Cropland Concentrating Faster Where Payments
Are Higher
Research examines whether
areas that had received higher program payments
per cropland acre experienced faster or slower growth
in the concentration of production than areas with
lower or zero payments.
Nigel Key
and Michael
J. Roberts
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Both
crop production and government commodity
payments have become more concentrated
on larger farms, raising questions about
the role of payments in changes in concentration
growth
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Concentration
of cropland since 1987 grew much more
rapidly in areas with relatively high
initial payments per acre. |
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While
causality is not established, the evidence
suggests that higher initial payment
levels are associated with greater concentration
in the control of cropland as time passes. |
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This
article is drawn from . . . |
Commodity
Payments, Farm Business Survival, and Farm
Size Growth, by Nigel Key and Michael
J. Roberts, ERR-51, USDA, Economic Research
Service, November 2007.
ERS
Data on Farmland and Cropland Concentration
Measures
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You
may also be interested in . . . |
“Government
Payments and Farm Business Survival,”
by Nigel Key and Michael J. Roberts. In American
Journal of Agricultural Economics. 88(2)
(May 2006): 382-392.
“Do Government Payments Influence
Farm Size and Survival,” by Nigel Key
and Michael J. Roberts, in Journal of
Agricultural and Resource Economics,
Vol. 32, No. 2 (August 2007) pp. 330-348.
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Both crop production and the share
of government payments have shifted over time toward
the largest farms. The fact that these trends are
occurring simultaneously is not surprising since
most government agricultural payments are tied to
the amount of land farmed or the land’s production
history. The concentration of production certainly
leads to a concentration of payments, but the reverse
may also be true.
Increasing concentration of production
is observed in many areas of agriculture. Hog finishing
operations today typically feed two to three times
the number of hogs that they finished in the early
1990s. Broiler operations are typically twice as
large as they were 20 years ago. Today, over 1,400
dairy herds comprise more than 1,000 cows. There
were fewer than 600 such herds in 1992.
Cropland has become increasingly
concentrated on large farms. The Census of Agriculture
shows increasing numbers of small farms (less than
50 acres) and large farms (1,000 acres or more)
but also sharp and ongoing declines in the number
of medium-sized farms. The many small farms account
for little acreage and output, but strongly affect
measures of average farm size. Thus, while average
farm size edged up from 431 acres in 1982 to 441
in 2002, this modest change belies a large increase
in the concentration of production—a much
greater share of land is now farmed by large operations.
Economists see the trend toward
larger farms as a byproduct of the innovations that
have spurred vast economic growth and employment
opportunities outside of agriculture, from factories
a century ago to today’s burgeoning service
sectors. Farms have turned to bigger, faster, and
more automated farm equipment, computerized information
systems, and other capital as agricultural labor
has shifted to other sectors of the economy. These
substitutions have allowed fewer farmers to produce
more agricultural output and to operate much larger
farms.
Technology may not be the only
force driving changes in cropland concentration.
Much public discussion of farm size and land concentration
centers on the role of government policy and the
degree to which program payments to farmers may
be facilitating growth in the number of very large
farms. In considering this issue, recent ERS research
focuses on crop farms because most government agricultural
policies are directed toward a handful of key crop
commodities. These crops—corn, soybeans, wheat,
cotton, and a few other grains—also account
for the bulk of cropland in the United States. ERS
examined whether areas that had received greater
payments per cropland acre subsequently experienced
faster or slower concentration of production than
areas with lower or zero payments.
Cropland Is Concentrating
on Larger Farms
Between 1982 and the most recent
Census of Agriculture in 2002, the number of farms
and the land in farms declined by less than 5 percent
and the average number of acres per farm in 1982
was almost equal to the average in 2002. Nonetheless,
there was considerable structural change in the
distribution of farm sizes.
The share of harvested cropland
operated by smaller to midsized farms (50-499 acres
of cropland) decreased, while the share operated
by large farms (1,000+ acres) increased. By 2002,
farms with at least 1,000 acres of cropland operated
48 percent of the total, up from about 19 percent
20 years earlier.
There was little change in the
share of land operated by farms with 1-49 acres
of cropland. While these small farms operated less
than 4 percent of total cropland in 2002, they comprise
a growing share of farms. In 2002, about 50 percent
of the 1.36 million farms that harvested cropland
harvested less than 50 acres. Many of these small
operations were “residential/lifestyle”
farms, and most of their household income came from
off-farm sources. While some small farms operated
as commercial enterprises growing high-valued crops
on relatively little land, most did very little
farming: three-fourths had sales below $5,000, and
many had no sales at all. The number of small farms
has increased, in part, because USDA’s definition
of a farm ($1,000 in actual or potential sales)
has remained fixed for over 30 years, without adjusting
for inflation.
