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Understanding the True Cost of American Food (Part I)

John Ikerd

Earl "Rusty" Butz (right), who served as secretary of agriculture under Richard Nixon and Gerald Ford, was a champion of industrial farming methods. He coined such phrases as "get big or get out" while advocating the planting of fields from "fence row to fence row."

The increase in size of U.S. farms has been moti­vat­ed by the quest for eco­nom­ic effi­cien­cy in an effort to reduce the finan­cial costs of food. How­ev­er, the true” cost of food also includes costs that are not cur­rent­ly reflect­ed in the costs of pro­duc­tion — these are instead exter­nal­ized” or imposed on soci­ety and nature.

The exter­nal eco­nom­ic costs of farm­ing have risen as farms have grown larg­er, so it’s rea­son­able to believe a rela­tion­ship exists between farm size and exter­nal eco­nom­ic costs. The true” cost of Amer­i­can food, how­ev­er, must include the non-eco­nom­ic social and eco­log­i­cal costs that can­not be con­vert­ed into eco­nom­ic costs or inter­nal­ized. Fur­ther­more, there are good rea­sons to believe the non-eco­nom­ic costs of large farms may mat­ter even more than the exter­nal eco­nom­ic costs.

An implic­it assump­tion of true cost account­ing” is that costs should include the cost of sus­tain­abil­i­ty — in the case of food, this means includ­ing the full eco­nom­ic, social, and eco­log­i­cal costs of sus­tain­able farm­ing. Pre­vi­ous con­cerns for eco­log­i­cal and social exter­nal­i­ties have now merged into con­cern for sus­tain­abil­i­ty: an abil­i­ty to meet the needs of all in the present with­out dimin­ish­ing oppor­tu­ni­ties for the future.

Most advo­cates of sus­tain­able agri­cul­ture seem to believe that in farm­ing size doesn’t mat­ter. They con­tend that farms can be man­aged sus­tain­ably or unsus­tain­ably regard­less of how large or small they may be. I read­i­ly admit that most small farms today are prob­a­bly unsus­tain­able. How­ev­er, I believe today’s so-called mod­ern” large farms would need to be man­aged like well-man­aged small farms in order to be sustainable.

Admit­ted­ly, my con­clu­sions reflect how I dis­tin­guish between large and small farms. I con­sid­er a farm to be a sin­gle man­age­ment unit — mean­ing a com­bi­na­tion of land, labor, and cap­i­tal, man­aged as a sin­gle farm or eco­nom­ic enti­ty. The size of a farm then reflects the num­ber of acres of land, dol­lars invest­ed, and hours of labor that are man­aged as a sin­gle eco­nom­ic entity.

Labor is a bit more com­plex than land and cap­i­tal. The work of farm­ing tra­di­tion­al­ly com­bines the func­tions of man­age­ment and labor. Farm­ers are not inan­i­mate machines but think­ing work­ers and work­ing thinkers. As farms grow larg­er man­agers tend to replace think­ing work­ers with mechan­i­cal and dig­i­tal tech­nolo­gies, employ­ing few­er peo­ple as work­ers, as well as few­er man­agers. So small­er farms tend to be more human-inten­sive” than large farms and more man­age­ment-inten­sive. Also, as man­age­ment becomes less inten­sive, farms must grow larg­er in val­ue of pro­duc­tion in order to main­tain an accept­able total return to management.

A sin­gle man­age­ment unit can obvi­ous­ly include far more acres, labor­ers, and dol­lars of invest­ment in some types of farm­ing oper­a­tions than in oth­ers. For exam­ple, a small beef cat­tle ranch would be a very large chick­en farm, at least in terms of acres of land. A larg­er mar­ket gar­den would also be a small corn, soy­bean or wheat farm. That said, for sim­i­lar types of farm­ing oper­a­tions, and for farms in gen­er­al, the greater the man­age­ment inten­si­ty or human inten­si­ty, the small­er the size of the farm in terms of land and cap­i­tal and in total val­ue of pro­duc­tion. In oth­er words, the less-inten­sive or more-exten­sive the man­age­ment, the larg­er the farm or ranch­ing operation.

