I Sociology 63(2), 1998, pp. 199-213 ~~;yright © 1998 by the Rural Sociological Society

I I

The Importance of Ownership Arrangements in U.s. Agriculture1

Rick Welsh Sustainable Agriculture Research and Education Program, University of Georgia, 1109 Experiment Street, Griffin, Georgia 30223

ABSTRACT According to a number of observers of the U.S. economy, large publicly traded corporations can be viewed as a social problem pri­marily because of their association with the concentration of wealth and power. In agriculture, nine states have laws which restrict or proscribe public corporations from engaging in farming. Also, groups and individu­als have attempted to preserve non-corporate production enterprises in agriculture through the establishment of direct markets such as farmers' markets. Proponents of such efforts believe public corporations have neg­ative economic impacts; opponents of such efforts, especially efforts to es­tablish and retain anti-corporate farming laws, argue that corporations can provide economic benefits to rural areas.

These debates beg the question of whether ownership and direct mar­keting arrangements have important influences on economic outcomes such as levels of cash returns from farming and increases in the number of farms realizing cash gains. Using multi-year, county-level data from the Census of Agriculture, this study finds that, even when holding a number of important variables constant, ownership arrangements, as well as the ( interaction between the percentage of total sales which are direct sales and the percentage of farms selling directly, are important determinants of both net cash returns and the percentage of farms realizing cash gains.

Introduction

Historically, the vast majority of farms in the United States have been household-based operations, usually organized as an individ-' ual or family (sole) proprietorship or partnership. Despite the rel­atively small numbers of corporate owned production operations, there has been concern that corporate agriculture threatens the survival of household-based, and family-owned, production (Ed­mondson and Krause 1982; Krause 1987). In fact, any involvement of publicly traded corporations in agricultural production has tra­ditionally been viewed with suspicion (Dahl 1991). Although, there are few corporate farms, the number relative to the number of sole proprietorships and partnerships has increased over the last couple of decades (see Table 1). The concern over corporate domination of agricultural production has resulted in several major agricultural

1 This paper draws on research supported by the Henry A. Wallace Institute for Alternative Agriculture. The author gratefully acknowledges Elizabeth Barham, anonymous reviewers, and the Editor for helpful comments on earlier drafts.

200 Rural Sociology, Vol. 63, No. 2, June 1998

Table 1. Farms by ownership arrangements, 1978-1992

1978 1982 1987 1992 % Change (78 to 92)

Number of farms 2,257,775 2,240,976 2,087,759 1,925,300 -15 Individual or

family proprietors 1,965,860 1,945,639 1,809,324 1,653,491 -16 Partnerships 232,538 223,274 199,559 186,806 -20 Family corps. 44,413 52,652 60,771 64,528 45 Non-family corps. 5,818 7,140 6,198 8,039 38

Source: Census of Agriculture, Commerce Dept.

states adopting what have been termed "anti-corporate farming laws" (Haroldson 1992; Powers 1993). These laws differ from state to state in a number of ways. However, they all tend to proscribe or regulate large-scale, publicly traded corporations which attempt to engage in agricultural production (Hamilton 1995; Morrison and Krause 1975). Also, other organizational types, such as family corporations, partnerships, or sole proprietorships, are either exempt or have less restrictions placed on them by these laws (Hamilton 1995).

Supporters of such laws believe they are needed to ensure that agricultural economies provide a level playing field among organi­zational types and that these laws protect the interests of family / household based agricultural production operations (Dahl 1991; Powers 1993). Unrestricted access to agricultural production by non-family corporations is not desirable, it is argued, because such organizations have the protection of limited liability and find it eas­ier to raise capital than other types of organizations. These advan­tages enable public corporations to concentrate wealth and power in an industry (see Dugger 1988; Fligstein and Brantley 1992; Roy 1997) which has traditionally, at least in part, witnessed broad-based holdings of land and other assets, as well as economic returns.