Cropland Concentration
Grows Faster Where Payments Are Higher
There is a strong statistical
relationship between cropland concentration growth
during 1987-2002 and payments received in 1987.
To determine this, ERS measured changes in concentration
for ZIP Codes that contained agricultural production
and compared the information with the government
payments per acre in the areas in the initial year,
1987 (see box, “Measuring
Cropland Concentration and Government Payments”).
Between 1987 and 2002, concentration declined in
the 10 percent of ZIP Code areas with no payments
in 1987. ZIP Code areas with payments in 1987 show
a positive relationship between cropland concentration
growth and payment levels. Concentration increased
more in areas with high payments than in areas with
lower payments. At the high end, concentration grew
by more than 60 percent in ZIP Codes with payments
exceeding $37.67 per acre; at the low end, concentration
increased by about 15 percent in those ZIP Codes
with payments less than $5.31 per acre.
The same pattern holds across
and within regions of the country. Within each region,
cropland concentration increased more rapidly in
ZIP Code areas with the highest initial payments
per cropland acre, and the relationship between
concentration and payments is persistent, steadily
increasing as payments increase. Concentration increased
noticeably faster in the Heartland, Northern Great
Plains, and Mississippi Portal—those regions
that tend to specialize in program crops that have
higher payments. Moreover, the differences in concentration
growth across regions are substantial.
What Might Explain the Association
Between Cropland Concentration and Payments?
Association between two variables
does not demonstrate causality. While it cannot
be concluded that the observed association between
cropland concentration and government agricultural
payments proves that payments cause concentration
or that payments help keep smaller farms in production,
the evidence does uncover a specific set of noteworthy
patterns. There are several possible explanations
for the patterns observed.
Government payments may accelerate
the shift in cropland toward larger farms if payments
enhance farmers’ liquidity and borrowing leverage,
allowing payment recipients to expand more easily
to larger and more efficient sizes. In this context,
government payments—which provide cash, some
degree of insurance (due to links with commodity
prices), and, perhaps, also a means to leverage
greater resources from lending institutions—might
allow payment recipients to transition more quickly
to a large and efficient scale. While government
payments may have accelerated the expected trend
for larger and more profitable farms to expand at
the expense of smaller farms, this trend is evident
in sectors with and without government payments.
Alternatively, factors other than
government payments could have caused the observed
link between payments and the subsequent pattern
of concentration growth. For example, new technologies
might have caused concentration to increase more
in regions with better land quality. Per acre payments
tend to be higher in areas with greater land quality
and yields. Those areas also may feature flatter
and more contiguous cropland (that is, fields near
each other and not separated by hills and woods).
Some new technologies, such as bigger and faster
pieces of equipment, may be better suited to areas
with better land quality and higher payments, so
payments are higher in regions that experience more
rapid technological change.
Measuring
Cropland Concentration and Government Payments |
Common farm size measures, such as the
average and median, obscure the rapid concentration
of cropland into larger farms (see “Measures
of Trends in Farm Size Tell Differing Stories”).
ERS looked at the distribution of cropland
acres across farms of different sizes, from
those with thousands of acres down to those
with just a few, and selected the farm size
at the midpoint of the cropland distribution,
that is, at the point where half of all
cropland is in larger farms and half is
in smaller farms. This measure of cropland
concentration—an acre-weighted median
of cropland acres—is the statistic
ERS used in the analysis.
In 1982, the typical U.S. crop farm was
400 acres—half of all cropland was
in larger farms and half in smaller farms.
Twenty years later, the typical crop farm
had grown by 133 percent to 932 acres as
cropland became concentrated into larger
operations.
Applying the farm-size measure to ZIP
Codes provides a highly disaggregated geographic
unit of analysis. In rural areas, ZIP Codes
usually encompass townships and are substantially
smaller than counties. Such areas vary markedly
in size, with rural ZIP Codes generally
larger than urban, and ZIP Codes in the
West generally larger than those in the
East. A clear advantage to using ZIP Code
areas is that there are a lot of them, which
allows researchers to see how cropland concentration
is changing across a wide range of payments.
ERS measured concentration and payments
in each ZIP Code in each of four Censuses
of Agriculture (1987, 1992, 1997, and 2002)
having at least three farms in all four
Census years—about 21,500 ZIP Codes
that capture over 90 percent of farms in
the Census and 97 percent of cropland.
The Censuses of Agriculture also provide
data on government payments received by
farm operators, including disaster payments,
but excluding Conservation Reserve Payments
and subsidies paid under the Federal Crop
Insurance Program. The data also exclude
payments to individuals not involved with
the operation of farms, notably landlords.
Payments per acre were calculated based
on all cropland acres, not just those that
were the basis for payments. ERS focused
on payments per acre rather than total payments
in an area because some ZIP Codes have much
more cropland than other ZIP Codes.
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