The industrialization of agriculture: getting big

If I were to describe a U.S. farm at the end of the 19th century, I would describe it as having about 80 acres of crops (notably corn and/or wheat), 50 hogs, 40 cows, and 20 laying hens.(N2) Much of the inputs would be supplied by the farmer. The plow used to turn the ground, the scythe used to cut the rye, and the lumber used to make the barn: these would probably have been purchased from someone else, but the farmer would be self-sufficient in other regards. Manure from her livestock would constitute her fertilizer. She grew the corn that was fed to the hogs, and the wheat seed came from last year’s harvest. The hay came from her own meadows, and the chickens were hatched from eggs right on her farm.

Visit this farm, and parts would have the rural romance we envision, like livestock with plenty of room to roam and dry areas to rest in the warm sun—but some aspects would seem disturbing. Hogs and chickens would indeed be outside with the cattle, but this is partly because the farmer wanted hogs and chickens eat the undigested corn in the cattle manure. Sometimes the chickens and hogs would have had to scavenge for their own food, especially in winter, and spring might find some animals skinny and sickly from a lean winter in confinement.(N2,O1)

Go to a farm today and you will find the farmer to be highly specialized, receiving most of her inputs from various industries. If she raises crops, she does so on a farm with more than 80 acres. If she raises livestock, she probably only raises hogs, chickens, or cattle, and lots of them. She buys her fertilizer from a company. She buys her pesticides from a company. On some hog farms, the only things the farmer owns are the land and the buildings—a company owns the hogs and provides all the feed. Many wheat farmers no longer own combines, but pay other people to harvest it for them. Some cattlemen still rely on their bulls for natural breeding, but many purchase semen from a company to artificially inseminate their cows. Many crop producers today hire firms to help them make planting and fertilizing decisions, and these firms employ not only agricultural scientists, but database managers, computer programmers, and geographers.

When we say that agriculture has been industrialized, we mean that farms have become bigger, more specialized, and place greater reliance on inputs produced in big factories by corporations using advanced science. Farmers are no longer “jacks of all trades, master of none,” but are masters at producing only a few goods on a large scale. They are remarkable experts in a few very specific skills, like caring for hogs or managing fields of barley, but they also depend on experts of other trades for their fertilizers, pesticides, machinery, and the like.

Quotation 1—On the evolution of farms “Most of these farms when I started farming had livestock on them. People were raising hogs, people were raising cattle, and even some people when I was a kid had chickens. These big corporations industrialized livestock production. That took the livestock off of the family farm and put them in these big factories.”
—George Naylor, Corn-belt farmer, interviewed in the documentary Fresh (2012).

In this lecture, we want to look at two sources of efficiency gains— economies-of-scale and specialization—and their influence on modern agriculture.

The source of efficiency: economies of scale

Economies-of-scale exist whenever a firm can lower its average production cost by becoming bigger. This is the reason so many businesses today are enormous. The next time you go to a Waffle House (one of the few restaurants where you can watch the cook), observe the cook for a while. He doesn’t cook one type of food for everyone, but must manage perhaps a dozen or more different food requests. In particular, observe the amount of time it takes him to transition from one type of food to the next. For instance, placing the spatula down (which was used to stir scrambled eggs) and walking to the waffle iron, then walking to the freezer to retrieve a package of frozen hash browns, and then walking back to the eggs, and so on.

Much of his time is spent just thinking about which food he will tend to next. If, instead of cooking a dozen different foods, he could cook just waffles, he would become much more efficient at waffle-making. The same could be said if he only cooked eggs, or only hash browns. Because there is less wasted time moving from one food to the next, the amount of time it would take him to produce one waffle would fall considerably.

Compare this to a farmer who produces ten different crops in addition to raising chickens for eggs, chickens for meat, beef, pork, and milk. So much of her time is spent moving from one endeavor to another that she is relatively inefficient at producing everything. Conversely, if she decided to produce only milk she could focus all her energy on milk production, and every second that had been used in switching from one farm product to another could now be spent milking and caring for the cows. She no longer produces corn or eggs, but she can produce milk very efficiently.

