Technology, Public Policy, and the Changing Structure of … · 2018-04-29 · Recommended Citation: Technology, Public Policy, and the Changing Structure of American Agriculture:

Technology, Public Policy, and theChanging Structure of American

Agriculture: A Special Report for the 1985Farm Bill

March 1985

NTIS order #PB86-210374

Recommended Citation:Technology, Public Policy, and the Changing Structure of American Agriculture: ASpecial Report for the 1985 Farm Bill (Washington, DC: U.S. Congress, Office of Tech-nology Assessment, OTA-F-272, March 1985).

Library of Congress Catalog Card Number 85-600518

For sale by the Superintendent of DocumentsU.S. Government Printing Office, Washington, DC 20402

.—

Foreword

In July 1983 the Technology Assessment Board approved the requests of fivecongressional committees that OTA conduct a study that would project the mostlikely picture of U.S. agriculture in 2000 by analyzing the relationships betweenemerging agricultural technologies, public policy, and structural change in the farmsector. The major concern the committees expressed in requesting the study wasthe lack of knowledge about the nature and impacts of emerging technologies incombination with public policy specifically as they affect the future direction ofagriculture, The committees that requested the study are: the Senate Committeeon Agriculture, the Senate Small Business Committee (the Subcommittee on theFamily Farm), the Joint Economic Committee, the House Committee on Scienceand Technology, and the House Committee on Agriculture (the Subcommittee onLivestock, Dairy, and Poultry; the Subcommittee on Department Operations, Re-search, and Foreign Agriculture; and the Subcommittee on Forests, Family Farms,and Energy).

Although the study will not be completed until late 1985, some findings fromthe study, provided in this report, are relevant to specific legislation that will shortlybe debated and acted upon in Congress (the reauthorization of the Agriculture andFood Act of 1981). Like the legislation, the report focuses on three main policyareas: commodity, credit, and research and extension.

In the course of preparing this report, OTA drew on the experience of manyindividuals. In particular, we appreciate the assistance of our advisory panel andmany workshop participants, as well as the efforts of the project’s consultants andcontractors, We would also like to acknowledge the help of the numerous reviewerswho helped ensure the accuracy of our analysis. It should be understood, however,that OTA assumes full responsibility for this analysis and that the report does notnecessarily represent the views of the individual members of the advisory panel.

JOHN H. G I B B O N SDirector

iil

of American Agriculture Advisory Panel

Frank Baker Richard HarwoodDirector, International Stockmen’s School Program OfficerWinrock International Livestock Research and International Agricultural Development

Training Center Service

James BonnenProfessorDepartment of Agricultural EconomicsMichigan State University

William BrownChairman of the BoardPioneer Hi-Bred International, Inc.

Frederick ButtelAssociate ProfessorDepartment of Rural SociologyCornell University

Willard CochraneConsultant

Jack DoyleDirectorAgricultural Resources ProjectEnvironmental Policy Institute

Marcia DuddenDudden Farms, Inc.

Walter EhrhardtElk Ridge Mountain Farm

Charles KiddDeanCollege of Engineering Science, Technology,

and AgricultureFlorida A&M University

Robert Lanphier IIIChairman of the BoardDICKEY-john Corp.

Edward LegatesDean, College of Agriculture and Life SciencesNorth Carolina State University

John MarvelGeneral ManagerResearch DivisionMonsanto Agriculture Products Co.

Donella MeadowsAdjunct ProfessorResources Policy CenterDartmouth College

Don paarlbergConsultant

Don ReevesDean Gillette Consultant, Interreligious Taskforce onProfessor U.S. Food PolicyDepartment of EngineeringHarvey Mudd College Milo Schanzenbach

Roger GranadosSchanzenbach Farms

Executive DirectorLa Coopertiva

iv

————.

OTA Project Staff-Technology, Public Policy,and the Changing Structure of American Agriculture

Roger C. Herdman, Assistant Director, OTAHealth and Life Sciences Division

Walter E. Parham, Food and Renewable Resources Program Manager

Michael J. Phillips, Project Director

Yao-chi Lu, Senior Analyst

Robert C. Reining, Analyst

Juliette Linzer, * Research Assistant

Kathryn M. Van Wyk, Editor

Administrative Staff

Phyllis Balan* * and Patricia Durana, * * * Administrative Assistant

Nellie Hammond, Secretary Carolyn Swann, Secretary

Contractors/Consultants

Boyd Buxton, U.S. Department of Agriculture, St, Paul, MN

Steve Cook, University of Minnesota

B. R. Eddleman, Mississippi State University

Ronald Knutson, Texas A&M University

James Richardson, Texas A&M University

Burt Sundquist, University of Minnesota

Center for Agriculture and Rural Development, Iowa State University

*Through May 1984.● ● Through September 1984

* ● *After September 1984.

ContentsChapter Pagel. Overview .. . . . . . . . . . . . . . . .O... . . . . . . . . . . . . . O...O.. . . . . . . 3

2. The New Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Survey of Emerging Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i’

Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Information Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Impact of Emerging Technologies on Production . . . . . . . . . . . . . . . . . . . . . . . . . 12Projections of Agricultural Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Projections of Food Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

S. The Changing Character of the U.S. Agricultural Sector... . . . . . . . . . . . . . . 1!3The Present Structure of Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Changes in Farm Size and Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Changes in Distribution of Sales and Income . . . . . . . . . . . . . . . . . . . . . . . . . 20Changes in Sources of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Changes in the Structure of Debt in the Farm Sector . . . . . . . . . . . . . . . . . . 22

Defining Structural Change in Agriculture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23The Economic Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23The Sociological Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Causes of Structural Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Technological Forces ....,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Institutional Forces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Economic and Political Forces . . . . . . . . . . . . . . . . . . . . . . . . . . , . . . . . . . . . . , 31

The Dynamics of Structural Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

4. Economic Impacts of Emerging Technologies andSelected Farm Policies for Various Size Crop Farms . . . . . . . . . . . . . . . . . . . . 35The Crop Farms Analyzed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Corn-Soybean Farms in the Corn Belt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36Wheat Farms in the Southern Plains .,, . . . . . . . . . . . . . . . . . . . . . . . . . , . . . 37General Crop Farms in the Delta Region of Mississippi . . . . . . . . . . . . . . . . 38Cotton Farms in the Texas Southern High Plains, . . . . . . . . . . . . . . . . . . . . . 39

Policy and Technology Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39Farm Policy Scenarios. . . . . . . . . . . . . . . . . . . . ..., . . . . . . . . . . . . . . . . . . . . . 40Tax Policy Scenarios . . . . . . ., . . . . . . . . . . . . . . . . . . . ., ., . . . . . . . . , , ., , . . 45Technology Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ., . . . . . . . . . . . . 46Implications for the 1985 Farm Bill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Financial Stress and New Entrants Scenarios . . . . . . ., ..., . . . . . . . . ., . . . . . . 47Financial Stress Scenarios ., ., ..., . . . . . . ., , ., ., , ., ., , ., , . . . . . . . . , . . 47New Entrants Into Farming Scenario, . . . . . . . . . . . . . . . . . . . . . ., ., . . . . . , 48Implications for the 1985 Farm Bill .,, , . . .,,.,..,, . . . . . . . . . . . . . . . . . . 49

!5. Economic Impacts of Emerging Technologies andSelected Farm Policies for Various Size Dairy Farms . . . . . . . . . . . . . . . . . . . 53Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53Technologies and Practices ...,.....,.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5Policy and Technology Scenarios. . . . . . . . . . . . . . . . . . . . . . . . . . . , . . . . . . . . . . . 56

Farm Policy Scenarios..,.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57Tax Policy Scenarios . . . . . . . . . . . . . . . . . . . . . . ....,,.., , .,.,, .,,.,, . . . 59Technology Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Financial Stress Scenarios, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , , . . . . . . . . . . . 61Implications for the 1985 Farm Bill, ........,.. . . . . . . . . . . . . . . . . . . . . . . . . . 61

vi

— .—

Contents-continued

Chapter Page6. Agricultural Research and Extension Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Who Profits From Technology Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..,, 66The Effect of Agricultural Research and Extension on Farm Structure . . . . . . 66Research, Private Sector, and Extension Roles . . . . . .,..., , . . . . . . . . . . . . . . . 68

Private Sector Involvement . . . . . . , , , . . . . . . . . . . . . . . . . . . . . . . . ..., . . . . . 69Research Involvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70Extension Roles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Implications for the 1985 Farm Bill, ,,, .,, ,,, ..,,...., . . . . . . . . . . . . . . . . . . 74

Appendix A.—Summary Analysis Tables for Crop Farms ..., , . . . . . . . . . . . . . . . 77

Appendix B.—Summary Analysis Tables for Dairy Farms . . . . . . . . . . . . . . . . . . . . 84

References , . . . . . , . . . . . , , . . . . . . . . . . . . . , . . . . . . . , . . . . . . . . . . . . . . ..., , . . . . . 89

Tables

Tabfe No, Page2-1,2-2.2-3.3-1,3-2.

3-3

3-4<

4-1,

4-2.

