the
agricultural land base has not changed substantially. Since 1940, output per hour per
farmworker has increased tenfold. While reflecting more farmer knowhow and con-
tinued hard work, this surge in productivity is aided strongly by production goods
and services. These include improved seed varieties, use of commercial fertilizers,
synthetic pesticides, and more efficient tillage and harvesting equipment.

The United States is the world's largest exporter of farm products, with two in five
acres of our farmland harvested for export. Agricultural exports are crucial in limiting
the amount of red ink in the Nation's trade balance. While the 1981 agricultural trade
surplus topped $26 billion, the nonagricultural trade deficit exceeded $56 billion. With
agriculture's contribution, the total trade deficit was limited to a little over $30 bil-
lion.

Agriculture employs more workers than any manufacturing industry. Nearly one in
five nonagricultural workers in this country is providing farm inputs or processing
and distributing farm products. Food wholesaling and retailing, including food service,
alone employed 8.2 million workers. I might note that U.S. farmers received $85
billion for the food which went to American consumers in 1981. The overall job of
marketing that food cost $200 billion.


xxxiv









We in the U.S. Department of Agriculture assist in providing efficiency throughout
the food chain-from the production of food to its use in nutritious, satisfying meals.
Research we conduct moves us toward more efficient practices. People around the
country benefit from authoritative information about agriculture and food, developed
by experts from inside and outside the Department.

Informed shoppers searching out bargains in food of high quality can be the major
force that guides producers and marketers toward greater efficiency. Proper selec-
tion and handling of food can result in money savings, increased eating pleasure, and
improved nutritional well-being.

One way to reach that goal is to share knowledge through the Yearbook of Agricul-
ture. The audience includes thousands of farm families, community leaders and
groups, as well as thousands of other individuals. General information in the econom-
ics of food production, in food marketing, and in consumer food buying is included in
this Yearbook, along with a good deal of how-to-do-it material for farmers and con-
sumers. I hope you will take time to become aware of the contents, and keep this
Yearbook close at hand.








John R. Block
Secretary of Agriculture









Preface


Jack Hayes
Yearbook Editor


rom my office overlooking the Mall in Washington I can see the Capitol and
other monumental buildings that testify to our Nation's greatness. Agriculture,
of course, has always been and is today a major contributor to that greatness. In
this Yearbook of Agriculture you will find what's going on amid the earthshaking
energies that feed us three times a day, day in and day out, year in and year out.

Three major sections make up this book: Sect. I, Changing Economics of Agricul-
ture; Sect. II, Farm Marketing in a New Environment; and Sect. III, Food Buying-
Making Decisions. The third section, as you might guess, is primarily for con-
sumers-and we are all consumers. The general reader, along with farmers and
other agriculturists, should find things of interest in all three sections. I might add
that the book contains a variety of viewpoints.

William T. Manley of the Agricultural Marketing Service was Chairman of the Com-
mittee that planned this book. Subcommittee chairmen for each of the sections were:
Sect. I, George H. Hoffman. Sect. 2, Charles Beer. Sect. 3, Sara Beck. Members
of the Committee, by agency, were:
Agricultural Cooperative Service-Jack H. Armstrong
Agricultural Marketing Service-Elizabeth Crosby, Georgia Stevens Neruda, J.C.
Williamson
Cooperative State Research Service-Elizabeth Y. Davis
Economic Research Service-Clark R. Burbee, Reed Friend, David H. Harrington,
Richard G. Heifner, Ronald L. Meekhof, James A. Zellner
Extension Service-Evelyn H. Johnson, Roger H. Wilkowske
Food Safety and Inspection Service-Elizabeth W. Murphy
Foreign Agricultural Service-Dewain Rahe
Human Nutrition Information Service-Betty B. Peterkin
Soil Conservation Service-Peter F. Smith
World Agriculture Outlook Board-James R. Donald

Photography-William E. Carnahan, Extension Service


XXXVI









Contents


Forew ord ............................................................................ xxxiv
John R. Block, Secretary of Agriculture
Preface ................................................................................ xxxvi
Jack Hayes, Yearbook Editor

I. Changing Economics of Agriculture
Agriculture's Vital Role for Us All............................................ 2
James A. Zellner and R. McFall Lamm
Profile of Farming and Rural America............................................. 10
Harold F. Breimyer and Lyle P. Schertz
Farmers, Society Share a Policy Interest.................................... 20
Kenneth C. Clayton
How a Dime Can Help Us Save Our Resource Base....................... 28
James N. Benson and Chris Risbrudt
What Farmers Buy Makes Production Fly.................................... 41
Paul Andrilenas and Ted Eichers
Productivity and the Real Cost of Our Food ................................. 52
Lloyd D. Teigen
Whys and Hows of Credit, Finance ........................................... 59
Stephen C. Gabriel and John R. Brake
Financial Planning and Management........................................ 72
Thomas L. Frey and Neal Sox Johnson
Getting Started in Farming Is Tough ........................................ 82
Michael Boehlje and Ron Durst
Farm Exports-A Key to Our Economy....................................... 92
Dewain Rahe and Reed Friend
World Economic Shifts Affect Agriculture, All of Us ....................... 105
Jim Longmire, Arthur Morey, and John Nuttall
Tariffs, Embargoes, Other Trade Barriers ................................... 112
G. Edward Schuh and Philip L. Paarlberg
Tracing Your Food Dollar Back to the Farm................................ 119
Harry H. Harp and John M. Connor


xxxvii









II. Farm Marketing in a New Environment
The $200 Billion Job of Marketing Our Food.................................. 128
Alden C. Manchester
Links That Make Up the Marketing Chain..................................... 137
Edward V. Jesse
Who Does What in the Marketing Field....................................... 145
Joseph N. Uhl
How Markets Coordinate Decisions............................................. 151
Wayne D. Purcell
Grades and Promotions in the Food System .................................. 159
Mary C. Kenney
Timing Sales for High Returns ................................................... 170
Gene A. Futrell and Robert N. Wisner
Selecting the Best Market Alternative......................................... 179
V. James Rhodes
How to Minimize Marketing Risks .............................................. 187
T. Everett Nichols, Jr.
Fair Treatment in the Marketplace............................................... 191
Thomas M. Walsh and Everett 0. Stoddard
Exploiting New Marketing Opportunities ...................................... 198
James L. Pearson and Harold S. Ricker
Rules of the Game-for Market Stability ..................................... 209
Bruce Gardner
Transportation Handles the Surge in Production .............................. 216
William W. Gallimore
The Challenge of Foreign Marketing................... .......................... 223
Robert J. Wicks

III. Food Buying-Making Decisions
Food Patterns-Where Are We Headed? ..................................... 230
Betty B. Peterkin and Richard L. Kerr
Where to Eat-At Home or Away ............................................. 237
Robert B. Reese and Sharon J. Mickle
Where Consumers Buy Their Food ........................................... 242
Edgar P. Watkins
Motivating Factors in the Marketplace .......................................... 250
Effie Hacklander
Family Economics and Food Purchases ........................................ 253
Carolyn G. Carter and Frances Cogle Lawrence


xxxviii








Personal Beliefs, Preferences and Food...................................... 257
Merry Jo Davis and Joyce R. Garrick
Nutritional Needs: Eat for Good Health All Your Life....................... 263
Chung Ja Lee
Appliances and Their Effect on Food Buying.................................. 270
Fern E. Hunt
How to be a First-Rate Food Manager......................................... 276
Mary E. Mennes
Buying Food for the Nutrients it Provides..................................... 285
Linda E. Cleveland
Food Safety From Farm to Market ............................................. 290
Patricia F. Stolfa
Consumer Guidelines for Food Safety ....................................... 295
Carole A. Davis
Let the Grade Be Your Guide in Buying Food................................ 302
Sara Beck, Elizabeth Crosby, and Martha Parris
Better Buymanship-Know Your Labels and Standards.................... 318
Elizabeth W. Murphy and Cheryl Garrett
Cost Comparison Tools to Stretch Your Food Dollar....................... 326
Cynthia Cromwell Junker
Convenience Foods-What They Cost You................................... 343
Dianne Odland and Julein Axelson
How We Waste $31 Billion in Food a Year ................................... 352
William Rathje and EE Fung
How Consumers Can Affect the Marketplace............................... 358
Georgia Stevens Neruda, Mildred Brooks, and Karen Brown

For Additional Information ........................................................ 363
Credits................................................................................ .. 367
Index .................................................................................... 369






Section I
Changing Economics of Agriculture








Agriculture's Vital Role for Us All
By James A. Zellner and R. McFall lamm


t the time of the American Revolu-
tion the United States was almost
totally agrarian. Ninety percent of
our population was engaged in farming
and 60 percent of income went for food.
Almost all our exports were agricultural
products, and the basic structure of soci-
ety depended on the agrarian economy.
Through time the U.S. agricultural sys-
tem has produced an increasing abund-
ance of food and fiber, using relatively
fewer resources. The unparalleled pro-
ductivity gains in American agriculture
have resulted in a broader choice of nu-
tritious foods available for a declining por-
tion of income.

Societies the world over face periodic
crop failure, economic mismanagement,
and a chronic inability of their food and
agricultural systems to perform adequate-
ly. The inevitable results of a failure to
provide adequate diets are political and
economic instability, a compromised
national security, and ultimately, chaos.
American agriculture has an envious rec-
ord of providing a safe, secure, afford-
able, and wholesome domestic food sup-
ply while increasingly contributing to the
easing of food security problems in the
rest of the world.

Today Americans spend less than 17 per-
cent of family income on food. Only 3


percent of our labor force is engaged
directly in farming. And agricultural prod-
ucts now account for only about 20 per-
cent of total exports. The importance of
farming seems to have diminished. But it
would be erroneous to conclude that
agriculture is no longer vitally important
to our economy. As the following sec-
tions explain, the food and agricultural
sector as a source of productivity
gains, a user of resources, and a source
of employment remains large and im-
portant by any standard.

Increased agricultural productivity, the
rise in output per unit of input, has been
a major contributor to improved living
standards for Americans. Where just 10
years ago one farm worker supplied
enough food and fiber for 47 people, he
now supplies enough for 78, up from a
mere seven persons at the beginning of
this century. Total agricultural output has
more than doubled in the past 50 years,
though the agricultural land base has not
substantially changed.

These increases in agricultural productiv-
ity have contributed to the domestic eco-
nomy by enabling consumers to upgrade
their diets at lower cost while simultane-
ously expanding their consumption of
nonfood items. At the same time in-
creased productivity has facilitated the


James A. Zellner is an Agricultural Economist in the National Economics Division,
Economic Research Service.
R. McFall Lamm is Director of Forecasting and Economic Analysis with Pillsbury,
Minneapolis, MN.








transfer of production workers from agri-
culture into industrial and service indus-
tries, expanding the supply of nonfood
goods and services, and enabling our
economy to meet the new demands of
consumers.

The great strides in productivity have
been accompanied by major changes in
the input mix. From the earliest periods
of American history hand power gave
way to horsepower then to mechanical
power, and ultimately to "science pow-
er." New technologies introduced over
the past 50 years have resulted in a
nearly fifteenfold increase in fertilizer
use, a fivefold increase in tractor num-
bers, and a tenfold increase in tractor
horsepower used in farming. Purchased
inputs are now 2.6 times their 1930
levels and farm labor input only 30 per-
cent of 1930 levels. Farms are larger and


significantly more dependent on capital
and purchases from the nonfarm eco-
nomy.

As farming has come to rely more on
purchased inputs and less on inputs sup-
plied on the farm, the sector has become
more fully integrated with the general
economy. Consequently, farming is influ-
enced by and has an influence on the
same factors that determine conditions in
the general economy. Where once, for
instance, credit market conditions had lit-
tle influence on farm well-being or farm-
ers' decisions, modern production agricul-
ture depends heavily on credit to finance
capital and other purchases from the non-
farm economy. Specialized industries
have evolved in the nonfarm sector to
service the input needs of agriculture and
to process and market farm products. As
agriculture has become more important


Agricultural Productivity Grows Throughout U.S. History


% of 1967 Hand Horse Mechanical Science
120| Power IL oPower 4 Power Power


Civil
Civil WWI WII Proauciiviry
8 Wr / Growin
80 ---------- ------ -- J_----




40



(0Estm3mear

1775 1800 1825 1850 1875 1900 1925 1950 1975 2000
*Precise data are not available.









Employment in selected industries, 1979

Industry Employment
Number Percent of total

Agriculture 3,297 3.1

Mining 957 0.9

Construction 4,644 4.4

Manufacturing 20,972 19.9
Food and kindred products (0) 1,176 1.1
Textile mill products (0) 777 0.7
Apparel and other textiles (0) 1,899 1.8
Chemicals and allied products (I) 637 0.6
Petroleum & coal products 140 0.1
Leather and leather products (0) 244 0.2
Primary metal industries 1,244 1.2
Machinery, except electrical (I) 2,463 2.3
Motor vehicles and equipment 983 0.9
All other manufacturing 11,357 10.8

Transportation 3,037 2.9

Communications 1,308 1.2

Electric, gas & sanitary services 809 0.8

Wholesale trade (I, 0) 5,170 4.9
Retail trade (I, 0) 14,966 14.2

Finance, insurance & real estate (I) 4,963 4.7

Services (I, 0) 17,043 16.2

Government 15,612 14.8


(I) Closely related to agriculture as input suppliers.
(0) Closely related to agriculture as output processors and distributors.
Source: U.S. Bureau of Labor Statistics, Employment and Earnings, monthly.









in world trade, particularly during the
past 20 years, this interdependence has
taken on important international dimen-
sions.