Moreover, in recent years, consumers, farmers, and a number of community groups and local governments have made efforts to in­crease the number and size of direct marketing outlets, such as farmers' markets and community-supported-agriculture operations (CSAs) (Hamilton, 1996).2 A rhetorical justification for establishing direct marketing outlets is the increase in the number of economi­cally viable household-based agricultural operations (Hamilton 1996; Lyson et al. 1995). Promoters of direct marketing see the need to develop alternative market arrangements where smaller-

2 CSAs, or subscription farming, are operations where groups of consumers con­tract with a farm or farms to purchase produce and other farm products directly from the farmer or farmers. Farm products are either picked up at the farm by the consumer or the farmers and consumers meet at predetermined sites.

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Ownership Arrangements in U.S. Agriculture - Wel5h 201

scale, non-corporate farms can compete successfully with larger­scale corporate interests. Such efforts are attempts to return peo­ple to the land in order to democratize and redistribute the factors of production and the returns from farming (Hamilton 1996).

On the other hand, some analysts of V.S. agriculture see restric­tions on non-family public corporations as economically unwise (Powers 1993). It has been argued that restricting the involvement of public corporations in agriculture restricts the private investment needed for rural areas to realize economic benefits through high cash returns from farming. Opponents of anti-corporate farming laws argue that structural changes regarding capital investment, in­creasing linkages between production, processing, distribution and marketing, as well as the globalization of agricultural markets, make restrictions such as anti-corporate farming laws ultimately counter-productive, perhaps leading to economic malaise (see Sonka 1995).

Debates over the efficacy and wisdom of anti-corporate farming laws and over the rhetorical justification for the need to increase the number of direct marketing outlets beg the question of whether efforts to promote or discourage particular types of own­ership or marketing arrangements are warranted. That is, are own­ership arrangements in agriculture important determinants of eco­nomic outcomes, such as high cash returns and/or the spreading out of returns across a large number of operations? Further, will an increase in farms selling directly, and the level of direct sales, posi­tively impact net cash returns and/or the realization of positive economic returns by a larger percentage of producers?

To answer these questions, I first present a brief review of cri­tiques of incorporation in the literature analyzing the general econ­omy and in the sociology of agriculture literature. I then analyze the text of a number of state anti-corporate farming laws to discern their purpose and how ownership arrangements are regulated or proscribed. To supplement this, I evaluate the rhetoric of direct marketing promoters to elucidate their arguments as to why family­based, non-corporate agricultural production needs to survive in the V.S. Then, using county-level data frpm the Census of Agricul­ture, I attempt to measure the impact of the most common owner­ship arrangements in V.S. agriculture, and the level of direct market­ing activity, on net cash returns from farming and on the percentage of farms in a county which realize cash gains.

Critiques of incorporation

Roy (1997) argues that publicly owned corporations have been con­troversial since they began to emerge as a significant feature of the V.S. economy at the end of the nineteenth century. That is, the

202 Rural Sociology, Vol. 63, No. 2, June 1998

emergence of the publicly owned corporation substantially altered the nature and understanding of the relationships between owner­ship and control of a firm and the knowledge of how the firm op­erates. As Roy (1997:11) explains: "Whereas previously the right to determine what products to produce or whom to hire and the en­titlement to profits and the obligation to pay debts had been bun­dled together with ownership, the corporation separated them." This separation is seen as undesirable, since management is not ac­countable to owners because firm ownership is diffuse. That is, shareholder/owners cannot wield any power other than selling off their shares. The threat of losing the confidence of shareholders is seen as insufficient to constrain managers from engaging in activi­ties which the shareholders may not endorse, such as antagonism toward trade unions or closing plants or other facilities. This lack of constraint can lead to undesirable outcomes for/other types of businesses, corporate employees, and the communities in which corporations operate (Kuttner 1993).

Corporations also have been controversial because they are often considered synonymous with the concentration of wealth and power (Dugger 1988; Fligstein and Brantley 1992; Roy 1997). De­bate has raged since the turn of this century over the need for gov­ernment intervention to keep markets competitive and free from monopolistic and oligopolistic entities (Kuttner 1993). With large corporations dominating most sectors of the U .S. economy, skepti­cism about their efficacy and fairness has resulted in the develop­ment of various modes of corporate regulation. These have taken a number of forms, including anti-trust measures, disclosure laws, and the promotion of balancing institutions such as labor unions (Kuttner 1993).

