Farm Management, Industrial Organization,

Molen, Jennifer Yezak

English

Research Papers in Economics

Agricultural Outlook Forum                                                          For Release:
February 23, 1998
“A TIME TO ACT” - HIGHLIGHTS OF A REPORT OF THE
USDA NATIONAL COMMISSION ON SMALL FARMS
Jennifer Yezak Molen
Director, National Commission on Small Farms
The purpose of the USDA National Commission on Small Farms was
to recommend to the Secretary of Agriculture a national strategy to ensure
the continued viability of small farms, including specific measures the
public, nonprofit and private sectors can take to enhance the economic
livelihood of small farms. The Commission was an outcome of the USDA
Civil Rights Action Team. In July of 1997, Secretary of Agriculture Dan
Glickman appointed a 30-member National Commission on Small Farms to
examine the status of small farms in the United States and to determine a
course of action for USDA to recognize, respect, and respond to their needs.
The Commission began its work in Memphis, Tennessee, on July 28.
Subsequent public hearings and meetings were held in Sioux Falls, South
Dakota, on August 21 and 22; Washington, DC, on September 10 and 11;
and Sacramento, California, on September 15 and 16. Three smaller meetings
were held in Albany, New York; Albuquerque, New Mexico; and Portland,
Oregon. The results of the Commission's work are embodied in the 146
recommendations in their report, A Time to Act. 
When Secretary of Agriculture Bergland's report, A Time to Choose,
was published, nearly 20 years ago, it warned that "?unless present policies
and programs are changed so that they counter, instead of reinforce or
accelerate the trends towards ever-larger farming operations, the result will
be a few large farms controlling food production in only a few years."
Looking back now nearly 2 decades later, it is evident that this
warning was not heeded, but instead, policy choices made since then
perpetuated the structural bias toward greater concentration of assets and
wealth in fewer and larger farms and fewer and larger agribusiness firms.
The Commission recognized that Federal farm programs had historically
benefited large farms the most. Today, we have 300,000 fewer farmers than
in 1979, and farmers are receiving 13 percent less for every consumer dollar.
Four firms now control over 80 percent of the beef market. About 94 percent
of the Nation's farms are small farms, but they receive only 41 percent of all
farm receipts. 
Like most major industries, the ownership and control over
agricultural assets is increasingly concentrated in fewer and fewer hands.Farmers have little to no control over setting the price for their products. The
basic tenets of a "competitive" market are less and less evident in crop and
livestock markets today. 
The recent passage of the 1996 Federal Agricultural Improvement
and Reform Act was a watershed event in the history of Federal farm policy.
It signals the reduction and eventual elimination of government intervention
in commodity markets as a means to provide income and price stability for
the farming sector. 
Agricultural technologies have emerged that use ever greater levels
of capital to enable fewer people to produce the Nation's food. As a result,
income and opportunities have shifted from farms to the companies that
produce and sell inputs to farmers. As farmers focused on 
producing undifferentiated raw commodities, food system profit and
opportunities were shifted to the companies that process, package, and
market food. Consequently, from 1910 to 1990 the share of the agricultural
economy received by farmers dropped from 21 to 5 percent.
The pace of agriculture industrialization has quickened. The dominant
trend is a few, large, vertically integrated firms controlling the majority of
food and fiber products in an increasingly global processing and distribution
system. The Commission believed that if we do not act now, we will no
longer have a choice about the kind of agriculture we desire as a Nation. 
A Vision for Small Farms in the 21st Century
The National Commission on Small Farms set its choice for the future
of American agriculture. This is their vision:
“Small farms have been the foundation of our Nation, rooted in the
ideals of Thomas Jefferson and recognized as such in core
agricultural policies. It is with this recognition of our Nation's
historical commitment to small farms that we renew our dedication
to the prominence of small farms in the renewal of American
communities in the 21st century. Black, Hispanic, Native American,
Asian, women, and other minorities have contributed immensely to
our Nation's food production and their contributions should be
recognized and rewarded. 