One of Biggest Employers
Agriculture employs more workers than
any manufacturing industry. Only govern-
ment and the construction, trade, fi-
nance, and service industries employ
more people than agriculture, and agricul-
ture's role as a purchaser of inputs or
supplier of its output looms large in
several of those. Food processing, of
course, is highly related to agriculture, as
are textiles, transportation, and trade -
all users or marketers of agriculture's
output. Also, agriculture is an important
customer of the chemical, machinery, fi-
nance, real estate, and service
industries.

Production of grains and oilseeds by U.S.
farmers has expanded 2V2 times over
levels of just 30 years ago. At the same
time there has been a tenfold increase in
exports of these commodities. About a
third of U.S. cropland is used to produce
commodities for export. The United
States now accounts for 55 percent of
total world grain exports, over half of


world soybean exports, and almost a
third of cotton exports. Exports of
grains, oilseeds, and other unprocessed
items reached nearly $28 billion in 1981.
Another $13.5 billion of export earnings
was generated in the nonfarm food and
fiber sector through the sale of pro-
cessed products. These exports provided
jobs for 1.2 million workers, two-thirds
of them in the nonfarm sector.

Rising agricultural exports have been a
major factor holding down the U.S. trade
deficit in recent years. The agricultural
trade surplus in 1981 stood at $26.5 bil-
lion as exports of $43.3 billion offset
$16.8 billion of imports. The nonagricul-
tural trade account was in deficit by
$56.6 billion. Agricultural exports are im-
portant to our economy for reasons
beyond the income and jobs they create
in agriculture and the food and fiber sys-
tem. The narrowed trade gap that re-
sults from our agricultural trade surplus
helps strengthen the American dollar,
which reduces the prices of imported
goods and contributes to a lower inflation
rate.

The internationalization of agriculture has
had significant impacts beyond the in-


Value of US. Agricultural Exports, Calendar Years
$ billion
50 IAnimals and products Other agricultural exports $43.3
40 ----- Food grains and products $41.2 -9 10%
I IFeed grains ana producli $34 8 1-
30 Oilseeds and products $29 4 Ip '
20
5219.F $230 i:i S236,.11. i'-


10 76 77 258 8 81-
1975 76 77 78 79 80 81
1975 76 77 78 79 80 81









The United States accounts
for 55 percent of total world
grain exports. Right: empty
barges near Pendleton,
Oreg., return for more grain
that will be exported.
Below: soft white wheat
is loaded onto barges for
export. Exports of grains,
oilseeds, and other
unprocessed items reached
nearly $28 billion in 1981. .











.%









come and jobs it has supported. Condi-
tions in U.S. agriculture depend greatly
on world production and economic condi-
tions. Large year-to-year changes can
occur, and often do. This causes con-
siderable instability in the U.S. agricul-
tural sector as evidenced by wide price
and income fluctuations. Even world
financial conditions can strongly influence
the price of U.S. farm commodities.

Several factors directly influence prices
that U.S. farmers receive and prices that
foreign customers pay for U.S. farm
commodities. Changes in world food sup-
plies and production are affected by the
vagaries of weather, demand factors such
as world income, and levels of economic
activity. And the changing strength of the
U.S. dollar relative to foreign currencies
can cause major swings in U.S. farm
prices and add to the uncertainties facing
farmers.

Products of the food and fiber system
are seen everywhere. The food we eat
at home and in restaurants, the clothing
we wear, our shelter and home furnish-
ings, the beverages we consume, and
other products such as tobacco all ori-
ginate in the farm sector. Some form of
agricultural output is used as input into
production by every major industry. The
agricultural industry itself uses output
from more than 80 percent of the other
basic industries in the United States.
Some of the more important interdepen-
dencies are discussed next.

Farms were largely self-sufficient during
much of American history. It wasn't until
the early 20th century that farmers pur-
chased more inputs from the nonfarm
sector than were produced on the farm
or by other farmers. Today nearly two-
thirds of farm inputs, by value, are pur-


chased from nonfarm suppliers. Feed,
seed and livestock which originate in the
farm sector are still among the major
purchases made by farmers, though 80
percent of feed and nearly all the seed
are purchased from commercial sources.

In 1981 farmers used 367 million acres of
cropland, purchased $32 billion of inputs
originating in the farm sector, and bought
$84 billion worth of goods from nonfarm
sectors of the economy. These inputs
were used to produce livestock valued at
$69 billion and crops worth $75 billion.
Interest expenses accounted for nearly
23 percent of the value of nonfarm pur-
chased inputs in 1981. Following in im-
portance were chemicals mainly fertili-
zer and pesticides, energy, and hired
labor. Rent and taxes also were large
items in the farmer's budget, accounting
for nearly 14 percent of production
expenses.

Farmers are, of course, particularly im-
portant customers for industries provid-
ing specialized goods and services to
farmers. For example, 80 percent of the
output of the farm machinery industry is
purchased by farmers (the remainder
being exports). Farmers are the third
largest buyers of chemicals and chemical
products. In addition they purchase vir-
tually all of the nitrogenous fertilizers,
two thirds of the phosphate fertilizers,
and 95 percent of the pesticides pro-
duced in this country. Besides, farmers
are prime customers for several other
important industries. They are the larg-
est users of wooden containers, the sixth
largest users of petroleum, the fourth
largest customer of the finance and insur-
ance industry, and the fourth largest user
of real estate and rental services. Only
five industries use more transportation
and warehouse services than agriculture.









Processors Employ 1.1 Million
The food processing and manufacturing
industry accounted for about 13 percent
of all manufacturing in 1981. Over 23,000
processing plants employed 1.1 million
workers to produce food and beverages
valued at $276 billion. Meat packing and
meat products with shipments of $66 bil-
lion accounted for nearly 25 percent of
processed food and beverage shipments.
Other leading food and beverage indus-
tries are processed fruits and vegetables
with shipments of $29 billion; beverages
(including alcoholic beverages), with ship-


ments of $34.7 billion; bakery foods, with
shipments of $18 billion; and dairy prod-
ucts with shipments of $37 billion.
Together these five industries account
for more than two-thirds of the output of
the food and beverage processing indus-
try.

Processors of nonfood agricultural prod-
ucts include the leather tanning and
finishing industries, related footwear and
leather apparel industries, tobacco manu-
facturers, cotton and wool weaving, tex-
tile finishing mills, and related apparel

*o "-t '. -.. '-- ,, :* ,. .t.^ i.- ,j,. -, .
"-- .r'- ,tW ../.".,.- ,-- w .
L" -"








manufacturers. These processors added
about $36 billion in value to the fiber pro-
duced on American farms during 1981.
Together these industries employ more
than 400,000 workers at more than
17,000 plants in all 50 States.

The food and fiber marketing system in-
cludes all the transportation services re-
quired to move agricultural products from
farms to storage facilities, from storage
to processors, from processors to distri-
butors, and from distributors to consum-
ers in the United States and abroad.





.i ,,


Transportation services provided by food
manufacturers, wholesalers, and retail-
ers, and distributors of apparel, home
furnishings, tobacco and other agricul-
turally related products are a major part
of this system. But important as well are
related expenditures on storage, energy,
advertising, and fixed costs such as build-
ings and equipment.

Food wholesaling and retailing, including
food service, added $155 billion in value
to processed and semi-processed farm
products in 1981, and employed 8.2 mil-
lion workers to market food products. In
addition, $15 billion of transportation ser-
vices were used. Nonfood marketing is
also a huge part of the economy. About
$17 billion is spent and around 20,000
workers employed in wholesale market-
ing of apparel and piece goods derived
from agricultural fiber. And another $20
billion of apparel sales and some 100,000
employees are accounted for by retailing
of apparel and piece goods.

This discussion serves to highlight the
immense complexity and importance of
America's most crucial industry. Clearly,
agriculture and the food and fiber system
are an integral part of the domestic and
world economies. Success of the U.S.
economy as a whole depends in large
part on how well our agricultural system
performs, but agriculture also depends
on nonagricultural industries for inputs.
Millions of workers and consumers de-
pend on continued effectiveness of the
agricultural system for security, for their
sustenance and their livelihoods.




In 1981 farmers produced crops on 367
million acres of farmland, such as this corn
and soybean farm in Carroll County, Md.









Profile of Farming and Rural America

By Harold F. Breimyer and Lyle P. Schertz


he business of farming, farm fami-
lies' way of living, and the welfare
* of rural communities are inter-
linked in a mutually supportive manner
that is not found elsewhere in the Na-
tion. The unique connection among
farms, farmers, and their community
arises primarily from the geography of an
agriculture of small units scattered over
space. A farm on which crops are pro-
duced or animals grazed is space-using.
It is also a managerial unit that, paradoxi-
cally, is independent yet increasingly de-
pends on others in both economic and
cultural activities.

Both the farm and the farm family must
reach out for supporting help for fuel,
feed, and fertilizer for use in farming, for
markets to which products can be deliv-
ered and sold, for nonfarm work opportu-
nities, and for items of living as well as
educational and cultural activities for the
family. Hence the close tie between
farms and farmers on the one hand, and
the rural community on the other.

Such a symbiotic relationship between
farms, farmers, and the farming com-
munity is not new. On the contrary, it is
as old as the Nation. It has changed in
form and intensity but it dates from the
Nation's first years. The idea that
pioneer farms existed in total self-


sufficiency is lore of song and story, but
invalid. With rare exceptions, U.S. farm-
ers have always produced at least some
product for a market, and have depended
on a business firm or artisan for some
service or supply. Farmers have likewise
contributed to and depended upon
schools, churches, and other community
institutions.

Trends of recent years have been almost
contradictory. The economic inter-
dependency between farms and their
communities has become even greater
than before, and crucial to both, even as
cultural distinctions between farmers and
other members of the community have
just about faded away.

Pioneer farms had to buy nails for barns
and medication for horses, but the tech-
nology of today's farming calls for a big
and constant flow of materials and ser-
vices received from off the farm. Early in
this century a fourth to a third of all the
inputs of farming were bought from out-
side the farm, and the rest were internal-
ly supplied (feed for horses, for exam-
ple). Now two-thirds to three-fourths of
inputs are obtained from off-farm
suppliers.

A few of the largest farms may go direct-
ly to big cities for machines, fertilizers,


Harold F. Breimyer is Professor, Department of Agricultural Economics, University of
Missouri, Columbia.
Lyle P. Schertz is Economist, Economic Research Service, USDA, Washington, D.C.









and other supplies, but the majority of
farms buy within the local community. In
doing so, they incidentally make the local
farm-supply businesses as dependent on
farmers' buying from them as farmers
depend on the businesses. During the
decline in farmers' income in the early
1980's, for example, farm machinery
dealers in county seat towns suffered an
even sharper drop in income than
farmers did, because farmers were not
financially able to continue their previous
level of machinery purchases.

American Gothic No More
The farmer and the farm family may at
one time have been culturally distinctive,
even to the point of justifying the somber
caricature of Grant Wood's American
Gothic. Not so now. By any test of living
style in homes, furnishings, and dress, of
preferences in recreation, of literacy and
religion by any of these tests farmers
and nonfarm members of the rural com-
munity are indistinguishable.

Marvelous improvements in transporta-
tion and communication in our century
are usually credited with breaking down
cultural barriers. They doubtless are
important. But the amalgam has other
origins too. Common efforts by all
citizens in two world wars, nationwide
merchandising of items of everyday liv-
ing, and of course the gradual erosion
over time of islands of ethnic identity
have all been involved.

Still another trend has been barrier-
breaking. If highways and automobiles
took farmers to town for both shopping
and cultural activities, they also took
many industrial (manufacturing and com-
mercial) enterprises out of the big cities
and put them in the country. These rural
businesses have provided employment


for hundreds of thousands or even mil-
lions of farmers (husbands and wives),
and their sons and daughters.

The ultimate outcome has been to blur
age-old distinctions between farms, farm-
er, and the nonfarm part of the rural
community. In 1978, 18 percent of all
farmers did not live on their farms. Cur-
rently nearly half of all persons who are
"farmers" by the Census criterion of sell-
ing more than $1,000 worth of farm
products in a year do not call themselves
farmers by occupation. They produce and
sell farm products, but they identify
themselves as schoolteachers, sales-
people, steamfitters, or corporate vice
presidents. And, as will be noted later,
part-time farms have become about as
numerous as farms on which the farm
operators work full time, without other
employment.

Farms and farming may be described in
so many ways! Perhaps the starting point
is the nature of the farm itself. An irony
arises immediately. Everyone has a men-
tal picture of a "farm." Yet, each per-
son's picture is different. And well it
should be. For the first feature of agri-
culture is its internal heterogeneity. Its
farm units vary extremely widely.

Nonetheless, U.S. agriculture and its
farms have one distinguishing feature:
the farms are numerous. Even though
they range in size from tiny to immense
they appear relatively small when com-
pared with giant industrial firms in steel,
automobiles, and oil. And their 2.4 million
number in 1981 compares with the doz-
ens or at most hundreds of firms in those
three industries.

Among all the characteristics of U.S.
farms, the nature of the proprietary unit









attracts most interest. It is even more
important than size of farm. Farmers are
especially concerned for their status and
role in farming. They are sensitive to
whether they are owners, tenants, or
wage workers, for example. All operating
farmers are touchy about whether they
are independent proprietors or are bound
to suppliers or outlets under production
contracts. Related issues arise as to
whether they may join together in coop-
erative marketing, collective bargaining,
or other group action that circumscribes
the farmer's latitude in exchange for a
stronger position in the market.

Almost everywhere in the United States
except parts of the Southwest and Pacific
Coast, the traditional mainstay of farming
has been the family farm. It comes clos-
est to being a "typical" farm. It is usually
defined as a farm on which the farmer
and members of the family own at least
part of the land, do at least half the
work, are the managers and have limited
if any nonfarm work activities. The family
farm buys and sells in the market, rather
than being contractually integrated.
However, it may be linked with other
farms in cooperatives. Its size and pro-
ductivity are sufficient to provide an
acceptable living for the family.