Farm size mat­ters because man­age­ment inten­si­ty mat­ters. Man­age­ment inten­si­ty deter­mines whether the eco­nom­ic ben­e­fits go pri­mar­i­ly to farm­ers or instead go most­ly to those who own farm­land and have cap­i­tal to invest in farm­ing. So, man­age­ment inten­si­ty deter­mines how much eco­nom­ic ben­e­fit remains in rur­al com­mu­ni­ties and how much of it leaves to feed finan­cial mar­kets. But even more impor­tant­ly, man­age­ment inten­si­ty mat­ters because the sus­tain­abil­i­ty of a farm­ing oper­a­tion depends on the inten­si­ty with which farms are man­aged. The stereo­typ­i­cal large farms of today’s agri­cul­ture are not unsus­tain­able because they are large, they are large because they are man­aged unsus­tain­ably. They are unsus­tain­able because they are man­aged exten­sive­ly” — mean­ing they rely more on land and cap­i­tal and less on think­ing people.

The quest for eco­nom­ic effi­cien­cy has actu­al­ly made the hunger prob­lem worse, not better.”

Sus­tain­able farms, by def­i­n­i­tion, must meet the basic food needs of all in the present with­out dimin­ish­ing oppor­tu­ni­ties for the future. Today’s large farms are doing nei­ther. The pri­ma­ry jus­ti­fi­ca­tion for gov­ern­ment pro­grams that have sub­si­dized large farms was to reduce food costs so every­one would have enough good food to sup­port active healthy lifestyles: food secu­ri­ty. But the per­cent­age of peo­ple in the Unit­ed States clas­si­fied as food inse­cure” today is about three-times larg­er than dur­ing the 1960s. More than 15 per­cent of Amer­i­cans are clas­si­fied as food-inse­cure and more than 20 per­cent of our chil­dren live in food inse­cure homes.

In addi­tion, typ­i­cal Amer­i­can diets today are high­er in calo­ries and appar­ent­ly lack­ing in essen­tial nutri­ents, as reflect­ed in an epi­dem­ic of obe­si­ty and oth­er diet-relat­ed health prob­lems—includ­ing dia­betes, heart dis­ease, hyper­ten­sion, and var­i­ous diet-relat­ed can­cers. As America’s farms grew larg­er dur­ing the lat­ter 1900s, the per­cent­age of an American’s dis­pos­able income spent for food dropped by one-half, but the per­cent­age of GDP going to health care more than dou­bled.

Sim­ple cor­re­la­tions do not prove causal­i­ty, but there is rea­son to believe this rela­tion­ship is not coin­ci­den­tal. The chal­lenge of food secu­ri­ty sim­ply can­not be met by mak­ing food cheap­er. It is a prob­lem of social and eco­nom­ic inequity rather than eco­nom­ic inef­fi­cien­cy. The quest for eco­nom­ic effi­cien­cy has actu­al­ly made the hunger prob­lem worse, not better.

Today’s large, unsus­tain­able farms are degrad­ing the health of soils and min­ing the pro­duc­tiv­i­ty of the land; pol­lut­ing the air, streams, and aquifers with agro­chem­i­cal and bio­log­i­cal wastes; and degrad­ing and demean­ing the agri­cul­tur­al work­force. These are all essen­tial resources for the future pro­duc­tiv­i­ty of Amer­i­can agri­cul­ture. With near­ly 80 per­cent of total val­ue of agri­cul­tur­al pro­duc­tion in the Unit­ed States account­ed for by farms with more than $350,000 in gross farm cash income, the lack of long-run sus­tain­abil­i­ty of Amer­i­can agri­cul­ture obvi­ous­ly can­not be blamed on mis­man­age­ment of America’s small farms.

