Urban Pressures & FarmingUrban Pressures & FarmingPositioning Agriculture for the FuturePositioning Agriculture for the Future

Soji AdelajaSoji AdelajaJohn A. Hannah Distinguished Professor in Land PolicyJohn A. Hannah Distinguished Professor in Land PolicyDirector, Land Policy InstituteDirector, Land Policy InstituteMichigan State UniversityMichigan State University

Presentation at the Annual Meeting of thePresentation at the Annual Meeting of theNational Association of County Agricultural National Association of County Agricultural

AgentsAgents

Amway Grand HotelAmway Grand HotelGrand Rapids, MI Grand Rapids, MI

July 17, 2007July 17, 2007

SummaryNational Population Dynamics.– Causes of Suburbanization.– Etiology of Sprawl.– Implications for Agriculture

Farming in the Path of Development.Effects of Urbanization on Agriculture.Farmland Preservation and Farm Viability.Political Economy of Urban-Fringe Land Policy.Positioning Agriculture for the Future.

National Population Dynamics

States increasingly experiencing out migration of people and businesses away from cities and urban centers into suburban and rural areas which historically were dominated by agriculture.

Causes of SuburbanizationLargely American phenomenon tied to our land use heritage:– Home Rule, Planning Framework, American Consumerism.

Significant national and local costs of sprawl:– Duplication, High Cost of Services, dysfunctional cities, struggling

metros, and social/economic sprawl.

Push factors (Characteristics of Cities):– Schools, Income, Crime, Concentrated Poverty, Old Housing

Stock, Shrinking Jobs, Cultural and Entertainment Opportunities, Preferences, Recreation and Lifestyle.

Pull factors (Characteristics of Non-Urban Areas):– Better Schools, Larger Homes, Property Ownership, Income, Open

Space and Amenities, Safety, Jobs, Lifestyle.

Other Factors:– Divorce, Family Structure, Highways, Public Spending, Schools,

etc.

-11.6%

-7.5%-6.1%

4.3%

1.3%

16.1%

3.5%4.1%

3.5%

18.1%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Flint Detroit Lansing Ann Arbor Grand Rapids

Central City

MSA

Etiology of Sprawl Etiology of Sprawl Populations in Michigan’s Largest Metros 1990-2000Populations in Michigan’s Largest Metros 1990-2000

Source: Michigan Land Resource Project

-2.4%

12.8%

17.6%

-7.5%

10.2%9.2% 9.9%

-10%

-5%

0%

5%

10%

15%

20%

Detroit WayneCounty

MonroeCounty

MacombCounty

OaklandCounty

St. ClairCounty

LapeerCounty

Etiology of SprawlDetroit Metropolitan Area Population Metropolitan Area Population 1990-1990-

20002000

Source: Michigan Land Resource Project

Etiology of SprawlEtiology of SprawlLand to Population Growth Ratios 1960-1990Land to Population Growth Ratios 1960-1990

Ann Arbor 2 to 1

Lansing 2 to 1

Grand Rapids 3 to 1

Kalamazoo 2.5 to 1

Flint 7 to 1

Muskegon 12 to 1

Jackson 10 to 1

Saginaw 14 to 1

Detroit 13 to 1

Bay City 27 to 1

Source: Michigan Land Resource Project

ImpactsImpactsLoss of some of our best farmland (unique farmland under Loss of some of our best farmland (unique farmland under threat).threat).Rising land values (82% of market value of farmland is Rising land values (82% of market value of farmland is development value in one state).development value in one state).Reduced political clout of the farm community – unfavorable Reduced political clout of the farm community – unfavorable policies.policies.Growing conflicts between neighbors and farmers, especially Growing conflicts between neighbors and farmers, especially agriculture (RTF).agriculture (RTF).Disinvestments in technology (impermanence syndrome).Disinvestments in technology (impermanence syndrome).Loss of a critical mass of agricultural activities.Loss of a critical mass of agricultural activities.Increased land fragmentation (efficiency).Increased land fragmentation (efficiency).Declining profitability of farmers (systematic).Declining profitability of farmers (systematic).Loss of open space and rural quality of life.Loss of open space and rural quality of life.Increased likelihood of down-zoning.Increased likelihood of down-zoning.De-motivation of farmers.De-motivation of farmers.Integrity of agriculture is affected.Integrity of agriculture is affected.

Urbanization and Farmland LossBest and most productive farmland are near cities.

Most vulnerable farmland are the best farmland.

Projected loss of farmland is severe – will challenge the functionality of agriculture as an industry.

