in U.S. Farming?
A Summary Analysis of the Structure of U.S. Farming
U.S. Department of Agriculture
Economics, Statistics, and Cooperatives Service
Agriculture Information Bulletin No. 433
ANOTHER REVOLUTION IN U.S. FARMING? A SUMMARY
ANALYSIS OF THE STRUCTURE OF U.S. FARMING. National
Economics Division; Economics, Statistics, and Cooperatives Service;
U.S. Department of Agriculture. Agriculture Information Bulletin
Farming in the United States is undergoing dramatic changes.
There is a transformation in the ownership, organization,
management, and size of farms, use of capital goods, and risks in
These changes relate closely to inflation, nonfarm employment
opportunities, new technologies, the availability of credit, tax
regulations, and support of farm prices-and in some cases, decisions
made in other countries.
How Americans deal with these changes is important to the
wealthy, the poor, farm and ranch operators, food processors and
distributors, and consumers. The eventual social, economic, and
political responses to these issues will affect the distribution of
income and wealth and the economic growth of the Nation.
This summary analysis of the structure of U.S. farming previews
the new 450-page book titled: Another Revolution in U.S. Farming?
The book describes how U.S. production of livestock and crops is
organized and managed; why it is that way; and how resources are
likely to be organized and managed in the future, why, and with
To get your copy, send the coupon on the inside back cover to:
ESCS Publications, Room 0054-S, U.S. Department of Agriculture,
Washington, D.C. 20250.
Washington, D.C. 20250
Another Revolution in U.S. Farming?
A Summary Analysis of the Structure
of U.S. Farming
A NATIONAL OVERVIEW
U.S. farming is changing dramatically and rapidly. Farms are fewer
and larger, and production is concentrated among large operators.
The largest 50,000 farms are fewer than 2 percent of the
total .but they account for more than one-third of all farm sales.
Great heterogeneity in terms of size, ownership, and products
continues, with owner-operated farms still the dominant tenure
arrangement. However, the relative importance of the number of
arrangements in which some land is owned and some is rented has
increased significantly. And the corporate form of ownership has
become more common.
Dramatic shifts in the mix and productivity of resources used in
farming have been key aspects of the transformation. The substitu-
tion of capital goods incorporating new and different technologies
for labor and land has been a prominent feature of this change.
However, incentives to substitute capital inputs for labor have been
lessened in recent years as price increases for land and capital goods
have been greater than price increases for labor.
Significant changes in the distribution of income and wealth
among farm people and substantial adjustments in the distribution of
wealth among Americans have accompanied the increasing concentra-
tion of farming into larger units. Increases in farm income and wealth
of landowners have given rise to higher returns on investments in
farming over time in relation to returns on common stock of U.S.
Many forces have affected the way U.S. farms are organized and
managed. Seven, however, are especially important. They are:
Increases in farm product exports.
Availability of capital-intensive new technologies.
Nonfarm employment opportunities.
Availability of institutional credit for the purchase of land and
Commodity programs supporting farm product prices.
Tax rules applicable to incomes and estates.
Inflation increases: (1) the wealth of those who own land, (2)
demand for land, and (3) input prices. And it strengthens the relative
economic position of the wealthier and higher income people in
buying land. Through these effects, inflation-compared with stable
prices-leads to fewer farms and greater concentration of production,
incomes, and wealth among those associated with the larger farms.
Exports were important to the: (1) sharp increase in farm earnings
in the 1970's, (2) opportunity to realize politically acceptable prices
and farm income with only modest restraints on production, and (3)
relatively strong markets for soybeans and corn. Aside from the
substantial effects of the higher incomes and wealth on the organiza-
tion of U.S. farming, these developments led to greater specialization
in the production of grain and soybeans in the Corn Belt.