Family Farm Fading
The family farm remains foremost in im-
ages about farms and farming, and it con-
tinues to rank high in announced goals
for agriculture in the future. Yet it is
gradually disappearing. Data are inexact
but at most only half of all farm market-
ings now come from family farms. The
predominance of family farms in U.S.
farming is giving way before a trend to-
ward a dual agriculture. It is being dis-
placed in number by smaller farms, the
majority of which are part-time, and in


volume of marketing by larger-than-
family farms and by large corporate or
agribusiness farms.

Family farms are losing out also in their
market relationships. Family farms and
indeed most farms traditionally have
bought supplies from a nearby dealer and
sold products in an open market. In
recent years integrative arrangements
have replaced open markets in many in-
stances, most notably in poultry and
eggs. The kinds of proprietary farms
now found in the United States may be
classified as follows:
I. Linked to local market
A. Smaller-than-family size
B. Family size
1. Primarily owner-operated
2. Primarily tenant-operated
II. Not linked to local market
A. Larger-than-family size
B. Contractually integrated
C. Large corporate

Smaller-than-family-sized farms number
more than one million, yet their total
volume of marketing does not exceed 5
percent of all farm marketing. The
majority of these farms are part-time
operations in which the farmer holds a
job off the farm. Some are retirement
farms where the farmer receives a re-
tirement income. A significant number,
however, are unproductive and unre-
warding full-time farms. These are the
instances of the "poor small farmer" that
are publicized and in fact may be by-
passed in educational and other public
services to agriculture.


The family farm remains foremost in images
about farms and farming and continues to
rank high in expressed goals for agriculture
in the future. This young Wisconsin farm
family is an example.









Family farms already have been defined.
Some family farmers, as noted, may be
tenants rather than owner operators.
Ideally, though, farmers are tenants only
temporarily as they hope to climb the
ladder to ownership, or they may rent
some land in addition to that which they
own. This latter arrangement is known
as part-ownership. It has become com-
mon, as will be noted later. Other groups
of farms are not linked closely to local
markets for outlets for their products or
for their farm inputs other than labor.

Many family-owned farms of larger-than-
family size depend heavily on hired labor
yet are not big enough to be classified as
corporate bureaucracies, although some
have incorporated for tax or other advan-
tages. Some of these have multifarm
units. They now form a sizable part of
U.S. agriculture. They especially in-
creased in number and size during the in-
flationary 1970's, when it was attractive
for larger farms to keep adding to their
holdings by borrowing all the money they
could ("leveraging") at the relatively low
interest rates of the time. Allegedly, the
goal was to "buy one farm a year."
However, the trend toward continuous
expansion slowed in the early 1980's as
interest costs increased, inflation eased,
and land values adjusted downward.

Two other kinds of farms are not linked
closely to local markets. They are usually
less closely identified with the local com-
munity than are the first three categories
of farms. One of these consists of the
various arrangements in contractual inte-
gration. Broilers provide the best exam-



The broiler industry includes farmers known
as "growers" but financing, management, and
marketing are all in the hands of integrators.


ple. The broiler industry includes a great
many small farmers known as "growers,"
but financing, management, and market-
ing are all in the hands of the integrators.

Contracts normally are used instead of
open marketing for production of fruits
and vegetables for processing. But the
terms of contracts are not as restrictive
as those in broilers. About 20 percent of
all farm products move from farmers to
processors or handlers under some kind
of production contract. If all delivery con-
tracts with cooperatives are included, the
figure exceeds 30 percent.

Corporate-Type Farming
Large corporate approaches to farming
are most common in the feeding of cattle
in feedlots that may hold as many as
100,000 head, and in "egg cities" where
a million or more hens try to lay an egg
a day in order to avoid being removed
for slaughter. Some confined hog opera-


If-


i .
:1.

,
-t. 'i'


5 ~i








tions are large. Corporate management is
less common in field operations, yet Ten-
neco in the west and First Colony farms
in North Carolina are examples of huge
holdings that operate with hired workers
and specialization in labor and manage-
ment tasks. Estimates are inexact but
possibly as much as a tenth of all farm
products arise in this kind of large corpo-
rate-type production.

Farms vary widely in size. Size may be
measured by acreage, value of assets
held, man-years of labor employed, or
value of marketing. Number of acres
may be the poorest measure. A cattle
feedlot or a greenhouse may use only a
few acres yet be highly productive.

Value of annual marketing is used often.
This measure reveals many but decreas-
ing numbers of small farms and few but
an increasing number of large farms. The
large ones, of course, account for a large


part of U.S. farm production. For exam-
ple, the number of farms with sales of
more than $200,000, though only 5
percent of all farms, account for about
one-fifth of U.S. net farm income. In
contrast, the number of farms with sales
of less than $20,000 account for more
than half of all farms but for only about
15 percent of net farm income.

U.S. agriculture of the last couple of
decades has been marked by an uptrend
in the price of land based heavily on ex-
pected increases in farm earnings but
inconsistent with "current" earning pow-
er. Only in 1982 did the long inflationary
surge abate. As land prices kept going
up, younger farmers found it difficult to
enter farming as owners. Some did so as
full tenants; they rented all their land
from a landlord. Others bought a small
home base and rented numerous indi-
vidual tracts. The latter arrangement is
called partownership.


~i~F;li~-~L' ~?~ilaab~8ql~wl$lsl84Wi~l?;j*'"-









The proportion of full tenancy is not high
nationwide. In some regions, though, it
now accounts for a substantial part of all
farming. Nationwide, one-third of all
farmers are classified as part owners.
They own some land and rent some land
from others, and their farms account for
57 percent of all land. The proportion of
farmland operated by its owner varies
somewhat across the country. However,
it approximates two-thirds of the total
farmland in all regions except the North-
east, where it is 78 percent.

Dual Agriculture Forces
U.S. agriculture is moving toward a dual
makeup of many small and few large
units because of a number of pressures
that are felt. They, in turn, are interre-
lated. Those pressures may be divided
into 1) Technological, 2) Expanded de-
Smand, and 3) Institutional.

The technology of machines and electric
power and chemical herbicides and other
trappings of modem farming have had a
major effect in reducing the number of
farms, increasing the size of some and
making it easier for others to combine
farm and nonfarm activities. Tractors and
other farm machines are available in all
sizes and shapes. The newer four-wheel
tractors and associated machinery are
capable of being combined with large
amounts of resources such as land.







Farms vary widely in size. Size may be
measured by acreage, value of assets held,
man-years of labor employed, value of
marketing, or product value added on the
farm. This corn-hog farm is in the heart of
America's farmland-Iowa.


Commercial cattle feedlots and egg cities
are instances where power equipment
and industrial processes are so well
suited that they lead to large size. In
these operations, modem technologies
facilitate control over large-scale produc-
tion units. Some techniques can also be








adapted to facilitate small farming as well.
Thus, some people holding off-farm jobs
find it possible to keep up with the farm-
work with evening and weekend work.
Mechanical power, chemical fertilizers,
pesticides, and drugs for control of live-
stock diseases are all involved.


In contrast, the middle size farm is under
increasing pressure to get smaller or lar-
ger. With modern technology the oper-
ators of middle-sized farms are only par-
tially employed. Getting smaller would
permit doing off-farm work since the
farming work might be done in the even-









ings and/or weekends. In contrast, get-
ting larger permits using managerial tal-
ents and machinery on a larger scale,
thus increasing the returns to labor and
management. This pressure need not ex-
tend, however, to conversion into multi-
unit farms that rely extensively on hired
labor.

Part-time farmers buy land by drawing
on their income from nonfarm sources
and being able to accept a low return for
their farm labor. Among large farms,
landholding may be financed by landlords
or by large corporations using capital


funds from nonfarm financial sources out-
side agriculture. The family farmer may
be left with the fewest means to finance
ownership of land. One outcome of this
is the persistence of tenancy, mentioned
earlier, either as full tenancy or as part
ownership.

Agriculture has felt the effect of an ex-
panded demand for its products. Our
own growing population and its increased
incomes have expanded the demand for
farm products. Increased exports have
also. We are feeling the effect of a
worldwide need for food. These in-


Commercial cattle feedlots are instances where technology, power equipment, and financial
and legal arrangements are so well suited that they lead to large size.








creased demands underlay land price in-
creases in the 1970's. It therefore be-
came more difficult for operating farmers
to acquire land of their own to farm.

Economic Slowdown Effect
Demand conditions shifted sharply in
1981 and 1982 as economic activity
slowed in the United States and around
the world. These conditions combined
with high crop production levels to bring
about lower farm crop prices, lower farm
income, and in turn lower farmland
prices. The supply-demand balance can
shift quickly, as obviously happened in
the early 1970's and again in recent
years. Thus while many projections point
to continued long-term expansion of de-
mands, the balance between demands
and supplies in any year is very unpre-
dictable.

The third pressure brought to bear is
institutional. It relates to access to
credit, the differential effects of tax laws,
the provisions of national programs to
support farmers' prices and incomes, and
conditions in the general economy. This
is the most complex of all the influences
on current trends in farming. Some
critics say that institutional forces work,
in total, very much in favor of large units
in agriculture and against the family farm.
Certain it is that any farming enterprise
that can get credit on favorable terms, or
that can use income tax shelters advan-
tageously, or can take fuller advantage of
commodity price supports gets "one leg
up" in the contest to survive in agricul-
ture.

The entire cooperative credit system, for
example, was designed as a way to make
sure that the rank and file of farmers
would be able to get credit at rates that
are not usurious. And, the Farmers


Home Administration is charged with
making credit available to farmers of
average size, as well as to some smaller
farmers. Price support programs were
designed to support farm product prices
and reduce farming risks.

None of these institutions was designed
specifically to favor large units in agricul-
ture. However, for many years these
institutions operated in an environment
experiencing inflation of the general price
level, attractive nonfarm employment,
and technological changes permitting
effective control of large as well as small
amounts of farm resources and expanding
markets. The net effect has been to
encourage some farmers to leave farm-
ing, others to expand their farming
operations, and still others to combine
farm and nonfarm pursuits.

This quick sketch reminds us that U.S.
agriculture of the 1980's is far from
homogeneous. Everyone may have a
mental image of the "typical" farm, but it
is certain to be wrong if only because
there scarcely is such a farm. The only
accurate picture is of an agriculture of
extreme diversity. Furthermore, the
trends are toward even wider diversity.
The traditional family farm may have, at
one time, come closest to typifying all
agriculture. It is fading slowly from the
scene, however, as many part-time
farms and a relatively few large units
replace it.

This sketch also reminds us that the
makeup of U.S. agriculture is not entirely
happenstance. It is affected by human
institutions those for education, re-
search, credit, taxes, and farm programs
- as well as developments in the gen-
eral economy and markets for U.S. farm
products.









Farmers, Society Share a Policy Interest
By Kenneth C. Clayton


Though specific objectives of our
farm policy vary over time, several
widely held purposes provide a
common thread. Among these are in-
creased stability of market supplies and
prices, enhanced farm income, abundant
quantities of food at reasonable prices to
consumers, food aid for the domestic
poor and foreign countries in need of
assistance, and expansion of commercial
export markets. Farm programs adopted
over the years have been the principal
vehicles for achieving these policy goals.

Agricultural policy really began with the
land settlement programs that were
promoted throughout the Nation's first
hundred years. Effort devoted to getting
people onto the land culminated in the
Homestead Act of 1862. Railroads were
established to move commodities to east-
ern markets. In the mid-1840's, mecha-
nization was introduced to agriculture. By
the time of the Civil War, manpower had
largely been replaced by animal power.
The Morrill Land Grant College Act and
the law setting up the U.S. Department
of Agriculture in the 1860's established
the base for a more scientific approach to
farming. Agriculture moved from self-
sufficiency to a greater market orienta-
tion.

By the 1870's, the United States had a
growing commercial agricultural industry.
Farm numbers were increasing and the


acreage devoted to agricultural produc-
tion was rising. Exports grew significant-
ly over the last half of the century with
Western Europe becoming a major con-
sumer of U.S. agricultural commodities.
Because of the tremendous productivity
gains realized through mechanization and
scientific advances, the proportion of the
population needed in agriculture began to
decline. Employment in agriculture was
still increasing, but not as fast as the
overall population. With the advent of
commercial agriculture, the importance of
national policies monetary, trade, and
others in the daily life of farmers be-
came increasingly evident. The Populist
movement and the growth of farm orga-
nizations reflected the concern of farmers
that their interests be considered in the
conduct of national affairs.

Seeds of Modern Policy
While agriculture experienced its ups and
downs during early years of the 20th
century, it was by and large a prosper-
ous period. Most of America's good
farmland was under private ownership.
Technological advances continued; me-
chanical power gradually replaced animal
power. Farm prices rose markedly with
both production and exports continuing to
increase. Deficiencies in the banking and
credit system were addressed and de-
bate was focused on an appropriate tariff
policy. Food safety became an issue with
the Food and Drug Act and the Meat In-


Kenneth C. Clayton is Chief, Food and Agricultural Policy Branch, National Econo-
mics Division, Economic Research Service.








section Act of 1906. Public regulation of
the railroads and the conservation of nat-
ural resources emerged as policy issues.

As World War I drew to a close, there
was a brief downturn in prices but an
overall aura of optimism prevailed. Do-
mestic purchases previously restricted by
the war put upward pressure on prices.
European nations were permitted to use
war credits for acquiring U.S. foodstuffs.
A relaxed credit policy was followed by
the Treasury Department and the Fed-
eral Reserve, giving rise to general price
inflation. Much of the increased return to
farmers was capitalized into land values.
Between 1918 and 1920 land prices rose
by a third; mortgage debt in 1920 was
more than double what it had been in
1914. But the bubble soon burst.