1980

2020

2040

Built

Agriculture

Other vegetation

Forest

Lake

Wetland

ProjectedLand Use

Trend

Farmland Loss: MI Land Use Forecast (1980 to 2040)

Source: Michigan Land Resource Project

Future Farmland LossFuture Farmland Loss

ClassClass 19801980 20402040 ChangeChange %%

AgricultureAgriculture 11.011.0 9.19.1 - 1.9- 1.9 -17 -17

BuiltBuilt 2.32.3 6.46.4 + 4.1+ 4.1 +178 +178

Private Private ForestlandForestland

18.2318.23 16.916.9 - 1.3- 1.3 -8-8

Other Other VegetationVegetation

2.932.93 2.22.2 - 0.7- 0.7 -24-24

WetlandWetland 1.831.83 1.371.37 - 0.2- 0.2 -10-10

Land Use Change in Michigan, 1980 – 2040 (Millions of Acres)

Source: Michigan Land Resource Project

Land Use Projections from 1980-2040Land Use Projections from 1980-2040Southwest MichiganSouthwest Michigan

1980 2020 2040

BuiltForestOther land useLake

Urbanization and Land ValuesUrbanization significantly raises the value of farmland.Development value ranges from 0% to 82% of farm land values (Plantinga).

Other Effects of Urbanization

•Farmers have to deal with new issues and challenges not common in a rural farming environment. •These problems gradually weaken agriculture, its infrastructure and its short-term viability.

Effects of Urbanization (LAA)Regulatory effects:Regulatory effects:– Caused by the decline in the political clout of farmers. Caused by the decline in the political clout of farmers. – Agricultural and non-agricultural conflicts become more severe as Agricultural and non-agricultural conflicts become more severe as

suburban residents move closer to agriculture. suburban residents move closer to agriculture. – New non-farmer residents tend to implement new regulations that New non-farmer residents tend to implement new regulations that

constrain agricultural production (e.g., regulation of effluent constrain agricultural production (e.g., regulation of effluent discharge and pesticide usage, limiting building codes and, in some discharge and pesticide usage, limiting building codes and, in some cases, down-zoning).cases, down-zoning).

Technical effects:Technical effects:– Reduce the technical efficiency of agriculture through vandalism, Reduce the technical efficiency of agriculture through vandalism,

frequent right to farm complaints, damage to farm equipment, and frequent right to farm complaints, damage to farm equipment, and other limiting activities. other limiting activities.

– Communities can use their eminent domain and police powers to Communities can use their eminent domain and police powers to condemn farmland for public purposes. condemn farmland for public purposes.

– This erodes the efficiency of farms and de-motives farmers. This erodes the efficiency of farms and de-motives farmers. – A technical effect is the erosion of critical mass of farming activities A technical effect is the erosion of critical mass of farming activities

which, if severe enough, would eventually result in the loss of a which, if severe enough, would eventually result in the loss of a farm. farm.

Other Effects of UrbanizationSpeculative effects:Speculative effects:– Relate to distortions in farm production decisions and the resulting Relate to distortions in farm production decisions and the resulting

suboptimal behavior of farmers as a result of rising land values and suboptimal behavior of farmers as a result of rising land values and uncertainties about asset valuation. uncertainties about asset valuation.

– Farmers typically become less interested in investing in the farm, especially Farmers typically become less interested in investing in the farm, especially in technologies that have a long-term payoff. in technologies that have a long-term payoff.

– The shortening of the farmer’s planning horizon as a result of The shortening of the farmer’s planning horizon as a result of suburbanization is typically referenced as “The Impermanence Syndrome.suburbanization is typically referenced as “The Impermanence Syndrome.

– Another dimension is the long-term profit potential from the eventual sale of Another dimension is the long-term profit potential from the eventual sale of land. land.

Market effects:Market effects:– Accrues because suburbanization brings farmers closer to customers. Accrues because suburbanization brings farmers closer to customers. – Urban fringe farmers have opportunities to directly market their products to Urban fringe farmers have opportunities to directly market their products to

consumers and have greater proximity to the market.consumers and have greater proximity to the market.– Farmers at the urban fringe who take advantage of direct marketing Farmers at the urban fringe who take advantage of direct marketing

opportunities enhance their incomes considerably.opportunities enhance their incomes considerably.– Nursery and ornamental operations are particularly lucrative as they are Nursery and ornamental operations are particularly lucrative as they are

driven by the same factors that enable suburbanization.driven by the same factors that enable suburbanization.– Agri-tourism opportunities can contribute to the bottom-line . Market effects Agri-tourism opportunities can contribute to the bottom-line . Market effects

are generally overshadowed by technical and regulatory effects.are generally overshadowed by technical and regulatory effects.On the average, farmers lose money because of suburbanization. On the average, farmers lose money because of suburbanization.

Some Facts About Farmland PreservationSome Facts About Farmland PreservationFarmers need to educate Non-farmers about the benefits of Farmers need to educate Non-farmers about the benefits of farmland preservation.farmland preservation.