4-3.

4-4.

4-5.

5-1.

5-2.5-3.

Emerging Agricultural Production Technology Areas . . . . . . . . . . . . . . . . .,,. ‘7Estimates of Crop Yields and Animal Production Efficiency . . . . . . . . . . . . . . 14Projection of Major Crop Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Sales Classes of Farms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Distribution of Farms, Percent of Cash Receipts, Percent of Farm Income,and Farm and Off-Farm Income per Farm by Sales Class, 1982 . . . . . . . . , . . 21The Distribution of Farms With High Debt-to-Asset Ratios, by Sales Classfor January 1984 ...,,...,,, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .,,,..,,. 22Historical and Projected Percentages of Cropland Harvested by FarmsWith Sales in Excess of $200,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Financial Characteristics of Three Representative Corn-Soybean Farms inEast Central Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36Financial Characteristics of Three Representative Irrigated Corn Farms inSouth Central Nebraska. . , . . . . . . . . . . . , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37Financial Characteristics of Three Representative Wheat Farms by Size inthe Southern Plains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38Financial and Resource Characteristics for Three Representative GeneralCrops Farms in the Delta of Mississippi, 1983 . . . . . . . . . . . . . . . . . . . . . . . . . . 38Financial Characteristics of Three Representative Cotton Farms by Size inthe Texas Southern High Plains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39Total Producers and Size Distribution of Herds Selling MilktoPlants Regulated by Federal Milk Marketing Orders, May 1983 . . . . . . . . . . . 54Representative Dairies by Region and Herd Size . . . . . . . . . . . . . . . . . . . . . . . . 55Financial Characteristics Assumed for Eight Dairy Operations inFour States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Figures

Figure No. Page3-1. Factors Influencing the Structure of Agriculture . . . . . . . , . . . . . . . . . . . . . . . . 275-1.How the Dairying Picture Has Changed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

vii

Chapter 1

Overview

Chapter 1

Overview

Continuing, rapid advances in biotechnologyand information technology promise to revo-lutionize agricultural production and to alterdramatically the structure of the U.S. agricul-tural sector. In the next 15 years, 1.5 of the esti-mated 1.8 percent annual growth in produc-tion needed to balance world agriculturalsupply and demand must come from increasesin agricultural yields—yields that will be pos-sible largely through the development andadoption of emerging technologies. While itseems clear that these technologies must beused if this Nation is to compete in the inter-national marketplace, it is also clear that thepotential impacts of adopting these technol-ogies have important policy implications forCongress as it begins debate on the reauthoriza-tion of the 1981 farm bill,

One impact will be technology’s role, underthe current policy environment, in creating asurplus of certain commodities in the imme-diate future. Overall, the agricultural commu-nity is expected to experience unpredictablefluctuations in the balance of agriculturalsupply and demand. For certain commodities,however—notably, dairy products—a substan-tial potential for further U.S. surpluses exists.The adoption of new technologies coupled withcurrent farm policy will exacerbate that prob-lem. The implication for policy makers is theneed for a farm program that more easilyallows for adjustments in periods of shortagesand surpluses rather than remaining fixed.

Another impact of technology will be its con-tinuing role in changing the structure of theagricultural sector from a system dominatedby the moderate-size farm to one dominated bylarge and very large industrialized farms. ]

Technology has provided the technical meansfor structural change: mechanization has madeit possible for farmers to operate larger farms,

I Fo r purposes of this study we have defined a moderate-sizefarm as having gross sales of $100,000 to $199,000; a ]arge farm,$200,000 to $499,000; anc] a \reryr large farm, $500,000 and over.

and disease control has made it possible to uselarge-scale confinement feeding. Public policyhas provided further incentives, such as pricesupports and tax incentives, for farmers to ex-pand operations.

The technologies a farmer now needs to re-main competitive are costly and complex.Farmers who lack the capital and expertise toadopt new technology early enough to main-tain a competitive edge must seek supplemen-tary off-farm income, find some special nichefor their products, or give up farming alto-gether. This last alternative has become a fa-miliar picture for the moderate-size farm,which is fast disappearing from the agriculturalscene, As it drops from the middle of the farmspectrum, it leaves small and part-time farms(whose owners earn their primary incomeelsewhere) clustered at one end and the largefarms (whose owners can take advantage ofeconomies of scale) clustered at the other,

This trend has several implications for pub-lic policy. First, if a decision is made to slowthe decline of the moderate-size farm, policy-makers must provide ways for: 1) making newtechnologies more available to these farms, and2) providing training in the use of these tech-nologies. Targeting income support to the oper-ators of such farms would also be an effectivepolicy component, although even this measuremay not help dairy farmers in some regions.

Second, despite the apparent advantages ofoperators of very large farms, such operatorsmay need a loan safety net to help them weatherprice instabilities and the rigors of the worldmarketplace. Unlike most of their moderate-size counterparts, such farms can survive with-out income supports.

Third, agricultural policy may have to in-clude ways to help particular groups and re-gions make the transition to different endeavors.For example, programs to retrain agriculturalworkers for jobs in other sectors of the econ-omy may be necessary, or farm operators in

3

4 ● A Special Report for the 1985 Farm Bill

a region may need help changing to alterna-tive kinds of farming. The Lake States region,for instance, shows some comparative advan-tages for switching from dairy production tocorn.

Finally, and perhaps most significantly, farmprograms must be considered in the context ofthese strong technological, economic, and in-stitutional forces. Farm programs can merelyspeed up or slow down these forces of change—they cannot reverse the trends.

While the forces influencing change in theagricultural structure have been identified, theyhave not primarily been studied in the overallcontext of farm policy decisions. This reportattempts to do just that. It focuses on the fol-lowing sections of the 1981 farm bill: Title I–

Dairy, Title III—Wheat, Title IV—Feed Grains,Title V—Cotton, Title VI—Rice, Title VIII—Soybeans, Title X–Grain Reserves, Title XI–Payment Limitations, Title XIV—Research andExtension, and Title XVI—Credit, Rural Devel-opment, and Family Farms.

Chapters 2 and 3 of this report provide back-ground information on technology and struc-tural change and on the procedures followedin the conduct of this study. The remainder ofthe chapters present the results of OTA’S anal-ysis. The long-run impacts of technology, pub-lic policy, and structural changes on rural com-munities, the natural resource base, and theenvironment will be addressed in detail in thelater full report from this study.

Chapter 2

The New Technologies

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Chapter 2

The New Technologies

Technology has made U.S. agriculture one nologies encompass both products and processes,of the most productive in the world. Some of and, like their predecessors, promise to reshapethat technology has taken the form of new the practice of agriculture.products—che-rnicals to control pests, drugs tocontrol disease, or sensors and computers thatautomatically measure moisture conditionsand irrigate the field. Other technology hasbeen embodied in new processes—such as theability to use a computer, to make better eco-nomic decisions, or to apply the best combina-

This chapter provides a brief survey of theemerging agricultural production technologiesthat could have such an impact and analyzesthe effect of various technology developmentand adoption environments on agriculturalfood production over the next 15 years,

tion of cultural practices. The emerging tech-

SURVEY OF EMERGING TECHNOLOGIES

Before the turn of the century, cattle ranchers electronics will be used to increase manage-in Texas may be able to raise cattle as big aselephants. California dairy farmers may be ableto control the sex of calves and to increase milkproduction by more than 10 percent withoutincreasing feed intake. Major crops may begenetically altered to resist pests and disease,grow in salty soil and harsh climate, and pro-vide their own fertilizer. And computers and

ment efficiency. These are only a few of about150 emerging technologies in the 28 technologi-cal areas that have been identified and eval-uated for this study (table 2-1). While it maysound like science fiction, advances in biotech-nology and information technology will makethese technologies a reality in the next 10 to20 years,

Table 2.1 .—Emerging Agricultural Production Technology Areas

Animal Plant, soil, and water

Genetic engineering Genetic engineering ‘ -

Animal reproduction Enhancement of photosynthetic efficiencyRegulation of growth and development Plant growth regulatorsAnimal nutrition Plant disease and nematode controlDisease control Management of insects and mitesPest control Weed controlEnvironment of animal behavior Biological nitrogen fixationCrop residues and animal wastes use Chemical fertilizersMonitoring and controlling Water and soil-water-plant relationsCommunication and information Soil erosion, productivity, and tillageTelecommunication Multiple croppingLabor-saving technologies Organic farming

Communication and information managementMonitoring and controllingTelecommunicationsLabor-saving technologiesEngine and fuelsLand managementCrop separation, cleaning, and processing

SOURCE Office of Technology Assessment

7

8 . A special Report for the 1985 Farm Bill

Biotechnology

Animal Agriculture

One of the major thrusts of genetic engineer-ing in animals is the mass production in micro-organisms of proteinaceous pharmaceuticals,including a number of hormones, enzymes, ac-tivating factors, amino acids, and feed supple-ments. Previously obtained only from animaland human organs, these biological were ei-ther unavailable in practical amounts or inshort supply and costly.