The postwar boom turned to bust in late
1920. Farm prices fell while nonagricul-
tural prices and wages did not. The pur-
chasing power of farm products in terms
of the nonfarm goods that they would
buy declined by a third. An economic dis-
parity was emerging between farmers
and others in society.

Relief Sought the farm community and
policymakers alike sought some type of
relief. One set of policies that was adopt-
ed allowed farmers greater strength in
the marketplace. The Capper-Volstead
Cooperating Marketing Act of 1922 as
well as subsequent legislation encouraged
farmers to form cooperatives to market
their commodities.

A second policy thrust would have meant
greater direct government involvement in
agriculture. The so-called McNary-
Haugen bills were twice passed by Con-
gress and each time vetoed by the Presi-
dent. These bills would have established


a Federal export marketing corporation
to handle foreign sales of "surplus pro-
duction" (beyond domestic needs). Farm-
ers would have received for domestically
consumed commodities a price equivalent
in purchasing power to that received in
the prewar years. The world market
price would have been received on "sur-
plus production."

Among policy actions taken was creation
of a Federal Farm Board in 1929. Man-
dated to work with and through coopera-
tives to enhance farmers' marketing pow-
er, it included in its authorities the ability
to make loans to cooperatives for their
use in purchasing commodities to stabi-
lize markets. Some success was realized
in the support of wheat and cotton. The
Board ultimately exhausted its funding,
however, and gave way to the current
Farm Credit Administration.

The situation confronting farmers during
the years of the Great Depression was
fundamentally one of excess capacity.
Farmers simply produced more than was
needed to meet domestic demands. With
the world in economic depression, fore-
ign demand was down and prices had fall-
en precipitously.

A domestic allotment plan, first proposed
in the late 1920's, was enacted into law
with the Agricultural Adjustment Act of
1933. This was the first instance of pro-
duction controls being used to constrain
excess capacity within the farm sector.
The Secretary of Agriculture was autho-
rized to enter into voluntary agreements
with producers to reduce acreage or pro-
duction, to enter into marketing agree-
ments with processors to affect prices,
and to spend money for the expansion of
markets and the removal of surpluses.








The 1933 Act eventually was invalidated
by the Supreme Court, although it was
quickly replaced by similar acceptable
legislation. The concept of an "ever-
normal granary" featuring balanced sup-
plies of commodities emerged in the
1938 Agricultural Adjustment Act with a
program of loans, acreage allotments,
and marketing quotas for the so-called
basic crops. This foundation of programs
continues to the present day.

During World War II and the period that
followed, first our allies and then those
countries that had been defeated clam-
ored for the foodstuffs that our farm sec-
tor could provide. The excess capacity
that had and would continue to plague
agriculture in more normal times was not
of immediate concern. Land previously
retired was brought back into production.
Adoption of various technological ad-
vances was swift and effective. As the
war drew to a close, continued high de-
mand for foods for foreign relief and
continued government price supports
stimulated an even greater adoption of
mechanical advances, increased use of
fertilizers, and the expanded use of im-
proved seed and feed.

Crisis of the Fifties
The full dimensions of overproduction
came more clearly into focus in the
1950's. Total farm output during this
period increased at a rate nearly one-
third greater than population. Since per
capital consumption remained largely un-
changed, domestic demand for food could


The "Ever-Normal Granary," forerunner of
today's agricultural programs, came into
being with the 1938 Agricultural Adjustment
Act. The corn "sealed" here, "has been
mortgaged to secure a loan made under a
program of the Commodity Credit
Corporation...


-UNI








not absorb the increases in production
that occurred. Commercial foreign de-
mand did increase somewhat and the PL
480 or Food for Peace distribution pro-
gram was initiated in 1954. The result
under the prevailing policy and programs,
however, was massive government
assumption of commodity stocks, increas-
ing from $1.3 billion in 1952 to $7.7 bil-
lion in 1959. Price supports were clearly
at levels that precluded the sale by farm-
ers of all they produced.

A variety of reasons account for the
chronic excess capacity that plagued agri-
culture through the 1950's and into the
1960's. Great emphasis was placed on
scientific research, including that related
to agriculture. Breakthroughs in hybrid
seed varieties and the further develop-
ment of equipment and farming techni-
ques added to already serious overpro-
duction. The markets in which farmers
sold their commodities, moreover, were
somewhat unique. Because there were
so many producing units it was not possi-
ble for any one farmer to influence price.
The result was an attempt to adopt tech-
nologies that would increase efficiency
and decrease costs. This, of course,
promoted adoption of productivity-
enhancing technology.

In addition, the nature of the demand for
agricultural commodities was rather in-
sensitive to changes in price (and con-
tinues to be). Thus, improvements in
price generally required a large or signifi-
cant reduction in the quantity of agricul-
tural commodities made available for sale.
Even then, the difficulty of the surplus
condition would not have been so severe
if the resources used in agriculture -
land, labor, equipment, and the like -
were able to move easily into and out of
production. Such was not the case.


As supply outpaced demand throughout
the decade of the fifties, farmers and
others sought policies for the farm sector
that would deal with the chronic surplus
situation. The response during the fifties
had been to keep price supports at rela-
tively high levels, with the government
assuming responsibility for excess pro-
duction. In effect the price support,
which operated through the nonrecourse
loan program, set the market price. If
the market price were to fall below the
loan rate, farmers could forfeit their com-
modity to the government without penal-
ty or recourse. These relatively high
levels of support did much to encourage
farmers to adopt the new technology. A
system of allotments and quotas was also
employed. Productivity increases, how-
ever, often rendered acreage allotments
ineffective in limiting production.

Shift in Policy The programs of the
sixties reflected dissatisfaction with
events of the fifties and an emerging shift
in policy. Frustration over large govern-
ment stocks along with a concern that
farmers were producing for government
programs and not for the market
prompted a change in strategy. For
wheat and the feedgrains it was decided
in the early sixties that a greater market
orientation was necessary. Two major
changes were initiated: 1) more producer
flexibility in supply control decisions and
2) a separation of price and income sup-
ports.

The first change involved a movement
away from rigid acreage allotments, with
greater reliance on program incentives to
induce producer participation in acreage
reductions. The second change was fun-
damental to the regaining of a competi-
tive position in world markets. Loan
rates, or price supports, were reduced








from their relatively high levels of the
1950's to world market price levels. The
difference in support was made up
through direct government payments for
land diversion and other actions on the
part of farmers. Through this shift, an
opportunity for market clearing prices
was created while maintaining income
support to farmers.

Policy continued its shift toward greater
producer response to conditions of the
marketplace under the 1970 and 1973
Farm Acts. The individual commodity
approach to production control was in-
creasingly discarded in favor of restraint
on the total farm unit. Direct payments
were continued for wheat, cotton, and
feed-grains. In the search for a workable
criterion to set equitable support levels,
the use of production costs was initiated
in place of parity for several commod-
ities, including the food and feed grains
and upland cotton.

Agricultural policy, in attempting to deal
with the problem of excess capacity, had
shifted noticeably toward working in con-
cert with the market as we moved into
the decade of the seventies. But signifi-
cant change was occurring both within
the farm sector and in farm product mar-
kets that foretold yet further evolution in
U.S. agricultural policy. A number of
events are especially noteworthy. In
1971, foreign exchange rates were
realined, leaving U.S. farm exports in a
much stronger competitive position. Ex-
ports did in fact increase significantly,
due initially to poor harvests worldwide
and more basically to a shift in the food
import policies of several major coun-
tries.

The result was a buoyant agricultural
sector during early years of the decade.


Export sales were at historical highs.
Prices were up, costs were rising rather
slowly, profits were at near record
levels, and the surplus stocks of earlier
years finally disappeared. Reaction within
the farm sector was perhaps quite pre-
dictable. New entrants and expansion by
many existing farmers caused land prices
to be bid up and generally raised the
level of debt, much of this debt being in-
curred at inflated asset values. Cash flow
needs to service this debt were to be-
come a serious problem later in the de-
cade.

Volatile Markets While crop farmers
tended to benefit from this newly found
prosperity, livestock producers became
extremely susceptible to volatile grain
markets and high feed prices. A serious
liquidation of livestock herds resulted.
Consumers were buffered initially by
price controls but soon experienced a
significant increase in food costs; an ex-
port embargo was imposed in response
to the food price concerns. Thus, while
policy goals for one group in agriculture
were met, others for whom a policy in-
terest also existed tended to fare some-
what less well.

Beyond these current circumstances,
more fundamental changes appear to
have occurred in the organization and op-
eration of the farming industry by the
end of the seventies. A number of obser-
vers suggest that the chronic farm prob-
lem of excess capacity, or too many re-
sources devoted to producing agricultural
commodities, may well have passed.
Available evidence seems to suggest that
the exodus of labor and land from agricul-
ture that had been occurring since the
1930's had ended. Certainly the net labor
outmigration from farming had slowed,
and it appeared that labor use was actual-








ly on the increase. Readily available crop-
land was essentially back into production.

Economic returns in the farm sector
were, in most years, on a par with those
earned elsewhere in the economy. But
commodity prices and farm income had
become noticeably more erratic. This
was due in part to increasing dependence
on an inherently volatile export market,
and in part to the fact that prices had
been set free to respond more to market
signals than to artificial support prog-
rams.

Future Farm Policy
If this assessment of agriculture as it
emerged from the seventies is correct, it
suggests the likely motivation for further
evolution in our farm policy. Quite clearly
the notion that the chronic excess capac-
ity problem has passed is in a major way
contingent upon continued strong foreign
demand for U.S. commodities. With two-
thirds of our wheat and two-fifths of our
feedgrains moving to world markets, this
factor is critical.

As we have learned, the world market
can be rather fickle in its treatment of
U.S. farmers. The success of harvests in
both importing countries and major ex-
porting nations is an annual unknown.
Movement of exchange rates in response
to changes in world economic conditions
can cause the price of a commodity to
vary substantially from one month to the
next. And the purchase behavior of many
nations, especially the centrally planned





Foreign demand for U.S. wheat and
feedgrains is strong. Two-thirds of our wheat
crop, perhaps some of it from this Oklahoma
wheat farm, is sold in world markets.


countries, may not respond to prices but
to other more general policy considera-
tions.

U.S. agriculture's efforts to respond to
the challenges of world markets seem
likely therefore to provide much of the
basis for further evolution in public policy
for the farm sector. Implied policy issues
will include assisting farmers to secure a


''
;








fair and competitive access to world mar-
kets, dealing with the negative aspects of
market instability, maintaining competi-
tive technology, and enhancing the
productive capacity of our land and water
resources.

Clearly, farmers will manage their busi-
nesses in a more market-oriented
environment characterized by both new


opportunities and risks. How they deal
with this environment will be their indi-
vidual decision. But the public will not be
disinterested because the way the farm-
ing industry performs is enormously
important to the Nation's well-being.
Thus, how society and farmers will
choose to share the risks of producing
under these new circumstances remains
to be seen.


Atrt


Sk- ?


~W




L ~-c''" :f.i








How a Dime Can Help Us Save Our Resource Base

By James N. Benson and Chris Risbrudt


5 ot a dime? Look at the edge. It's
so thin you can hardly see it. But
the thickness of a dime represents
the difference between maintaining our
soils in good condition and allowing them
to deteriorate. The dime reminds us
what a thin line there is between sound
and unsound resource management.
Keep that dime in mind. It can help us
remember how fragile our resources are.

Through the action of water, air, and soil
micro-organisms, topsoils form very
slowly. On the average, topsoils form at
the rate of about 1/30th of an inch a year
- about the thickness of a dime. The
average topsoil also loses a certain
amount through erosion. But if the top-
soil erodes no faster than it forms, the
erosion is considered tolerable. There is
no net loss in topsoil thickness, and the
soil's inherent productivity is maintained.
Excessive soil loss, however, eventually
reduces inherent productivity.

Our soils sustain the crops, livestock,
and trees upon which a healthy agricul-
tural economy depends. Careless or ex-
ploitive management can lead to exces-
sive soil erosion, water pollution, and
other problems that generations of work
may not be able to correct. Civilizations
have perished as the fertile soil they
were founded upon washed away. If we


treat our soils, water, and forests right,
they will serve future generations as well
as they have served us.

The United States is blessed with vast
areas of fertile soils that support the
most productive agriculture the world
has known. The total area of the United
States is about 2.36 billion acres, includ-
ing more than 100 million acres of inland
and coastal waters. About one-third is
owned by the Federal Government. The
other two-thirds about 1.5 billion
acres is owned by individuals, or-
ganizations, and State and local govern-
ments. Most of the Nation's crops, live-
stock, and forest resources are on non-
federal lands.

Nearly 90 percent of the nonfederal land
is crop, forest, range, and pasture land.
The rest is urbanized or otherwise de-
veloped, mined, or barren. The Nation's
agricultural lands and related water re-
sources produce enough food and fiber
not only to meet domestic needs but also
to supply about one-tenth of total over-
seas consumption. But will America's
cornucopia always overflow? Resource
problems in some areas threaten our
farmers' ability to continue to increase
productivity. Much agricultural land -
especially sloping cropland is eroding
faster than the soil can rebuild itself


James N. Benson is Writer-Editor, Appraisal and Program Development, Soil Con-
servation Service.
Chris Risbrudt is Staff Economist, Cooperative Forestry Program, Forest Service.








through natural processes. Each year
about 3 million acres of agricultural land
are converted to nonagricultural uses.
Once converted, these acres are per-
manently lost to food and fiber produc-
tion. Depletion of ground water threatens
continuation of irrigated agriculture in
extensive areas of the West. Floods
threaten life, property, livestock, and
crops in many upstream watersheds. Be-
cause of continued development on flood
plains, the likelihood is for greater dam-
age in the future. Deterioration of water
quality limits potential use of water for
irrigation, municipal and industrial supply,
fish and wildlife habitat, and other pur-
poses.

