The Changing Economics of Farming

US agriculture differs in key ways from agricultural realities elsewhere in the world. Whereas five of every six farms worldwide are smallholder operations producing food solely for the families who own them, most US farms today produce food for commercial agricultural markets. Increasing corporate control and consolidation has created an industry dominated by large farms, disadvantaged smaller farmers, and spread the use of intensive farming practices like monocropping and concentrated animal feeding operations (CAFOs), which are devastating to the environment and harmful to local communities.

Farms in the US tend to specialize in either raising animals or growing crops, with significant differences between these two systems of production. Animal agriculture is significantly more resource-intensive, using more water and land, emitting more greenhouse gases, and delivering less of the population’s nutritional needs.[1] By comparison, crop farming uses 115 million acres less to generate around 1.5 trillion more pounds of food. Despite the vast potential of plant-based farming to feed more people using fewer resources, most crops in the US go to feed intensively farmed animals.

Modern farms of all sizes navigate complex economic environments shaped by fluctuating markets, uncertainties of production, and changing technologies. Smaller farmers must compete with high-output intensive systems while contending with diminishing resources like water and healthy topsoil. Hard working small farmers are caught, economically and operationally, in this economically and environmentally unsustainable food production system that exploits their labor and land.

HOW FARM ECONOMICS DIFFERS FROM OTHER KINDS OF ECONOMICS

Farm economics—the production, distribution, and consumption of agricultural products across globally interconnected supply chains—is unique because of the essential role that food plays in society and the special conditions inherent in agricultural systems. These conditions include the tendency for food production and farming to be politicized: in the US and other high-income nations, food production is deeply influenced by government financial supports and incentives aimed at shaping markets and dietary patterns.

The US government has significantly influenced farm economics and supply chains by subsidizing certain commodities and providing preferential financial assistance to farmers producing certain kinds of goods. Subsidies may take the form of preferential loans, direct payments, disaster payments, and price supports. By providing subsidies, the US government promotes certain foods in consumers’ diets. The top subsidized crops in the US are corn, wheat, soy, and rice, which are used to create processed food components like high-fructose corn syrup and soy oils, or to feed animals in agriculture. Dairy producers also receive subsidies through federal regulation of minimum milk prices, special protections from falling prices, and premium insurance coverage. Cattle producers received more than $326 million in subsidies in 2020. Overall, the US Department of Agriculture (USDA) spent $52 billion on farm subsidies in 2020, with less than 3% of that going to fruits and vegetables. The system of agricultural subsidies has determined what commodities farmers produce and what consumers eat—creating the predominant US diet of meat, dairy, and processed foods.

Food production is deeply influenced by government financial supports and incentives aimed at shaping markets and dietary patterns.

Globally, subsidies have shaped supply chains by encouraging high production of meat and dairy and flooding international markets with products at prices that undercut local farmers. Industrial farming operations and large corporations are often best placed to receive the benefits of subsidies, and in turn, they exploit cheap and vulnerable labor forces.[2]

HOW DID INDUSTRIALIZATION CHANGE FARM ECONOMICS?

The industrialization of farming began about a century ago, replacing the subsistence and smallholder farms that once fed the US population with large operations that use mechanized processes and chemical fertilizers and pesticides to achieve high outputs of commodity crops. Profits from agricultural products benefit the largest farms, which represent less than 4% of the total farms in the US but account for over two-thirds of all production and sales.

The change to intensive agricultural practices has reshaped the agricultural labor force, reducing the need for on-farm labor. From 1950–2000, the number of self-employed and family farmworkers fell from 7.6 million to 2 million, a 74% reduction, while the number of hired farmworkers fell from 2.3 million to 1.1 million, a 52% reduction. Today farm labor accounts for a very small percentage of US labor.

Industrialized animal agriculture, in which thousands of animals are kept in crowded and unhygienic conditions, has created a pool of low-paying and hazardous jobs which are often occupied by Black, Indigenous and people of the global majority (BIPGM). Immigrants make up around 73% of the US agricultural workforce, typically working long hours for minimal pay in fields, slaughterhouses, and CAFOs.

While intensive crop farming also relies on exploitative labor practices in the name of cost efficiency, animal agriculture is notorious for harming CAFO workers, slaughterhouse workers, and nearby communities. Vertical integration of animal agriculture has increased production efficiency, allowing for higher outputs, but it has reduced farmer autonomy and consolidated production chains within large companies. Vertically integrated companies are involved in all aspects of modern production, from breeding and raising animals to slaughter, processing, and distribution to the consumer. Further, they enjoy greater power to set prices through their control over the supply chain. Farmers own the physical infrastructure (land, structures, and equipment), but must operate their farms according to the dictates of integrators. In the chicken industry, over 90% of all chickens are raised by farmers under contract to large companies, who often have to supplement their income with other jobs outside the agricultural sector.