There are other reasons why economies-of-scale exist. One has to do with efficient use of fixed costs. Suppose a farmer takes a loan to pay for a barn to store his equipment, and the loan payment is the same no matter how much grain he harvests. If he is able to produce more grain without needing a larger barn, the cost of that barn on a per bushel basis falls (because the monthly payment is the same but is divided by more bushels).

Large firms can purchase inputs in bulk, allowing them to negotiate lower prices. It is easier for them to lobby politicians and to experiment with new methods. To illustrate the benefits of size, consider the following excerpt from an author trying to sell the public on allowing health care firms to become larger.

Quotation 2—A perspective on becoming a big business “Big chains thrive because they provide goods and services of greater variety, better quality, and lower cost than would otherwise be available. Size is the key. It gives them buying power, lets them centralize common functions, and allows them to adopt and diffuse innovations faster than they could if they were a bunch of small, independent operations. Such advantages have made Walmart the most successful retailer on earth. Pizza Hut alone runs one in eight pizza restaurants in the country. The Cheesecake Factory’s major competitor, Darden, owns Olive Garden, LongHorn Steakhouse, Red Lobster, and the Capital Grille; it has more than two thousand restaurants across the country and employs more than a hundred and eighty thousand people. We can bristle at the idea of chains and mass production, with their homogeneity, predictability, and constant genuflection to the value-for-money god. Then you spend a bad night in a “quaint” “one of a kind” bed-and-breakfast that turns out to have a manic, halitoxic innkeeper who can’t keep the hot water running, and it’s right back to the Hyatt.”
—Gawande, Atul. August 13 & 20, 2012. "Big Med." The New Yorker. Pages 53-63.

Evidence of economies-of-scale are all around you. Most products today are produced in big factories and in massive amounts, and our wealth allows us to buy more and more of these products, which must mean that the real prices of these products are falling. The only way a business can survive in an era of falling prices is if their costs are falling also. The same goes for farms. On average, the inflation-adjusted price of farm products is lower than it was a century ago, and the only farms able to stay profitable are the very efficient farms with very low costs. Since it is generally the large farms that survive, it seems evident that larger farms are more efficient.

We don’t have to rely on that logic though. When economists investigate the relationship between the size of a farm and its costs, they tend to find the following.

The more cattle dairy farmers milk, the lower their cost of producing milk.

Figure 1—Relationship between herd size of dairy farm and its milk production cost (dollars per cwt of milk produced)(M9,M10)

The more hogs a farmer produces, the lower her production cost of live hogs.

Figure 2—Relationship between farm size (total cwt of hog weight produced on farm) and its cost of production (dollars per cwt of gain produced)(K1)

Economies-of-scale exist in many other settings, not just livestock and not just agriculture. Large corn farms produce at a 38% lower cost (per bushel) than small corn farms,(L2) and a large brewery has half the costs (per ounce) of a small one.(T1) This is not meant to suggest that economies-of-scale always exist. A business can become so large that when it tries to produce more, its production costs rise. Back in the 1930’s J.P. Morgan owned a 95,000 acre farm,(T2) but that evidently turned out to be too large, as I don’t know of any farms that big today.

The source of efficiency: specialization

With economies-of-scale always comes specialization. By producing more of a single good one can really hone their skills on that one good. You now have more incentives to invent more efficient production practices. The farmer who produces 20 different things has little incentive to invent new egg production methods, because that was only 1/20 of her job. But if she specializes only in eggs, that invention will improve her entire business.

It is hard to specialize in something unless you produce a lot of it, and it is hard to produce a lot of something without specializing in it, and that is why specialization and economies-of-scale are twins of efficiency. For this reason, from this point forward when I say specialization I am implying there are economies-of-scale also, and vice-versa.

The benefits of specialization are nothing new. It is as old as the written word, as the following narratives from the Greek philosophers Plato and Xenophon demonstrate.