It is our resolve that small farms will be stronger and will thrive,
using farming systems that emphasize the management, skill, and
ingenuity of the individual farmer. We envision a competitive
advantage for small farms realized through a framework ofsupportive, yet 
responsible, government and private initiatives, the application of
appropriate research and extension, and the stimulation of new
marketing opportunities. As small farms and farmworkers succeed in
this nurturing environment, not only will they continue their valuable
contribution to the Nation's food supply, but they will also fuel local
economies and energize rural communities all across America. In the
process of flourishing, small farms will contribute to the
strengthening of society, providing communities and the Nation with
opportunities for self-employment and ownership of land, and
providing a cultural and traditional way of life as well as nurturing
places to raise families.
We emphasize public policies that recognize the value of small farms and
actively
 encourage their growth and continuation. These policies are essential to the
realization of this vision; so too, are policies that recognize and reward the
contributions of farmworkers and their families. Toward this end, the
Commission has articulated goals and made specific recommendations to
guide the decision-making of the Secretary of Agriculture, the Executive
Branch and Congress into the next century.”
This vision is focused on those farms with less than $250,000
gross receipts annually, on which day-to-day labor and management are
provided by the farmer and/or the farm family that owns the production or
owns, or leases, the productive assets. 
Policy Goals for Our Nation's Small Farms
The Commission outlined 8 policy goals for a national strategy for
small farms. I will briefly review each goal and highlight recommendations
from each goal.
Policy Goal 1: Recognize the importance and cultivate the strengths of
small farms
Research - USDA's Research, Education and Economics Mission Area
should design and 
implement a small farm research initiative dedicated to optimizing the labor
and ingenuity of small farm operators and the biological assets of their farms
using less capital-intensive investments.
Credit - USDA should re-commit itself as the "lender of last resort" byfocusing greater attention to serving the credit needs of small, minority, and
beginning farmers; reversing the shift to guaranteed loans; and accelerating
action on pending credit regulations. Congress should repeal the provisions
that prohibit farmers who have previously had "debt forgiveness" from
receiving any future USDA loans or credit assistance. 
Program Bias - USDA policies, programs, and regulations should be
reviewed to identify 
program rules and regulations that are either intentionally or unintentionally
biased against small farms, including the Environmental Quality Incentives
Program, the Business and Industry Loan Program, and Forestry Stewardship
Programs. 
Policy Goal 2: Create a framework of support and responsibility for 
small farms
Leadership and Support - Establish an Administrator of Small Farm
Programs who reports to the Secretary and has Senior Executive Service
status. 
Policy - USDA should develop a Department-wide Small Farm and Ranch
Policy that encompasses the vision and the guiding principles set forth by the
Commission and that must be reflected in the services, programs, and
materials delivered by each agency.
Policy Goal 3: Promote, develop, and enforce fair, competitive, and open
markets for small farms 
Cooperatives - USDA's Rural Business ? Cooperative Service should give
priority to the development of farmer-owned, value-added cooperatives and
farm-based businesses where profits flow to and within the community;
where wage-laborers are paid a living wage; where the efforts results in more
local and regional competition in the cash market, not less; and where 
natural resource stewardship is rewarded through the market. 
Market Enforcement - The Secretary should propose legislation clarifying the
authority of the 
Grain Inspection, Packers and Stockyards Administration (GIPSA) to
prohibit discriminatory pricing on the basis of volume. 
The Secretary should consider Federal production contract legislation to
address issues such as contract termination, duration, and re-negotiation;
prohibition against discriminatory practices; and responsibility for
environmental damages. The Commission endorses the proposed rule to prohibit packers from
procuring cattle for slaughter through the use of a forward contract, and from
owning and feeding cattle, with limited exceptions. 
USDA should investigate the processing and retailing segments of the dairy
industry to determine if excessive profits are being made at the expense of
farmers and consumers.
Market Development - USDA should develop an interagency initiative to
promote and foster 
local and regional food systems featuring farmers markets, community
gardens, Community Supported Agriculture, and direct marketing to school
lunch programs.
Policy Goal 4: Conduct appropriate outreach through partnerships to
serve small farm and ranch operators
Farm Service Agency State Executive Directors, Rural Development State
Directors, Natural Resources Conservation Service State Conservationists,
and State Cooperative Extension program administrators should support the
formation of farmer networks and mentoring programs for small farmers.