Benefits include: Avoiding traffic, reduced congestion, Benefits include: Avoiding traffic, reduced congestion, infrastructure/service duplication, auto-dependence, infrastructure/service duplication, auto-dependence, diminishing quality of life, higher property taxes and high diminishing quality of life, higher property taxes and high cost of living.cost of living.

However, farmland preservation is a public good.However, farmland preservation is a public good.

Gap between desire and propensity to support preservation.Gap between desire and propensity to support preservation.

When pressured by growth, communities pursue regulatory When pressured by growth, communities pursue regulatory means to conserve open space (will see later). means to conserve open space (will see later).

In the absence of a significant preservation program, the In the absence of a significant preservation program, the regulatory approach will eventually set in, making it possible regulatory approach will eventually set in, making it possible to rob farmers of their equity.to rob farmers of their equity.

Farming is a business – Farming is a business – to survive, we must also preserve to survive, we must also preserve

the underlying farm enterprise.the underlying farm enterprise.

Economic Viability and ResiliencyEconomic Viability and Resiliency““A farm is economically viable when it generates A farm is economically viable when it generates enough revenue from its operations to cover all enough revenue from its operations to cover all variable and fixed costs of production, all variable and fixed costs of production, all appropriate family living expenses, and capital appropriate family living expenses, and capital replacement costs.” Adelaja, 2004replacement costs.” Adelaja, 2004

““A Farm is resilient when it A Farm is resilient when it optimizes survival by optimizes survival by optimizing its benefits to the public and to the optimizing its benefits to the public and to the farm community itself”. farm community itself”. Adelaja, 2007Adelaja, 2007

Michigan Example (2002)Michigan Example (2002)

CommodityNet Gain

(# of farms)

% Making Money

Net Loss(# of

farms)

2002% Losing

Money

1997% Losing

Money

Vegetable & Melon

1,084 71% 447 29% 29%

Fruit & Tree Nut 1,193 51% 1,149 49% 37%

Greenhouse/Nursery

2,017 61% 1,300 39% 38%

Oilseed & Grain 7,280 55% 6,046 45% 52%

Other Crops 5,492 39% 8,480 61% 54%

Animal Products 5,671 30% 13,137 70% 61%

Total 22,737 43% 30,559 57% 53%

Source: 2002 Census of Agriculture, Table 59. Summary of North American Industry Classification System.

Past Viability Studies Show . . .Past Viability Studies Show . . .

Agribusinesses with appropriate managerial, financial Agribusinesses with appropriate managerial, financial and marketing practices are more viable.and marketing practices are more viable.Farmers who direct market and utilize frontier marketing Farmers who direct market and utilize frontier marketing techniques are more profitable.techniques are more profitable.Farms with high liquidity and high return on assets fare Farms with high liquidity and high return on assets fare better.better.Ecotourism, farm-based recreation, and value-added Ecotourism, farm-based recreation, and value-added products enhance profitability.products enhance profitability.Farmers with longer planning horizons are more Farmers with longer planning horizons are more profitable.profitable.Farmers who sell bits of their land less profitable.Farmers who sell bits of their land less profitable.As land value rises, viability falls.As land value rises, viability falls.Innovative farmers and processors are more viable.Innovative farmers and processors are more viable.Farmer attitude and interest are important.Farmer attitude and interest are important.

Past Viability Studies Show . . .Past Viability Studies Show . . .Education increases viability.Education increases viability.Viability falls with age (except for beginner farmers).Viability falls with age (except for beginner farmers).Right-to-farm conflicts reduce viability.Right-to-farm conflicts reduce viability.Deer damage adversely affects viability.Deer damage adversely affects viability.Farmers who complain about regulation and the farming Farmers who complain about regulation and the farming environment are less profitable.environment are less profitable.Farmers who reduce chemical use are not less profitable.Farmers who reduce chemical use are not less profitable.Farmers with difficulty accessing inputs are less viable.Farmers with difficulty accessing inputs are less viable.Farmers who work regularly with extension are more Farmers who work regularly with extension are more successful.successful.Farmers who are involved politically and with neighbors Farmers who are involved politically and with neighbors are more successful.are more successful.Preservation alone will not guarantee profitability.Preservation alone will not guarantee profitability.Farming is a business – to survive, we must also Farming is a business – to survive, we must also preserve the underlying farm enterprise.preserve the underlying farm enterprise.

Basis of DownzoningBasis of DownzoningSpeculativeReturn

Return from Agriculture

ReturnRate [%]

Preservation Funds

Easement Value

T* X*

Value Gap

Value ($)

Tipping Point

Time

DownzoningDownzoningPropensity to support preservation is income Propensity to support preservation is income driven, not wealth driven.driven, not wealth driven.

Most suburban communities desire to slow down Most suburban communities desire to slow down growth.growth.

When pressured by growth and sprawl, When pressured by growth and sprawl, communities pursue regulatory means to conserve communities pursue regulatory means to conserve open space.open space.