Some of these biological can be used fordetection, prevention, and treatment of infec-tious and genetic diseases; some can be usedto increase production efficiency. One of theapplications of these new pharmaceuticals isthe injection of growth hormones into animalsto increase productivity. Several firms, in-cluding Monsanto and Eli Lilly, are develop-ing genetically engineered bovine growth hor-mone to stimulate lactation in cows. In trialsat Cornell University, daily doses of recombi-nant bovine growth hormone were adminis-tered to dairy cows. The hormone, producednaturally by a cow’s pituitary gland, was syn-thesized by Genentech for Monsanto. Theresults showed that each cow treated with thehormone increased milk production by at least12 percent without increasing feed intake.Commercial introduction of the new hormonenow awaits approval by the Food and DrugAdministration (FDA) (Bachrach, 1984; Hansel,1984).

Another new technique arising from the con-vergence of gene and embryo manipulationspromises to permit genes for new traits to beinserted into the germ lines of livestock andpoultry, opening a new world of improvementin animal health and productivity, Unlikegenetically engineered growth hormone, whichincreases an animal’s milk production or bodyweight but does not affect future generations,this technique will allow future animals to bepermanently endowed with traits of other ani-mals and humans, and probably also of plants.

I Pharmaceuticals that are proteins.‘Reproductive cells.

In this technique, genes for a desired trait, suchas disease resistance and growth, are injecteddirectly into either of the two pronuclei of afertilized ovum (egg), Upon fusion of the pro-nuclei, the guest genes become a part of all ofthe cells of the developing animal, and the traitsthey determine are transmitted to succeedinggenerations.

In 1983, scientists at the University of Penn-sylvania and University of Washington suc-cessfully inserted a human growth hormonegene, a gene that produces growth hormone inhuman beings, into the embryo of a mouse toproduce a supermouse that was more thantwice the size of a normal mouse (Palmiter,1983). In another experiment, scientists at OhioUniversity inserted rabbit genes into the em-bryos of mice. The genetically engineeredmice, which were 2.5 times larger than normal,ate as much as normal mice (Mintz, 1984).

Encouraged by the success of the super-mouse experiments, USDA scientists at theBeltsville Agricultural Research Center arenow conducting a new experiment to producesuper sheep and pigs by injecting humangrowth hormone gene into the germ lines ofsheep and pigs (Russell, 1984). In this experi-ment, USDA scientists provide Ralph Brinsterof the University of Pennsylvania with fer-tilized eggs from sheep and pigs at their Belts-ville farms. After injecting the eggs with thehuman growth hormone genes, Brinster re-turns the embryos to Beltsville to be insertedinto the surrogate mother animals.

The experiments of crossing the geneticmaterials of different species in general and ofusing the human growth hormone in particu-lar have prompted lawsuits from two scientificwatchdog groups: the Foundation of EconomicTrends, headed by Jeremy Rifkin, and theHumane Society of the United States. Bothcharged that such experiments are a violationof “the moral and ethical canons of civiliza-tion, ” and they sought to halt the experiment.The researchers argued that they are continu-ing the experiment cautiously and counteredthat the potential scientific and practical bene-fits far outweigh the theoretical problemsraised by the critics.

— ————

Ch. 2—The New Technologies ● 9

The success of the mice experiments in-dicates that analogous insertion into bovinegerm lines of additional bovine growth hor-mone genes, or of growth hormone genes fromlarger mammals such as sperm whales orelephants, could yield larger productivity gainsthan would somatic injections of growth hor-mones. Moreover, the change in growth wouldremain a permanently inheritable characteris-tic, The expression “a whale of an animal”would no longer be just a figure of speech.Probably, however, the growth hormone genefrom any animal may be used (not just hor-mones from very large animals) as long asenough of that hormone is injected to do thejob.

Although some scientists may be too op-timistic when they predict in 2 years the de-velopment of a lo, ()()()-pound cow and thegrowth of a pig 12 ft long and 5 ft high (Mintz,1984), these developments are certainly withinthe realm of possibility in the next 10 to 20years, However, some of these changes mayormay not be desirable due to economic, envi-ronmental, anatomical, institutional, and ethi-cal reasons.

Another technique, embryo transfer in cows,involves artificially inseminating a super-ovulated donor animal4 and removing the re-sulting embryos nonsurgically for implantationin and carrying to term by surrogate mothers.Prior to implantation, the embryos can betreated in a number of ways. They can besexed, split (generally to make twins), fusedwith embryos of other animal species (to makechimeric animals or to permit the heterologousspecies to carry the embryo to term), or frozenin liquid nitrogen, Freezing is of great practicalimportance because it allows embryos to bestored until the estrus of the intended recipi-ent on the farm is in synchrony with that ofthe donor. For gene insertions, the embryomust be in the single-cell stage, having pro-nuclei that can be injected with cloned foreigngenes. The genes likely to be inserted into cat-

31njections into body cells rather than into reproductive cells.4An animal that has been injected with a hormone to sti mu-

late the production of more than the normal number of eggs perovulation,

tle maybe those for growth hormones, prolac-tins (lactation stimulator), digestive enzymes,and interferon, thereby providing both growthand enhanced resistance to diseases.

While less than 1 percent of U.S. cattle areinvolved in embryo transfers, the obvious ben-efits will push this percentage upward rapidly,particularly as the costs of the procedure de-crease (Brotman, 1983). One company, GeneticEngineering Inc. (GEI), already markets frozencattle embryos domestically and abroad andprovides an embryo sexing service for cattlebreeders (Genetic Engineering News, 1983).

Plant Agriculture

The application of biotechnologies in plantagriculture could modify crops so that theywould make more nutritious protein, resist in-sects and disease, grow in harsh environments,and provide their own nitrogen fertilizer. Whilethe immediate impacts of biotechnology willbe greater for animal agriculture, the long-termimpacts may be substantially greater for plantagriculture. The potential applications of bio-technology on plant agriculture include micro-bial inoculums, plant propagation, and geneticmodification.

Microbial Inoculums.—Rhizobium seed in-oculums are widely used to improve nitrogenfixation by certain legumes. Extensive study ofthe structure and regulation of the genes in-volved in bacterial nitrogen fixation will likelylead to the development of more efficient in-oculums. Research on other plant colonizingmicrobes has led to a much clearer understand-ing of their role in plant nutrition, growthstimulation, and disease prevention, and thepossibility exists for their modification and useas seed inoculums,

Recently, Monsanto announced plans tofield-test genetically engineered soil bacteriathat produce naturally occurring insecticide ca-pable of protecting plant roots against soil-dwelling insects (Journal of Commerce, Dec.12, 1984). The company developed a geneticengineering technique that inserts into soil bac-teria a gene from a micro-organism known asBacillus thuringiensis, which has been regis-

10 ● A special Report for the 1985 Farm Bill

tered as an insecticide for more than two dec-ades. Plant seeds can be coated with these bac-teria before planting. As the plants from thesebuds grow, the bacteria remain in the soil nearthe plant roots, generating insecticide that pro-tects the plants.

Plant Propagation.—Cell culture methodsfor regeneration of intact plants from singlecells or tissue explants have been developedand are used routinely for the propagation ofseveral vegetable, ornamental, and tree species(Murashige, 1974; Vasil, et al., 1979). Thesemethods have been used to provide large num-bers of genetically identical, disease-free plantsthat often exhibit superior growth and moreuniformity over plants conventionally seed-grown. Such technology holds promise for im-portant forest species whose long sexual cyclesreduce the impact of traditional breeding ap-proaches. Somatic embryoss produced in largequantities by cell culture methods can be en-capsulated to create artificial seeds that mayenhance propagation of certain crop species.

Genetic Modification.—Three major bio-technological approaches—cell culture selec-tion, plant breeding, and genetic engineering—are likely to have a major impact on the pro-duction of new plant varieties. The targets ofcrop improvement via biotechnology manipu-lations are essentially the same as those oftraditional breeding approaches: increasedyield, improved qualitative traits, and reducedlabor and production costs. However, thenewer technology offers the potential to accel-erate the rate and type of improvements be-yond that possible by traditional breeding.

Of the various biotechnological methods thatare being used in crop improvement, plantgenetic engineering is the least established butthe most likely to have a major impact. Usinggene transfer techniques, it is possible to in-troduce deoxyribonucleic acid (DNA) from oneplant into another plant, regardless of normalspecies and sexual barriers. For example, it hasbeen possible to introduce storage proteingenes from French bean plants into tobaccoplants (Murai, et al., 1983) and to introduce

5Embryos reproduced asexually from body cells.

genes encoding photosynthetic proteins frompea plants into petunia plants (Broglie, et al.,1984),

Transformation technology also allows intro-duction of DNA coding sequences from vir-tually any source into plants, providing theyare engineered with the appropriate plant generegulatory signals. Several bacterial genes havenow been modified and shown to function inplants (Fraley, et al., 1983; Herrera-Estrella, etal,, 1983). By eliminating sexual barriers togene transfer, genetic engineering will greatlyinc:rease the genetic diversity of plants.