Within agriculture, where a substantial portion of production is still accounted for by non-corporate operations, the debate extends beyond the design of modes of regulation to minimize the eco­nomic and social externalities of corporations; the debate also in­cludes raising the question of whether corporations should be al­lowed to operate at all in agricultural production (see Hamilton 1995; Haroldson 1992; Powers 1993). Other forms of ownership arrangements (family partnerships, individual or family proprietor­ships, and cooperatives) are viewed by large numbers of individuals and groups involved in agriculture as superior to the corporation and as viable alternatives to the corporation (see Powers 1993). In fact, to a large degree, the sociology of agriculture has been com­prised of competing explanations of why the non-corporate house­hold-based production operation has survived in agriculture, while it has largely been displaced by the public corporation in the other major production sectors (see Buttel et al. 1990; McIntosh 1996).

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State anti-corporate farming laws

States with some type of law prohibiting or limiting large, publicly traded corporate involvement in agriculture include Oklahoma, North Dakota, South Dakota, Nebraska, Kansas, Missouri, Min­nesota, Iowa, and Wisconsin (Hamilton 1995; Powers 1993). These laws generally restrict corporate involvement through limiting or banning corporate ownership of farmland (DahI1991). Legislative action to limit corporate ownership of farmland or direct corporate involvement in agriculture has its origins in the Great Depression of the 1930s, when foreclosures and the concentration of farmland in a relatively few corporate hands was seen as a threat. For exam­ple, Minnesota enacted a statute in the 1930s that prohibited any corporation from owning more than 5,000 acres of farmland (Dahl 1991). From the 1970s until the late 1980s, a number of Midwest­ern states put anti-corporate farming laws into place. These new laws grew out of a concern that, as agribusiness conglomerates gained control of production and marketing of a substantial por­tion of the food supply, they would also be able to control prices and boost profits. Government restraint thus was seen as necessary (Kyle et al. 1972). Under recent versions, prohibited ownership arrangements usually include certain types of corporations, pen­sion or investment funds, limited partnerships, and alien person or non-U.S. citizen-owned businesses (Dahl 1991). Moreover, current laws that restrict corporate involvement in agricultural production are often justified as a means to protect the "family farm" from large investor-owned corporations (Powers 1993). A family farm is usually defined as an unincorporated farming unit owned by per­sons residing on the farm and actively engaged-in farming.

Although these types of laws are labeled anti-corporate farming laws (Hamilton 1995), they do not restrict all types of incorpora­tion. Authorized corporations are often family-owned corporations. However, family-ownership is usually not sufficient to be exempt from the law; additional qualifications also must be met. For in­stance, the Nebraska statute stipulat~s that, for family corporations to engage in farming, a family member must reside on the farm or be actively engaged in the day-to-day labor and management of the farm. Similarly, Minnesota's law exempts family farm corporations from its prohibitions on corporate ownership of agricultural land if one family member lives on the farm or is actively engaged in farm­ing (Dahl 1991).

Sometimes states place a limit on the number of shareholders al­lowed. For example, North Dakota's law allows family corporations if the corporation has -no more than fifteen shareholders. North Dakota also requires that at least 65 percent of the gross income of

l 204 Rural Sociology, Vol. 63, No. 2, June 1998

the corporation over the previous five years be derived from farm­ing. States also qualify corporate involvement in agriculture by lim­iting the amount of land that may be acquired. For example, Iowa amended its law in 1988 to prohibit corporations from acquiring more than 1,500 acres of farm land, and Minnesota now has the same cap on land ownership.

In some states, partnerships and limited partnerships have also been formed to meet certain requirements similar to those im­posed on family and authorized corporations. In states with anti­corporate farming laws, a farming operation that is something other than an unincorporated family-owned farm, on which the members live and work, is likely to be subject to certain prohibi­tions or restrictions.