In 1977, the most recent year for which
accurate data are available, there were
about 413 million acres of cropland in the
United States. Cropland acreage has in-
creased slightly since about 1970 but is
still some 10 percent lower than in 1958.
The decline in the sixties reflects the
abundance of farm products during the
period. The increase in the seventies re-
flects the recent strong growth in foreign
demand. Nearly half of all cropland is in
row crops corn, soybeans, cotton,
and the like. About one-fourth is in close-
grown crops such as small grains. The
rest is in orchards, hay, or truck crops.

The acreage of irrigated cropland has
doubled in the last 30 years. Most of the
Nation's irrigated land is in the 17 West-
ern States, but the irrigated acreage in
the Midwest, Southeast, and Middle
Atlantic States is increasing. Most of the
recent growth in irrigation has been
concentrated in Nebraska and Kansas,
where irrigation water is pumped from
deep aquifers. From 1971 to 1973, the
12 percent of the Nation's cropland that
was irrigated produced more than 25


percent of the total value of U.S. crops.

Use of the land is governed largely by in-
herent soil productivity and by conditions
at a given site. Productivity is influenced
by many factors, including natural fertil-
ity, moisture-holding capacity, and soil
temperature. Other site conditions such
as salinity, soil density, and slope can
also determine what crops a farmer can
grow.

Many problems can stem from land uses
that ignore natural soil conditions. Too
much irrigation can cause leaching of salt
into ground water and re-emergence of
that salt somewhere else. Where the salt
seeps back to the surface, it damages or
destroys crops or grasses. Or, sloping
land that might be perfectly suited to
pasture could be severely eroded if
cropped.

Remember that dime? It represents a
tolerable amount of soil erosion. Across
the Nation, the average rate of soil ero-
sion is just about at that tolerable level.
On cropland, however, the average ero-
sion rate is higher.

Rates of soil loss vary but are generally
low on undisturbed soil under native
vegetation. On about one-fourth of the
Nation's cropland, however, sheet and rill
erosion the removal of soil in thin
layers or small channels by moving water
- exceeds the tolerable rate. The most
severely eroding 10 percent of the Na-
tion's cropland accounts for more than
half of all sheet and rill erosion. Add soil
loss through wind erosion, and one crop-
land acre in three is eroding faster than
the tolerable rate.

Conservation tillage, a form of tillage in
which a crop is planted in residue of the








- previous crop, is gaining favor in many
areas. It not only reduces erosion as
much as 90 percent but also saves time
and fuel. And it provides more food and
cover for the wildlife that normally lives
on cropland. The major factor limiting
conservation tillage is cost of the spe-
cialized equipment required. Conserva-
tion tillage also relies heavily on chem-
icals to control insects and weeds, and
therefore increases the risk of subse-
quent water pollution. Despite these
potential drawbacks, acreage under
conservation tillage probably will increase
steadily during coming years.

Forests Cover Third of Our Land
S The picture is considerably brighter for
the forests in the United States. Despite
a declining trend, the Nation has a huge
and productive forest land base that can
meet our needs as far into the future as
we can see. The problem is to intensify
our forestry and wood-using practices to
make full use of the potential productivity
available.

Forests cover about one-third of the Na-
tion's land area 737 million acres.
Nearly two-thirds of this is suited to and
available for commercial timber produc-
tion. Most of this commercial forest land
is in nonindustrial, private ownership.
One-fifth is administered by the U.S.
Department of Agriculture's Forest Serv-
ice, and the forest industries own a
productive 14 percent. Nonindustrial, pri-
vate ownership is concentrated in the
Eastern United States. Nearly half of




On about one-fourth of the Nation's cropland,
Sheet and rill erosion exceeds the tolerable
n rate. This west Tennessee cornfield is eroding
Severely following one brief storm.








these forests are in the South, and a
substantial portion are in the North.
Relatively few nonindustrial private acres
exist in the West; most are publicly or
industrially owned.

Harvest of timber in the United States
totaled more than 14 billion cubic feet in
1976. About 48 percent of this volume
came from nonindustrial private forests
such as farm woodlots, while almost 30
percent came from forest industry lands.
Seven-tenths of timber harvested in the
U.S. is softwood. Annual growth of
American forests presently exceeds the
amount of timber harvested by about 50
percent. In 1976, growth on commercial
forest lands amounted to 21.7 billion
cubic feet. About 57 percent of this
growth was in softwood trees. Most of
the total growth occurred on nonin-
dustrial private forests. Since 1952,
annual growth on all ownerships has in-
creased, although the greatest increase
has been on nonindustrial private owner-
ships.

Despite the fact the forests are presently
growing more wood than we are using,
Forest Service projections indicate even
more is needed to meet future demands.
Should present trends continue, prices
for softwood and desirable hardwood logs
will rise 2 to 2.5 percent faster than
inflation as demand overtakes supply.
However, economically feasible invest-
ments in forest lands exist on 168 million
acres. Nearly three-fourths of these eco-
nomic opportunities are on nonindustrial,
private lands.

Products from the forest play an impor-
tant role in the U.S. economy. In 1972,
timber-based economic activity accounted
for 4.1 percent of the Gross National
Product. Employment in timber-related


U.S. Commercial Forest Land
(millions of acres)


Current and Potential Net
Annual Growth per Acre of U.S.
Forests by Region

Cubic feet of timber
125
1 Current
1976
100

0 PolenrlI

75-



25 -- -



25



North South Rocky Pacific
Mountain Coast








activities from timber management to
retail trade totaled 3.3 million. With
forests, the problems do not usually in-
volve soil degradation. Rather, they are
ones of motivating forest owners to tap
full productive potential. While growth in
U.S. forests is substantial, it falls short
of the potential. Current growth on com-
mercial timber lands is only three-fifths of
the potential which would be achieved
with reasonably intensive management,
such as reforestation, thinning, and prun-
ing.

Increased management of our forests is
necessary if we are to produce the wood
needed in the future. Most of the in-
crease must come from nonindustrial pri-
vate lands. However, for many reasons
these owners are not making the needed
investments in their forests. Surveys of
commercial forests in the South, where
most of the potential exists, show that
less than one-third of the pine forest
lands harvested are regenerating in pine
trees. Instead, in many instances, low-
quality hardwoods take over. Should this
process continue, the Nation will be un-
able to supply the softwood we are likely
to need in the future.

Some of the constraints which discourage
landowners from more intensively
managing their forests are lack of invest-
ment money, scarce technical knowledge
and advice, limited market information,
long time periods before investments pay
off, low prices, and risks from fire, in-
sects, and disease. Many forest land-





Only about 40 percent of the Nation's
rangeland is in good to excellent condition.
On this Kansas range, cattle are feeding on
reseeded native grasses.


owners probably consider forestry a poor
investment relative to other possibilities.
Also, many people own forests for rea-
sons other than growing timber, such as
recreation, second home sites, specula-
tion, and simply the satisfactions of
ownership.

Land Management Needs
In general, grazing lands are divided by a
climatic line at about the 96th meridian.
Most rangeland is to the west and most
pastureland to the east. The condition of
rangeland is measured by comparing
existing plant cover with the potential na-
tural cover for the site. Experts claim
overall condition of the nonfederal range-
land has improved continuously since the
1930s, and improvement since 1963 can








be documented. Nevertheless, only
about 40 percent is in good or excellent
condition. Almost one-third of the Na-
tion's nonfederal rangeland is eroding at
excessive rates. And because rangeland
generally recovers from erosion more
slowly than other agricultural lands, the
effects of erosion on rangeland are
magnified.

There are three times as many acres of
nonfederal rangeland as of pastureland,
but the pastureland provides more total
forage. Even so, better management
could improve pastureland production by
about one-third. Excessive erosion is not
as widespread on pastureland as on crop-
land or rangeland. Only about 10 percent
of the pastureland is eroding at rates that


eventually would reduce inherent produc-
tivity of the land. The average rate of
erosion on pastureland is less than half
that on cropland.

In some areas, grazing lands are being
converted to cropland or to nonagricul-
tural uses. Because demands for red
meat currently are low, the losses of
grazing lands have not yet led to produc-
tion shortfalls. Should these demands rise
again, however, shortages in available
grazing lands could lead to meat short-
ages and higher prices.

From 1958 to 1977, almost 40 million
acres of rural land were developed for
housing, industry, roads, and similar
uses. Most of the conversions were








made during the second half of the
period. Almost one acre in three of the
conversions during this period was forest
land, less than one in four was cropland,
and about one in five was pasture or
range.

Conversion of agricultural lands to nonag-
ricultural uses is considered irreversible
because reclamation generally is costly.
For each acre developed, an average of
one additional acre is isolated and lost
from potential or actual production. Of
the nonfederal rural land not now being
cropped, only about 12 percent (127 mil-
lion acres) has potential for conversion to
cropland. This potential cropland now is
mainly grazing and forest lands, how-
ever, so there would be fewer acres
available to grow forage and wood pro-
ducts.

Wildlife Habitat Wild animals and birds
need food, cover, and water to survive.
Many people view the condition of wild-
life habitat in an area as a barometer of
resource conditions. Irrigation, conserva-
tion tillage, and other management prac-
tices can change the character of the land
and thus its suitability for various kinds of
wildlife. Habitat quality on cropland has
declined in many areas because of larger
fields, removal of windbreaks, continuous
cropping, and other factors.

Since the condition of nonfederal range-
land has been improving, wildlife habitat
on rangeland also has been improving.
Habitat quality on privately owned wood-
land is low in some places where wooded
areas are either being overgrazed or un-
managed. In 1977 more than 70 million
acres of nonfederal land were classified
as wetlands. Wetlands provide habitat for
a variety of wildlife. They also serve as
sediment and nutrient traps for the


streams that flow into and through them,
and in this way enhance downstream wa-
ter quality. Since 1958, however, wet-
lands have been drained for agricultural
and other purposes at the rate of
500,000 acres a year. In recent years,
the conversion rate slowed to about
300,000 acres a year.

Water Management Needs
Without water, the most fertile soil could
not support a single blade of grass. Wa-
ter requirements of different plants vary,
and natural precipitation can be supple-
mented by various water management
techniques, including irrigation. Recent
dry periods have underscored the need
for improved management so that all wa-
ter users farmers and nonfarmers
alike have enough. Precipitation in the
48 contiguous States ranges from less
than 4 inches to more than 200 inches
annually. The annual average is about 30
inches. In the western half of the United
States, most areas receive less than the
average, and seasonal and year-to-year
variations tend to be greater than in
other regions. In general the 17 Western
States are considered "water short."

To ensure an adequate, steady water
supply for all users, dams and reservoirs
have been constructed, water has been
transferred between regions, and ground
water sources have been tapped. With-
drawals from surface waters exceed 250
billion gallons a day. Withdrawals from
ground waters exceed 80 billion gallons a
day, including 21 billion gallons a day that
are not replaced through natural
recharge.

Four times more water is used for
producing food and fiber than for all other
purposes combined. In semiarid parts of
the country, agricultural production de-








pends heavily on water storage systems.
In arid regions, production of many crops
depends almost totally on irrigation. Even
in humid areas, farmers are irrigating
cropland to compensate for periodic dry
spells during the growing season.

Of the water diverted from surface
sources or withdrawn from the ground
for irrigation, about 78 percent reaches
the farm. Of the water that reaches the
farm, about 53 percent is taken up by
the crop. Inefficient irrigation can de-
grade water quality (by leaching minerals
into ground water or carrying agricultural


chemicals into surface water), waste wa-
ter and energy, reduce instream flows,
and increase production costs.

In arid and semiarid areas, increasing de-
mands for water for nonagricultural uses
could limit the amount of water available
for agriculture. Much water could be
conserved through better management of
soil moisture, control of unwanted vege-
tation, and improved water handling
techniques. It is unlikely that water sup-
plies can be increased significantly by
constructing more reservoirs. Many of
the best sites have been developed


In California's Imperial Valley, a technician takes soil moisture readings with a neutron
probe. The information will help the farmowner conserve irrigation water through better
management of soil moisture.


OPP




























































When it rains, animal wastes and other runoff from this feedlot pollute a nearby stream,
degrading its water quality.


36








Areas Where Potential for Degradation of Water Quality Is High Because of
Agricultural Nonpoint Source Pollutants.


Use of Nonfederal Land in the United States and Caribbean Area, 1977.








already and development costs at most
remaining sites are becoming prohibitive.

Pollution As food and fiber production
is increased to meet domestic and for-
eign demands, likelihood of water pollu-
tion will increase. As more farmland is
converted to other uses, marginal land
will be brought into production. Because
marginal land is generally more erodible
than good farmland, more sediment and
associated pollutants will enter lakes and
streams.

To some degree, 95 percent of the Na-
tion's drainage basins are polluted. Bac-
teria, nutrients, salts, sediment, and
chemicals are the most common and
most serious water pollutants associated
with agriculture. These pollutants are
carried mainly in runoff from fields and
feedlots and in irrigation return flow.
"Acid rain" is degrading water and lower-
ing the pH of the soil in parts of the Na-
tion, especially the Middle Atlantic and
Northeastern States. Heavy concentra-
tions of acid rain can kill fish and plants
and require farmers to apply more lime
than normal.