Information Technology

Animal Agriculture

The most significant changes in future live-stock production due to information technol-ogy will come from the integration of com-puters and electronics into a modern livestockproduction system that will make the farmera better manager.

Computers and electronic devices can beused efficiently in animal feeding, reproduc-tion, disease control, and environmental con-trol. The first step toward efficient managementwill be with electronic animal identification(Muehling and Jones, 1983). Positive identifica-tion of animals is necessary in all facets of man-agement, including recordkeeping, individual-ized feed control, genetic improvement, anddisease control. All animals could be identifiedsoon after birth with a device that would lastthe life of the animal. The device would bereadable with accuracy and speed from 5 to 10ft for animals in confinement and at muchgreater distances for animals in feedlots or onpasture. Research on identification systems foranimals has been in progress for some years,especially for dairy cows. For example, an elec-tronic device now used on dairy cows is atransponder that is worn in the ear or on a neckchain. A feed-dispensing device identifies theanimal by its transponder and feeds the ani-mal for maximum efficiency, according tostage of production. It also permits animals indifferent stages of production to be penned to-gether yet still be fed properly.

Ch. 2—The New Technologies ● 11.— - .—

Feeding systems with sensing devices alsodetect outdoor temperature so that animals canbe fed accordingly. Since the amount of feed-energy an animal needs under various weathersituations and at each stage of growth is known,the ability to sense weather information couldfine-tune diet preparation.

A rapid analysis of the feedstuff going intothe ration will be available at the farm. In for-mulating a ration, it will be very helpful to getan instant and accurate reading on the calcium,phosphorus, and Iysine contents of the rationingredients, This will permit a feedback con-trol to adjust the mill and mixer automaticallyto provide an optimum feed.

The largest potential use of electronic devicesin livestock production will be in the area ofreproduction and genetic improvement. An in-expensive estrus detection device, for example,would prove profitable in several ways:

Animals could be rebred faster after wean-ing and increase the number of litters peryear.Animals that did not breed could be culledfrom the herd, saving on feeding andbreeding space.Time would be saved because breedingwould be done faster.Embryo transplants would be easier be-cause of better estrus detection.

Another use of information technology is indisease control and prevention (Osburn, 1984).Computers and computer programs are beingused at many dairies and swine productionunits and in the poultry industry. Herd record-keeping systems for animal health are being de-veloped and refined for various productionunits. Examples of these programs now inoperation include FARMHX in Michigan andsimilar systems in New York and California(Mather, 1983). These recordkeeping systemsmay be linked with animal identification sys-tems, including radiotransmitters, as indicatedearlier. Examples of the types of informationthat can be recorded for each animal includeproduction records, feed consumption, vacci-nation profiles, breeding records, conceptiondates, number of offspring, listing and dates

of diseases, and costs of medicants for treat-ment or prevention of disease, A review ofprintouts will allow the manager or veterinar-ian to analyze quickly a health profile for eachanimal. Bringing all of this information to-gether will allow the veterinarian and managerof the livestock enterprise to plan for more cost-effective disease control programs and to des-ignate the duties, such as vaccinations andpregnancy examinations, that are to be carriedout, These programs are being applied andrefined on a few farms. By 1990 many of themore progressive livestock producers will beusing these systems, and by 2000 these systemswill be widely applied to nearly all of the cost-efficient livestock production units.

Environmental control of livestock facilitiesis another area where electronic devices canbe used. Microprocessors will be used to alle-viate odorous gases and airborne dust in ven-tilation systems.

Plant Agriculture

One of the applications of information tech-nology in plant agriculture is in the manage-ment of insects and mites (Kennedy, 1984), Im-provements in the design and availability ofcomputer hardware and software will producetremendous changes in insect and mite man-agement at all levels (research, extension, pestmanagement, personnel, and farmer). To beimplemented efficiently, as measured by itscontribution to crop profitability, insect andmite management requires the processing ofvoluminous quantities of information, includ-ing: 1) condition and phonological stage of thecrop, 2) status of the various insect and mitepests and their natural enemies present in thecrop, 3) production inputs into the crop, 4) in-cidence of plant diseases and weed pests andthe measures used in their control, 5) weatherconditions, and 6) insect and mite managementoptions. Further, this information must be up-dated and reviewed at regular intervals, Com-puters can help superbly in the effective andefficient processing of this information as wellas in the design, direction, and analysis of pestmanagement-related research.


The availability at the farm level of micro-computers equipped with appropriate softwareand having access to larger centralized databases will greatly speed the transfer of infor-mation and facilitate pest management deci-sionmaking. The advantages, simply in termsof information storage and retrieval, will betremendous, The ready storage of and accessto current and historical information on pestbiology, incidence, and abundance; pesticideuse; cropping histories; weather; and the likeat the regional, farm, and even field level willfacilitate the selection of the appropriate man-agement unit and the design and implementa-tion of pest management strategies for thatunit.

Centralized, computer-based, data manage-ment systems for crop, pest, and environmentalmonitoring information have been developedand are being evaluated for use on a regionalscale by a USDA/Animal and Plant Health In-spection Service regional program. Such sys-tems will provide rapid analysis, summariza-tion and access to general crop summaries,observer reports, pesticide and field manage-ment information, reports of new or unknownpests, general pest survey information, andspecified field locations with pest severities.

Other software systems designed to facilitatedirectly the implementation of pest manage-ment programs are in use and are continuallybeing improved. The Prediction ExtensionTiming Estimator (PETE) model (Welch, et al.,1978) is a generalized model for the predictionof arthropod phonological events. PETE is suf-ficiently flexible to be used for management inmany agricultural and nonagricultural systems,

For example, it is used as a part of the broaderbiological monitoring scheduling system(BIOSHED) developed in Michigan by Gageand others (1982) for a large number of pestson a wide variety of crops (Croft and Knight,1983).

Experiences with these and other softwaresystems have demonstrated their great valueand identified areas where improvements areneeded. It has also pointed out that the database from which biological models are devel-oped is limited, Since all biological models areonly as good as the biological information uponwhich they are based, the continued develop-ment and improvement of such models for usein integrated pest management (1PM) is con-tingent on continued high-quality research onthe appropriate aspects of plant and pest bi-ology and ecology,

The advantages provided by computer soft-ware are tremendous, in terms of improvedefficiency and accuracy with which pest man-agement decisions can be made and imple-mented. There is a great deal of effort currentlybeing devoted to the development of new soft-ware and the improvement of existing soft-ware. This, in conjunction with the rapid ad-vances being made in computer hardware,provides a powerful force that will lead todramatic changes in the implementation of1PM and to increases in the level of sophis-tication of 1PM, where such increases aredesirable.

A detailed description of all technologies ex-amined in this study will be presented in OTA’Sfull report later this year,

IMPACT OF EMERGING TECHNOLOGIES ON PRODUCTION

To help analyze the impact of emerging tech- technologies. Participants in the workshops—nologies on agricultural productivity, OTA on animal and plant agriculture—provided datacommissioned leading scientists in each of the on: 1) the timing of commercial introduction28 technology areas studied to prepare papers of each technology area, 2) the number of yearson the state of the art. The papers were valu- needed to adopt the technology (by commod-able resources for workshops conducted to ity), and 3) yield increases (by commodity)assess the impacts of emerging production expected from the technology. Workshop par-

Ch. 2—The New Technologies ● 1 3

ticipants included physical and biologicalscientists, engineers, commodity extensionspecialists, economists, agribusiness represent-atives, and experienced farmers.

Since the impact of a new technology on agri-culture at a given time depends in part on whenthe technology is available for commercial in-troduction, workshop participants were askedto estimate the probable year of commercial in-troduction of each technology under four alter-native environments:

1.

2.

3.

4.

Baseline environment—assumes to 2000:a) a real rate of growth in research and ex-tension expenditures of 2 percent per year,and b) the continuation of all other forcesthat have shaped past development andadoption of technology.No-new-technology environment—assumesthat none of the technologies identified inthe study will be available for commercialintroduction by 2000.Less-new-technology environment—as-sumes to 2000: a) no real rate of growthin research and extension expenditures,and b) all other factors less favorable thanthose of the baseline scenario.More-new-technology environment—as-sumes to 2000: a) a real rate of growth inresearch and extension expenditures of 4percent, and b) all other factors more fa-vorable than those of the baseline scenario.

The year of commercial introduction rangedfrom now—for genetically engineered pharma-ceutical products; control of infectious diseasein animals; superovulation, embryo transfer,and embryo manipulation of cows; and con-trolling plant growth and development—to2000 and beyond—for genetic engineeringtechniques for farm animals and cereal crops.Of the 57 potentially available animal technol-ogies, it was estimated that 27 would be avail-able for commercial introduction before 1990,and the other 30 between 1990 and 2000, underthe baseline environment. In plant agriculture,50 out of 90 technologies examined were pro-jected to be available for commercial introduc-

tion by 1990, and the other 40 technologies be-tween 1990 and 2000.