THE THREE STAGES OF THE FARMING ECONOMY

Food passes through three stages of economic activity between the farm and the consumer’s table. Each of these stages involves different processes, businesses, and types of labor. Combined, these three stages of the US agricultural economy represent 19.7 million jobs, or 10.3% of US employment.

PRIMARY ACTIVITIES

Primary activities involve the extraction and harvesting of agricultural products. Examples may include planting, fertilizing, and harvesting a field of soy or alfalfa. Hunting, fishing, or raising confined animals for slaughter is also considered a primary agricultural activity. Primary activities in agriculture collectively employ 2.1% of the US workforce.

SECONDARY ACTIVITIES

Secondary activities generate value-added goods from the products extracted in the primary stage. These include the processing and manufacture of primary agricultural products prior to their sale to consumers, for example, by converting corn into high-fructose corn syrup, canning fruit, or preparing and packaging cuts of meat. Secondary agricultural activities also include the processing of non-edible farm products such as cotton into textiles and clothing. This stage of the food and agriculture industry employs 1.2% of the US workforce.

TERTIARY ACTIVITIES

Tertiary activities involve services provided. In the food and agriculture industry, services are performed by restaurants, grocery stores, food delivery companies, and food service workers in schools and hospitals. This stage of the food and agriculture industry employs 7.2% of the US workforce.

Not all agricultural products pass through all three stages. Some farmers sell their products directly to consumers through farmers’ markets and community-supported agriculture. Direct sales of this sort are often minimally processed, like fruits and vegetables, although farmers may also engage in secondary activities by making breads, jams, ciders, wines, etc., and selling these products directly to consumers. In 2015 the USDA reported that over 114,000 farms engaged in direct sales to consumers. On-farm stores and farmers’ markets accounted for over one-third of such sales.

WHY DO FARMERS FACE ECONOMIC DIFFICULTIES?

A key outcome of US farm policies has been to disadvantage small farms. Smaller farms have faced diminishing incomes for years because subsidies and financial relief programs disproportionately benefit the largest farms, whose profits aggregate to corporations and their shareholders. According to the USDA, between 2013 and 2018, farmers’ incomes decreased by half as prices for farm products steeply declined. While bailout programs from the USDA made up for some of this decrease, in 2019, farm incomes were at their second lowest since 2013.

Another issue created by US farm subsidies is the chronic overproduction of certain commodities, leading to market saturation. This has hit industries like dairy particularly hard, shrinking market opportunities and putting farmers out of business or forcing them to sell their operations to larger farms or corporations. Less-processed commodities like fruits and vegetables receive little government support.

Subsidies have also created inequities in farming by privileging white farmers and large-scale operations over small farms and those owned by farmers who are Black, Indigenous, or people of the global majority. The population of Black farmers, in particular, has declined significantly over the past century, from 14% to just 1.4%, as discriminatory loan policies made it difficult for Black farmers to earn adequate incomes and maintain ownership of their lands.

WHAT FACTORS LED TO THE GROWING ECONOMIC CRISIS IN FARMING?

The many difficulties facing US farmers have been fueled in large part by industrial animal agriculture, which has reshaped the economic landscape of US agriculture. Vertical integration was first implemented in the 1920s in chicken farming, resulting in higher outputs from lower inputs of labor and land. Over the decades, industrialized animal farming paved the way for corporate consolidation. Smaller animal farms have been increasingly challenged by integration and consolidation; for example, the close connection between meatpacking plants and CAFOs gives these two types of large operations an unfair advantage over smaller farmers in dealing with market fluctuations.

Integration and consolidation have shifted the US toward fewer, larger farms. From 2012 to 2019, average farm size rose from 433 to 444 acres while the number of farms shrank by more than 86,000, to 2,023,400. Twenty percent of farms control nearly 70% of US farmland. Meanwhile, since 1980, nearly 17,000 cattle ranchers per year have gone out of business, and the US has 70% fewer hog farmers today than in the mid-1990s.

Industrial animal agriculture has reshaped farm economics, contributing to difficulties for many US farmers.

In food supply chains, corporate concentration and consolidation is measured by the percentage of trade controlled by the top four firms in a particular commodity, known as the four-firm concentration ratio, or CR4 ratio. As of 2017, the top four firms controlled 51% of US broiler chicken processing, 53% of turkey processing, 66% of hog processing, and 83% of beef processing.