These types of restrictions attempt to maintain a link between the ownership of the operation and knowledge of its day-to-day activi­ties, but they still allow family-owned and operated farms to incor­porate in order to acquire a number of financial advantages (Dahl 1991). Reasons for wanting to operate as a family-farm corporation include obtaining tax advantages (if applicable), making it easier to retain earnings in the farm firm, separating the farm business from the household, limiting legal obligations of farm household mem­bers, and facilitating the transfer of the farm to heirs (Krause and Burbee 1982; Reimund 1979). Authors of anti-corporate farming laws tried to draw a line which promoted household-based and household-controlled production but allowed for financial growth and flexibility.

As structural change has occurred in agriculture, industry lead­ers in states with anti-corporate farming laws have been petitioning state legislatures to relax the laws (Powers 1993). The ability of cor­porations to attract capital and concentrate investment and jobs in a community causes many people to view them as sources of eco­nomic development. Corporate investment ;md involvement in the livestock industry, for example, is viewed by some members of state governments, by agribusinesses and by rural community residents, as a way to enable this industry to grow and create opportunities (Powers 1993). These beliefs and attitudes have caused several state governments to amend and relax their anti-corporate farming laws. For example, Oklahoma changed its corporate farming law in 1991 so corporations could raise poultry and swine. And Missouri ex­empted three counties in 1993 from its corporate farming law re­garding corporate ownership of land for swine production. Also, Kansas changed its prohibitions on meat processors and corporations from engaging in swine production to allow county governments or the county electorate to decide such issues (Hamilton 1995).

As the structure of agriculture has changed, groups critical of corporate involvement have sometimes been unable to convince

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Ownership Arrangements in U.S. Agriculture - Welsh 205

legislatures to enact or continue bans on corporate involvement. However, other individuals and groups have been active and suc­cessful in creating alternative opportunities for smaller-scale, non­corporate farms. These alternatives are often touted as a way to save the family farm (Hamilton 1996) and to preserve ownership arrangements in agricultural production other than non-family cor­porations (Lyson et al. 1995).

Direct marketing and the promotion of household-based production

Many of these alternatives center on increasing the number of di­rect marketing opportunities for family-based farms. Certainly, di­rect marketing in agriculture has increased in both size and visibil­ity. Burns and Johnson (1996) report that there are at least 2,410 farmers' markets in the V.S. This represents an increase of over 2,300 farmers' markets in the past twenty years. Current estimates of the number of CSAs stand at over 500, up from zero only one decade ago (Bio-Dynamic Farming and Gardening Association 1997). Farmers who participate in direct marketing often legitimize their activities as not merely an economic enterprise, but also as a social and political project to foster .an increase in small-scale, in­dependently-owned and operated farms. This increase is seen as de­sirable because these types of farms provide benefits that other forms of production do not. For example, small to moderate sized family-owned farms are often seen as an integral and beneficial as­pect of the cultural, political, and economic history of the Vnited States (see Gregson and Gregson 1995; Hamilton 1996).

Authors writing about direct marketing point to aspects of it that favor the smaller-scale family farm. For example, Gibson (1996) be­lieves that farmers' markets allow people with small acreages an outlet for experimentation with a new operation or with new prod­ucts (Gibson 1996). Also, Lyson et al. (1995) argue that farmers' markets provide a vehicle for entry into farming for smaller family operations, and Burns andJohnson (1996), of the V.S. Department of Agriculture'S Agricultural Marketing Service, found that farmers' markets provide market access for small to medium-sized growers, access which is critical for these growers' survival.

Participants in, and proponents of, community supported agri­culture operations often argue that the wide assortment of prod­ucts which CSAs produce make it difficult for larger operations to participate (Fieldhouse 1996; Gn:gson and Gregson 1995). Direct links between seller/grower and consumer can also influence the size of an operation because the farmers cannot devote themselves full-time to farming, as they must also manage customer relations, including customers who pay in part by laboring on the farm. Ar­guments that direct markets favor smaller-scale, non-corporate pro­duction are bolstered by empirical evidence concerning the struc-

1 206 Rural Sociology, Vol. 63, No. 2, June 1998

ture of farms engaging in direct marketing. A survey of farmers' markets in New York State (Lyson et al. 1995) found that all of the

. growers participating in the markets were relatively small in scale and either individual or family (sole) proprietorships or partner­ships.