Upstream flooding Nearly 12 percent
(175 million acres) of the Nation's non-
federal rural land is subject to flooding.
Almost half of these flood-prone lands
are in the Southeast. Some 21,000 com-
munities have flooding problems, includ-
ing 6,000 with populations exceeding
2,500. Annual flood damage to cropland,
pastureland, built-up areas, and other
property in upstream watersheds of 400
square miles or less totals about $2 bil-
lion per year. Damage to cropland and
pastureland represents two-thirds of the
total. By the year 2000, annual flood
damage to all lands is projected to in-
crease by nearly half. Almost all the in-


creased damage will occur on real estate
improvements and community develop-
ments.

The Outlook American agriculture has
doubled production in the past 30 years
in response to increasing domestic and
foreign demands. Forest wood produc-
tion has remained somewhat above de-
mand. We can expect demands for both
agricultural and forest products to con-
tinue to increase, and we can expect
concurrent pressures on our natural re-
sources to meet the rising demands. The
Nation can increase and protect its
agricultural production by
Developing new technology
Protecting agricultural lands from
erosion, and
Limiting conversion of agricultural
lands to nonagricultural uses

Because of technological improvements
better crop varieties, fertilizers,
equipment, and farming techniques -
crop yields have increased nearly 2 per-
cent per year since the 1930's. In the
short term, such increases can offset
losses of inherent soil productivity caused
by erosion. Some experts predict, how-
ever, that annual increases in yields due
to technological improvements will be
smaller in the years to come. Controlling
erosion will become more important be-
cause continued excessive erosion over a
long period will reduce productive capa-
bility of the Nation's soils.

To meet future demands for farm com-


Because of technological improvements, crop
yields have increased steadily since the
1930's. This Iowa farmer is harvesting a
record soybean crop that was planted using
conservation tillage on land contoured and
terraced to reduce erosion.








Woodlands can often be used for dual
purposes. A Louisiana dairy farmer is using
4, this woodland to graze his dairy cows.


ANAr.


IAJAL








modities, we can continue to depend on
improved technology alone, or couple it
with conservation. The increasing use of
conservation tillage shows that saving the
soil can be compatible with production
technology. The best soils for agriculture
are also among the most attractive for
urban development, so we can expect
competition for agricultural lands to re-
main strong. Loss of farmland could sev-
erely reduce the choices available to
coming generations of farmers.

Forestry In forestry, greater and more
efficient productivity is also possible, and
practical, by 1) applying technology for
intensifying timber-growing practices on
forest land, but particularly on nonindus-
trial private woodlands, and 2) continuing
research and application of findings to
make better use of the wood supplies we
have. Intensified management of the Na-
tion's forest lands can reduce the rate of
increase projected for forest product
prices by expanding wood supplies. At
the same time, it can enhance other
benefits of the forests, such as recrea-
tion, range, wildlife, and fish.

Recent studies highlighting economic
opportunities for private investment in
forest lands have shown that such invest-
ments can yield good returns. In addi-
tion, new tax provisions encourage
reforestation. Crop insurance for timber
is in the pilot testing stage, and as it be-
comes feasible will be expanded. Market
information consisting of prices landown-
ers can receive for their trees is now
widely available in the South, and is
extending to other regions. Technical
assistance for forest management is avail-
able from State Foresters, forestry
consultants, and Extension and industry
foresters, who also disseminate new re-
search information. These factors will


help increase forest productivity in the
future. Present work on genetic
improvement of trees will result in seed-
lings that will grow 19 to 25 percent fas-
ter by the year 2030.

Improving utilization of our timber re-
sources can also greatly help meet future
demands and hold prices down. Better
harvesting and processing practices can
reduce waste and increase the amount of
valuable products obtained from each log.
Research into manufacturing processes
can encourage substitution of our abun-
dant hardwood resources for the more
scarce softwood. Today about 70 percent
of our harvests are softwood. In the fu-
ture, new knowledge and expertise will
allow more use of our hardwoods.

The other choice is to continue forest
and wood utilization as we are currently,
and wait for the inevitable wood short-
ages and the spiraling prices that accom-
pany them.

We must look beyond today's agricultural
surpluses if we want to avoid shortages
tomorrow. Remember that dime? It re-
minds us how fragile our resources are.
Protecting those resources is a job that
never ends.

Further Reading

Soil, Water, and Related Resources in the
United States: RCA Appraisal Parts I and
II. Soil Conservation Service, P.O. Box
2890, Washington, D.C. 20013. Free.

An Assessment of the Forest and Range
Land Situation in the United States.
Forest Service. For sale from the Super-
intendent of Documents, U.S. Govern-
ment Printing Office, Washington, D.C.
20402. $9.00.








What Farmers Buy Makes Production Fly
By Paul Andrilenas and Ted Eichers


farmers have relied increasingly on
the use of purchased items or in-
puts to produce the Nation's food
and fiber. Gains in agricultural productiv-
ity in the last 40 years were largely asso-
ciated with farmers' use of purchased
items which increased nearly seven times
in terms of dollars spent. Since 1940,
use of purchased inputs enabled farmers
to double crop output per acre. The
combination of improved seed varieties,
use of commercial fertilizers, synthetic
pesticides and improved tillage and har-
vesting equipment has resulted in in-
creasing output per man hour tenfold
while the amount of land used remained
almost unchanged.

Once largely self-sufficient, U.S. farmers
now spend nearly two-thirds of their cash
receipts to purchase and finance things
used in the production process. Between
1940 and 1980 purchased inputs (includ-
ing credit) increased from 44 percent to
61 percent of cash farm receipts. Antici-
pated increased demands on the limited
land and water resources of U.S. agricul-
ture assure that purchased inputs will be-
come even more critical in the future.
Major purchased farm input items include
fertilizer, pesticides, farm machinery,
feed, fuels and energy, and seed.

The growing use of fertilizer has been a
major factor in doubling crop output per


acre in the last 40 years. However, after
increasing steadily for several decades,
the growth in U.S. fertilizer use is begin-
ning to slow. Little expected growth in
crop acres and reduced yield gains -
along with the potential to increase the
efficiency of fertilizer use will further
trim the fertilizer growth rate. Major
plant nutrients used by farmers are nitro-
gen, phosphate, and potash. In 1980/81
farmers used 23.5 million tons of these
materials, a 478 percent increase over
1950. They spent over $9 billion in 1981
on fertilizer, of which about half was for
nitrogen.

Use of chemical fertilizer enabled farmers
to take advantage of the production po-
tential of improved seed varieties. How-
ever, agronomic considerations were not
the primary purpose for developing new
fertilizer products. Since fertilizer pro-
duction is usually located away from the
areas of use, fertilizer product develop-
ment has concentrated on developing
products with a high nutrient content that
are more economical to transport, store,
and apply. Bulk handling has become
very popular in recent years, greatly
reducing the cost of transporting, storing
and applying fertilizer. Special services
such as soil analysis to determine crop
nutrient requirements are also generally
available from fertilizer dealers.


Paul Andrilenas and Ted Eichers are Agricultural Economists, National Economics Di-
vision, Economic Research Service.










Trends in acres harvested, crop output, and labor 1940-80

Acres Crop Labor in crop
Year harvested output production


Million Million
acres Index hours

1940 341 67 652
1950 345 76 428
1960 324 93 268
1970 293 100 179
1980 353 131 141

Percent
change
1940-80 +4 +96 -78


Trends in cash farm receipts and expenditures for purchased inputs, 1940-80


Cash farm Expenditures for Inputs' share of
Year receipts farm inputs' cash receipts


Billion dollars Percent

1940 9 4 44
1950 29 13 35
1960 35 17 47
1970 55 27 50
1980 140 85 61



'Includes interest. Does not include livestock, labor, services, taxes, or land.









Trends in expenditures for selected farm input items, 1950-1980.


Expenditures 1/

Percent change
Year 1950 1960 1970 1980 1950-1980

Billion dollars Percent

Feed 3.3 4.6 8.0 18.6 463
Fertilizer 1.0 1.3 2.4 9.5 850
Pesticides 0.2 0.3 0.9 3.1 1450
Farm machinery 2.2 2.0 4.0 9.1 314
Fuels and energy 1.3 1.7 3.0 10.2 685
Seed 0.5 0.5 0.9 3.9 680
Machinery repair
and operation 1.1 1.7 1.9 6.3 473
All production
inputs 1/ 13.4 20.7 34.2 105.2 683


1/ Not including rents, labor, or taxes.


Pesticides In 1981 U.S. farmers
bought over 700 million pounds of pesti-
cides (chemicals used to control crop or
livestock pests). Farmers' annual expen-
ditures for pesticides rose from about
$300 million in 1960 to $3.6 billion in
1981, a 10-fold increase. While much of
this jump was a result of price rises, pur-
chases more than quadrupled during the
21-year period after accounting for infla-
tion.

The dramatic rise in pesticide use during
the 1960's and 1970's resulted largely
from development of new types of weed
control chemicals (herbicides) that could
control specific weeds and were designed
for use on specific crops such as corn,
soybeans, wheat, or cotton. Herbicides
essentially eliminated the need for
mechanical and hand weed control for
many major crops. Use of insecticide


chemicals enabled cost-efficient farming
systems which permitted farmers to
plant large acreages of a single crop on a
continuous basis without serious pest
problems.

Total Tractor HP Doubles
Modern machinery has been one of the
major factors in reducing labor require-
ments in agriculture. Although the total
number of farm tractors remained almost
unchanged between 1960 and 1981 at
about 4.7 million units, total tractor
horsepower available on farms nearly
doubled. This trend represents an in-
crease in average horsepower per tractor
from 33 to 58. Half the new tractors pur-
chased in 1981 had a power rating grea-
ter than 100 horsepower. This compares
with only 3 percent of the new tractors
produced with over 100 horsepower in
1965. Large-scale tractors and equipment








have enabled one person to perform
nearly all the tillage, planting, harvesting,
and other mechanical operations on
several hundred acres of land.

Over time the capacity of machines has
increased, as has the variety of tasks and
the precision with which tasks are per-
formed. Manufacturers have introduced
many features to add comfort, conven-
ience, durability, and flexibility. Tractors
produced today have many automatic
functions. Traction boosters can auto-


matically transfer weight from front to
rear axle. Automatic speed controls pro-
vide precision timing needed for planting
and chemical application, while hydraulic
controls and improved transmissions
allow for greater ease in handling farm
implements.

Combines can harvest more grain with
less grain loss. Some self-leveling models
are designed for use on hilly terrain.
Large cotton pickers with improved han-
dling of picked cotton have reduced the








need for onfarm cotton storage. Planting,
tillage, and forage and hay harvesting
equipment have all been improved to
provide greater operating precision,
maneuverability, capacity, and flexibility.

Availability of commercial feeds has made
possible large-scale specialized livestock
operations. In 1981 livestock feed pur-
chases amounted to $19.0 billion, about
15 percent of all U.S. farm production
expenses. Besides the feeds farmers
purchase, a large portion of feed concen-


trates are consumed on the farms where
they are produced.

Activities from feed manufacturing to
marketing and processing the final farm-
fed commodity are often carried out by
the same management. Almost all broil-
ers are produced by growers who have
contracts with the feed producer. Over
80 percent of the farmers producing eggs
have some form of contractual arrange-
ment with their feed supplier and/or the
egg marketer. Contractual production
agreements between hog producers and
feed suppliers are also becoming quite
common.

Fuel Use Agriculture accounts for a
very small share of U.S. fuel and energy
consumption. For example, farmers
accounted for only 4 percent of total
U.S. motor gasoline use in 1981. That
year farmers spent nearly $11 billion for
fuels and energy, a 7-fold increase over
1950, with most of the increase oc-
curring in the 1970's. Direct natural gas
and liquefied petroleum gas (LP) use, for
agricultural production purposes, repre-
sents only 1 or 2 percent of the domestic
market for these fuels. However, agricul-
ture accounts for about 20 percent of all
diesel fuel used in the United States.

Modest gains in agricultural energy de-
mand during the period 1960-1974 can be
explained to a large extent by the switch
from gasoline to diesel fuel powered en-
gines. Diesel tractors are more energy
efficient than gasoline powered units de-
spite their higher horsepower. Most of




In 1981, U.S. farmers spent an estimated $3.6
billion on about 700 million pounds of
g pesticides to control livestock pests, or crop
pests as in this Michigan cherry orchard.








the indirect energy (energy used to pro-
duce other products) consumed in agri-
culture is provided by natural gas and is
put to work primarily to produce nitrogen
fertilizer. Nearly 40 percent of the ener-
gy consumed in crop production in 1980
was used indirectly to make fertilizer and
pesticides.

$4 Billion to Buy Seed
In 1981 farmers spent about $4 billion to
buy seed. Although this amount is
dwarfed by several other production
items, seeds have accounted for an in-
creasing share of agricultural input ex-
penditures in recent years. This rise re-
flects both an increase in the amount of
seeds farmers purchased and a significant
jump in seed prices. Genetic improve-
ments in seed varieties resistant to in-
sect and disease pests and capable of re-
sponding to higher fertilization rates have
been a major factor in increased crop
productivity. Hybrid seeds have been de-
veloped to provide higher yielding plant
varieties to grow under various climatic
and farming conditions.

Farmers long have relied on custom ser-
vices for seasonal or infrequent farming
operations. Custom application of pesti-
cides and fertilizers, and custom harvest-
ing of crops, are common throughout
U.S. agriculture. Farmers are also in-
creasingly using such services as soil
testing, animal health care, artificial
breeding, and seed treating. Repair and





A soil test tells the farmer how much
fertilizer, especially nitrogen, to put on his
cropland. Too much nitrogen wastes money
and not enough can result in lower crop
yields. The lab technician here is preparing
soil samples for analysis.


Changes in price indexes for farm
commodities and production items,
1972-82.