Zoning that restricts farmers’ use of the land is not Zoning that restricts farmers’ use of the land is not the right answer. the right answer.

States are beefing up their war-chest for States are beefing up their war-chest for preservation and the leadership usually comes preservation and the leadership usually comes from the state.from the state.

LPI Study on Preserving Viable FarmsLPI Study on Preserving Viable Farms

Farmland preservation that does not address the viability of Farmland preservation that does not address the viability of agriculture will be ineffective.agriculture will be ineffective.It must also address the issue of sustainability of farms.It must also address the issue of sustainability of farms.Many state programs focus on productivity (soil quality and Many state programs focus on productivity (soil quality and farm profitability) but ignore other important factors in farm profitability) but ignore other important factors in setting the target and selecting areas for farmland setting the target and selecting areas for farmland preservation.preservation.Survivability is an issue of market access and farm Survivability is an issue of market access and farm diversity, as well as critical mass and soil quality.diversity, as well as critical mass and soil quality.It is also an issue of ecological integrity of the state.It is also an issue of ecological integrity of the state.Based on the concept of strategic growth.Based on the concept of strategic growth.– Focus on global competitiveness by exploiting assets and thinking Focus on global competitiveness by exploiting assets and thinking

in terms of clusters and regions.in terms of clusters and regions.

The Land Policy Institute set out to answer The Land Policy Institute set out to answer four fundamental questions for the State of four fundamental questions for the State of Michigan:Michigan:– Vision:Vision:

How many acres? At what cost? Where and for what reason?How many acres? At what cost? Where and for what reason?

– Funding:Funding:What funding source will support State’s vision?What funding source will support State’s vision?

– Can we save money through innovative Can we save money through innovative preservation methods?preservation methods?

Can we do it more cheaply through equity insurance/mortgageCan we do it more cheaply through equity insurance/mortgage

– How do we make agriculture more viable?How do we make agriculture more viable?Can the venture capital community be brought into agriculture.Can the venture capital community be brought into agriculture.

What needs are being unmet in enhancing viability.What needs are being unmet in enhancing viability.

Four Farmland Preservation ProjectsFour Farmland Preservation Projects

VisionVision Target Acreage and PriceTarget Acreage and Price

Acreage at most at risk of being developed that also Acreage at most at risk of being developed that also scored high on indicators of resiliency (including scored high on indicators of resiliency (including biological, economic, social, and land use factors).biological, economic, social, and land use factors).

Agro-ecological:Agro-ecological:Prime FarmlandPrime FarmlandUnique FarmlandUnique FarmlandBiodiversityBiodiversity

Economic:Economic:Farm ViabilityFarm ViabilityCommodity ViabilityCommodity ViabilityProximity to ConsumersProximity to ConsumersProximity to Markets & ProcessorsProximity to Markets & ProcessorsValue-added PotentialValue-added PotentialEconomic SupportEconomic SupportLivestock Local DemandLivestock Local DemandProduct DiversityProduct Diversity

Social:Social:Income DemographicsIncome DemographicsEthnic DiversityEthnic DiversityTourismTourismOpen SpaceOpen Space

Land Use:Land Use:Farm Size DiversityFarm Size DiversityFarm Cluster CapacityFarm Cluster CapacityPopulation PressurePopulation PressureCompetition of Land UseCompetition of Land UseCurrent PreservationCurrent Preservation

Four Scenarios for Potential Target Four Scenarios for Potential Target Acreage & FundingAcreage & Funding

Farmland Acreage at Risk & Resilient1.3 million acres$3.3 billion

Farmland Acreage at Risk & Resilient683,000 acres$1.8 billion

Farmland Acreage at Risk & Resilient639,000 acres$1.5 billion

Farmland Acreage at Risk & Resilient661,000 acres$1.7 billion

Scenario 1: 2040

Scenario 3: Leap Frog Scenario 4: Half 2040

Scenario 2: 2020

FundingFundingHow do we pay for it?How do we pay for it?

Alternative funding sources.Alternative funding sources.– 18+ existing taxes/fees and 14+ innovative funding sources 18+ existing taxes/fees and 14+ innovative funding sources

evaluated to raise $50 million annually.evaluated to raise $50 million annually.

Each source evaluated for:Each source evaluated for:– Nexus to farmland preservation.Nexus to farmland preservation.– Use in other states and feasibility.Use in other states and feasibility.– Incidence (population affected by change).Incidence (population affected by change).– Stability of revenue source.Stability of revenue source.– Projected revenue stream.Projected revenue stream.– Proponent and opponent views.Proponent and opponent views.– Legality.Legality.– Implementation strategy.Implementation strategy.– Ability to achieve target ($50 million). Ability to achieve target ($50 million).