The individuals and groups which helped draft and pass the anti­corporate farming laws, and those that industriously organize direct marketing outlets, believe that the type of ownership arrangements of a farm has important economic impacts. They see publicly traded corporations as inherently problematic because they can ac­cumulate and concentrate large amounts of wealth and, conse­quently, power. This power can be used to threaten non-corporate enterprises, for example, by dominating and controlling access to markets (see Martinez and Reed 1996). Moreover, efforts to set-up direct marketing outlets, such as farmers' markets and CSAs, at least in part are motivated by the idea that smaller-scale farming operations, free from large-scale corporate interests, are important to the rural economy.

However, the individuals and groups that support public corpo­rate involvement in agriculture believe that corporations provide economic benefits· to rural areas by enhancing the level of eco­nomic returns in an area, thus creating jobs. Despite these oppos­ing views, relatively little is known about the impacts of particular types of ownership and marketing arrangements on economic out­comes in farming.

Ownership, direct marketing, and net cash returns

To shed some light on the issue of the importance of the social or­ganization of production in agriculture, an analysis was performed on the relationship between levels of particular ownership arrange­ments in a county and size and distribution of net cash returns from farming at the county-leveL Data were assembled from the Census of Agriculture for every county with at least 1,000 acres of farmland for the contiguous forty-eight states for 1982, 1987, and 1992. This resulted in data being collected on 3,037 counties in 1992, 3,033 counties in 1987, and 3,039 counties in 1982. Descrip­tive statistics on basic ownership patterns are presented in Table l. The data were then used to discern how the most common owner­ship arrangements in a county (percentage of sole proprietorships, partnerships, family corporations and non-family corporations3) are related to the average cash gain per farm realizing cash gains in a county, and to the percentage of farms in a county which realize

3 These four types of organizations accounted for an average of 99 percent of the farms in the counties in the data set. All results regarding social organization of pro­duction (ownership arrangements) are relative to the percentage of sole propri­etorships in the county.

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Ownership Arrangements in U.S. Agriculture - Welsh 207

cash gains. Data on cash returns4 is available from the Census of Agriculture for 1987 and 1992. Data on the number of farms in a county which sell directly to consumers and on the overall level of direct sales in a county are used to discern if such marketing arrangements have positive economic outcomes.

In order to account for confounding influences and other possi­ble determinants of the dependent variables, a number of control variables were included. The purpose of the controls is to discover if these variables "wash-out" any connection between ownership/ di­rect marketing arrangements and financial performance. In other words, how owners structure their farms beyond organizational form could be important in influencing financial performance, and these factors must be accounted for. These other factors could include the level of capital investment, the amount of hired labor employed, the relative level of mechanization, the size of the farm, and the natural and social environment in which a farm is located.

For example, Thomas et al. (1996) found that corporate-owned agriculture tended to be located in parts of California, Florida, Washington and Idaho. Non-corporate but large-scale agriculture whichis both equipment and machinery intensive is concentrated in the upper Midwest, and small-farm agriculture is more highly concentrated in the Northeast and North Central States, the Mid­dle and South Atlantic States, and the South Central States.5 And earlier work by Friedberger (1988) exemplifies the differences be­tween California agriculture and Corn Belt agriculture regarding their historical development.

Although it is impossible to account for all possible influences, the following variables were used as controls to try to take into ac­count regional differences and kinds of farming:

• average value of land and buildings per farm; • average value of hired labor per farm; • average value of machinery and equipment per farm; • average sales per farm; • number of farms in a county; and • production region.6

4 Net Cash Return is not the same as farm income. Net Cash Return is derived by subtracting total operating expenditures from the gross market value of agricultural products sold. Net Cash Return is that of the farm unit rather than the net farm in­come of the operator.

5 Thomas et al. .(1996) provide maps of this distribution. 6 Regional control variables were ,constructed using the standard production re­

gions of the D.S. Department of Agriculture (see Salassi and Gatton 1985). The vari­able representing the Pacific region was omitted from the analysis to provide a basis for comparison with the other regions. Any influence that region has on the depen­den t variables is relative to the Pacific region.