Historical trend lines of efficiency measure-ments of crop and livestock production wereprovided to the participants as a starting pointfor their assessment of impact on productivity.Through the Delphi process, participants col-lectively projected the primary impacts of thetechnologies on each of the nine commoditiesfor 1990 and 2000 under the different environ-ments. Based on the information obtained fromthe workshops on the year of commercial in-troduction, the adoption profile, and the pri-mary impacts, OTA computed crop yields andproduction efficiencies for the nine commod-ities for 1990 and 2000 (table 2-2).

Projections of Agricultural yield

Under the baseline environment, major cropyields are estimated to increase from now un-til 2000 at a rate ranging from 0.8 percent peryear, for soybeans and cotton, to 1.3 percentper year, for wheat. Wheat yield, for example,is projected to increase from 35.6 bushels peracre in 1982 to 44.8 bushels per acre in 2000at the rate of 1.3 percent per year under thebaseline environment. However, under the no-new-technology environment, wheat yieldwould increase to 40,8 bushels per acre in 2000at the rate of 0.8 percent a year. The differencein wheat yield between the two environments,4 bushels per acre, represents the impact ofnew technologies.

Under the baseline environment, feed effi-ciency in animal agriculture would increase ata rate of from 0.4 percent per year for beef to0.8 percent for poultry, In addition, the repro-duction efficiency would also increase, at anannual rate ranging from 0.5 percent, for beefcattle, to 0.9 percent, for swine. Milk produc-tion per cow per year would increase from12,300 pounds (lbs) to 17,563 Ibs per cow in theperiod 1982-2000. Without new technologies,milk production per cow per year would in-crease to only 13,700 lbs in 2000; under the

14 . A Special Report for the 1985 Farm Bill

Table 2-2.—Estimates of Crop Yields and Animal Production Efficiency

No-new- More-new-technology Baseline technology

environment environment environment

1982 1990 2000 1990 2000 1990 2000Corn bu per acre 115 117 124 119 139 121 150Cotton lb per acre 481 502 511 514 554 518 571Rice bu per acre 105 105 109 111 124 115 134Soybean bu per acre 30 32 35 32 37 33 37Wheat bu per acre 36 38 41 39 45 40 46BeefPounds meat per lb feed 0.070 0.071 0.066 0.072 0.072 0.072 0.073Calves per cow 0.90 0.94 0.96 0.95 1.0 0.95 1.04DairyPounds milk per lb feed 0.94 0.94 0.95 0.95 1.03 0.96 1.11Milk per cow per year

(thousand lb) 12.3 13.7 15.7 14.0 17.6 14.2 19.3PoultryPounds meat per lb feed 0.44 0.52 0.53 0.53 0.57 0.53 0.58Eggs per layer per year 245 255 260 258 275 257 281SwinePounds meat per lb feeda 0.165 0.167 0.17 0.17 0.176 0.17 0.18Pigs per sow per year 14.4 14.8 15.7 15.2 17.4 15.5 17.8

aTh~ value shown for swine feed efficiency for 1982 is the average of national feed efficiencies fOr the IIJ Years Prior to 1982The national aggregate linear trend of swine feed efficiency is sllghtly negative and gwes a value of ,157 In 1982.

SOURCE. Office of Technology Assessment

more-new-technology environment, produc-tion could reach 19,300 lbs.

Projections of food Production

The data obtained from the two technologyworkshops were used in an econometric modeldeveloped by the Center for Agricultural andRural Development at Iowa State University toassess the collective impact of the 28 areas ofemerging technologies on the production of va-rious crop and livestock products.

Table 2-3 shows projections to 2000 of in-creased production for three major U.S. exportcommodities (which comprise 60 percent ofU.S. agricultural food production exports).Under the baseline environment, corn produc-tion is projected to increase at the rate of 1.8percent per year from 1981 to 2000. However,without the new technologies examined in thisstudy, the rate of growth would be only 1.2 per-cent. Under the more-new-technology environ-ment, corn production would increase at amuch faster rate—2.2 percent per year,

About the same growth rates were obtainedfor wheat production, which would increase

at 1.8 percent per year from 1981 to 2000 underthe baseline environment. Under the no-new-technology environment, wheat productionwould increase at only 1 percent per year,

A more drastic increase in soybean produc-tion is projected from now until 2000 regard-less of the environment considered. The annualproduction of soybeans is projected to increaseunder the baseline environment at an annualrate of 2.8 percent from 1981 to 2000. Withoutnew technologies, the production is still ex-pected to increase at 2,4 percent a year. Underthe more-new-technology environment, soy-bean production would increase at 2.9 percentper year.

In the world marketplace available informa-tion points to a series of periodic surpluses anddeficits in agriculture over the next two dec-ades (Mellor, 1983; Resources for the Future,1983). A Resources for the Future (RFF) studyindicates that global balance between cerealproduction and population will remain quiteclose to 2000, indicating vulnerability to annualshortfalls resulting from weather, wars, ormistakes in policy. Over the next 20 years theworld will become even more dependent on

Ch. 2—The New Technologies ● 1 5

Table 2-3.—Projection of Major Crop Production

2000No-new- More-new-

technology Baseline technologyCrop Unit 1981 environment environment environment

CornProduction Million bushels 8,136Growth rate Percent

WheatProduction Million bushels 2,704Growth rate Percent

SoybeanProduction Million bushels 1,953Growth rate Percent

10,289.0 11,499.0 12,394,01.2 1.8 2,2

3,273.0 3,825.0 4,063.01.0 1.8 2.2

3,067.0 3,311.0 3,351.02.4 2.8 2.9

SOURCE Off Ice of Technology Assessment

trade. There will be increasing competition forU.S. farmers in international markets. Muchof this increased competition will come fromdeveloping countries selling farm commoditiesas a source of exchange to pay for imports suchas oil. Despite this increased competition, ex-ports of grain from North America are pro-jected to nearly double by 2000.

On the other hand, there is another schoolof thought that believes current studies suchas that by RFF have not properly assessed themagnitude and impact of emerging technol-ogies on farm production. Technologies suchas genetic engineering and electronic informa-tion technology that are available in variousforms could mean rapid increases in yields andproductivity. While such changes may improvethe competitive position of American agricul-ture, they have the potential for creating sur-pluses and major structural change—favoring,for example, larger more industrialized farms.

Any conclusion regarding the balance ofglobal supply and demand requires many as-sumptions regarding the quantity and qualityof resources available to agriculture in thefuture. Land, water, and technology are likelyto be the limiting factors as far as agriculture’sfuture productivity is concerned.

Agricultural land that does not require irriga-tion is becoming an increasingly limited re-source. In the next 20 years, out of a predicted1,8 percent annual increase in production tomeet world demand, only 0.3 percent will come

from an increased quantity of land used in pro-duction (RFF, 1983), The other 1.5 percent willhave to come from increases in yields—mainlyfrom new technology, Thus, to a very large ex-tent, research that produces new technologieswill determine the future world supply—de-mand balance and the amount of pressureplaced on the world’s limited resources.

The OTA results indicate that with continu-ous inflow of new technologies into the agri-cultural production system, U.S. agriculturewill be able not only to meet domestic demandbut also to contribute significantly to meetingworld demand in the next 20 years, This doesnot necessarily mean that the United States willbe competitive or have the economic incentiveto produce. It means only that the United Stateswill have the technology available to providethe production increases needed to export forthe rest of this century.

Under the baseline environment, growthrates in production, which include additionalland resources and new technology, will beadequate to meet the 1.8 percent needed to bal-ance world supply and demand in 2000. Underthe more-new-technology environment, pro-duction could increase at 2,2 percent per year,which would be more than enough to meetworld demand. This increased productioncould, however, point to a future of surplusproduction. On the other hand, under the less-new-technology environment the productionof major crops in 2000 would drop to 1.6 per-


cent per year, a growth rate that would not be rent administration proposal to reduce the agri-able to meet the demand. Under the no-new- cultural research budget is accepted by Con-technology environment, the annual rate of gress, the rate of production growth would beproduction growth would be reduced further somewhere between 1.1 to 1.6 percent.to 1.1 percent. It should be noted that if the cur-

Chapter 3

The Changing Character of

Chapter 3

The Changing Character ofthe U.S. Agricultural Sector

Who will use a new technology is as impor-tant a consideration as which technology willbe adopted, for the distribution of technologyhas a considerable impact both on agriculturalproduction and on the structure of the agricul-tural sector.

The emerging technologies examined for thisstudy will be introduced within a socioeco-nomic structure that has undergone consider-

able change in the last 50 years and that pro-mises to continue to change throughout theremainder of this century. This chapter pro-vides a perspective for analyzing technology’sdistributional impacts on agricultural structureby surveying the characteristics of that struc-ture and noting the past and present factorsthat define it.

THE PRESENT STRUCTURE OF AGRICULTURE

The heart of agriculture, the farm, is officiallydefined as a place that produces and sells, ornormally would have sold, at least 1,000 dol-lars’ worth of agricultural products per year.So defined, there were about 2.2 million farmsin 1982. Farms in that year had an average netincome from farming of $9,976 and an aver-age off-farm income of $17,601, for a total of$27,577.