All farm commodities
Crops
Livestock


Percent change
102
110
95


All production items 150
Machinery 209
Fuels and energy 292
Pesticides 85
Fertilizer 181


maintenance of trucks, tractors, com-
bines, and other farm equipment is an
important adjunct to agricultural pro-
duction.

The Squeeze Increased expenditures
for purchased production inputs are the
result of higher prices, as well as greater
input use. Prices of purchased production
items increased as costs to produce,
transport, and retail these products
climbed. In the last 10 years prices farm-
ers paid for purchased items increased at
a rate about 50 percent greater than
prices they received for products they
sell, resulting in a "cost-price squeeze."

Economic conditions have had some
dramatic effects on the use of purchased
farm inputs and prices paid for them in
the 1960's and 1970's. Expenditures for
fuel, fertilizer, pesticides, and farm
machinery went up much more between
1970 and 1980 than from 1960 to 1970.
During the 1970's fuel expenditures
soared nearly 400 percent compared to a
15-percent rise in the 1960's. Fertilizer
expenditures increased more than 3
times as fast in the 1970's as in the
1960's. On the other hand, in the 1970's








(except for chemicals) quantities used
rose little or not at all. Because of low
farm incomes, unit sales of nearly all
farm machinery items dropped in the ear-
ly 1980's. For example, 2-wheel drive
tractor unit sales fell 15 percent in 1980,
13 percent in 1981, and in the first 5
months of 1982 sales were 20 percent
below the same period for 1981.

Financing requirements increased drama-
tically as farmers substituted capital
items for labor and expanded the size of
their farms. While interest rates began to
rise in the early and mid-1970's, it was
not until the 1978 to 1982 period that in-
terest costs had an appreciable dampen-
ing affect on the purchase and use of
farm production items. The high interest
rates caused farmers to delay purchases
of many major items in order to minimize
the interest costs on debt. Machinery
purchases may be put off several years,
while purchases of such items as fertili-
zers, pesticides, and seed can be delayed
until planting time. Farmers have thus
forced farm supply dealers and producers
of these items to maintain the necessary
inventories. As a result, there is greater
uncertainty about the availability of sup-
plies of input items and the prices farm-
ers pay for them.

Farm Supply Industries
The farm machinery and fertilizer indus-
tries specialize in producing farm supplies
and are largely devoted to producing
them. However, production of some farm
input items is only incidental to the
manufacturers' overall operations. For
example, farm energy and pesticides
account for less than 5 percent of the
petroleum and farm chemical producers'
total sales.

The three major fertilizer nutrients


(nitrogen, phosphate, and potash) each
have unique production characteristics.
While producers tend to specialize in one
of these products, some firms turn out
two or all three nutrient items. Nitrogen
fertilizer is produced as anhydrous am-
monia by combining nitrogen from the air
with hydrogen from natural gas. About
53 firms operating about 80 plants pro-
duce nitrogen fertilizer. In periods of
rapid expansion in the nitrogen fertilizer
market, there is usually an influx of new
firms, increasing competition in the in-
dustry. In periods when sales are slow,
smaller firms often discontinue operating
and their market is absorbed by stronger
dominant firms.

Phosphate fertilizers are produced by
treating phosphate rock with sulfuric
acid. The United States has major phos-
phate rock deposits, particularly in Flor-
ida and North Carolina. Our country ex-
ports large amounts of phosphate either
as rock or as processed fertilizer. Many
of the phosphate fertilizer manufacturing
facilities are located in phosphate mining
areas. Frequently, phosphate fertilizer
manufacturers also produce nitrogen.

Potash is a mineral extracted from the
earth. Little additional processing is re-
quired once the mineral has been ex-
tracted. While most potash was provided
by U.S. mines in New Mexico in the
past, U.S. farmers currently obtain more
than 75 percent of their potash fertilizer
from Canada. The Province of Saskatche-
wan controls a substantial share of Can-
ada's potash industry.

Pesticides are complex organic chemicals
produced by major chemical companies.
However, pesticide chemicals account for
a very small share of the manufacturer's
total business, generally less than 5 per-








cent. About 70 firms produce agricultural
pesticides, but four firms accounted for
well over half of all the farm pesticides
turned out in 1976. Pesticide markets for
specific crops are often dominated by a
few firms. In 1976, the leading firm
accounted for 28 percent of the total
weed control market. The two leading
firms accounted for 42 percent of the
weed control market for corn and 37 per-
cent of this market for soybeans that
year.

Research capability to develop new prod-
ucts is probably the most important fac-
tor preventing new firms from entering
the pesticide market. Increasing com-
plexity of the pesticide chemicals de-
signed to control specific pest problems
on specific crops, and the increasing
regulatory requirements, are likely to
continue exerting upward pressure on re-
search and development costs. As a re-
sult, fewer firms are likely to devote
large expenditures on new pesticide re-
search.

Machinery, Fuel
While four or five firms produce most of
the tractors and self-propelled equip-
ment, about 2,000 establishments manu-
facture some specialized farm machinery
items. These specialized farm implement
markets have provided opportunities for
new firms in the industry and made pos-
sible the continued existence of some
small machinery manufacturers. Efficien-
cies obtained through use of large-scale
production facilities, the seasonal nature
of farm equipment demand, and the high
capital costs involved in establishing a
dealer network prevent new firms from
producing tractors and self-propelled farm
machinery.

Since agriculture accounts for a very


small share of the total U.S. fuel con-
sumption (less than 5 percent), the
petroleum industry is not primarily con-
cerned with farm fuel markets. The sup-
ply system for producing and distributing
refined petroleum products is most com-
plicated. About 25,000 fields produce oil
and/or gas in the United States, with
over 500,000 wells owned by some
10,000 producers. These fields and wells
provide crude oil and natural gas for
around 300 refineries, 30,000 bulk termi-
nals, and 200,000 retail service stations.

The domestic petroleum industry con-
sists of large multinational corporations
which may operate various combinations
of wells, pipelines, terminals, refineries,
and service stations. The Organization of
Petroleum Exporting Countries (OPEC)
is also a major determinant of U.S. oil
supplies and prices. In addition, more
than 16 major national legislative and
executive actions initiated since the 1973
OPEC embargo complicate the petroleum
supply system.

Development of the commercial feed in-
dustry has made possible large-scale spe-
cialized livestock operations, and pro-
vided livestock producers who grow their
own grains with feed supplements to help
meet their animals' complete dietary
needs for maximum production. Competi-
tion in the commercial feed industry has
changed in recent years through mer-
gers, consolidation, and other forms of
concentration, particularly on a local and
regional basis. However, on a national
basis feed manufacturing competition has
increased. While the four largest com-
panies accounted for about one-fourth of
all feed industry shipments in the mid-
1930's, their market share has declined
steadily to about half that level today.
Currently, it would require about 20








companies to account for one-fourth the
tonnage manufactured.

R and D Research and development
within the farm input industries varies
with the industry. The pesticide industry
funds most of the research and develop-
ment programs needed to develop new
pesticide products, which are protected
by patents. While the farm machinery
and feed industries also fund research
and development, they draw heavily on
research conducted by publicly funded
universities and experiment stations. The
fertilizer industry probably relies most
heavily on research and development in
the public sector.

The environment in which seed research
and development takes place underwent
a significant change in the 1970's. Pas-
sage of the Plant Variety Protection Act
in 1970 made it possible for seed com-
panies to obtain patents on new plant
varieties they developed. This sparked
the interest of many multinational com-
panies to acquire seed companies and
boosted the capability for undertaking ex-
tensive research.

Foreign trade has had a growing impact
on the fertilizer, pesticide, and farm
machinery industries. The United States
is the world's major producer and user of
pesticides. Nearly half the pesticides pro-
duced in this country are exported,
either directly or through farm products
that are exported. Imports account for a
small share of domestic pesticide use,
less than 10 percent. Exports of farm
machinery and equipment in 1981
reached an estimated $3.1 billion, an in-
crease of 20 percent over 1980, and
accounted for about one-fourth of all U.S.
farm machinery production. Imports of
farm machinery and equipment were esti-


mated at $2.37 billion for 1981, up 15
percent from 1980.

In the last decade the United States has
developed into the world's largest ex-
porter of phosphate fertilizer. Nitrogen
exports and imports have been about
equal, with the trade balance varying
from year to year. However, with rising
natural gas costs it is expected that the
United States will become a net importer
of nitrogen in the future. Most of the
potash U.S. farmers use is imported
from Canada.

Effects of Public Action
Government regulations play an impor-
tant role in activities of some of the input
industries. For example, public action
concerning pesticides has resulted in
rules and regulations to safeguard people
and the environment. Restrictive actions
may be reflected in the marketplace,
with higher farm production costs and
higher consumer food prices. Environ-
mental and health concerns also impact
on other input industries. The feed in-
dustry is affected by community concern
over noise, odor, and dust pollution.
Also, regulations concerning feed addi-
tives will continue to be an important fac-
tor in commercial feed production. In the
fertilizer industry, phosphate rock pro-
ducers must take into consideration the
effect that phosphate rock mines have on
air and water pollution in contiguous
areas.

Government agricultural programs also
have an effect on input industries. Pro-
grams that reduce crop acres tend to cut
the need for fertilizers, pesticides, and
other inputs. Conversely, programs that
increase farm income or reduce the un-
certainty of income tend to spur use of
inputs.








Future Directions In the future the
United States will be called upon to pro-
vide additional food to feed a growing
world population. Since land and water
available to grow crops is limited, in-
creased U.S. food production must come
primarily from greater or more efficient
use of fertilizers, pesticides, farm
machinery, and other inputs.

The growth rate of U.S. farm pesticide
use for the eighties is expected to re-
main stable or even decline slightly. This
assumes greater use of more highly con-
centrated formulations, improved pest
management, better pesticide application
techniques, and more government re-
strictions. Because of higher energy
costs and potential labor and moisture
savings, more farmers will adopt reduced
tillage practices. This will increase de-
mand for pest control chemicals. How-
ever, such rises are not likely to offset
pressures toward overall reduced pesti-
cide use. Larger exports of farm commo-
dities should result in increasing demand
for equipment with greater capacity, and
could affect the future of farm machinery
design.

The U.S. fertilizer industry can expect
increasing production, transportation, and
retailing costs. Specifically, rising prices
of natural gas feedstocks will add to the
cost of producing nitrogen fertilizers and
increase the proportion of nitrogen fertili-
zer imported. Higher energy costs will
also increase the cost of sulfur, and con-
sequently the cost of phosphate fertili-
zers. In addition, increasing mining costs
associated with protecting the environ-
ment and with utilizing lower grade phos-
phate rock deposits will add to the cost
of producing phosphate fertilizers.


Rising fertilizer prices will encourage
farmers to adopt practices that will im-
prove the efficiency of fertilizer use.
Some of the fertilization practices that
farmers will employ are better timing of
application and placement of materials,
use of nitrification inhibitors and slow re-
lease materials, and more accurate as-
sessment of the availability of plant nu-
trients in soils.

New Feed Era The feed industry, in
many respects, is entering a new era.
Many trends and changes that evolved
during the past 10 to 15 years have run
their course and the feed manufacturing
industry will become more complex and
specialized during the next decade. Be-
cause of the growing predominance of
local mills and the rising volume of feed
concentrate and premix sales, the indus-
try probably has more than adequate
capacity in most areas of the country.
Future physical additions to existing feed
facilities probably will involve installation
of more sophisticated controls, including
use of computers to perform mixing and
pelleting functions. Greater attention will
be paid to automatic recordkeeping and
quality control. Fewer new drug products
for use in medicated feeds will be intro-
duced in future years, primarily because
of high research and clearance costs.

Energy prices will continue to go up. But
price increases in the 1980's are not like-
ly to match those of the 1970's. Rises in
natural gas costs are likely to result in
higher nitrogen fertilizer prices, more
efficient fertilizer use, and larger nitrogen
imports. In summary, farming in the fu-
ture will be ever more dependent on the
use of nonfarm inputs to assure efficient
food and fiber production.








Productivity and the Real Cost of Our Food
By Lloyd D. Teigen


f ime-a-loaf bread and 50-a-pound
beefsteak bring to mind the "Good
Old Days." But were those prices
such a bargain? Not really. The last time
bread and beefsteak were priced at those
levels was in 1946 when an hour's work
would bring the factory worker a little
over a dollar ($1.075) before taxes or
other deductions. The price of food ex-
pressed in hours of effort is a much bet-
ter bargain today than then. Productivity
gains have reduced the amount of labor
required to produce and market food and
have increased the number of dollars the
worker reaps for his time.

Over long periods of time, prices and
wages both tend to change so that the
dollar value of an item often loses mean-
ing. The real cost of something can be
better visualized using barter terms,
where workers trade time directly for
goods they consume instead of using
money in exchange. An hour of time to-
day means the same as it did in history,
while a dollar today and one in 1930 do
not. The working consumer is obviously
better off when the proceeds of his or
her work will purchase more goods and
services or when the same consumption
is possible from fewer hours of work.
The choice between consuming more and
working less becomes a matter of indi-
vidual preference.


An hour's work today will buy twice as
much food as an hour's work did in 1930.
This can be illustrated by individual food
commodities or by the market basket
represented by the Consumer Price In-
dex. Points of time are chosen to illus-
trate some of the changes of both the
absolute and relative prices of food over
time. While round steak and bacon were
nearly equal in price in 1930, changing
supplies and consumer preferences have
raised the price of steak to twice that of
bacon. Changing production technology
and vertical market coordination have
dramatically reduced the real price of
eggs. The real prices of coffee and sugar
have risen nearly 50 percent between
1970 and 1980. The vagaries of the in-
ternational market and U.S. import poli-
cies are major considerations here.