Farms in Amer­i­ca were much small­er pri­or to the 1940s — the years pre­ced­ing World War II. Most pre-war farms were diver­si­fied, with a num­ber of dif­fer­ent crops and live­stock enter­pris­es man­aged so as to main­tain the fer­til­i­ty of the soil and to man­age weeds and oth­er agri­cul­tur­al pests. Post-depres­sion, pre-war farm poli­cies in the Unit­ed States were focused on increas­ing the pro­duc­tiv­i­ty of inten­sive­ly-man­aged fam­i­ly farms as a means of ensur­ing domes­tic food secu­ri­ty by keep­ing diver­si­fied fam­i­ly farm­ers on the land to pro­duce enough food to meet the needs of all. These tra­di­tion­al fam­i­ly farms were as much way of life as a means of mak­ing a liv­ing. They bal­anced the eco­nom­ic, social, and land stew­ard­ship tra­di­tions of fam­i­ly farm­ing — earn­ing an eco­nom­ic liv­ing in order to pur­sue a cho­sen way of life.”

Fol­low­ing World War II, the chem­i­cal and mechan­i­cal tech­nolo­gies devel­oped for war­fare were trans­formed into the agri­cul­tur­al tech­nolo­gies that became crit­i­cal in sup­port­ing the indus­tri­al­iza­tion of Amer­i­can agri­cul­ture. Farm­ers no longer need­ed to rely on diver­si­fied, inte­grat­ed crop and live­stock sys­tems to main­tain soil fer­til­i­ty or man­age pests; they could use cheap syn­thet­ic fer­til­iz­ers and com­mer­cial pes­ti­cides. Farm­ers could plant, cul­ti­vate and har­vest far more acres with trac­tors than hors­es. Land devot­ed to horse feed was con­vert­ed to cash crops, gen­er­at­ing far more income than the cost of cheap fos­sil fuels. The vagaries of nature were being tamed with new indus­tri­al tech­nolo­gies; allow­ing farm­ers to spe­cial­ize, rou­tinize, and accu­mu­late cap­i­tal to con­sol­i­date exist­ing small farms into few­er large farm­ing operations.

The neg­a­tive eco­nom­ic exter­nal­i­ties of large farms were not wide­ly antic­i­pat­ed and still remain large­ly unappreciated.”

Equal­ly impor­tant, the tran­si­tion to the indus­tri­al sys­tem of agri­cul­ture was sup­port­ed by gov­ern­ment pro­grams, includ­ing pub­lic research and edu­ca­tion, which promised low­er food costs for Amer­i­can con­sumers and more prof­its for Amer­i­can farm­ers. The indus­tri­al­iza­tion of agri­cul­ture replaced sup­port­ing fam­i­ly farms as a means of ensur­ing domes­tic food secu­ri­ty (although the fam­i­ly farm rhetoric” of farm pol­i­cy con­tin­ues even today). Agri­cul­tur­al pro­duc­tion increased and Amer­i­cans were able to spend a small­er share of their income for food as small, diver­si­fied fam­i­ly farms were replaced by larg­er spe­cial­ized, indus­tri­al farm businesses.

Between 1940 and 1980, farms in the Unit­ed States dropped from 6.1 mil­lion, 175 acre farms to 2.4 mil­lion, 426 acre farms, and the per­cent­age of the U.S. work­force employed in agri­cul­ture dropped from 18 per­cent to 3.4 per­cent. Even­tu­al­ly large crop­ping and live­stock oper­a­tions were orga­nized and man­aged like fac­to­ries with­out roofs and fields. And feed­lots func­tioned as bio­log­i­cal assem­bly lines. Land and cap­i­tal were sub­sti­tut­ed for think­ing work­ers. Small, inten­sive­ly-man­aged fam­i­ly farms were replaced by large, exten­sive­ly-man­aged indus­tri­al farms.