Quotation 3—Plato on specialization    “And now let us see how our city will be able to supply this great demand: We may suppose that one man is a husbandman, another a builder, someone else a weaver – shall we add to them a shoemaker, or perhaps some other purveyor to our bodily wants?”
    “Quite right.”
    “The barest notion of a State must include four or five men.”
    “Clearly.”
    “And how will they proceed? Will each bring the result of his labors into a common stock? The individual husbandman, for example, producing for four, and laboring four times as long and as much as he need in the provision of food with which he supplies others as well as himself; or will he have nothing to do with others and not be at the trouble of producing for them, but provide for himself alone a fourth of the food in a fourth of the time, and in the remaining three-fourths of his time be employed in making a house or a coat or a pair of shoes, having no partnership with others, but supplying himself all his own wants?”
    “Adeimantus thought that he should aim at producing food only and not at producing everything.”
   “Probably, I replied, that would be the better way; and when I hear you say this, I am myself reminded that we are not all alike; there are diversities of natures among us which are adapted to different occupations.”
    “Very true.”
    “And will you have a work better done when the workman has many occupations, or when he has only one?”
    “When he has only one.”
—Plato (424-348 B.C.) in The Republic. Book II: The Individual, The State, And Education. A conversation between Socrates and Glaucon, and perhaps some others.
Quotation 4—Xenophon on specialization “Just as the various trades are most highly developed in large cities, in the same way food at the palace is prepared in a far superior manner. In small towns the same man makes couches, doors, plows and tables, and often he even builds houses, and still he is thankful if only he can find enough work to support himself. And it is impossible for a man of many trades to do all of them well. In large cities, however, because many make demands on each trade, one alone is enough to support a man, and often less than one: for instance one man makes shoes for men, another for women, there are places even where one man earns a living just by mending shoes, another by cutting them out, another just by sewing the uppers together, while there is another who performs none of these operations but assembles the parts, Of necessity, he who pursues a very specialised task will do it best.”
—Xenophon (431-355 BC) in Cyroppaedia.


Getting big and producing more

Specialization can be seen in the following charts, where the percent of farms with a particular form of crop or livestock falls considerably over time. Yet agriculture is producing more of everything, which means the few farmers who specialize in any particular crop or livestock are producing on a large scale.

Figure 3—Percent of farms raising select crops(G2)

Figure 4—Percent of farms raising select livestock(G2)

Figure 5—Number of commodities produced per farm(D1)

The drive towards larger farms necessarily drove smaller, less efficient farms out of business. This shouldn’t be thoughts of as, “demise of the family farm” or a corporate takeover of agriculture, as 98% of farms today are still family farms.(L2) Yet, even if it did, it’s not clear why that would be bad. Much of the American public works for corporations—are they less ethical than the family farmer for doing so? Of course not. Many retail stores used to be family-owned and family-run; does that make the large superstores who replaced them less moral?

In fact, the only way a nation can prosper is if it becomes more productive, allowing more food to be produced by fewer people, releasing some of the labor force to produce new things like cars and video games. If we are prospering as a nation, we should see fewer and fewer people producing more and more food, and that is what we see. The number of farms keeps falling, the average farm size keeps growing, and the food supply becomes more abundant.

If we just look at the average farm and its size, it is evident that the average farm is much larger, and the figure below shows that this has led to a considerable reduction in the population whose occupation is farming.

Figure 6—Percent of U.S. jobs as farm jobs(P2)

Some industries are still going through radical changes, like the hog industry, which is watching its farm size leap while the number of farms dwindles.

Figure 7—Number hogs on average hog farm(N2)

Livestock farms in general are falling in number, specializing in few livestock species, and are nevertheless producing more meat, dairy, and egg products every year.

Figure 8—Livestock output over time(N2)

Figure 9—Number of livestock farms over time(N2)

Industrial agriculture in three graphs

When you put everything together, and look at how farm size, number of farms, and farm productivity correlate over time, you get the undeniable impression that bigger, more specialized farms really are more productive. First, you have the trend towards larger farms and fewer farms.

Figure 10—Change in number and size of farms(D1)

Second, for the years numbers are available, farms are becoming more productive as they become larger, allowing them to produce more food with the same number of inputs.