The trend toward decreasing food prices
has not been without interruption. The
1940s through the end of the Korean
War was a period of considerable price
instability in which food prices were high-
er at the end of the period than the be-
ginning. The last decade, particularly
since 1973, has seen considerable fluc-
tuation in the real price of food in a time
of overall price inflation. In retrospect, it
appears that, for food, 1972 was a pretty
good year for the consumer.


Lloyd D. Teigen is an Economist, National Economics Division, Economic Research
Service.








Individual farmers have gained in real
terms, since each farmer and farmworker
is receiving more consumer time for
their efforts than before. The farmer's
return is his or her portion of the con-
sumer's cost of food. The farm price per
unit of food product is found by multiply-
ing the consumer's cost in worktime by
the farmer's share of the consumer food
dollar. The farm price per unit of food
expressed in consumer's time has de-
creased since 1930, although the change
from 1970 to 1980 is much less than
earlier changes. Consumer time per unit
of food output in recent years has been
shared among a much smaller number of
farmers than in 1930, so that the con-
sumer time received per unit by each
farmer and farmworker in 1970 and 1980
is more than 10 percent greater than
earlier years. This represents a real gain
in the well-being of the farmer.

The increased labor productivity on the


farm has lowered the time requirements
for each unit of output and reduced the
total employment necessary for food pro-
duction. Higher levels of total output
further increased the real returns of the
individual farmer and farmworker. In fact,
livestock production in 1980 is 2.1 times
its 1930 level, crop output is 2.2 times
the 1930 level, and the volume of output
available to the consuming public and ex-
port market is 2.3 times its level in
1930.

How Was Real Cost Brought Down?
The interaction of supply and demand ex-
plain part of the change. U.S. population
growth has averaged 1.2 percent per
year, contributing to the demand for food
and farm products. Annual increases of
hourly earnings averaged 4.5 percent be-
fore 1970 and more than 7.3 percent
since 1970, although these were offset
some by increasing marginal tax and so-
cial security rates and shorter work-


Minutes of work equal to the price of selected food items 1/

Item Amount 1930 1950 1970 1980
Minutes
Round steak 1 Ib. 48.4 43.8 28.8 29.4
Potatoes 10 lb. 40.9 21.6 19.9 20.2
Bacon 1 Ib. 48.3 29.8 21.0 15.5
Eggs 1 doz. 50.6 28.3 13.6 8.9
Bread (2 loaves) 3 lb. 29.3 20.1 16.1 16.2
Butter 1 lb. 52.7 34.1 19.2 20.0
Milk 1 gal. 64.1 38.6 29.2 22.3
Coffee 1 Ib. 44.9 37.2 20.2 33.3
Sugar 5 Ib. 34.7 22.7 14.4 22.8
Rice 5 lb. 54.0 39.3 21.2 27.2
All the above 1 ea. 467.9 315.5 203.6 215.8
Total food CPI 2/ 60.0 40.9 28.8 31.9

1/ Price of food item relative to manufacturing wage rate after taxes and employee social security
contributions.
2/ Quantity of each item in Consumer Price Index market basket such that the entire market basket
required one hour in 1930.









Minutes of Nonfarm Labor Equal to the Farmer's Share of
Retail Food Prices 1/


Item Amount 2/1930 1950 1970 1980


Minutes
Round Steak 1 lb. 35.8 32.8 17.9 18.5
Potatoes 10 lb. 16.4 8.6 5.8 5.7
Bacon 1 Ib. 30.9 19.1 10.7 7.9
Eggs 1 doz. 35.4 3/19.8 8.6 5.7
Bread (2 loaves) 3 lb. 6.2 4.2 2.3 2.4
Butter 1 lb. 40.6 26.3 13.6 14.0
Milk 1 gal. 35.3 21.2 14.6 11.6
Coffee 1 Ib. -
Sugar 5 lb. 12.8 8.4 5.9 9.1
Rice 5 lb. 18.4 4/13.4 6.6 8.1
All of the Above 1 each 231.8 153.8 86.0 83.0
Total Farm Employment
(BLS) Million 10.450 7.160 3.463 3.364
Minutes per Farmworker 5/ 22.2 21.5 24.8 24.7
Total Farm Percent
Output of 1967 52.0 74.0 101.0 122.0


1/ Price of food item relative to manufacturing wage rate after taxes and employee social security
contributions, multiplied by farmer's share of the food dollar.
2/ Farmer's share for 1950, or nearest year, was used to compute 1930.
3/ 1953 share used for eggs.
4/ 1960 share used for rice.
5/ Total minutes for all of the above divided by farm employees.


weeks. Increasing labor force participa-
tion by women added to the demand for
prepared foods. On the supply side,
since 1930 livestock output has averaged
1.5 percent growth per year, crop output
1.6 percent per year and the total output
of final products has averaged 1.7 per-
cent annual increases.

The increase in per capital food supplies
is a major source of the lower real food
prices. But for the working consumer,
the higher wages and income made
possible by productivity gains on the job


are even more important. Output per
man-hour in the nonfarm business eco-
nomy increased more than 2 percent per
year during 1950-72, and money wages
increased almost 4.4 percent per year,
or 2 percent faster than the general price
level. Since 1973, the increase in output
per hour has averaged only a fraction of
a percent a year, and output per hour
has not yet exceeded the level in 1977.
The 1981 dollar purchases what only 91
cents purchased in 1973, even though
money wages increased more than 7.6
percent per year.








The increased supply of farm products
and food derives from the increasing pro-
ductivity of agricultural resources and the
increase in the amount of resources
used. Virtually the entire change in crop
production is due to higher yields per
acre of land, with increased fertilizer and
pest control playing a substantial role in


the changes. The increased use of feed
concentrates has increased the livestock
output per breeding animal, and im-
proved animal health practices have per-
mitted the concentration of large animal
populations in efficient feeding and grow-
out operations.


Output per man-hour for factory workers, such as these and others in the nonfarm business
economy, increased more than 2 percent per year during 1950-72 and money wages
increased almost 4.4 percent per year, or 2 percent faster than the general price level.


70









Employment and Productivity Change in the Food and Agriculture System

Change in output
Industry Employment per hour

1970 1980 1958-72 1973-79

Thousands Percent per year

Total Civilian Employment 78,678 99,303 -

Nonagricultural Sector: 75,215 95,938 2.49 1/0.77

Agricultural Sector: 3,463 3,364 6.07 1/2.81

Inputs Sector:
Farm and Garden Machinery 129 172 2.3 2/2.3
Agricultural Chemicals 55 73 5.9 2/0.2
Agricultural Services 170 3/166 -

Processing Sector:
Food and Kindred Products 1,783 1,711 4/2.26 1.86
Tobacco Manufacture 83 69 5/1.8 2.9
Textile Mills 976 853 -
Apparel and Other
Textile Products 1,365 1,266 -
Leather and Leather
Products 320 233 -

Transportation Sector:
Class I Railroads 559 482 6/3.8 0.8
Trucking and Warehousing 1,083 1,276 7/2.1 1.4
Water Transportation 215 212 -

Distribution Sector:
Retail Food Stores 1,731 2,386 3.0 -1.0
Wholesale Groceries 550 674 -
Eating and Drinking Places 2,488 4,666 1.2 -2.4


1/ 1973-1981 data used.
2/ 1973-78 data only.
3/ 1977 employment; data since 1977 is not available.
4/ 1967-1972 data only.
5/ Excludes cigar manufacture; data for 1954-72 and 1973-79.
6/ 1954-72 data.
7/ Output per employee. Intercity trucking of general freight; data for 1954-72 and 1973-78.








But the supply of food to the consumer
is more than just the supply of farm
products. The transportation, processing,
wholesaling, and retailing sectors must
be considered. And labor productivity is
an important factor in the final cost of
food, since salary and employee benefits
in the food marketing system nearly
equal the farm value of domestically pro-
duced foods. The significant gains in out-
put per manhour in these sectors prior to
1972 contributed to lower real food
prices. As output per manhour increased,
labor costs per unit declined, lowering
the price markup in the food industry.

Agriculture-related industries account for
more than one-seventh of civilian em-
ployment in the United States and are
significant users of fuels and energy. The
constellation of forces set in motion by
the realinement of energy prices in 1973
has reduced the annual increase of output
per manhour from an average increase of
more than 2 percent per year to a de-
crease of 0.7 percent per year, when
weighted by employment levels. The
productivity decrease is passed to the
consumer, as retail prices rise in re-
sponse to higher labor costs per unit. In-
deed, the real cost of food since 1973
has risen to levels that prevailed in the
early sixties.

U.S. consumers spend a smaller fraction
of personal income on food (16 percent


U.S. consumers spend a smaller fraction of
personal income on food than any other
people. This homemaker also has the widest
choice of foods from which to select.









before taxes, or 19 percent after taxes
last year) than any other people. The
proportion varies considerably worldwide:
27.5 percent in Britain, 62.5 percent in
India, 59.3 percent in Sierra Leone
(West Africa), and 45 percent in the
Soviet Union.

This fraction has continued to decrease
despite the leveling off of real food
prices. The ratio of food consumption ex-
penditures to disposable (after tax) in-
come which was 19 percent in 1980 was
20 percent in 1970, 23 percent in 1960,
26 percent in 1950, and nearly 27 per-
cent in 1940. The share of the consum-
er's budget spent on food reflects both 1)
the price and quantity of food and 2) the
wage rate and hours worked. Our mea-
sure of real food price the minutes of
work per item of food is one side of
the budget share. The other side, quanti-
ty of food consumed divided by hours
actually worked, has continued to fall as
labor force participation has increased
faster than the workweek has been re-
duced. Although the budget share for
food has historically shrunk as real prices
of food declined, it is now diminishing be-
cause households trade leisure time to
increase the income with which to pur-
chase goods and services. Current
trends in the labor market indicate that
the budget share for food will continue to
decline.

Can We Keep Costs From Rising?
With some qualifications, yes. The agri-
cultural production sector has the capac-
ity to respond to higher levels of demand
for farm products. This productive capac-
ity depends on the natural, human, and
physical resources in agriculture and the
productivity of those resources. The
capacity of the food and agriculture sys-
tem responds to the economic signals of


price and cost and to the changing tech-
nologies brought about by scientific
breakthroughs and commercial develop-
ment. The capacity, then, will change
over time.

The other side of the coin is the produc-
tivity of the working consumer. That
productivity determines the wage and in-
come commanded for his or her time
and, consequently, the amount of time
which must be given up to fill the shop-
ping cart. Many factors have been sug-
gested as causing the post-1973 produc-
tivity slowdown energy prices, regula-
tory burdens, inadequate or unproductive
capital investment, tax-related disincen-
tives, changing character of the work-
force, the increasing size of the service
economy, uncertain expectations of infla-
tion, and more. Changing Federal policies
governing taxation, expenditures, regula-
tion and monetary growth address some
of the factors, but other factors are part
of a different environment to which the
economy must adjust. Certainly, not all
the adjustments have been completed.

Of particular interest is the effect these
adjustments will have on the industries
which affect food and agriculture. Restor-
ing the pre-1972 productivity growth
rates will substantially reduce the price
markups in the food industry and lower
the real price of food the hours you
work to fill your shopping cart. In all
likelihood the number of dollars which
change hands in the grocery store and
eating place will continue to increase.
The 50W-a-pound steak and dime-a-loaf
bread are history. But the number of
working hours required to earn the
money which changes hands can de-
crease nonetheless if we overcome the
problems which have plagued the produc-
tivity growth of the economy.









Whys and Hows of Credit, Finance

By Stephen C. Gabriel and John R. Brake


In the last two decades, both in-
vestment per farm and the cost of
operating a farm have risen drama-
tically. In 1960, investment per farm was
$53,036. By 1980 that figure had soared
to $413,685, almost an eightfold in-
crease. This represents a compound an-
nual rate of increase of 10.8 percent.
The rate of increase was much more
rapid from 1970-80 than from 1960-70.
Investment per farm doubled from
$53,036 in 1960 to $106,780 in 1970.
However, it nearly quadrupled from 1970
to 1980.

In like manner, production expenses per
farm increased from $6,909 in 1960 to
$53,812 in 1980, a compound annual rate
of increase of about 10.5 percent. But
cash receipts per farm grew at a rate of
only 9.8 percent during the same period.
Hence, farm profit margins in 1980 were
lower than in 1960. In 1960 production
expenses absorbed about 78 percent of
farm cash receipts. Today roughly 93
percent of cash receipts go to pay pro-
duction expenses. In addition, farming
has become more mechanized, requiring
in many cases that farmers obtain a large
amount of funds to purchase necessary
equipment. Both the increased invest-
ment per farm and the increased produc-
tion expenses as a proportion of gross


income have resulted in greater credit
use by farmers. Credit has become an
important tool of the farm business for
larger farm enterprises.

Over the last two decades, new and im-
proved machinery, equipment, and facili-
ties have made it possible for one person
to accomplish more than ever before.
These improvements, however, required
substantially greater capital investments,
not just for the larger scale machinery
and equipment but also for the additional
acreage or animals that could be handled
per person. Financing the acquisition of
more and/or larger capacity durable
inputs required a substantial amount of
credit. Credit is also used to bridge the
cash flow gap from declining profit mar-
gins as well as to finance the application
of inputs until the output is sold later in
the year. And debt capital has been in-
strumental in financing farm enlargement.

Growth in farm debt directly resulted
from the increase in investment in the
agricultural sector. Non-real-estate farm
debt grew at a rate of about 6.5 percent
during the sixties. This growth rate
almost doubled in the seventies, reaching
a rate of about 12 percent annually. Real
estate debt also grew faster in the
seventies than in the previous decade.


Stephen C. Gabriel is an Agricultural Economist with the Economic Research Service.
John R. Brake is W.I. Myers Professor ofAgricultural Finance, Cornell University,
Ithaca, N.Y.




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