The neg­a­tive eco­nom­ic exter­nal­i­ties of large farms obvi­ous­ly were not wide­ly antic­i­pat­ed and still remain large­ly unap­pre­ci­at­ed. The pub­lic man­date of agri­cul­tur­al indus­tri­al­iza­tion was to increase eco­nom­ic effi­cien­cy. But eco­nom­ic val­ue is dif­fer­ent from intrin­sic val­ue. Eco­nom­ic val­ue is a reflec­tion of scarci­ty, not human neces­si­ty. Scarci­ty means there is not enough of some­thing for every­one to have all they want.

For exam­ple, while air is intrin­sic or essen­tial for human life, air has no eco­nom­ic val­ue until clean air is made scarce by pol­lu­tion. Food is valu­able only because it is scarce — mean­ing not enough of it for every­one to have all they want. The dri­ving force of the agri­cul­tur­al econ­o­my and sup­port­ive agri­cul­tur­al poli­cies was to reduce the eco­nom­ic costs of food. While the pre­oc­cu­pa­tion was on reduc­ing the eco­nom­ic costs of food, lit­tle atten­tion was giv­en to the impacts on food qual­i­ty or qual­i­ty of life in rur­al communities.

The increas­es in eco­nom­ic effi­cien­cy asso­ci­at­ed with con­sol­i­da­tion of small farms into man­aged farms brought a grow­ing list of pub­lic con­cerns— includ­ing pol­lu­tion of air and water with chem­i­cal and bio­log­i­cal wastes, the demise of fam­i­ly farms, and eco­nom­ic and social decay of rur­al com­mu­ni­ties. These large, exten­sive­ly man­aged farm­ing oper­a­tions result­ed in the same basic neg­a­tive eco­nom­ic exter­nal­i­ties as those expe­ri­enced by oth­er indus­tri­al sec­tors of the U.S. econ­o­my. How­ev­er, unlike oth­er indus­tri­al sec­tors, indus­tri­al agri­cul­ture remained large­ly unregulated.

Today, the out­dat­ed pub­lic image of farm­ing is still that of the tra­di­tion­al diver­si­fied, small-scale, fam­i­ly farm. But the real­i­ty is quite different. 

(This text, sep­a­rat­ed into three parts, was adapt­ed from a pre­sen­ta­tion pre­pared and deliv­ered by John Ikerd on April 16, 2016 at The True Cost of Amer­i­can Food Con­fer­ence in San Fran­cis­co, Calif. It is repost­ed on Rur­al Amer­i­ca In These Times with per­mis­sion from the author. For more infor­ma­tion, or to sub­scribe to Mr. Ikerd’s blog, vis­it JohnIkerd​.com.)

John Ikerd was raised on a small dairy farm in south­west Mis­souri. He received his BS, MS, and Ph.D. degrees in agri­cul­tur­al eco­nom­ics from the Uni­ver­si­ty of Mis­souri. After work­ing in pri­vate indus­try, he spent 30 years in var­i­ous pro­fes­so­r­i­al posi­tions at North Car­oli­na State Uni­ver­si­ty, Okla­homa State Uni­ver­si­ty, Uni­ver­si­ty of Geor­gia and the Uni­ver­si­ty of Mis­souri before retir­ing in ear­ly 2000. He now spends most of his time writ­ing and speak­ing on issues relat­ed to sus­tain­abil­i­ty with an empha­sis on eco­nom­ics and agri­cul­ture. He cur­rent­ly resides in Fair­field, Iowa and is the author of sev­er­al books includ­ing Essen­tials of Eco­nom­ic Sus­tain­abil­i­ty, Sus­tain­able Cap­i­tal­ism, A Return to Com­mon Sense and Cri­sis and Oppor­tu­ni­ty: Sus­tain­abil­i­ty in Amer­i­can Agri­cul­ture and A Rev­o­lu­tion of the Mid­dle.
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