Figure 11—Change in farm productivity(D1)

More productive farms do not guarantee more food, yet even when we look at how nutrient availability has changed over the last century, there is an undeniable trend towards more nutrients. Whatever reservations one might have about the industrialization of agriculture, one cannot deny that it has made food more affordable and plentiful than ever before.

Figure 12—Change per capita nutrient availability in the U.S.(N3)

Technology and big farms

New technological developments in agriculture don’t have to, but they usually do, favor big farms. Consider some of the newest innovations, like the self-driving tractor, the robot fertilizer, and the robot milking machine (see all three here). Would it be profitable for an eighty acre corn farm to buy a self-driving tractor? No, because the large expense would be spread over only a few acres, and the tractor cost on a per-bushel base would be large, making its average production costs too high. Likewise, the eighty acre corn farm is unlikely to buy a robot fertilizer, however cool it is. For the same reasons, a dairy farmer with fifty cows will not be able to affordable robot milkers, but a dairy with 5,000 will be able to use the machine for many cows, making the robot milker's cost on a per lb of milk basis low.

Land Grant Universities are sometimes criticized for studying and advocating technologies that favor large farmers, and in some ways I understand where this criticism is coming from. What the critics miss is that agricultural colleges are more concerned with providing safe, healthy, and affordable food than they are helping big farms—or small farms for that matter. Scientists want better, cheaper food, and if the technologies that achieve this tend to favor larger farms, so be it. Technology of any sort tends to favor larger businesses, and farming is no exception.

In some cases government agencies and agricultural researchers have encouraged farmers to “get bigger.” The Secretary of Agriculture during the 1970s, Earl Butz, became famous for telling farmers they should “get big or get out.”(K2,N3) This was not because he favored larger farmers per se, but because he thought larger farmers produced at a lower cost and would eventually be the only ones able to operate profitably.

Quotation 5—Promoting larger farms “Those initial farm bills [of the 1930s] were also structured to encourage farmers to practice factory farming. Indeed, in the 1940s and 1950s, lawmakers, the USDA, and other government departments and agencies actively tried to move marginal farmers onto other lines of work, not because agribusinesses kept lawmakers and bureaucrats on a leash, but because economic policymakers believed that big farms could provide food and fiber to an urban population more cheaply than small ones.”
Ogle, Maureen. 2013. In Meat We Trust. Houghton Miffllin Harcourt: NY, NY. Page 236.


One piece of the puzzle

There often seems an antipathy for large farms, as if a large farmer will behave less ethically than a small farmer. It seems implied that the farmer must neglect something to be able to cultivate more acres or raise more chickens. It is as if the large farmer is so overwhelmed that they do not have the time to comply with environmental or food safety regulations. This lecture has hopefully demonstrated that this isn’t necessarily the case. The efficiency gains associated with large farms could make it easier to comply with regulations, easier to care for animals well, and easier to use resources more efficiently.

This is not an argument in favor of large farms, but an argument that large farms should not be criticized simply because they are large. All aspects that differentiate small and large farms should be considered before rushing to judgment, and of those items considered, economies-of-scale should be among them.

Quotation 6—Are small farms more ethical than large farms? “... I mean, at what size does my farm get too big to be moral? I mean, what size farm is immoral?”
—Missouri farmer, Blake Hurst. Panelist at the Intelligence Squared debate Motion: Organic food is marketing hype. April 13, 2010. Transcript available at http://intelligencesquaredus.org/images/debates/past/transcripts/organic-food.pdf.


Figures

(1) Figure taken from a screenshot of figure in M10.

(2) Figure taken from screenshot of figure in K1.

(3) Figure taken from a screenshot of figure in G2.

(4) Figure taken from a screenshot of figure in G2.

(5) Figure taken from a screenshot of figure in D1.

(6) Original figure using data from P2.

(7) Original figure using data from N2.

(8) Original figure using data from N2.

(9) Original figure using data from N2.

(10) Figure taken from a screenshot of figure in D1.

(11) Figure taken from a screenshot of figure in D1.

(12) Original figure using data from N3.

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