By Tracy Sayler

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Prairie Grains is the official publication of
the Minnesota
Association of
Wheat Growers,
North Dakota Grain Growers Association,
South Dakota Wheat, Inc., and the Minnesota Barley Growers Association.

"The very term, ‘family farm’ has been defined more by emotion and nostalgia in the media and the coffee shops of America than by a more obvious definition: a farm owned and managed by a single family," he says.

There is a definite trend towards the loss of mid-sized farms as U.S. agriculture becomes "polarized" into either large, commercially viable farms, or small part-time farms, he says. But to describe family farms as primary "victims" of this trend would not be accurate, says Wiesemeyer. Pro Farmer has broken down America’s farms by gross annual sales and given each category a name (see chart).

"Nowhere on this list is a category called ‘family farm.’ That’s because all of them, every category is dominated by ‘family farms’ using our definition: a farming operation owned and operated by a single family," says Wiesemeyer.

Even the category Pro Farmer calls "super farms," those grossing $500,000 per year or more, are dominated by family farms, he says. "Less than 5% of them are owned by faceless ‘corporations’ if you allow for the fact that most farm corporations are simply family farms that have incorporated for business reasons. Even what we call ‘hobby farms’ still meet the definition of ‘family farm’ if you define it by the obvious, a farming operation owned and operated by a family," says Wiesemeyer.

U.S. farm numbers since 1973 have dropped by nearly one third, from 2.823 million, to 2.059 million. The vast majority of farmers lost during that period, over 500,000, were in the hobby farm category. "That’s a very important perspective to keep in mind when we hear emotional speeches about the huge loss of farmers in this country. Remember, those total farm numbers include anybody who took in more than $1,000 in farm income for an entire year," says Wiesemeyer.

Still, in the last decade, it is mid-sized farms that are declining the most. From 1988 to 1997, the number of larger farms has grown. And while the two smallest categories, lifestyle and hobby farms, dropped dramatically from 1973 to 1988, they have actually stabilized over the last nine years as a percentage of total farm numbers.

"This is what we mean when we say that one of the trends in agriculture is the polarization of farms by size," says Wiesemeyer. (See next page for other ag trends pegged by Pro Farmer).

Overall, however, the rate of decline in total farm numbers has dropped by more than 50% in the last decade. "We dropped 22% in the 15 years from 1973 to 1988, or about 1.5% per year. But since 1988, we’ve dropped just 6% in total farm numbers, or less than 7/10ths of a percent per year," he says. Still, while the decline in U.S. farm numbers is slowing, it isn’t going to stop.

"The reason we don’t see it ending is that there is still far too large a gap between the most efficient producers of any commodity and the least efficient. You can look at the farm business records from any land grant college and still see a spread in cost of production for comparable farms of 15% to 20% in almost any commodity. The global market we operate in today simply will not accommodate those less efficient farmers without a renewal of massive support by governments, which isn’t going to happen consistently. Instead, what support remains today is being phased down."

Wiesemeyer says the cold hard reality is that those who believe the right to farm is a birthright, and that society needs to guarantee with tax dollars if necessary the right of anyone who wants to farm to do so whether they are competitive or not, are doomed unless they change their attitude. "Anytime they think the government can make them whole, there will be problems in the long run," he says.

"Yes, professional farming is a way of life. But no more so than professional sports are a way of life for professional athletes. And not every athlete who wants to be a pro is allowed to compete. Each sport has room for only so many players. Only the best make the cut. And the reality of the 1990s is that the game of farming is no different," says Wiesemeyer. "If you want to make the cut, there are two essential requirements: You have to know what the standards of competitiveness are for each commodity you produce, and you have to accept the challenge of meeting or beating those standards."

Tough talk. But how can U.S. producers compete against other countries that subsidize their agriculture unfairly, market against oversupply, or manage multiple years of crop disaster with no federal farm payments and crop insurance that many farmers consider to be ineffective?

Wiesemeyer takes these points on one at a time:

How can the U.S. compete against unfair subsidized trade?

Given a European Union annual budget for export subsidies of $6 billion to $7 billion compared with the unused U.S. budget of $500 million for the Export Enhancement Program, we can’t compete, says Wiesemeyer. He is not a fan of EEP, but favors the aggressive use of financing programs such as GSM 102. No other country can package credit programs like the U.S. can, and we should, to maintain and increase export grain market share.

Push the U.S. Trade Representative and USDA to follow through on legitimate complaints about unfair trade, he says. "If it’s unfair, it can be disputed." Further, ag leaders need to make sure that U.S. negotiators do their homework in preparation for the 1999 talks of the World Trade Organization, the successor to GATT. The NAWG (National Association of Wheat Growers) is absolutely right to complain about the fact that U.S. producers are shut out of nearly 11% of the world wheat market because of unilateral economic sanctions. "They’re toothless tigers. I’ve never seen a trade sanction that’s worked."

