Smaller farmers are being driven out of business as the deepest slump hits since the 1980s. Low prices for corn, wheat, and other commodities are causing a greater number of smaller American farmers to go out of business. This has left a larger share of the nation’s farms within supersized family farms, which could transform America’s rural economy,
The Wall Street Journal reports.
Farms with $1 million or more in annual sales now produce two-thirds of the nation’s agricultural output, according to the U.S. Agriculture Department. This marks the largest portion measured since the department began tracking this statistic in the 1980s.
“The shift means food production is being increasingly handled by larger farmers, which can be more financially secure,”
The Wall Street Journal reports. “It also fuels a cycle in which size begets size, further transforming the rural economy. Smaller-scale farmers struggle to expand their operations to become profitable. Work becomes more scarce. Farm-supply retailers and grain companies are pressured, since larger farmers use their size to wrangle better deals.”
The larger farm operations are almost entirely still run by private farmers, not companies.
Lon Frahm owns about 30,600 acres in Kansas, one of the nation’s largest farming states. Frahm estimates that farms of that size produce $10 million to $15 million worth of grain during a good year. Farms of this size reap $1 million to $3 million in profit, he says.
Meanwhile, a typical smaller farm selling $500,000 worth of grain annually has generated about a 5 percent profit margin, or about $25,000, over the past three years, Mark Wood, an agricultural economist for the Kansas Farm Management Association, told
The Wall Street Journal.
Larger farms are snatching up more acreage to survive the agricultural downturn. Frahm took over the family’s 5,600 acres of farmland in 1986 after his father died of a heart attack. In 2013, he expanded the farm further, adding 7,000 acres, which boosted his total land by nearly one-third. This spring, he rented another 480 acres, and he is in negotiations to buy more this fall.
Many large farmers pay cash on leases. Smaller farmers often have to rely on crop-sharing dealers, which can add risk to the landowner.
The number of million-dollar–plus revenue farms more than doubled between 1992 and 2015. Meanwhile, the revenue of smaller farms between $350,000 and $999,999 dropped by 5 percent.
USDA researchers said in a report last year that they believe consolidation among farms will continue.
“The big guys can cover their costs and have money left over to grow,” Wood says. Smaller farms, on the other hand, “are going to struggle.”
Source: “Supersized Family Farms Are Gobbling Up American Agriculture,” The Wall Street Journal (Oct. 23, 2017) [Log-in required.]