Potential Funding SourcesPotential Funding SourcesRevenue Revenue SourceSource

OriginOrigin(Act & Yr)(Act & Yr)

Rate Rate (Current)(Current)

Rate Rate (New)(New)

Meet Meet $50m $50m Target?Target?

Nexus?Nexus? Stable?Stable? Broad?Broad? Other Other States?States?

IncomeIncome19671967PA 281PA 281

3.9%3.9% 3.93%3.93% XX XX XX XX

SalesSales19331933PA 167PA 167

6%6% 6.045%6.045% XX XX XX XX XX

UseUse19371937PA 94PA 94

6%6% 6.15%6.15% XX XX XX XX XX

Real Estate Real Estate TransferTransfer

19931993PA 330PA 330

0.75%0.75% 0.87%0.87% XX XX XX XX

GasolineGasoline20002000PA 403PA 403

19¢/gal.19¢/gal. 20¢/gal.20¢/gal. XX XX XX XX

Impact FeesImpact Fees N/AN/A N/AN/A$1,200/$1,200/homehome

XX XX XX XX

Water TaxWater Tax N/AN/A N/AN/A$12.60/$12.60/householdhousehold

XX XX XX XX

Service TaxService Tax N/AN/A N/AN/A 6%6% XX XX XX XX

Tobacco Tobacco SettlementSettlement

N/AN/A N/AN/A N/AN/A XX XX XX

Bond Bond FinancingFinancing

N/AN/A N/AN/A VariableVariable XX XX XX XX XX

Saving MoneySaving MoneyWith a pool of $50 million each year, it would take 20 years to With a pool of $50 million each year, it would take 20 years to purchase 765,000 easement acres using traditional PDR purchase 765,000 easement acres using traditional PDR programs, assuming a 50% local match.programs, assuming a 50% local match.Land appreciates as we acquire easements each year; locking Land appreciates as we acquire easements each year; locking land in now reduces long-term expenditures.land in now reduces long-term expenditures.Equity Insurance and Equity Mortgage programs (Adelaja) would Equity Insurance and Equity Mortgage programs (Adelaja) would allow the state to save money over traditional PDR programs.allow the state to save money over traditional PDR programs.These tools allow the state to preserve land now, spread These tools allow the state to preserve land now, spread payments out over time, and save money.payments out over time, and save money.Equity Insurance programs: state purchases an insurance policy Equity Insurance programs: state purchases an insurance policy in exchange for development rights.in exchange for development rights.Equity Mortgage: state purchases development rights through Equity Mortgage: state purchases development rights through mortgage.mortgage.A legal analysis conducted by Dickinson and Wright showed that A legal analysis conducted by Dickinson and Wright showed that Equity Insurance, while legal, will not likely result in the avoidance Equity Insurance, while legal, will not likely result in the avoidance of capital gains tax.of capital gains tax.Implementation would probably require reform of state laws and Implementation would probably require reform of state laws and education of the lending and insurance communities.education of the lending and insurance communities.

Actuarial Analysis of EQ & EMActuarial Analysis of EQ & EM

Michigan Equity Insurance Equity Mortgage Farmers (between the ages of 25 and 59) 35,349 35,349 Average Farm Size (acres) 190 190 Farmland to be Preserved (acres) 6,736,634 6,736,634 Average Easement Value per Acre $ 2,142 $ 2,142 Total Easement Value $ 14,432,107,057 $ 14,432,107,057 Adjusted Easement Value (2.5% growth) $ 16,168,840,508 $ 16,168,840,508 20% Down Payment $ 3,233,768,102 $ 3,233,768,102 Interest Paid to Farmers (2.5%) $ 9,811,566,901 - Total Premiums Paid $ 22,746,639,307 - 1.5 % Up-front Fees and Expenses - $ 242,532,608 Loan Amount - $12,935,072,406 Total Paid to Farmers $ 25,980,407,409 - Total Interest Payments at 4% $ 9,506,023,180 Total Payments to Acquire Easements $ 25,917,396,295 Net Present Value of all Payments $ 9,467,981,602 $ 8,582,423,298 Cost Per Acre (Net Present Value) $ 1,405 $ 1,274

• Equity Insurance has a potential cost savings of 40%40%..• Equity Mortgage has a potential cost savings of 47%47%..

Viability and Innovation?Viability and Innovation?Entrepreneurial farmers need access to capital Entrepreneurial farmers need access to capital and tools to make their ideas work.and tools to make their ideas work.We need to position farms for a more innovative We need to position farms for a more innovative future.future.Traditional funding sources in agriculture are Traditional funding sources in agriculture are now well positioned to fund innovative ideas.now well positioned to fund innovative ideas.Farmland preservation must be supported by an Farmland preservation must be supported by an initiative to move agriculture closer to areas of initiative to move agriculture closer to areas of growing demand in the economy.growing demand in the economy.A Innovation Fund for Agriculture can attract A Innovation Fund for Agriculture can attract new venture capitalists into agriculture and can new venture capitalists into agriculture and can be positioned to enhance long-term viability.be positioned to enhance long-term viability.We identified funding gaps and designed an We identified funding gaps and designed an “Innovation Pipeline.”“Innovation Pipeline.”

