By Andrew Martin

1
Farm Living (Subsidized by a Job Elsewhere)

• By Andrew Martin
• New York Times
• February 7, 2009

2
Green Acres

• More and more people are embracing country
  lifestylessort of.
• Pride in their work, frustration with desk jobs
  are a couple of reasons cited for this trend.
• According to the Agriculture Department, the
  number of farms increased by 4 from 2002 to
  2007.
• Most of the increase was in small, part-time
  farms
• American farming is highly polarized
• 41 of the nations farms harvested 2,500 or
  less in sales in the year 2007.
• In contrast, 5 of the farms produced 75 of the
  total agricultural output in 2007.

3
Stopping the Disparity

• Newly appointed Ag. Secretary Tom Vilsack is
  keenly aware that farmers with a few hundred
  acres of land are being outbid by farmers with
  thousands of acreage.
• Diversification is his approach to helping the
  small-time farmers out
• Energy production
• Carbon sequestration
• Conservation
• Ecotourism

4
Part-Time Farmers

• Despite recent strong profits, less than half of
  the 2.2 million American farms were profitable in
  2007.
• In 2007, 65 of farmers had non-agricultural
  jobs, up from 55 in 2006.
• Land costs and health care are major hurdles for
  most prospective farmers, according to Amy
  Bacigalupo, a program organizer for the Farm
  Beginnings program in Minnesota.

5
The Look of Farming

• The number of American farms peaked in 1935 at
  about 6.8 million and declined steadily for
  decades, until it stabilized for the last two
  decades between 2 and 2.5 million.
• The average farmer today is a 57 year-old white
  male with 418 acres of farm generating about
  135,000 in annual sales
• BUT the number of female farmers grew by 30 from
  2006 to 2007 to 306,200.
• Hispanic famers grew by 10 in the same time
  span, with more modest gains by black and Asian
  farmers.
• American Indian famers more than doubled, but the
  Ag. Dept. attributes that rise to different
  reporting techniques.

6
More about what Farming Looks Like

• About a third of farms generated less than
  250,000 in sales and the farmer had another job
  as a primary occupation.
• Although most farmers focus on cattle or crops,
  more are closing in on niche areas of
  agriculture.
• The number of organic farms increased by 51 from
  2002 to 2007.

7
The Economics

• Presumably, the small-time farmers are the ones
  not profiting. Why?
• Land rents are bid upward by other people
  looking for more satisfying jobs and their
  competitors, who might buy them out to eliminate
  competition economies of scale and scope might
  also drive profits higher for larger, more
  diversified farms.
• The small farmers compete against the large
  farmers in two markets the goods market, in
  which they supply agricultural products to the
  public, and the market for land, which they need
  as a factor to production.
• The small farmers are competing against more
  people wanting to have the country life in the
  land market.
• Federal subsidies help out rural land owners who
  are not farmers, driving land costs further up.
• In the closed city model where utility is
  constant, if land price is bid upwards, people
  are worse off so they move elsewhere . The city
  contracts until everyone is just as well off as
  someone else.
• So, then the more wealthy large farmers will keep
  buying the agricultural land until the marginal
  profit of that next unit of land is zero and they
  are just as well off as the small farmers.

8
The Economics Cont.

• Potential farmers and small-time farmers must pay
  more to satisfy their preference for the country
  life
• Having to pay extra to have that life might not
  be possible, considering the extra challenges
  brought on by smaller incomes and/or higher
  transportation costs, and perhaps more commuting
  time if the farmer is a part-time farmer.
• How much extra the land will get bid up is an
  issue too because of the low profitability of the
  industry. The question is, how big of a farm do
  you need to be profitable? Is there some average
  acres of land that all farmers (of one type) are
  profitable?
• Relevant markets and the distribution of
  profits needs to be further investigated to
  better understand that issue.