Perhaps the best known characteristic of U.S.agriculture is the trend toward larger but fewerfarms. Currently, about 1 billion acres of landare in farms, resulting in an average farm sizeof about 400 acres. However, this average sizehas little meaning, since fewer than 25 percentof all farms fall within the range of 180 to 500acres. Almost 30 percent of all U.S. farms haveless than 50 acres, while 7 percent have morethan 1,000 acres.

The number of farms reached a peak of about6.8 million in 1935 and is now approximately2.2 million. The rate of decline has slowedsince the late 1960s, with a loss of about 100,000farms since 1974.

Employment in farming began a pronounceddecline after World War II, when a major tech-nological revolution occurred in agriculture.

The replacement of draft animals by the trac-tor began in the 1930s and was virtually com-plete by 1960, releasing about 20 percent of thecropland, which had been used to grow feedfor draft animals.

The increased mechanization of farming per-mitted the amount of land cultivated per farmworker to increase fivefold from 1930 to 1980.The amount of capital in nominal terms usedper worker increased more than 15 times inthis period. Total productivity (production perunit of total inputs) more than doubled becauseof the adoption of new technologies such as hy-brid seeds and improved livestock feeding anddisease prevention. The use of both agriculturalchemicals and fuel also grew very rapidly inthe postwar period. Agricultural productionnow relies heavily on the nonfarm sector formachinery, fuel, fertilizer, and other chemicals.These, not more land or labor, produced thegrowth in farm production. The resultantchanges have also greatly increased the capi-tal investment necessary to enter farming andhave generated new requirements for operat-ing credit during the growing cycle.

One of the best ways to look at changes inthe economic structure of U.S. agriculture is

19


in terms of value of production as measuredby gross sales per year. Farms can be usefullyclassified into the five categories of gross salesshown in table 3-1.

Small farms generally do not provide a sig-nificant source of income to their operators.This class of farms is operated by people liv-ing in poverty and by people who use the farmas a source of recreation.

Part-time farms may produce significant netincome but in general are operated by peoplewho depend on off-farm employment for theirprimary source of income.

Moderate-size commercial farms cover thelower end of the range in which the farm islarge enough to be the primary source of in-come for an individual or family. Most fami-lies with farms in this range also rely on off-farm income. In general, farms in this rangerequire labor and management from at leastone operator on more than a part-time basis.

Large and very large commercial farms in-clude a diverse range of farms. The great ma-jority of these are family owned and operated.Most farms in these classes require one ormore full-time operators, and many depend onhired labor on a full-time basis. Five percentof these farms are owned by nonfamily cor-porations, a much higherthe other three classes. Inof contracting and verticalhigher in these classes.

percentage than ingeneral, the degreeintegration is much

Table 3-1 .—Sales Classes of Farms

Amount of grossClass sales per year

small . . . . . . . . . . . . . . . . . . . . . . Less than $20,()()0Part-time . . . . . . . . . . . . . . . . . . . $20,000 to $99,999Moderate

commercial . . . . . . . . . . . . . . .Large

$100! 000 to $199,000

commercial . . . . . . . . . . . . . . . $200,000 to $499,999Very large

commercial . . . . . . . . . . . . . . . $500,000 and overSOURCE: Off Ice of Technology Assessment

Changes in Farm Size and Numbers

Major changes in the structure of U.S. agri-culture can be seen in the changes in the num-ber of farms in these classes since the 1969Census of Agriculture. Inflation in commodityprices has tended to move large numbers offarms from lower sales classes into higher salesclasses. Even after the number of farms isredistributed to counteract these nominalchanges, the real number of small farms hasdeclined by about 22 percent—a dramatic de-cline. (Recent reports that the number of smallfarms has actually increased since 1978 referto farms that are small in acreage, not smallin sales.) The number of part-time farms hasalso declined by about 18 percent. The num-ber of moderate farms has increased substan-tially, by about 39 percent, and the number oflarge and very large commercial farms has in-creased even more dramatically, by about 43percent and 53 percent, respectively. Eventhough the number of moderate farms has in-creased, the loss of these farms in share of salesand net income to large and very large farms,as shown in the next section, more accuratelyindicates the changing character of Americanagriculture.

Changes in Distribution ofSaks and Income

Changes in the number of farms do not alonegive the whole picture. Changes in the distri-bution of sales and income are more importantand clearly show the direction in which U.S.agriculture is heading. In the sections that fol-low, sales and income data presented reflectredistributions calculated to adjust for the im-pact of inflation.

Between 1969 and 1982, sales by small farmsdeclined from 9 to 6 percent. Sales from part-time farms declined from 43 to 22 percent. Themarket share of moderate farms increased from13 percent of total sales to 19 percent. In thesame period the market share of large and very

.. .

Ch. 3—The Changing Character of the U.S. Agricultural Sector ● 21

large farms increased greatly–from 36 to 57percent.

The most telling changes of all have occurredin the distribution of net farm income. Thelarge and very large farms have not only cap-tured the majority of the market but also con-trolled or reduced their cost of production. In1974 these commercial farms had a 47-percentmarket share and 35 percent of net farm in-come after adjustment for inflation. In 1982,just 8 years later, with their market share at 54percent, these farms had 84 percent of net farmincome (table 3-2). Very large farms have beenresponsible for the majority of this growth. Thisclass, which accounts for only 1.2 percent ofall farms, increased its real share of net farmincome fourfold—from 16 to 64 percent. Bycomparison, small farms in 1982 had a nega-tive net farm income, and part-time farms haddeclined from 39 percent in 1974 to 5 percentof total net farm income. Moderate farms haveseen a substantial decrease in net farm income,from 21 percent in 1974 to 11 percent in 1982.

It is clear that if these trends continue, smalland part-time farms are likely to disappear, tothe extent that the operators of these farms de-pend on them for income. The number of smallrecreational, or “hobby,” farms may increase.Large and very large farms will completelydominate agriculture. The number of moderatefarms may continue to increase, but they willhave a small share of the market and a declin-ing share of net farm income.

Moderate farms comprise most of the farmsthat depend on agriculture for the majority oftheir income. Traditionally, the moderate farmhas been viewed as the backbone of Americanagriculture. These farms appear to be failingin their efforts to compete for their historicalshare of farm income.

Changes in Sources of Income

Employment and the sources of income ofU.S. farmers have changed greatly in the 20thcentury. These changes occurred at a rapid ratein the 1970s. The largest single source ofchange was the tremendous increase in laborproductivity made possible by technologicalchanges, resulting in a sharp drop in the de-mand for agricultural labor. During the 1930sthe disposable farm income per capita was lessthan 40 percent of disposable nonfarm income.This income differential resulted in the largemigration of the farm labor force out of agri-culture and rural areas. This out-migration ac-celerated after the Great Depression of the1930s because employment and per capita in-come opportunities increased considerablyoutside of agriculture. In general, the marginalproductivity of labor was higher outside theagricultural sector from the 1930s to the early1970s. Therefore, migration of labor fromfarming to the nonfarm sector contributed tonational economic growth.

In the 1970s, the average income differentialbetween farm and nonfarm households nar-


rowed to about 88 percent, owing to rapid in-creases in farm prices and a substantial in-crease in the number of farm jobs availablefrom growth in rural industries. These two fac-tors resulted in a slowing of the rate of out-migration.

In 1982 the average income of farm and non-farm households was quite close, $27,577 and$28,638, respectively. However, two-thirds ofthe income of farm households came from off-farm sources. The majority of farm operatorstoday have some off-farm employment.

The average income statistics mask eco-nomic problems that exist in the middle of thescale of sales classes of farm operations (table3-2). Farms in the part-time class, with sales inthe range of $20,000 to $99,999, are in serioustrouble. About 580,000 farms in this class in1982 had an average total income of about$15,000. Their average net income from farm-ing was only $2,033. These farms are not largeenough to generate much net farm income andhave lower-than-average off-farm incomes. Incontrast, farmers with sales of less than $20,000have substantial off-farm incomes and low ornegative net farm income. The average off-farmincome of these individuals enables them tomaintain this way of life.

Those owning moderate farms have suffi-cient off-farm income to maintain a household.However, this group may be under the moststress. To provide an adequate total income,moderate farm owners must earn almost asmuch off-farm as on-farm income. Farmerswith sales in excess of $200,000 have moder-ate off-farm incomes and moderate-to-verylarge net farm incomes. As a group, thesefarmers are well-off.