Funding the Innovation PipelineFunding the Innovation Pipeline

Discovery

The Innovation Pipeline for Michigan Agriculture

(who should help fund creative agricultural ventures?)

SeedStage

Proof-of-Concept

Commer-cial

Start-up

RevenueStage

SalesViability

ProfitStage

Growth

Government-Industry

PersonalSavings,Friends,

Government

Angels ??? ???VentureCapital

Banks IPO

Entrepre-neurialStage

$100K/Yr

$200K/Yr $100K/Yr $200K/Yr $200K/Yr $150K/Yr

Total Public Funding$950K/Yr

Tenets for Planning for AgricultureTenets for Planning for Agriculture

Farming is a business. If worthwhile, farmers will farm.Farming is a business. If worthwhile, farmers will farm.Agriculture is an industry, it too can grow.Agriculture is an industry, it too can grow.Need comprehensive industrial policy for MI’s 2Need comprehensive industrial policy for MI’s 2ndnd industry. industry.Must connect agriculture better to other industries.Must connect agriculture better to other industries.For agriculture to be viable in the future, it cannot be For agriculture to be viable in the future, it cannot be stripped of its wealth base (i.e. Down-zoning is not the stripped of its wealth base (i.e. Down-zoning is not the answer).answer).Can have real agricultural development centered around Can have real agricultural development centered around helping farmers achieve viability and Resiliency.helping farmers achieve viability and Resiliency.Agriculture’s benefits go beyond food and fiber. When we Agriculture’s benefits go beyond food and fiber. When we consider the environmental and fiscal impacts of consider the environmental and fiscal impacts of development, it makes sense to invest in agriculture.development, it makes sense to invest in agriculture.Well managed farms are more beneficial than abandoned Well managed farms are more beneficial than abandoned farms, dilapidated barns. farms, dilapidated barns. County and local government can do more to support County and local government can do more to support agriculture.agriculture.

Enhancing Viability of AgricultureEnhancing Viability of AgriculturePromoting local and regional agricultural visions.Promoting local and regional agricultural visions.Right to Farm enhancement.Right to Farm enhancement.Examine municipal codes for restrictive regulations. Examine municipal codes for restrictive regulations. Creating and strengthening County Agricultural Development Creating and strengthening County Agricultural Development Commissions to provide better economic development assistance and Commissions to provide better economic development assistance and strategies.strategies.Creation of statewide agricultural development zones. Creation of statewide agricultural development zones. Enhancing funding for innovative agriculture.Enhancing funding for innovative agriculture.Agricultural Venture Capital.Agricultural Venture Capital.Regional asset analysis and cluster-based development strategy.Regional asset analysis and cluster-based development strategy.Attracting farm-based value added production that relies on agricultural Attracting farm-based value added production that relies on agricultural products (bringing value added opportunities to farmers).products (bringing value added opportunities to farmers).Agriculture’s share of economic development funds.Agriculture’s share of economic development funds.New Marketing Opportunities (Direct Marketing Outlet, etc).New Marketing Opportunities (Direct Marketing Outlet, etc).Regional innovation centers for agriculture.Regional innovation centers for agriculture.Ecotourism, Farm Based Recreation & Bed and Breakfasts.Ecotourism, Farm Based Recreation & Bed and Breakfasts.Better defined intergeneration transfer program.Better defined intergeneration transfer program.

Moving Agriculture Forward Moving Agriculture Forward Requires a Focus on ProsperityRequires a Focus on ProsperityIn our work on farm prosperity, we identified drivers of successful farming.In our work on farm prosperity, we identified drivers of successful farming.Successful farmers have one thing in common:Successful farmers have one thing in common:– Appropriate production technology (efficiency).Appropriate production technology (efficiency).– Entrepreneurial spirit (innovation).Entrepreneurial spirit (innovation).– Consumer orientation (product uniqueness).Consumer orientation (product uniqueness).– Market Saavy (alternative markets, ecotourism, value added, new products).Market Saavy (alternative markets, ecotourism, value added, new products).– Enabling environment (proactive state/local policies, farmland preservation).Enabling environment (proactive state/local policies, farmland preservation).– Regulatory Climate (RTF, Supportive local Government). Regulatory Climate (RTF, Supportive local Government). – Commitment to compatibility and sustainability.Commitment to compatibility and sustainability.