I 208 Rural Sociology, Vol. 63, No. 2, June 1998

Table 2. . Effects of farm ownership arrangements on farm cash re" turns at the county level (betas)

1987-Percentage of:

Partnerships Family corporations Non-family corporations

1992-Percentage of:

Partnerships Family corporations Non-family corporations

* p < .05. ** P < .00l. _ Control variables for both years:

Average value per farm of: Machinery and equipment Hired labor expenditures Land and buildings

Average value of sales per farm Number of farms in the county Production region.

Pet. of cash gainers in the county

.167**

.016 -.018

F = 111 Adj R2 = .38

.170**

.009 -.054**

F = 169 Adj R2 =.49

Avg. cash gain per farm

.118**

.137**

.039* F = 375

Adj R2 = .68

.071**

.121 **

.016 F = 384

Adj R2 = .68

Because no hypotheses or research questions are posed in regards to the control variables, their corresponding regression coefficients are not reported.

Multiple regression analysis (OLS) was performed in three steps. First, 1987 and 1992 structural variables were used to predict 1987 and 1992 financial variables,7 respectively (Table 2). Then, lagged regression models using 1987 structural variables to predict 1992 fi­nancial performance variables and 1982 structural variables to pre­dict 1987 financial performance variables were performed8 (Table 3). Lagged analyses are used to test if structural arrangements in­fluence economic outcomes several years in the future (see Gujarati 1978:256-8; Lyson and Welsh 1993:431). Finally, direct marketing

7 To approximate a normal distribution, the natural logarithm of average cash gain per farm was calculated. OLS regression assumes a normally distributed de­pendent variable. The average cash gain per farm variable exhibited kurtosis. Tak­ing the natural logarithm resulted in a distribution which more closely resembled a normal distribution.

S The lagged regression models in this paper are lagged explanatory, or indepen­dent, regression models. The dependent variables are regressed on lagged indepen­dent variables only. No lagged dependent variables are included in the model (see Gujarati 1978).

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Ownership Arrangements in U.S. Agriculture - Welsh 209

Table 3. Effects of farm ownership arrangements on farm cash re­turns at the county level, lagged results (betas)

1987 structure and 1992 financial performance: a

Percentage of: Partnerships Family corporations Non-family corporations

1982 structure and 1987 financial performance: a

Percentage of: Partnerships Family corporations Non-family corporations

* p < .05 ** P < .001 a Control variables for both years:

Average value per farm of: Machinery and equipment Hired labor expenditures Land and buildings

Average value of sales per farm Number of farms in the county Production region.

Pet. of cash gainers in the cou:ilty

.182** -.009 -.027

F = 142 Adj R2 =.44

.197**

.029 -.039*

F = 126 Adj R2 =.41

Avg. cash gain per farm

.098**

.1l0**

.040* F = 351

Adj R2 = .67

.132**

.108**

.046** F = 322

Adj R2 = .64

data from the 1992 Census was employed to see the impacts of di­rect marketing on the financial performance variables (Table 4).

Three variables were constructed to account for the influence of direct marketing at the county-level: the percentage of direct mar­keters; total direct sales in a county divided by total sales in a county; and a variable capturing the interaction between these two. The interaction variable was calculated to distinguish between counties with a higher percentage of direct marketers and direct sales from those with lower levels on both measures.9 Accounting

9 I employed a technique used by Delacroix and Ragin (1978) to construct the in­teraction term. This technique entails regressing the interaction on its component parts and calculating the unstandardized residuals. The residuals are then used as the interaction between the two component variables.

This technique is often used to correct for collinearity problems with standard multiplicative interaction terms. In this case, the Pearson correlation coefficient for the two component variables is .602. However, Delacroix and Ragin (1978:134) also argue that "the residualizing procedure removes the additive effects of the compo­nent variables from the interaction term." This allows a clearer specification of the regression equation containing such terms.

210 Rural Sociology, Vol. 63, No. 2, June 1998

Table 4. Effects of farm ownership arrangements and direct mar­keting on farm cash returns at the county level (betas)

1987 structure and 1992 financial performance:' Percentage of:

Partnerships Family corporations· Non-family corporations

Percentage of: Direct marketers Direct sales

Interaction between percentage of direct marketers and direct sales

* p < .05. ** P < .00l. a Control variables for both years:

Average value per farm of: Machinery and equipment Hired labor expenditures Land and buildings

Average value of sales per farm Number of farms in the county Production region.

