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Report: US ag continues to consolidate

U.S. farms and ranches continue to consolidate, with the remaining operations — with the notable exception of ones in the cow-calf sector — becoming bigger than ever.

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Bryon Parman, an agricultural economist with North Dakota State University Extension. (NDSU photo)
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If you’ve spent time in rural areas of the Upper Midwest, you’ve seen more than a few vacant farmsteads. So you won’t be surprised by the findings of a new federal government report:

U.S. farms and ranches continue to consolidate, with the remaining operations — with the notable exception of ones in the cow-calf sector — becoming bigger than ever.

“It’s the continuation of a trend that’s been going on for a very long time,” said Bryon Parman, an agricultural economist with North Dakota State University extension.

The report from the U.S. Department of Agriculture’s Economic Research Service, or ERS, examined data from the 2017 Census of Agriculture, which was released in 2019, and updated the conclusions of an earlier analysis of the 2012 Census of Agriculture.

The three major conclusions of the new report:

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  • Consolidation of the ag sector continued from 2012 to 2017, maintaining a trend that began in 1982 when ERS began studying the data.

  • Consolidation of cropland into larger farms “was persistent over time and widespread among most crops and most states.”

  • Dairy, hog and egg production all saw major consolidation. But the cow-calf sector, as well as pasture and rangeland associated with it, showed little consolidation.

Cow-calf operations — in which a cow gives birth annually and the calf sold later — rely heavily on grass in pastures. Though ranchers generally are doing a better job of utilizing available grass, it remains a limiting factor and works against cow-calf operations getting bigger, Parman said.
The ERS report explained scant consolidation in cow-calf operations like this: “Bigger, faster, and smarter equipment and vehicles have allowed individual farmers and farm families in other sectors to manage more animals or acres, leading to steady shifts of production to larger farms. Those developments have yet to make major impacts on the cow-calf sector.”

The declining middle

So-called mid-size farms, or ones with 100 to 999 acres, saw much of the decline over the past three decades.

In 1987, mid-size farms accounted for 57% of cropland acres, with large farms operating 15% of all cropland. By 2017, mid-size operations accounted for 33 percent of cropland acres, with large farms operating 41% of all cropland.

That three-decade increase occurred steadily over time, with the share of cropland operated by large farms rising in every five-year census from 1987 to 2017.

The shift in acreage to larger farms also has occurred in nearly every crop.

One example: In 1987, the midpoint for corn was 200 acres, which means half of all corn was harvested on farms with 200 or more acres and half was harvested on farms with fewer than 200 acres. By 2017, in contrast, the corn midpoint has reached 685 acres (half of U.S. corn production came on farms with at least 685 acres).

Why the increase in farm size?

A big reason is that the inflation-adjusted per-bushel prices farmers receive for the crops have dropped sharply over time. That pressures farms to get bigger to produce more bushels that operators can sell, Parman said.

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He cautioned that a farm’s net revenue, not necessarily the number of acres it has, is the most important thing to consider. For example, a vegetable farm — though small in acres compared to a wheat, corn or soybean farm — can have high net revenue.

Another factor: Labor shortages have led to an increase in the size of farm equipment, which in turn encourages farms to add acres. At some point, however, farm equipment might get so big that it becomes unwieldy and too big for operators’ good, Parman said.

Greater economies of scale — spreading costs over more acres to reduce per-acre expenses — has led to bigger farms, too,

But economies of scale don’t always favor farms getting bigger, he said.

Parman’s research shows that farms with $1 million to $2 million from annual sales of widely grown crops such as wheat, corn and soybeans “begin to lose flexibility and lose benefit from greater economies of scale.”

To see the report:

https://www.ers.usda.gov/amber-waves/2020/february/consolidation-in-us-agriculture-continues/

Related Topics: AGRICULTURERURAL LIFE
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