Corporate dominion extends to crop agriculture as well. Large corporate farms produce over 30% of high-value crops such as fruits and vegetables. Corporate and large-business efficiencies push down the prices paid to farmers who grow the food while prices for consumers remain the same. Farmers face pressure to “get big or get out,” a situation that results in the disruption of rural communities as farmers are forced to consolidate, work under contract for large industrial producers, or leave their land.

The globalization of US agriculture opened new international markets, but small farmers did not necessarily prosper from these markets. Multinational corporations that benefit from loans, tax incentives, and access to technology engage in global trade that excludes small farmers. Large corporations also engage in political lobbying to influence economic policies in their favor, whereas small farmers lack similar resources and political platforms.

FARM ECONOMICS AND STATISTICS

  • Farms contributed nearly $135 billion to US gross domestic product in 2020, while on-farm employment accounted for 2.6 million jobs.
  • Crop farming uses 115 million fewer acres of land than animal farming and produces over five times more food by weight than animal agriculture. On a per-acre basis, plant farming produces 14,000 pounds more food for humans than animal agriculture does.[3]
  • In 2020, 329 million acres of land were used for crops in the US. Nearly double that, 654 million acres, were used to raise farmed animals. Worldwide, animal agriculture occupies 83% of agricultural land but provides only 18% of the calories to meet global nutrition needs.
  • The US has 74,276 vegetable farms, occupying 4.4 million acres. Animal agriculture is much larger, with 233,770 chicken farms alone.
  • When analyzed for net income per pound, every pound of beef produced generates a net loss of $0.64 and every pound of cow’s milk results in a net loss of $0.07. By contrast, every pound of vegetables generates a net income of $0.02.[4]
  • Overall, plant farming is 1.44% more profitable than animal agriculture and wastes fewer natural resources.[5]
  • According to the US Environmental Protection Agency, the agriculture industry is responsible for 10% of all US greenhouse gas emissions.
  • When agricultural emissions are further categorized, industries that raise animals like cows and pigs produce nearly 40% of US emissions. Crop cultivation comprises 55% of agricultural greenhouse gas emissions, of which corn farming (about half of which is used for animal feed) accounts for about half.
  • Fresh produce like vegetables and fruits contributes only 1% of greenhouse gas emissions.[6]

WHAT CAN ADVOCATES DO?

Supporting farmers is critical to maintaining healthy and nutritious sources of food, providing steady livelihoods for farmers and farmworkers, and preserving natural resources. Plant-based farming produces more food using less land and water, contributes far less to climate change and environmental degradation, and provides farmers with better profit margins overall. The future of an equitable food system lies in providing pathways for farmers to transition to plant-based farming, which will generate higher incomes and safer working conditions.

The future of an equitable food system lies in developing pathways for interested farmers to transition from animal agriculture to plant-based farming.

Several organizations are working to support farmers who wish to transition from animal agriculture and industrial commodity monocropping to more sustainable plant-based farming models that offer more resilient economic opportunity. Farmers and farmer advocates can learn more from these organizations about how to support sustainable farming and support transition.


[1] S. Thaler et al., “Impacts of Human Nutrition on Land Use, Nutrient Balances and Water Consumption in Austria,” Sustainability of Water Quality and Ecology 1–2 (December 2013): 24–39, https://doi.org/10.1016/j.swaqe.2014.04.003.

[2] Camille Bann et al., “A Multi-Billion-Dollar Opportunity: Repurposing Agricultural Support to Transform Food Systems” (Food and Agriculture Organization of the United Nations, United Nations Development Programme, and United Nations Environment Programme, 2021), https://www.fao.org/3/cb6562en/cb6562en.pdf.

[3] Jorge Sigler et al., “Animal-Based Agriculture vs. Plant-Based Agriculture. A Multi-Product Data Comparison” (Human Party, March 2017), https://humaneherald.files.wordpress.com/2017/12/animal-vs-plant-based-agriculture.pdf.

[4] See endnote 3.

[5] See endnote 3.

[6] Eric M. Bell and Arpad Horvath, “Modeling the Carbon Footprint of Fresh Produce: Effects of Transportation, Localness, and Seasonality on US Orange Markets,” Environmental Research Letters 15 (March 2020), https://doi.org/10.1088/1748-9326/ab6c2f.

About the author

Stray Dog Institute

To cultivate dignity, justice, and sustainability in the food system, Stray Dog Institute provides nonprofit allies with funding, strategic research, and opportunities for collaboration. Together, we hope to build a more compassionate world for people, animals, and the environment.

By Stray Dog Institute

About the Author

To cultivate dignity, justice, and sustainability in the food system, Stray Dog Institute provides nonprofit allies with funding, strategic research, and opportunities for collaboration. Together, we hope to build a more compassionate world for people, animals, and the environment.

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