One of the major results of new technologies used in farming has
been to facilitate efforts by some individuals to control larger
amounts of production resources. It is this control over a large
amount of production resources (on large farms and ranches) that
affords the opportunity to realize increased incomes and wealth. In
crop production, the adoption of modern machinery means produc-
tion systems that have extremely high unit costs at small volumes of
production and low costs at large volumes. Similar production
functions are associated with large-scale poultry, beef, drylot dairy,
and confinement hog feeding units. The increased use of capital-
intensive technologies in U.S. farming has meant decreased labor
The substitution of capital goods and land for labor has been
facilitated greatly by the opportunity for farm people to migrate to
the cities of our country and be better off than if they had stayed in
A prominent feature of the transformation of U.S. farming has
been the increased availability of institutional credit for purchases of
farm real estate and capital goods. The rules applied by lenders in
responding to demands for credit and for servicing loans have a
substantial influence on who survives in farming. But probably of
greater importance is the way economic forces associated with
inflation affect potential borrowers differently, and thereby deter-
mine who obtains credit to buy land. People with sources of money
other than the land being purchased have a clear competitive edge
over people without such alternate sources.
U.S. commodity programs have accelerated the shift to large farms
by supporting commodity prices and increasing the chances of
significant price increases. In this way, commodity programs have
enhanced the: (1) confidence of people aggressively willing to
accumulate land and/or invest in capital goods that facilitate large-
scale production of commodities, and (2) willingness of lenders to
extend credit to these kinds of people. Modifications of commodity
programs so there are greater risks of commodity price declines
would discourage increased farm size and product specialization, and
make farm resources less attractive as investment opportunities.
Several rules for income and estate taxes have a significant effect
on farming. In total, they increase the attractiveness of owning farm
assets and lead to: (1) larger investments by nonfarm people in farm
assets, (2) larger farms owned and/or operated by those farmers who
are able to exploit tax opportunities, and (3) more corporate farms.
The effects of any of these forces are influenced by the presence
of other forces. For example, the full effects of increased farm
exports on U.S. farming would have been significantly different if
U.S. income tax rules had not allowed cash accounting by farmers
and tax credits for investments. And the effect of inflation combined
with increased availability of credit is significantly different than if
either of these forces had acted without the other.
The sustained synergistic effects of the seven major forces suggest
that in the future the United States will experience:
Further declines in the number of farms, but at rates sub-
stantially less than in the 1950's and 1960's.
Increasing concentration of production among the largest pro-
Strong pressures for increased separation of ownership and use
Inflation, energy prices, and changes in tax rules have changed the
prospective character and degree of influence of the major forces
affecting farming. Both inflation and the changes in tax rules
reinforce the trends toward fewer and larger farms and are likely to
accelerate the separation of ownership and use of resources.
Prospective higher energy prices inject substantial uncertainties for
the future organization of U.S. farming. The higher energy prices are
bound to affect the mix of resources used in farming. There will be
increased economic incentives to use energy-efficient systems of
production, but the eventual effect on how U.S. production of
livestock and crops is organized and managed is highly uncertain.
Regardless of the eventual scenario and whether the changes are
described realistically as developments, transformation, or a "revolu-
tion," government policies and programs will influence and be
challenged by the events.
In rare cases, new programs may be developed; in a few other
situations, old programs may be discarded. The more likely outcome
is that the objectives of individual programs and related policies
which guide their implementation will be challenged and may be
Policies and programs will be under increasing pressure to discrimi-
nate among recipients to dampen the potential regressiveness of their
benefits. Consideration may be given to focusing on income prob-
lems of farmers on an individual need basis-an approach similar to
the way our society relates to income problems of people who are
not farmers. In this context, incomes from both farm and nonfarm
activities would be considered. In turn, criteria used in deciding upon
implementation of traditional farm-related programs, such as credit
programs, would give central emphasis to general economic and
social objectives of the country, such as price stability, employment,
and balance of trade.
Thus, changes in the way programs are implemented may be as
dramatic as changes in farming-and equally revolutionary.
