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The Changing Structure of Agriculture
Independent Insurance Agents of IowaRural Agents Conference
January 26, 2006
Michael DuffyDirector, Beginning Farmer Center
The Changing Structure of Agriculture: Outline
•Farming•Agribusiness•Consumption
The Changing Structure of Agriculture: Farming
• A farm is defined as any place that sold or could have sold $1,000 worth of agricultural products. This definition has been used since 1974
• Case of the disappearing middle• Tight margins• Increased reliance on government payments• Aging population• Changing rural environment
General Characteristics and Demographics
Number of Farms in Iowa
0
50,000
100,000
150,000
200,000
250,0001
91
0
19
14
19
18
19
22
19
26
19
30
19
34
19
38
19
42
19
46
19
50
19
54
19
58
19
62
19
66
19
70
19
74
19
78
19
82
19
86
19
90
19
94
19
98
20
02
Land in Farms in Iowa
20,000
22,000
24,000
26,000
28,000
30,000
32,000
34,000
36,000
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
(00
0 a
cre
s)
Average Farm Size in Iowa
0
50
100
150
200
250
300
350
400
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
Perecent of Iowa Farms by Sales Class
0%
10%
20%
30%
40%
50%
60%
70%
1978 1982 1987 1992 1997 2000 2004
< $10 K $10K - $1000K $100K - $500K > $500 K
Farm Distribution by Type of Farm, 2004
0%
5%
10%
15%
20%
25%
30%
35%
40%
Limite
d-re
sour
ces
Retire
men
t
Resid
entia
l/life
style
Lower
-sale
s
Highe
r-sal
es
Larg
e
Very l
arge
Nonfa
mily
U.S. Iowa
Percent of Iowa Farms and Sales by Sales Class, 2002
0%
5%
10%
15%
20%
25%
30%
Farms Sales
Percent Change in Iowa Farms and Sales by Sales Class, 1997-2002
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
< $1
,000
$1 to
$2,
499
$2.5
to $
4,99
9
$5 to
$9,
999
$10
to $
19,9
99
$20
to $
24,9
99
$25
to $
39,9
99
$40
to $
49,9
99
$50
to $
99,9
99
$100
to $
249,
999
$250
to $
499,
999
$500
to $
999,
999
> $1
M
Farms Sales
Percent of Iowa Farms and Land by Sales Class, 2002
0%
5%
10%
15%
20%
25%
30%
< $1,000 $1 to$2,499
$2.5 to$4,999
$5 to$9,999
$10 to$24,999
$25 to$49,999
$50 to$99,999
$100 to$249,999
$250 to$499,999
$500 to$999,999
> $1M
Farms Land
Average Age of Iowa Farmers
0
10
20
30
40
50
60
1964 1969 1974 1978 1982 1987 1992 1997 2002
Percent of Iowa Farmers Over 65 and Under 35 Years Old
0%
5%
10%
15%
20%
25%
1959 1964 1969 1974 1978 1982 1987 1992 1997 2002
< 35 > 65
Percent of Iowa Farms by the Number of Hours the Operator Worked on the Farm, 2003
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Less than 500 500 to 999 1,000 to 1,999 2,000 or more
Iowa Population Trends
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
1940 1950 1960 1970 1980 1990 2000
Urban Rural
Iowa's Rural Population
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
1940 1950 1960 1970 1980 1990 2000
Country Town Farm
Percent of Iowa's Rural Population Living on Farms
0%
10%
20%
30%
40%
50%
60%
70%
1940 1950 1960 1970 1980 1990
Income and Enterprises
Iowa Farm Output, Total Expenses, and Net Farm Income
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
$18,000,000
$20,000,000
Output Net Income Total Expenses
Iowa Net Farm Income as a Percent of Gross Income
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Iowa Direct Government Payments
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
Government Payments as a Percent of Net Farm Income
0%
20%
40%
60%
80%
100%
120%
140%
160%
Distribution of Government Payments, 1995 - 2004
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Top 1% Top 10% Top 20% Bottom 80%
Iowa U.S.