Changes in the Structure of Debtin The Farm Sector

At a time when agricultural production hasbecome more concentrated, the structure ofdebt in the farm sector has also become moreconcentrated. This process accelerated duringthe boom years of the 1970s. The size and con-centration of farm debt, combined with high

production costs and the continuing likelihoodof low commodity prices, have led to a greatdeal of concern about the financial conditionof the farm sector. A substantial proportion ofthe U.S. farm sector is under severe financialstress. Financial stress is defined as the per-ceived inability of the firm or individual tomeet cash flow commitments in the form ofcash farm expenses, debt repayment require-ments, tax payments, or family living needs.This stress can be measured indirectly by useof the debt-to-asset ratio. In general, the distri-bution of high debt-to-asset ratios is more im-portant than the average debt-to-asset ratio ofall farms. The percentage of farms with debt-to-asset ratios greater than 40 percent andgreater than 70 percent in January 1984 bygross sales class is shown in table 3-3,

Clearly, debt use is closely related to farmsize. To the extent that debt-to-asset ratios showpotential financial problems, beginning farmersand operators of larger farms are likely to bein more difficulty than are other farmers,

An important aspect of outstanding debt isthe risk of default from the lender’s standpoint.If those with the largest proportion of debts toassets are more likely to suffer losses, thenthere are important risk elements facing agri-cultural lenders. In January 1984, 24 percentof the total agricultural debt was owed byfarmers with over a 70-percent debt-to-assetratio. Another 32 percent was owed by farmerswith debt-to-asset ratios in the range of 40 to

Table 3-3.—Distribution of Farms With HighDebt-tomAsset (d/a) Ratios, by Sales Class, January 1984

Highly Very highlyleveraged leveraged

(d/a ratios: (d/a ratios:40 to 70”/0) over 70°\o)

“/0 of No. of 0/0 of No. OjSales class class farms class farms

Less than $50,000 . . . . . 8.3 123,200 5.0 74,800$50,000 to $99,999 . . . . . 14.7 44,000 8.7 26,400$100,000 to $249,999 . . . 18.1 52,800 9.2 26,400$250,000 to $499,999 . . . 19.0 17,600 12.6 11,000$500,000 and over . . . . . 17.4 5,200 15.3 4,500

All farms . . . . . . . . . . . 11.1 242,800 6.6 143,100SOURCE U S. Department of Agriculture, 1983 Farm Producllon Expenditure

Survey.


70 percent, Thus, over one-half of outstandingdebt was owed by operators with debts greaterthan 40 percent of their assets, This is a mat-ter of great concern for lenders, since poorfarm incomes or decreases in asset values willmore quickly erode the equity of highly lever-aged operators than of high-equity operators(Brake, 1985),

Another useful way to illustrate increasingfinancial stress is through the recent increasesin debt service burdens, This increase can bemeasured by the amount of interest expenseas a percentage of cash receipts after paymentof intermediate production expenses, businesstaxes, wages, and rents. By this measure, thedebt burden of U.S. farms was 17 percent in1975. By 1981 it had reached 35 percent andhas been in the range of 34 to 38 percent eversince. This has resulted in substantial reduc-tions in the amount of receipts remaining to

pay for the operator’s labor, for the owner’sequity in the business, for purchases of capi-tal durable goods, and for payments of inter-est and principal.

The consequences of increasing financialstress can be seen in increasing rates of pay-ment delinquency and foreclosure. For exam-ple, Production Credit Association loan charge-offs were under 0.1 percent in 1978 and 1979.By 1983 these charge-offs had risen to 1.2 per-cent of outstanding loans—an elevenfold in-crease in 4 years, Similarly, the number ofloans in process of liquidation was negligiblein the late 1970s. Data on these loans were noteven kept in the Farm Credit System. By 1982,loans in process of liquidation approached 1percent of outstanding loans, and as of March1984, Production Credit Association loans inthe process of liquidation were over 2.5 per-cent of all outstanding loans,

DEFINING STRUCTURAL CHANGE IN AGRICULTURE

Traditionally, American agriculture has beendominated by farms in which the operators andtheir families provided most of the labor, madethe management decisions, owned part of theresources, accepted most of the production andprice risks, bought and sold in the open mar-ket, and depended on the farm as their majorsource of family income. Such farms have beenrevered since the days when Thomas Jeffersonargued for national policies of public land dis-tribution that favored small, independent land-holders. In recent years, the dispersed, inde-pendent farm, open market system has becomeless dominant in American agriculture, Majorquestions are whether this system can competefor world markets and whether society shouldtake steps to halt present trends that are grad-ually diminishing this system’s prominence.Answering these questions entails viewing thecauses of structural change—that is, how farmresources are organized and controlled—througheconomic and noneconomic perspectives.

The Economic Perspective

An economic perspective encompasses con-centration and vertical integration in agri-culture.

Concentration

Concentration refers to the proportion of pro-duction controlled by the largest firms, It is im-portant to consider because the more highlyconcentrated the market, the greater the poten-tial impact of a firm or group of firms on price.

Concentration of total production in agricul-ture compared to that in many of the other eco-nomic sectors is generally low. As shown inchapter 2, concentration has occurred to thepoint where in 1982 about 28,000 very largecommercial farms—1,2 percent of all farms—produced one-third of the total value of U.S.farm products and accounted for over 60 per-cent of U.S. farm net income.


However, concentration in land resources isalso occurring.1 Trends in the distribution ofharvested cropland according to sales classshow that these productive acres are rapidlybecoming concentrated in the farms in thelarge commercial and very large commercialsales classes. Table 3-4 shows the percentageof total cropland harvested by the top two salesclasses of farms for the census years 1969 and1982 and projects them linearly to 1990 and2000. If present trends continue, almost halfof all cropland will be harvested by farms inthese sales classes by 2000.

The degree of concentration varies fromcommodity to commodity. For example, beefcattle operators with sales over $500,000 peryear in 1982 represented only 0.5 percent ofall beef cattle operations and accounted for 55percent of the total value of cattle sales. The69 largest of these feedlots produced 21 per-cent of the fed cattle in 1980 (USDA, 1981). Thelargest cattle feeders were also some of thelargest feed manufacturers and grain com-panies,

Higher levels of concentration exist forbroilers (chickens). In 1977 the 16 largestbroiler producers and contractors controlled

I Land resources in the agricultural sector can be viewed inthe general category of “land in farms, ” as defined by the Bu-reau of the Census, or in the “harvested cropland ” category. Theacreage of cropland harvested is a more accurate measure ofproductive agricultural resources than is the general categoryof land in farms.

Table 3-4.—Historical and Projected Percentages ofCropland Harvested by Farms With Sales in Excess

of $200,000

YearSales class 1969 1982 1990 2000

$200,000 -$499,000 . . . . . . . . . 12.0 25.3 27.0 32.0$500,000 + . . . . . . . . . . . . . . . 6.0 11.2 12.0 14.0

Total . . . . . . . . . . . . . . . . . . 18.0 36.5 39.0 46.0

Projection Assumptions:I Growth ,n total hamested acres IS \lIIf?ar, r&+Ultln9 In an increase ‘f 24 ‘Illlon

z~~~e~t~~~~~&. the Ilnear trend for the two sales ClaSSeS and results In an in-crease of 27 milllon acres per year for the farms in the $200,000-$499,000class and of 1 milllon acres per year for the $500,000+ class.

%he Ilnear projections are based on the acres harvested by sales classes, ad-justed for inflatlon. In flatlon in commodity prices tends to move acres fromlower to upper sales classes Since !nflatlon In commodity prices IS likely tocontinue, nominal growth In acreage harvested by these sales classes may begreater than projected

SOURCE Office of Technology Assessment

about 50 percent of the production (Brooke,1980). In vegetable crops, such as lettuce andcelery, concentration is comparably high(Brooke, 1980).

On the other hand, concentration is still verylow for most crop agriculture. Relative to otherAmerican industries, where the market shareof the four largest manufacturers frequently ex-ceeds 50 percent, concentration in agricul-ture—even for cattle feeding, broilers, lettuce,and celery—is low. However, attention isdrawn to agriculture because of the rapiditywith which certain industries, such as broilersand fed cattle, have gone from a diffused to aconcentrated and integrated agriculture (Knut-son, et al,, 1983).

Concern exists that if extended over a periodof time, the increasing concentration of agri-cultural production could lead to higher foodprices (Breimyer and Barr, 1972). This wouldresult from increased merchandising and mar-keting costs, the potential unionization of agri-cultural workers, and lack of effective competi-tion (Rhodes and Kyle, 1973).

Vertical Integration

Firms are vertically integrated when theycontrol two or more levels of the production-marketing system for a product, Such controlmay be exercised by contract or by ownership.

Contract integration exists when a firmestablishes a legal commitment that binds aproducer to certain production or marketingpractices. At a minimum, contract integrationrequires that the producer sell the product tothe buyer. Additional commitments may bindthe farmer to specified production practicesand sources of inputs, While all forms of con-tract integration have created concern, thegreatest controversy exists with contracts thatcontrol both production and marketing deci-sions of farmers. In addition, from a legalperspective, the producer may not even ownthe product being grown (Knutson, et al., 1983).

The extent of contract integration is not welldocumented. Ronald Knutson estimates that allforms of contract integration represented 32


percent of farm sales in 1981 (Knutson, et al.,1983). He makes the following observations onthe

1.

2.

extent of contracting:

Contracting used to be limited to perish-able products; now it has expanded to vir-tually all commodities.Production contracting appears to be asso-ciated with commodities where breedingand control of genetic factors play an im-portant role in either productivity deter-mination or quality control.

