How Expenses Vary with Farm Size

I've been a bit surprised at the number of comments and questions I continue to receive about this article I wrote for the New York Times almost a year ago.

Here are the opening sentences from the piece:

“There is much to like about small, local farms and their influence on what we eat. But if we are to sustainably deal with problems presented by population growth and climate change, we need to look to the farmers who grow a majority of the country’s food and fiber.

Large farmers — who are responsible for 80 percent of the food sales in the United States, though they make up fewer than 8 percent of all farms, according to 2012 data from the Department of Agriculture — are among the most progressive, technologically savvy growers on the planet. Their technology has helped make them far gentler on the environment than at any time in history. And a new wave of innovation makes them more sustainable still.”

Common questions I tend to get are "who are these large farms" and "do large farms use more or less fertilizer or chemicals than small farms?"  On the first question, I simply rely on USDA's classification of farms based on gross sales (which is where the above 80% from 8% originates).  The second types of questions are much more difficult to answer as there isn't great data easily accessible on the matter.

However, I recently ran across this USDA, National Agricultural Statistics Service (NASS) publication that reports farm expenses for different sized farms (again, where size is determined by gross sales).  These data are part of the Economic Research Service (ERS), Agricultural Resource Management Survey (ARMS).  Using the 2016 data in this publications, I created the following charts to help provide some perspective on how relatively small, medium, and large farms allocate their spending.

Here are relatively small farms.

The spending of relatively medium-sized farms is illustrated below.

Finally, here are graphics on spending by the largest farms.

A few comments on the comparisons are in order.  First, as indicated by the share of spending on livestock, poultry, and feed, there are different types of farms across size categories, so it's a bit like comparing apples to oranges.  The largest farms are most likely dairies, feedlots, or hog/poultry operations.  The proportion of crop output (as a share of total output) is likely higher for small and medium sized farms.  What we'd like to compare are small crop farms to large crop farms, but that data wasn't easily obtainable.   

The figures show that three categories of spending (as a share of total spending) fall as farms sizes increase: farm improvement and construction, tractors and trucks, and taxes and interest. This relates to some of what I argued in the NYT piece:  

“But increased size has advantages, especially better opportunities to invest in new technologies and to benefit from economies of scale. Buying a $400,000 combine that gives farmers detailed information on the variations in crop yield in different parts of the field would never pay on just five acres of land; at 5,000 acres, it is a different story.”

On two of the issues which people worry about the most - chemicals and fertilizers - these expenses tend to increase (again, as a share of total expenses) as size goes from small to medium than falls when going from medium to large.  However, some of this change is almost certainly due to the different mix of crops vs. livestock in the different size categories, so it's difficult to draw much of a conclusion from these data.   

Finally, I'll note the small sized categories of farm (less than $10,000 in gross sales) lose money on average.  Why?  Because, by definition, they're  bringing in less than $10,000 in revenue, but they're spending $13,755.  These farms need to generate at least $3,755 in additional annual value per farm to the farm owners, to their patrons, or to their neighbors that isn't reflected in market price for their activities to yield a net benefit to society.  

China's Food Economy

Bloomberg has a great feature article on food and agriculture in China with excellent visuals.  The article makes the case (correctly in my view) that China will have to rely on technology to sustainable feed its growing population.  

“But China’s efforts to buy or lease agricultural land in developing nations show that building farms and ranches abroad won’t be enough. Ballooning populations in Asia, Africa and South America will add another 2 billion people within a generation and they too will need more food.

That leaves China with a stark ultimatum: If it is to have enough affordable food for its population in the second half of this century, it will need to make sure the world grows food for 9 billion people.

Its answer is technology.”

Check out the whole thing to see graphs on rapidly increasing protein consumption and high levels of fertilizer use in the country compared to the US and other locations.

The Atlantic on Agricultural Fertilizer

Over at the Atlantic, Alex Fitzsimmons has an article on a vastly under-appreciated technology: synthetic fertilizer.   Fitzsimmons notes concerns about excess fertilizer application and reliance on fossil fuels, but he also weights that against the fact that we have forestalled the dire Malthusian concerns.

Fitzsimmons quotes me as saying:

“Pessimists like Malthus and Ehrlich consider people a self-destructive drain on nature, but as Lusk, the Oklahoma State University agricultural economist sees it, “they underestimated the ability of humans to adapt and innovate and make productive use of the resources we have available.””

Its nice to see some attention paid to this subject in the popular press. In any event, you can read the whole thing here.

The Future of Meat

If you haven't yet heard of the Breakthrough Institute, it is time you did.  They're bringing a fresh approach to thinking about environmental and food issues - one that isn't anti-technology, anti-growth, or anti-markets, and that is focused on improving the lives of the poor among us.  

The Breakthrough Institute is in the midst of releasing a series of articles on the future of food.  The latest article in their series is one on the future of meat by Marian Swain.  After discussing some of the environmental challenges with meat production, Swain is able to see through all the popular prognostications to get to the heart of the problem:

“conversations about mitigating this impact have focused on two strategies: convincing people to eat lower on the food chain and shifting meat production toward more extensive systems. But a growing body of evidence suggests that the former may not prove particularly practical, while the latter may not always bring about better environmental outcomes, particularly at global scales.”