Some of the most important aspects of and extensive changes
related to the transformation of U.S. farming involve livestock
production-especially cattle feeding, poultry and egg production,
and hog raising. Changes in cattle raising, as distinct from cattle
feeding, are considerably less. Changes in dairying are somewhat less,
but an important question is whether the large dairy operations of up
to 10,000 cows will be replicated in other parts of the country.
Cattle feeding and poultry and egg production have experienced
phenomenal adjustments in the United States. Today, one-half of the
cattle fed in this country are fed in 422 feedlots averaging over
30,000 head per year. In 1974, slightly more than 5,000 farms, each
with 20,000 birds or more, accounted for nearly 70 percent of U.S.
egg production. Sixteen to 17,000 farms, each selling 60,000 or more
broilers, accounted for 90 percent of production.
The hog industry also has been experiencing significant changes,
but the adjustments have not advanced as far as they have for beef
feeding and poultry and eggs. The changes have accelerated, however.
In 1974, 10,000 farms accounted for one-fourth of all hog sales.
There are now at least 15 to 20 firms with annual marketing of
50,000 to 200,000 head. If these are successful, the number of such
firms will increase.
Two-thirds of U.S. beef production come from cattle raising
activities and dairy cattle. There is some concentration of cattle
raising, but the changes have been much more limited than for hogs,
poultry, or eggs. In 1974, farms and ranches with 200 and more beef
cows accounted for 3 percent of farms and ranches with beef cows
and 28 percent of the beef cows in the United States. Future changes
are expected to occur slowly.
Dairying has become a specialized farm activity of commercial
farming. The number of commercial dairy farms now is about
200,000, one-third the number in 1950. While adjustments in
dairying have been much more limited than in some of the other
livestock areas, large-scale production units are being operated
successfully in California and Arizona-and a big question is whether
their number will increase.
Cattle feeding has shifted away from small feedlots to very large
commercial feedlot operations which utilize industrialized ap-
proaches to management, financing, and marketing. As a result, half
the cattle fed in this country are fed in 422 feedlots averaging over
30,000 head per year. The other half are fed in more than 130,000
feedlots averaging 90 head per year.
Cattle feeding has increased in importance. But fed beef is still
only one-third of all beef produced in the United States. The rest
comes from cattle raising activities and dairy cattle.
The South has led all regions in growth of cattle raising since 1950
and has more cows than any other region. The average size of beef
cow herds is small-40 head. And there is a large number of farms
with beef cows-in 1974, over 1 million. At the same time, there is
some concentration of production. In 1964, farms and ranches with
200 and more beef cows accounted for 1 percent of farms and
ranches with beef cows and 24 percent of the beef cows in the
United States. The respective percentages were 3 percent and 28
percent in 1974.
Further changes are expected in cattle feeding. However, the size
of the larger feedlots may not increase much. The more dramatic
changes in the coming years likely will involve changes in ownership
and organizational arrangements which could facilitate higher utiliza-
tion rates, lower production costs, and better production control.
Depletion of irrigation water in the Southern Plains and higher
energy costs create great uncertainty about the continual concentra-
tion of beef feeding lots in this area.
In contrast to beef feeding, changes in cattle raising will occur
Changes in dairying also have been substantial. Milk production,
which once was almost universal on farms in the United States, has
become a specialized form of commercial farming. Dairying to
produce milk for home use has disappeared.
The number of commercial dairy farms today is about 200,000,
one-third the number in 1950. They average over 50 cows per dairy
farm. U.S. production continues to be concentrated in the Northeast
(20 percent) and the North-Central (40 percent) regions. The South
and the Southwest each account for about 13 percent.