Ownership integration is a single ownershipinterest extended to two or more levels of theproduction-marketing system. It may involveeither cooperatives or proprietary agribusinessfirms. Knutson estimates that proprietaryownership integration accounts for about 6percent of farm sales. Some proprietary agri-business firms such as Cargill (beef), SuperiorOil (fruits, vegetables, and nuts), Coca-Cola(oranges and grapefruit), Tysons (broilers andhogs), Tenneco (fruits, vegetables, and nuts),and Ralston Purina (mushrooms) have madesubstantial investments in agricultural produc-tion. In products such as broilers, eggs, cotton,vegetables, and citrus fruits, ownership integra-tion is over 10 percent of total U.S. production(Knutson, et al., 1983).

Cooperative ownership integration is muchmore prevalent than proprietary ownership in-tegration, accounting overall for 34 percent offarm sales. However, in only 13 percent of co-operative integration is there a legal commit-ment by farmers to market their commoditiesor purchase inputs from the cooperative.

The economic implications and concern forstructural change of vertical integration aredebated. A principal problem in agriculture hasbeen the difficulty of coordinating productionwith market needs. Vertical integration canmake a substantial contribution to satisfyingthis need. For example, in broilers and turkeys,vertical integration has contributed to the uni-form size and quality of poultry sold. It has alsocontributed to increased efficiency and re-duced costs (Schrader and Rogers, 1978).

On the other hand, there are potentiallyadverse consequences of vertical integration.Contract integration with corporations, andsometimes cooperatives, radically changes therole of the traditional independent farmer.More often than not, the farmer loses controlof, if not legal title to, the commodities grownunder a production-integrated arrangement.Payment to the grower is largely on a per-unitor piece-wage basis, and not necessarily relatedto product value.

It has been argued that in the long run, mar-ket power in integrated agriculture will becomesufficiently highly concentrated that the con-sumer will pay higher prices for food. How-ever, no definitive conclusion can be made.The above argument fails to take into accountefficiency gains from integration. The extentto which these gains could be realized withoutthe development of a vertically integrated sys-tem is open to question,

The Sociological Perspective

Many concerns relating to structural changeare of a sociological nature, They revolvearound the impact of concentration and in-tegration on the institution of the family farm,on rural communities, and on rural institutions,

Concern has been expressed that continu-ously increasing the concentration and integra-tion will lead to the demise of the family farmas an institution. The term family farm hasbeen associated with the existence of an inde-pendent business and social entity that sharesresponsibilities of ownership, management, la-bor, and financing. The family farm systemleads to dispersion of economic power and hasbeen associated with the perpetuation of basicAmerican values and of the family as an insti-tution, Increased concentration and integrationtend to destroy the family farm institution.Very large farms lose many of the characteris-tics of the traditional family farm because theirbusiness and hired labor aspects clearly pre-dominate. Most of the management functionstraditionally associated with the family farm


institution are removed by integration. With in-tegration the farmer takes on more of the char-acteristics of a businessman.

Another concern is that concentration andownership integration reduce the number offarms and make the integrator less dependenton the local community. As a consequence,small rural towns and their social institutionsdecline or vanish. Recent research conductedin California provides some evidence to sub-stantiate such a relationship. Dean MacCan-nell (1983) has found that rural communitieswhere a few large and integrated farms domi-nate are associated with few services, lowerquality education, and less community spirit.

Concerns are also expressed about the im-pact of structural change on the nature of theU.S. political system. Thomas Jefferson vis-ualized the merits of a decentralized politicalsystem where power was highly diffused and

where every individual had the opportunity forinput to public decisions. His philosophyplaced a high value on independent farmersand landowners as a means of maintaining ademocratic system of government.

Already there has been a marked departurefrom the decentralized power structure idealvisualized by Jefferson. The question is whetheragriculture is basically unique and differentfrom other sectors of U.S. society, as has longbeen maintained—that is, are there uniquesocial, cultural, and traditional values in hav-ing land ownership widely dispersed, or shouldagriculture join the mainstream where theother economic sectors have long been? AsU.S. agriculture continues along the trends laidout in this report, it will increasingly take oncharacteristics of the nonfarm sector. Somewill interpret this trend as progress; others willinterpret it as a step backward.

CAUSES OF STRUCTURAL CHANGE

A number of factors have been identified byresearchers as causes of structural change.However, there has been no delineation of therelative importance of each factor. One of theobjectives of this study is such a delineation.Before moving to that analysis in the follow-ing chapters, however, it is important to un-derstand why each of these factors is consid-ered important to structural change.

Most observers of structural change citethree main determinants: 1) technology andassociated economies of size, specialization,and capital requirements; 2) institutional forces;and 3) economic and political forces (fig. 3-1).This section briefly defines these forces.

Technological Forces

Certain farmers have a strong incentive toadopt new technology rapidly. The early in-novator achieves lower per-unit costs and in-creased profits, at least for a short time, beforeother farmers follow his lead. For example, inWashington State a winter wheat farmer with

2,500 acres can reduce average machinerycosts by 9 percent per acre by replacing a con-ventional crawler tractor with a four-wheel-drive tractor. If he also expands the size of hisfarm to 3,900 acres, he can reduce costs by anadditional 18 percent (Rodewald and Folwell,1977), This nearly 60-percent increase in farmsize can be made without additional labor.Once the innovative wheat farmer adopts thetechnology, other crop farmers generally havetwo options: purchase a four-wheel-drive trac-tor and expand the size of their farm or accepta lower net income as market prices for theircrops fall. In short, new technology can playan important role in determining acreage andcapital requirements. Different farmers havedifferent costs because they use different com-binations of inputs, have different managementskills, or have different scales of operation.

Economies of Size

The relationship of scale of operation to costis of particular significance to structure, Ifcosts are relatively the same for all farm sizes,


Figure 3-1 .—Factors Influencing the Structure of Agriculture

Economic environment

Growth of demand● Consumer tastes and preferences

Institutional factors (agriculture specific)

● Credit institutions (PU blic and private)● Agribusiness firms (cooperative and proprietary)● Research and development (public and private)

Technical factors affecting farming New technologies available

Distribution of costs of production

Structure of agriculture Number and size of farms Contractual arrangements● Control of management decisions

● Ownership of farmland

SOURCE Off Ice of Technology Assessment

one would expect all farm sizes to have rela-tively little incentive to increase in size. In ad-dition, with relatively even costs, consumerswould clearly not benefit from increases infarm size. If, on the other hand, costs declinesharply as farm size increases, not only wouldthere be strong incentives for farms to growin size, but consumers would potentially realizelower prices for food, of at least equal impor-tance to policy makers, if costs decline sharplyas farm size increases, efforts to prevent thischange from occurring—for example, to pre-serve the family farm—would not only be dif-ficult but could be counterproductive from aconsumer perspective. Smaller farm operatorscould exist in a cost-declining environmentonly if they were willing to accept lower re-turns to contributed labor, capital, and man-agement, and/or had an off-farm job.

Past studies of the relationship between aver-age production costs and farm size support twomajor conclusions, First, most economies ofsize are apparently captured by moderatefarms. Second, while the lowest average costof production may be attainable on a moder-ate farm, average cost tends to remain rela-tively constant over a wide range of farm sizes,Thus, farmers have a strong incentive to ex-pand the sizes of their farms in order to in-crease total profits.

Earlier studies on economies of size have sev-eral limitations. External economies gainedfrom buying and selling in large volumes andfrom access to credit have usually been ig-nored. Common ownership of related farm andnonfarm activities has not been considered,There is some evidence that inclusion of such


pecuniary economies would lower the averageproduction costs for large farm units andwould shift the conclusion about the size of themost competitive farm (Smith, et al., 1984).

Specialization

Technology has also influenced specializa-tion and regional production patterns. Cottonproduction has moved westward, for example,into areas of broad, flat fields where larger ma-chinery can be used to optimum advantage.Specialization in crop production is also duein part to technology. Farmers who once reliedon crop rotation and diversification to con-serve soil fertility, prevent soil erosion, andcontrol pests have replaced these practices bychemical fertilizers, insecticides, and her-bicides, with questionable long-run effects.They can thus grow one crop exclusively yearafter year, specializing in commodities that arethe most profitable. Similarly, the developmentof new disease control techniques has givenpoultry and livestock farmers unprecedentedopportunities to specialize. The vertically in-tegrated broiler industry of today would havebeen impossible without scientific advances inbreeding, feeding, housing, and medicine,which have reduced the real cost of broilersby as much as 50 percent over the past 30 years,

These scientific breakthroughs have gener-ally enabled both small and large farmers tospecialize more. However, improvements infarm machinery have perhaps been most im-portant in fostering large-scale, specializedoperations. A decision to invest in a special-ized piece of equipment means that an opera-tor will emphasize production of the com-modity for which the machine is intended,quite likely at the expense of some other com-modity, And, insofar as a machine is mosteconomical on a particular size of operation,expansion to that size is encouraged. Thus,specialization and farm growth occur simul-taneously.

Capital Requirements

Agriculture is one of the most capital-inten-sive industries in the American economy. Theresult is high requirements for credit to financenew capital inve