Some drivers of success under control of farmers and others are Some drivers of success under control of farmers and others are community, state and policy induced.community, state and policy induced.One study of ag at urban fringe shows that the things outside of the One study of ag at urban fringe shows that the things outside of the farmers control are just as important as those things within their control.farmers control are just as important as those things within their control.Moving agriculture forward is a group effort – farm community, individual Moving agriculture forward is a group effort – farm community, individual farmers, local and state government and consumers.farmers, local and state government and consumers.

Market Elements of ProsperityMarket Elements of Prosperity

For agriculture to be successful, it must take For agriculture to be successful, it must take advantage of its critical assets.advantage of its critical assets.

In the rest of my talk today, I will focus on five things In the rest of my talk today, I will focus on five things that are critical to exploiting those assets.that are critical to exploiting those assets.– Taking advantage of agriculture’s Taking advantage of agriculture’s locationlocation..– Exploiting consumer’s desire for Exploiting consumer’s desire for convenienceconvenience in food in food

consumption and access.consumption and access.– Exploiting consumer’s quest for Exploiting consumer’s quest for quality of lifequality of life (niche (niche

products, health and wellness solutions).products, health and wellness solutions).– Making new market connectionsMaking new market connections..– Local Local supportsupport infrastructure for agriculture success. infrastructure for agriculture success.

Location, Location, LocationLocation, Location, LocationAgriculture is a real estate asset and the #1 driver of success in real Agriculture is a real estate asset and the #1 driver of success in real estate is location.estate is location.In many states, agriculture is on the pathway to recreational destinations. In many states, agriculture is on the pathway to recreational destinations. What are farmer’s doing to tap into this unique market opportunity? What are farmer’s doing to tap into this unique market opportunity? Another dimension of proximity is the nearness to major cities in the Another dimension of proximity is the nearness to major cities in the region (Grand Rapids, Detroit, Chicago) region (Grand Rapids, Detroit, Chicago) Farmers must intensify their efforts in the following areas:Farmers must intensify their efforts in the following areas:– Farmer’s markets;Farmer’s markets;– Bed and breakfasts;Bed and breakfasts;– Agro-tourism;Agro-tourism;– Farm-based recreation;Farm-based recreation;– Pick-your-own operations;Pick-your-own operations;

In one state, the ag community has partnered with Mapquest to create a In one state, the ag community has partnered with Mapquest to create a directional tool that highlights farm product purchase opportunities, as directional tool that highlights farm product purchase opportunities, as people plan travel routes.people plan travel routes.

Convenience, Convenience, Convenience, Convenience, ConvenienceConvenience

Agriculture produces food and rule number for food marketers Agriculture produces food and rule number for food marketers is convenience.is convenience.The American consumer is changing and the following The American consumer is changing and the following characterize their new persona: characterize their new persona: – Consumer’s increasingly time-starved (two wage earner families).Consumer’s increasingly time-starved (two wage earner families).– Growing culinary illiteracy (desire for complete solutions and home Growing culinary illiteracy (desire for complete solutions and home

meal replacements).meal replacements).– Desire for one-stop shopping solutions (Farm markets that offer more).Desire for one-stop shopping solutions (Farm markets that offer more).

Are farmers well-positioned to take advantage of this trend. Are farmers well-positioned to take advantage of this trend. For example, over the last 20 years we have seen a shift For example, over the last 20 years we have seen a shift away from food consumed at home to food consumed away away from food consumed at home to food consumed away from home. from home. How are our farmers and policy-makers positioning agriculture How are our farmers and policy-makers positioning agriculture to capture a larger marketing margin in the dynamic to capture a larger marketing margin in the dynamic environment where people are eating differently?environment where people are eating differently?

Unique Market OpportunitiesUnique Market OpportunitiesFood is more than a product, it is an experience that is an important element of lifestyle.Food is more than a product, it is an experience that is an important element of lifestyle.Food consumption has evolved from processed foods to specialty prepared foods.Food consumption has evolved from processed foods to specialty prepared foods.Aging baby-boomers have dominated consumer consciousness. Aging baby-boomers have dominated consumer consciousness. Health-consciousness is a major trend in American consumerism.Health-consciousness is a major trend in American consumerism.Influence of 1st generation Americans and interests in wellness.Influence of 1st generation Americans and interests in wellness.Interest in natural products and organics.Interest in natural products and organics.As consumers become wealthier, they demand specialty, quality and wellness solutions.As consumers become wealthier, they demand specialty, quality and wellness solutions.Consumers demand more vegetables, fruits and other healthy products.Consumers demand more vegetables, fruits and other healthy products.What are farmers doing to connect better with the health market?What are farmers doing to connect better with the health market?What are we doing to produce pharmaceutical crops?What are we doing to produce pharmaceutical crops?Can our product development research focus more on producing crop varieties with Can our product development research focus more on producing crop varieties with enhanced health attributes (low fat, high protein and appropriate fatty acids), rather than have enhanced health attributes (low fat, high protein and appropriate fatty acids), rather than have our processors have to take bad things out of what farmers have produced.our processors have to take bad things out of what farmers have produced.Another opportunity is the potential for farmers to benefit from carbon markets.Another opportunity is the potential for farmers to benefit from carbon markets.A recent study completed for the Land Policy Institute by Professors Kerr, Skole and others, A recent study completed for the Land Policy Institute by Professors Kerr, Skole and others, estimated almost $1,000,000 in the value of carbon sequestration by agriculture and forestry.estimated almost $1,000,000 in the value of carbon sequestration by agriculture and forestry.Another recent study by my colleagues and I, estimated that the development value of Another recent study by my colleagues and I, estimated that the development value of farmland appreciates at rates that typically exceed the treasury bill rate.farmland appreciates at rates that typically exceed the treasury bill rate.Does this mean that we can develop a land bank that holds development rights that can then Does this mean that we can develop a land bank that holds development rights that can then be traded in financial markets as we trade mortgage-backed securities.be traded in financial markets as we trade mortgage-backed securities.