Technological advances have been paramount in causing changes in
dairy farming. These advances have been the principal reason why
total farm labor requirements for dairying are now no more than
one-fifth of the requirements in 1960. The most dramatic changes in
dairying are illustrated by the large-scale drylot dairy operations in
California, Arizona, and Florida-with herds of as many as 10,000
cows. The size question is closely related to technology and mechani-
zation. But it also involves attitudes of operators and availability of
credit. Obvious questions are: Why have producers in California,
Arizona, and Florida found it profitable to organize dairying into
drylot enterprises involving as many as 10,000 cows, while producers
in the Northeast and Lake States have not developed enterprises of
comparable size? Will entrepreneurs develop 5,000- to 10,000-cow
dairies in the Northeast and Lake States? Or might such dairies
develop in other regions in association with acceptance of newer
techniques of product handling, such as reconstitution and steriliza-
Poultry and Eggs
Commercial poultry farms are large. Relatively few of these very
large farms produce the bulk of poultry and egg supplies. In 1974,
slightly more than 5,000 farms, each with 20,000 birds or more,
accounted for nearly 70 percent of U.S. egg production. Sixteen to
17,000 farms, each selling 60,000 or more broilers, accounted for 90
percent of production. Slightly more than 5,000 farms, each raising
3,200 or more turkeys, accounted for 90 percent of production.
Today's poultry and egg industries involve an extensive network of
linkages among production units and input-supplying and marketing
functions. Coordinating systems cover virtually all commercial
broiler production and four-fifths or more of all egg and turkey
production. In these systems, much production is under contract to
marketing firms or is only one phase within vertically integrated
Extensive coordination of production, input-supplying, and mar-
keting are likely to continue in the future. Further growth of typical
production unit sizes is expected. The number of farms producing
eggs may decline the most. Little change is expected in numbers of
farms producing broilers and turkeys.
Changes in the hog industry have been especially rapid in the last
10 to 15 years. Total annual production of pork has varied between
12 billion and 15 billion pounds since 1950, when pork provided half
the national supply of red meat. Now it provides only a third.
Hog production remains farm-based. Investment opportunities and
the importance of corn for feed have kept it that way, but the tie of
hog production to land is no longer essential. Advances in technology
have permitted hogs to be produced successfully without pasture.
Hogs now are produced year-round in low-labor, capital-intensive
systems conducive to large-scale production.
The number of hog producers has decreased rapidly. In 1950,
there were over 2 million-in 1974, less than 500,000. Size of enter-
prise has increased accordingly. In 1974, 10,000 farms accounted for
one-fourth of hog sales. Producers selling 1,000 or more hogs annually
now account for about 40 percent of total production, compared with
only 7 percent in 1964. Producers selling 5,000 head or more have at
least a sixth of the market. And their operations are growing rapidly.
Lack of necessary managerial abilities and skilled labor and risks of
.-disease have thwarted the successful establishment of extremely large
hog production units in years past. But there are at least 15 to 20
firms now in the United States with annual marketing of 50,000 to
200,000 head. Their experience will largely determine the prolifera-
tion of other operations of similar size.
Technological changes, credit availabilities, public policies, econo-
mies of size, and inflation have been important forces stimulating
changes in recent years. These same forces are expected to continue
to influence the hog industry in the future and likely will lead to
continuation of trends, unless strong countervailing forces develop.
REGIONAL CONTRASTS IN FARMING
There are similarities and significant differences in the transforma-
tion of farming among the U.S. regions. All regions have experienced
declines in farm numbers and corresponding increases in farm size.
Several forces have been pervasive in influencing farming and how
farms are organized and managed. Technology, nonfarm employment
opportunities, credit availability, tax rules, and inflation have had
impacts, albeit somewhat differently in each of the regions. Other
forces have been important in different regions.
Forces important in the Northeast are: (1) limited amounts of
highly productive land and a general division of most land into small
parcels hampering the aggregation of large tracts for farm purposes,
(2) government dairy programs and cooperative activities influencing
the profitability of dairying and the way products are marketed, and
(3) low transportation costs enabling producers in other regions to
compete with Northeast producers.