Distribution of Iowa's Land, 2004
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Percent of Total Land inFarms
Percent of FarmsHarvested
Percent of Farm Land inCorn and Soybeans
Percent of HarvestedLand in Corn/Soybeans
Distribution of Iowa's Cash Farm Receipts by Enterprise, 2004
0%
5%
10%
15%
20%
25%
30%
Ho
gs
Ca
ttle
Da
iry
Oth
er
LS
Co
rn
So
ybe
an
s
Oth
er
Cro
p
Go
vern
me
nt
pa
yme
nts
Percent of Iowa's Farms with Hogs and Pigs
0%
10%
20%
30%
40%
50%
60%
70%
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
Market Hogs on Iowa Farms
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
(00
0 H
ea
d)
Swine Breeding Herd in Iowa
0
500
1,000
1,500
2,000
2,500
3,000
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
(00
0 H
ea
d)
Number of Pigs per Farm with Swine
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
Land
Average Iowa Land Values
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
Iowa Average Rents
$0
$20
$40
$60
$80
$100
$120
$140
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
Who Purchased Iowa Farmland
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Existing Farmers Investors New Farmers Other
Percent of Iowa Farmland Owned by Owners Not Living on a Farm
0%
10%
20%
30%
40%
50%
60%
70%
1982 1992 2002
Live on farm Not on a farm
Percent of Iowa Farmland by Residence of Owner
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Iowa Resident Non-Iowa Resident
1982 1992 2002
Distribution of Iowa Farmland by Age of Owner and Year
0%
5%
10%
15%
20%
25%
< 25 25-34 35-44 45-54 55-64 65-74 > 75
1982 1992 2002
Distribution of Iowa Farmland by Tenure Type
0%
10%
20%
30%
40%
50%
60%
Owner operator Cash rent Crop share rent Government
1982 1992 2002
Percentage of Leased Farmland by Type of Lease
0%
10%
20%
30%
40%
50%
60%
70%
80%
1982 1992 2002
Cash rent Crop share Other rent arrangements
Next Generation
Anticipated Method for Transfering Iowa Farmland
0
5
10
15
20
25
30
35
40
Will to family Will to other Give tofamily
Give toothers
Sell to family Sell toothers
Put in trust Other DK
Perc
ent o
f Far
mla
nd
Percent of Farms with Known Successor
0%
10%
20%
30%
40%
50%
60%
70%
80%
yes no
Percent of Iowa Farms with an Estate Plan
0%
10%
20%
30%
40%
50%
60%
Yes No
Source: 1999 Beginning Farmer Center Succession Survey
Sources of Income by Retirement Plans
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
Sale of Land Sale of other Farm Soc Sec Private Invest Other
The Changing Structure of Agriculture: Agribusiness
• Disappearing middle• Increasing concentration
Top Five Grocery Retailers in the United States*
1997 2000
Kroger Co. Kroger Co.
Safeway Wal-Mart
American Stores Albertson’s
Albertson’s Safeway
Ahold USA Ahold USA
CR5 = 24% CR5 = 42%
* Source: Heffernan, William
Concentration Ratios for the Top Four Firms
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
BeefPackers
PorkPackers
Flour Dry Corn Wet Corn Bean Crush Ethanol
Percent of Export Market by the Same Three Firms
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Corn Soybeans
Number of Pork Slaughter Plants
0
100
200
300
400
500
600
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
Percent Hogs Slaughtered by Plant Size
0%
20%
40%
60%
80%
100%
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
% H
ogs
Sla
ught
ered
<300,000 300,000-999,999 1,000,000 +
Number of US Cattle Slaughter Plants
0
100
200
300
400
500
600
700
800
900
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
Cattle Slaughtered by Plant Size (thousands)
0%
20%
40%
60%
80%
100%
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
% C
attle
Sla
ught
ered
<500,000 500,000-999,999 1,000,000 +
Agribusiness Concentration
• Changes and increased concentration have occurred in almost all phases of agribusiness support– Seed– Machinery– Fertilizers– Pesticides
Consumer Patterns
U.S. Food Expenditure
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
1929
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
Bill
ion
Do
llars
Percent of Disposable Income Spent on Food
0
5
10
15
20
25
30
1929
1933
1937
1941
1945
1949
1953
1957
1961
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
Farm Share as Percent of Food Expenditure
0%
5%
10%
15%
20%
25%
30%
35%
40%
19
54
19
56
19
58
19
60
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
Percent of Food Dollar by Place
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%1
86
9
18
92
18
97
19
02
19
07
19
12
19
17
19
22
19
27
19
32
19
37
19
42
19
47
19
52
19
57
19
62
19
67
19
72
19
77
19
82
19
87
19
92
19
97
20
02
At home Away from home
Changing Structure of Agriculture; Concluding Thoughts
• Agriculture is changing and will continue to change at the production, processing and consumption level
• Production is dominated by a dual system with a large number of very small firms and a small number of large firms.
• These trends have been continuing for a number of years
Changing Structure of Agriculture; Concluding Thoughts
• Concentration in agribusiness is resulting in fewer large firms with an increasing share of the market provided by fewer companies.
• U.S. consumers spend a decreasing amount on food as such they are able to spend more away from home buying more of the attributes than the food
Changing Structure of Agriculture; Concluding Thoughts
• Consumer preference do change over time; some indication that other attributes besides convenience and price are important
• Energy price increases could slow or reverse some of the trends
• Very little is inevitable; the questions are should the U.S. be concerned with these trends and what could be done
Changing Structure of Agriculture; Concluding Thoughts
• Increasing concentration leaves the U.S. more vulnerable to supply disruption, bioterriorism, environmental impacts and pest changes
• Strategies could be pursued at both the national and state level; policies such as controlling anti-competitive behavior, internalizing the external costs, and supportive policies could all be enacted
Possibilities for Income for Beginning Farmers
• Farm with tight margins with a lot of volume• Widen the margins through management
and marketing• Alter production for non-commodity
commodities or alternative crops• Supplement income with off farm
employment (could be on farm)• Full time employment, farming part-time or
wait to start farming
Changing Structure of Agriculture
• Change is inevitable; the direction of the change is not
• We must decide as a society what type of agriculture we want and what we want from it
• Individuals have to decide how they are going to fit in the structure and operate accordingly
• The choice is ours
Thank you!
For more information contact me; • mduffy@iastate.edu• (515) 294-6160• www.econ.iastate.edu/faculty/duffy
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