Advocates of "convincing people to eat less meat" are right in one sense.  Eating meat isn't necessary.  Many people can live a perfectly healthy life without needing to eat meat.  We also don't need to drive cars, use electric light bulbs, type on our laptops, or have children.  But, we are immensely better off having these things in our lives.  The trick is to consume the things we want while trying to be responsible about it.  Swain, however, turns the table on perceptions of "responsible" by noting that intensive forms of production often come at a lower environmental cost than the extensive forms (e.g., free range, grass fed, etc.) so often favored by environmentalists.   

Swain documents the trends in consumption of meat products in different parts of the world over time.  When thinking about environmental outcomes, however, it is useful to focus on the number of animals rather than just the number of pounds or kilograms consumed.  The reason is that environmental impacts are more correlated with numbers of animals than numbers of pounds, and when it comes to animal welfare, animal well-being is experienced one brain at a time.  

As the graph below shows, we now have many fewer cows in the U.S. than we once did (for a broader discussion, see this article I wrote for the journal Animal Frontiers) 

The figure reports the ratio of the total beef production in a given year to the inventory of all cows and heifers (2 yr old and older) for the same year. The change is dramatic.  For each cow and heifer in the US, in 2012 an additional 217 lbs of beef was produced as compared with 1970 (a 50% increase). Meanwhile, the number of cows per capita has fallen by about 47%. Remarkably, 4.4 billion more pounds of beef were produced in 2012 than in 1970 despite the fact that there are now 9.5 million fewer cows and heifers. In a New York Times article, I pointed out that we would need 15.3 million more cows (not counting the additional heifers, stockers, and feedlot cattle) to produce the amount of beef Americans actually ate in 2015 if we were instead using 1950s technology.  For dairy, we'd need another 30 million cows to produce the amount of dairy products we enjoyed in 2015 if we were instead getting only 1950s yields.  The dramatic increase in productivity, brought about by changes in genetics, management, and other technologies, has given us more of want we want (meat and dairy) with fewer resource-using, methane emitting animals.  

One of the concerns in all this is the impact on animal welfare.  Yet, the tradeoffs are difficult.  Beef cattle have higher land requirements, lower feed efficiency, and higher carbon-equivalent emissions than pork and poultry.  Yet, a good case could be made that animal well-being is higher for beef cattle than for pork and poultry.  (And "no" it isn't the case that animal welfare is uniformly better or worse at small vs. large farms).  A key challenge for the future is in identifying how to realize the gains in efficiency and reductions resource use brought about by intensification without unduly sacrificing animal welfare or the price consumers pay for food.  As I discussed in my latest book, Unnaturally Delicious, there are innovate housing systems and creative markets that are attempting achieve these compromises.

Swain mentions another solution - lab grown meat.  As I discussed in Unnaturally Delicious, I'm a fan of this bovine-in-a-beaker approach.  But, it isn't a free lunch.  Lab-grown cell have to eat something.  And they produce waste.  The high costs of producing lab grown meat suggest the process currently uses many more resources than old-fashioned animals, but advances in technology may one day reverse that equation.  Whether people actually want to eat a lab grown burger is a different story and my surveys suggest the new burgers will face an uphill battle in terms of consumer acceptance.  Time will tell.

Regardless of whether we get meat from a lab, from a cow, or from a chicken, it is important to recognize science and technology as a path to improve environmental outcomes and animal welfare.  As I put in in a Wall Street Journal editorial on the subject:

“Let us also not gloss over what is beef’s most obvious benefit: Livestock take inedible grasses and untasty grains and convert them into a protein-packed food most humans love to eat. We may be able to reduce our impact on the environment by eating less meat, but we can also do the same by using science to make livestock more productive and environmentally friendly.”

Zilberman on the Slow and Natural Food Movment

David Zilberman, an agricultural economist at UC Berkeley, has an interesting blog post on the slow and natural food movements. The timing of his piece is impeccable given the long, aggressive defense of the food movement Michael Pollan just wrote in the New York Times Magazine. After a bit of praise for the movements, Zilberman gets to some critiques.

Here are the core criticisms:

“However, most of these bodies of thought emphasize advocacy and are short on analysis. In particular, they underemphasize several factors. First, they underemphasize tradeoffs and costs. There are tradeoffs on the demand side, where consumers choose food based on cost, taste, and convenience. Fast food is a huge industry for a reason. The development of ready-to-cook and ready-to-eat meals, modern equipment (electric stoves, refrigerators, and microwaves), and modern supermarkets have been contributors in enabling women to join the job market. At the same time, there are tradeoffs on the supply side between cost of production and technology. ”

and

“Second, the naturalized paradigms undervalue the importance of technology in production and distribution. Modern lifestyle is the result of immense innovations in medicine, biology, communication, etc. I am very aware of the risks that technologies pose, but when I see a poor farmer in Ivory Coast with a cell phone and bicycle, I realize the power of technology. ... The challenge is how to use it appropriately and spread its distribution broadly rather than giving up on it.”

and

“Third, the naturalist paradigm underestimates the importance of heterogeneity among people and regions. Differences in income lead to different food choices. ... There is a huge difference between farmers in Iowa that obtain more than 10 tons/Hectare of corn and farmers in Africa that may obtain 1.5 tons/Hectare. ... I don’t expect people to use the same techniques everywhere, and that different technologies are appropriate in different locations. ”

On his last point, I full agree:

“Heterogeneity brings me to a larger point. There is a place for both industrial and naturalized agricultural systems. The naturalization paradigm is leading to the emergence of higher-end restaurants and fresh food supply linking the farmer to the consumer, each of which have limited reach but are important source of income and innovation in agriculture. At the same time, the majority of people will be dependent on industrialized agriculture. The two can coexist and coevolve. ”