Pet. of cash gainers in the county

.119**

.030* -.034*

-.337** -.016

.108** F = 184

Adj R2 = .55

Avg. cash gain per farm

.069**

.122**

.019

.104** -.168**

.092** F = 366

Adj R2 = .71

for counties with high levels of direct sales and direct marketers fits the rhetoric of direct market enthusiasts, whose ideal would be large numbers of farms marketing high value products directly to consumers (see Gregson and Gregson 1995; Hamilton 1996).

Looking at Table 2, for 1987, counties with higher percentages of ownership arrangements other than sole proprietorships tended to have higher average cash gains per farm. Also, higher percentages of partnerships were associated with a higher percentage of farms with cash gains. Turning to the 1992 results, counties with higher percentages of partnerships and family corporations had higher av­erage cash gains per farm. Also, the 1992 results show that higher percentages of non-family corporate farms resulted in lower per­centages of farms with cash gains. Table 3 indicates that, for the most part, the lagged regression ·results mirror the unlagged results.

Adding in the direct marketing variables provides additional in­sight (Table 4). The interaction variable is strongly significant and positive in predicting both dependent variables. When an interac­tion is significant, then it can be said that its components vary with each other. That is, as the percentage of direct marketers changes in a county, so does the percentage of direct sales. The purpose of

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Ownership Arrangements in US. Agriculture - Welsh 211

testing for the interaction is to control for the relationship between the two variables (see Cohen and Cohen 1983). Further investiga­tion into the interaction variable shows that only counties with lev­els of direct marketers and direct sales several standard deviations above mean levels realize a benefit from the presence of direct marketing.lO However, because mean levels (in 1992) are so low, relatively small absolute increases in direct sales and direct marketers can increase mean levels substantially. In this population, 1992 county-level means for percentage of direct marketers and percentage of direct sales were five percent and less than one percent, respec­tively.

Discussion and conclusions

ownership arrangements are important determinants of economic outcomes in farming. In addition, direct marketing arrangements can have positive economic influences; however, at current levels, the impacts of direct marketing are still minimal. Non-family cor­porations do have positive influences on economic returns, as their proponents argue; but, so do other organizational forms, especially partnerships. Also, there is some evidence that non-family corpora­tions have a tendency to concentrate cash gains, as their detractors fear. That is, counties with higher percentages of non-family corpo­rations have, on average, higher cash gains but lower percentages of farms realizing cash gains. This is not due to lower farm num­bers in those counties with higher percentages of non-family cor­porations, since number of farms in the county was included as a control. This impact of non-family corporations is even more inter­esting given the very low numbers of non-family corporate farms (see Table 1). Therefore, efforts to scrutinize corporate ownership of agricultural operations and to promote other forms is at least partially supported by this analysis.

However, further research is needed into the corporate/anti­corporate debate. One important emerging question concerns the effectiveness of anti-corporate farming laws in retarding the in­crease in corporate farming. How much difference have they really made; moreover, how important are the differences between states' anti-corporate laws? Similarly, as anti-corporate farming laws are re­laxed, do net cash returns from farming become more concen­trated, as this analysis suggests they would? And, as direct market­ing grows in size and importance, will it continue to be associated with higher net cash returns and higher percentages of farms real-

10 The technique is presented in Cohen and Co hen (1983:323). The equation em­ployed to make this finding is-Y = beta j (%direct marketers) + beta2(%direct sales) + beta3 (%direct marketers) (%direct sales), where the number of standard deviations above and below the mean (1 = one above; 0 = mean levels; -1 = one below) for the variables of interest is multiplied by the beta coefficients.

212 Rural Sociology, Vol. 63, No. 2, June 1998

lzmg cash gains? Exploring these questions will give agricultural policy-makers needed information so that they may construct pol­icy which moves us toward an agricultural structure with positive economic outcomes for the largest number of farm businesses.

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