Significant forces in the North-Central region are: (1) increased
exports stimulating demands for corn and soybeans and thereby
sharply higher farm earnings, (2) commodity programs mitigating the
risks of lower commodity prices and increasing the chances of
significant price increases, and (3) the original approach in settling
the Northwest Territory combined with the contiguous nature of
highly productive soils facilitating consolidation of land resources.
Major forces in the South, in addition to those common to each of
the regions, are: (1) the flat terrain of the Delta facilitating farm
enlargement, and (2) hilly terrain such as in the Piedmont retarding
consolidation of resources into larger farms.
In the Great Plains, important forces are: (1) inadequate rainfall
and, in turn, irrigation in some areas and extensive areas of grassland
in others affecting types of farming and related investment require-
ments, (2) increased exports, especially of wheat, making it possible
to relax acreage limitations, and (3) abundant supplies of feed grains
and feeder cattle facilitating the development of large feedlots. These
forces have combined with others, especially capital goods incorpo-
rated in new technologies and commodity programs, to influence
farmer decisions in organizing and managing farm resources.
In the Southwest, numerous forces, many of them associated with
the generally arid climate of the region and the prevalence of
irrigation, have given rise to large-scale and diverse farming.
Forces especially important in the Northwest are: (1) water
resource policies, (2) Federal policies related to labor, (3) distances
to major markets, and (4) urbanization with population growth.
These forces have interacted with others, especially availability of
new technologies and Federal commodity programs, to give rise to
farming involving (1) significant increases in irrigation, (2) decreases
in farm numbers, (3) consolidation of resources into larger farms,
and (4) linking of production of individual farms to a growing food
In coming years, decisions by farm operators and other owners of
resources employed in farming will be affected by continuation of
the many forces determining these trends of the past. However, some
of the forces may be changing in significant ways, and there are new
uncertainties. Changes in energy prices create great uncertainty. The
terms of trade among factors of production are changing and will
encourage farmers to conserve land and capital goods (including
associated energy) relative to labor. Uncertainty is especially great
among farmers depending on irrigation. Energy is important to
irrigation. Areas, such as the Texas High Plains, which depend on
ground water for irrigation may confront pervasive adjustments from
irrigation to dryland farming as available water becomes more
limited. The possible application of size limitations on farms receiv-
ing water from federally funded projects and possible modification
of the amount of public subsidy to agricultural users of water by
market pricing of water, create other uncertainties in the West.
Unionization of labor and possible restraints on publicly sup-
ported mechanization research, stimulated by public concerns about
effects of technological change on labor displacement, also may be
important to farming, especially in the Southwest.
While there is great uncertainty, trends indicate a slowing of the
decline in the number of small farms, a further decrease in the
number of middle-size farms, and an increase in the number of large
farms. Public debate in the 1980's likely will focus on the increased
concentration of production among larger farms and the ever-
decreasing marketing opportunities for small farmers. But these
issues may be of secondary importance to another related issue-the
separation of ownership and use of resources. This separation may
increase, especially with respect to land. The substantial value of
even moderate-size farms makes intergenerational transfer of re-
sources to a single child extremely difficult, even if tax rules permit
avoidance of large tax liabilities at the time of such transfers.
Thus, ownership of individual land parcels in the next two decades
will involve multiple ownership by descendants of those who experi-
enced the capital gains of the 1970's. This, in itself, may involve
separation of ownership and use of land. Some children not farming
will want to sell their interests, but family people may not be able to
buy and potential buyers may not be farm operators. In fact, those
family members farming likely will prefer that sales be made to
people willing to rent the land to them.
The magnitude of these developments probably will be much
greater than likely sales to non-Americans. However, the character-
istics of the operators and the resulting organization and manage-
ment of farms may not be greatly different.
UNITED STATES DEPARTMENT OF AGRICULTURE
WASHINGTON. D.C. 20250
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U.S. DEPARTMENT OF