Technology and Structural Changes in Agriculture Since 1900 Otto Doering

Technology and Structural Changes in Agriculture Since 1900

Otto Doering, Purdue University

We often rush ahead without the benefit of perspective on what we are doing. Perspective prepares us for thoughtful discussion rather than combative rhetoric. Even though history doesn’t often give us the right answer for our particular problem, it does teach us which are the right questions to ask. If we can ask the right questions we have overcome one of the biggest impediments to successful problem solving.

As we look at the United States, we are a true Continental economy. River, canal, and then rail resulted in lowered transportation costs for bulky goods to the point where natural production advantage predominated. The diversity of our agricultural continent is almost unique, as is the confluence of good soils, adequate rainfall, favorable long seasons, and moderate temperatures in the agricultural heartland. We have most everything from Mediterranean climates to monsoon climates, which, because of our inexpensive transportation, allow a high degree of specialization in agriculture. (chart 1)

While our national population has been growing steadily, the population on farms peaked in the early to mid 1900s. At the same time the proportion of U.S. population on the farm has generally declined from the high 90s as a percentage to less than 2 percent today. (charts 2,3,&4) This is no accident. It was driven by technology in agriculture and the growing opportunities for rural people outside of agriculture.
We suffer from an abundance of riches. Our superb resource base, coupled with fruitful investments in technology has resulted in an almost constant overproduction beyond our national needs. (charts 5&6) This is something we have tried to address in many different ways. The technology pushing our productivity was initially labor saving (charts 7&8) and is now increasingly yield enhancing. (chart 9) Both of these have involved major changes in relative input use. (chart 10)

Our constant over-production resulted in the level of farm income being a continuing concern. This was an even greater concern in the last Century. The Populist movement represented the struggle of rural American to gain "parity" with the incomes and living standards of those off of the farm. (Chart 11) Populist leaders saw the need to raise less corn and more Hell! In the early 20^th Century we had a golden age for agriculture from 1910 through World War I until 1920. This came about at the time of the closing of the frontier, with immigrants flooding the cities and with industrialization employing growing urban populations and drawing rural folk from the land. This collapsed with world food surpluses in 1921. We tried to deal with the collapse with the Agricultural Adjustment Act, soil conservation programs, and other means, but it was World War II that provided the ultimate demand stimulus for improvement. War also profoundly changed the composition of the labor force making women critical participants and changing food consumption patterns. Today, farm incomes are similar to non-farm, yet, the issue of adequate returns remains.
Those in agriculture have often seen foreign markets as key to agriculture’s income prospects. However, we increasingly see that world weather, levels of production, and economic conditions shape our prospects - not our own decisions about boosting exports. We see periods where we move high volumes abroad, but at low prices. We see international markets increasingly competitive for one reason or another. The role of exports is more complex than we have thought in the past. (chart 12)

The size of the land base for agriculture has been relatively constant over the years, though its location has changed. We have settled few new lands since the beginning of the last Century. The encroachment on existing agricultural lands has been compensated for by land no longer needed to feed horses and mules to power agriculture. The cropland base stays the same, but moves around. (chart 13)

Along with new technology came the capacity to destroy our resource base. Taking care of our private farmlands has been a national concern since the Dust Bowl of the 1930s. Most expenditure on these private lands in the 1930s was also designed to get cash to rural areas. Thus, programs stressed payments to individuals to improve lands or to conserve them. Today, more emphasis is on specific land retirement programs and technical assistance, but total public expenditure has declined. (chart 14)

New technology also has forced us to have an increasing concern with water quality. This relates to erosion and the transport of chemicals and fertilizers. These issues are driven by the development of technology and the increase in productivity. A good example is the high value in use of nitrogen fertilizer with hybrid seed since 1945. The Mississippi Basin illustrates our improved efficiency as high yield technology matures and we learn how to manage it. However, we still cannot control weather, which is now a key factor in the variability of nitrogen losses. (chart 15)

Since the Populist movement of the 1800s, there has been a deep concern with structural issues in agriculture. We tend to forget that the issue is not structure per-se, the issue really is who will control agriculture. Who owns the resources, who receives the bulk of the returns from an enterprise or a product as it goes from seed and inputs to the consumer or industrial user. The Populists focused on railroads, packers, and grain merchants and left us the legacy of the Interstate Commerce Commission, the Sherman Anti-trust Act, the Packers and Stockyards Act, the Clayton Act, and Capper- Volstead. In spite of this we see change in the structure and characteristics of markets. A recent example is the precipitous decline of the importance of terminal markets and rise of contracting for hogs in the Midwest. There is concern about producer concentration. But, there has been a high level of concentration here since the early 1900s. (Chart 16) A key issue is producer independence in the face of vertical integration and coordination. The concerns we face today about structure reflect the concerns of the 19^th and 20^th Centuries, but with many new characteristics we will have to grapple with. I do not believe we have had a technology in the past with as pervasive a prospect for shaping ownership, control, and the distribution of profits - from input to final user - as biotechnology. The gut issues are the same – but, the vehicle, its power, and its drivers different – very different from Swift’s invention of the refrigerated railcar. Our challenge is in understanding this difference even though many key questions remain the same!
Finally, returning to the concern of farmers about farm incomes and the rewards farmers receive for their labors compared with those outside of farming. Farmers have also had a concern with the farm share of the value of goods sold to consumers or industrial users. While our earlier chart (#11) shows that farm incomes are parallel to non-farm incomes, we do see a downward trend in the farm value of products as compared with retail food prices since the 1970s. (Chart 17) This is disturbing to many and I am not sure we fully understand the reasons or are asking the right questions. The change in relative rewards is a symptom. The key issue is whether this results from changes in the structure of the sector or from other causes.

Concluding Observations

In the 20^th Century we made amazing progress in productivity. We also started an effort to protect the natural resource and environmental base on which our agricultural productivity depends and tried to ensure equal access to information and markets.

On other fronts we continued dealing with critical issues that were passed on to us by those in the 19^th Century. We still have a continuing concern with farm incomes. We still face the dilemma of the role of trade and external forces as they shape farm incomes and the prospects for our domestic producers.

We also continue the 19^th Century concern for who controls agriculture. Who reaps what proportion of the rewards and benefits as we move from inputs, the provision of land, the provision of labor, and all the other contributors to the process that brings a final product to the consumer or industrial end user? We are less proactive about this for other sectors of the economy. There are reasons why agriculture is very different and has become more of a direct focus for national concern and intervention. We need to understand these as we think about upcoming farm legislation that should look forward rather than attempt to solve past problems as many of our farm bills have done.

As Howard Tolley looked back from the vantage point of the 1940 Yearbook of Agriculture, he observed that good agricultural policy should:

Encourage and assist farmers who produce goods for sale on a commercial scale;
Assist those disadvantaged in agriculture; those suffering drought, subsistence farmers, and others at a disadvantage within agriculture itself;
Undertake activities to encourage better land use (including conservation) and more efficient production.

Tolley’s conclusion in 1940 was that the policies of the New Deal had accomplished a certain amount helping commercial agriculture, but that more effort needed to be applied to the other goals. Our questions need to be:

What are the goals for our agricultural policy in the coming Century?

Where have we not done enough in the past? Where do we need to do more, and what is it we need to do in the future?

Are we sure we are looking forward and treating the causes and not symptoms of the problems we face?

CHARTS

Chart 1