Over the long-term, the EU cannot sustain the massive subsidization of its agriculture, particularly as eastern European countries such as Poland and Hungary enter the EU fold. Also, despite global financial woes, fundamentally, the overall uptrend outlook for world grains consumption still appears promising.

How to market against oversupply?

Switch to more profitable crops. And learn how to become a better marketer: the bottom line is that the majority of producers still don’t use marketing tools to the extent they could. Sometimes the fickle market doesn’t give producers an opportunity to lock in a profit but instead, limit losses, Wiesemeyer admits. "That’s a real pain that hurts more than the pocketbook."

How to manage multiple years of crop disaster?

In the case of scab, ag research is the key, and Wiesemeyer gives credit to wheat growers for making this a top-agenda item. "Scab is now in the top horizon of issues in Washington, D.C., through the efforts of your group and others. Some groups are spending too much time chasing issues such as loan rates, when it’s things such as scab that are eating them alive," says Wiesemeyer.

The Red River Valley should be a profitable growing region, he says. When it’s not, something is wrong and may legitimately be in need of a legislative fix. "Policy backed by innovative thinking still has weight in Washington, D.C. At the same rate, there is no right farm policy that will fit all regions in the right way at the right time." That’s where greater state or regional policy involvement may come into play. "What if a state created a scab indemnity program to keep wheat and agribusiness going through a rough time caused by weather? To me that’s rural development."

How to manage declining federal farm programs and ineffective crop insurance?

"What the current major price downturn signals is that U.S. lawmakers will this year try to reach a bipartisan consensus that Freedom to Farm, while having advantages for planting flexibility, is not and can’t be a cure all for the global financial and currency crises, be they Asia, Russia or Brazil," says Wiesemeyer.

More lawmakers are talking about modifying Freedom to Farm: that doesn’t mean throwing out the basic elements of the legislation, but coming to grips with its faults, he says. "And it’s major ones are an adequate safety net when world trade volume is declining or steady at best." Wiesemeyer says a new and improved crop insurance program and risk management scheme will be under the Congressional microscope this year, with the possibility for legislative changes commencing with crop year 2000.

Freedom to Farm marks a phase-down in farm programs, but not a phase-out. After Freedom to Farm expires in 2002, or maybe even sooner, the $4 to $6 billion in program spending in 2002 could be rolled over to a risk management/revenue insurance type program. This may finally be the impetus to solve the inadequacies of federal crop insurance.

Wiesemeyer was a speaker at the 1998 ND-MN Wheat and Barley Growers Convention. "Inside Washington Today," his daily "inside-the-Beltway, inside-the-hallways" buzz from Washington D.C., can be found on the web site: www.profarmer.com.

Catagories of Farms in America

"Nowhere on this list is a category called 'family farm.' That's because all of them, every category is dominated by 'family farms' using our definition: a farming operation owned and operated by a single family" -- Jim Wiesemeyer, Pro Farmer's Washington Bureau Chief.

*Farm size as a percent of total farm numbers
Source: Professional Farmers of America

21st Century Ag Megatrends

Polarization of farms by size — More large or small farms, fewer mid-sized.

Separation of landowners from land operators — For a growing number of retired owners, there will remain a strong disincentive to sell land, until further reform of capital gains taxes kicks in. And for many operators, farms nowadays can be rented cheaper than they can be purchased. Resulting concentration of ownership in hands of aging owners makes land vulnerable to corporate buyouts as agribusiness seeks increasing vertical integration back to the producer level.

Increasing use of consultants — More sophisticated farming makes it difficult to be an expert on everything. More farmers are concentrating on their core competencies and likes, and hiring consultants in areas they dislike or where they realize they are not competitive. Most common areas of consulting, in order of usage: 1) accounting and tax management 2) crop scouting and fertility management 3) enterprise analysis and strategic planning 4) professional marketing and risk management.

Precision Farming — Economic benefits will become more attractive as global positioning technology costs drop. Facilitating production of genetically-engineered crops and "prescription" farming, as well as meeting environmental regulations will also require more precision farming techniques. Precision farming will not easily be integrated by foreign competition, giving American producers an edge in this department.

Rising role of comparative advantage — The U.S. has enormous comparative advantage in its vast reserve of land now in the CRP and its transportation infrastructure. This will help the U.S. meet rising food demand.

Increasing cooperation between environmentalists and farmers — More landowners and environmentalists will find common ground in a sensible system that combines incentives as well as penalties for protecting the environment in a way that makes sense economically and scientifically.

Rapid growth in "designer" crops and livestock — Genetically modified crops will create new markets and boost demand within existing markets. Livestock will be bred for specific characteristics for specific global markets. There will be a trend towards contract farming, with the producer trading flexibility in cultural practices for a broader stake in the food business. The vast number of individual grain bins and handling facilities in place on America’s farms will become a huge asset in the growing market for identity-preserved foodstuffs. All that is lacking is a system for close coordination of loading and delivery instructions among hundreds of separate farm bin sites, and that technology is now easily doable via the Internet.