Connections, Connections, Connections, Connections, Connections, Connections,

How well do farmers focus on connecting better with consumers?How well do farmers focus on connecting better with consumers?What do we know about where, when and how people eat, and we can better What do we know about where, when and how people eat, and we can better position ourselves?position ourselves?For example, the avg person shops for food within two miles of their homes For example, the avg person shops for food within two miles of their homes (Adelaja et al).(Adelaja et al).The average Michigan farmer farms in suburban communities where the end user The average Michigan farmer farms in suburban communities where the end user is right next door.is right next door.Yet farm products go through the complex maze of the food distribution system Yet farm products go through the complex maze of the food distribution system (vegetables are trucked to auctions, sold to wholesalers, pass through (vegetables are trucked to auctions, sold to wholesalers, pass through warehouses, only to end up in the back yard of many farmers. By then, truckers warehouses, only to end up in the back yard of many farmers. By then, truckers and graders make a fortune and farmers don’t). and graders make a fortune and farmers don’t). If the average farmer is just as close to the average consumer as he is to the If the average farmer is just as close to the average consumer as he is to the average supermarket, what are we doing to exploit this connection opportunity?average supermarket, what are we doing to exploit this connection opportunity?One solution that has worked well, is community-supported agriculture (CSA’s).One solution that has worked well, is community-supported agriculture (CSA’s).One CSA I’m familiar with grosses about $1 million dollars on 60 acres, an average One CSA I’m familiar with grosses about $1 million dollars on 60 acres, an average of $16,000 in revenue per acre.of $16,000 in revenue per acre.Another growing trend is the use of the internet.Another growing trend is the use of the internet.How many farms have websites?How many farms have websites?Farmers need to seek new connections.Farmers need to seek new connections.

Local Support Local Support A farm is a business and agriculture is an industry.A farm is a business and agriculture is an industry.Sometimes our communities forget this.Sometimes our communities forget this.In many local communities, we have plans and organizations that are In many local communities, we have plans and organizations that are embedded in our public infrastructure for the things that are important to embedded in our public infrastructure for the things that are important to us – downtown and economic development.us – downtown and economic development.We need to instill a sense of local commitment to agriculture as an We need to instill a sense of local commitment to agriculture as an industry in Michigan.industry in Michigan.Business climate matters.Business climate matters.Without supportive local government, agriculture will continue to struggle.Without supportive local government, agriculture will continue to struggle.Every community needs to go back to examine the following:Every community needs to go back to examine the following:– Its right-to-farm provisions.Its right-to-farm provisions.– Wild life management strategies.Wild life management strategies.– Its regulation of agriculture.Its regulation of agriculture.– Its marketing infrastructure to support farming.Its marketing infrastructure to support farming.– Allowable signage on farms.Allowable signage on farms.– How it promotes local agriculture.How it promotes local agriculture.– Incentives for agriculture.Incentives for agriculture.

Final ThoughtsFinal ThoughtsFarming is a business. If worthwhile, farmers will farm. Farming is a business. If worthwhile, farmers will farm. Agriculture is an industry.Agriculture is an industry.Can have real economic development centered around Can have real economic development centered around helping farmers achieve prosperity.helping farmers achieve prosperity.Agriculture’s benefits go beyond food and fibre. When we Agriculture’s benefits go beyond food and fibre. When we consider the environmental and fiscal impacts of consider the environmental and fiscal impacts of development, it makes sense to invest in agriculture.development, it makes sense to invest in agriculture.County and local government can do more to generate funds County and local government can do more to generate funds to support agriculture.to support agriculture.We need to promote the concept of ag enterprise zones. They We need to promote the concept of ag enterprise zones. They can be the anchors for a new economic development strategy can be the anchors for a new economic development strategy for agriculture.for agriculture.