USDA should collaborate with and jointly fund community-based
organizations to train people to be farmer advocates. 
Educational efforts by the Risk Management Agency should address
sustainable agriculture practices as a means of managing risk on small farms.
Policy Goal 5: Establish future generations of farmers
USDA should launch an interagency Beginning Farmer Initiative dedicated
to researching, developing, and disseminating farm management models that
emphasize low-capital investment, optimal use of skilled labor and
management potential of beginning farmers, and high-value crop and
livestock production and marketing methods. 
The Farm Service Agency should clearly define the eligibility requirements
for beginning farmers and recognize the farming experience of persons who
were raised on family farms, who worked as hired farm labor, or who
received training from apprenticeships.
Congress should authorize the Farm Service Agency to guarantee tax-exempt
First Time Farmer Bonds used to make loans to beginning farmers and
ranchers. USDA should seek legislative authority to create a Beginning Farmer
Matching Grant program for the purpose of supplying equity funds for entry
farmers in lieu of loans.
Policy Goal 6: Emphasize sustainable agriculture as a profitable,
ecological, and socially sound strategy for small farms
The USDA Office of Communications should conduct a communications
campaign to inform farmers of the new farming strategies emerging from the
10 years of sustainable agriculture research.
The Secretary of Agriculture should support policies that preserve the
grazing and water use rights of the small and traditionally underserved public
land permittees. 
USDA's Risk Management Agency should develop an affordable Whole
Farm Revenue Insurance pilot project for diversified small farms using
sustainable farming practices. 
The Secretary should exercise restraint in approving exceptions to the 1,000
animal units eligibility limit on EQIP funding for livestock manure storage
structures.
Policy Goal 7: Dedicate budget resources to strengthen the competitive
position of small farms in American agriculture
Increase appropriations for the Sustainable Agriculture Research and
Education (SARE) program by $10 million each year over 3 years to reach
$40 million. 
Increase the Outreach and Technical Assistance Program for Socially
Disadvantaged and Minority Farmers (Sec. 2501) program to the current
authorized level of $10 million annually. 
Increase funding to the maximum authorized levels of $85 million for Farm
Ownership Direct Loans and $500 million for Farm Operating Direct Loans.
Increase Rural Technology and Cooperative Development Center Grant
Program funding to $20 million.
Ensure GIPSA appropriated funding at $3 million for reorganization, $1.65
million for increased staff, and $750,000 for investigation into unfair market
practices in the poultry industry. Policy Goal 8: Provide just and humane working conditions for all
people 
engaged in production agriculture
The President should establish an interdepartmental task force led by
Secretary Glickman involving the Departments of Education, Labor, Health
and Human Services, and Environmental Protection Agency, as well as the
Internal Revenue Service and the Immigration and Naturalization Service, to
address the laws, regulations, and enforcement affecting farmworkers.
A Farmworker Coordinator position should be created within the USDA
Office of Outreach. 
The Public Value of Small Farms
The dominant belief in agriculture is that large farms are more
efficient than small farms. However, Professor Willis L. Peterson from the
University of Minnesota found that factors other than size influence the unit
costs in agriculture. Peterson asserts that "small family and 
part-time farms are at least as efficient as larger commercial operations. In
fact, there is evidence of diseconomies of scale as farm size increases."
In addition, our economic accounting systems do not take into
account the "hidden" costs of large farms. An agricultural system
characterized by a limited number of large-scale farms does not take into
account the loss of market competition when production is concentrated in
oligopsonistic markets. The environmental consequences of concentrating a
large number of animals in limited areas is rarely considered. 
Small farms contribute more than farm production to our society.
Small farms embody a diversity of ownership, cropping systems, landscapes,
biological organization, culture, and traditions. Since the majority of
farmland is managed by a large number of small farm operators, the
responsible management of soil, water, and wildlife encompassed by these
farms produces significant environmental benefits. Decentralized land
ownership produces more equitable economic opportunity for people in rural
communities, and offers self-employment and business management
opportunities. Farms, particularly family farms, can be nurturing places 
for children to grow up and acquire the values of responsibility and hard
work. 
On more than one occasion, farmers who spoke at the public meetings
referred to the Commission as "our last hope." It is with conviction and hope
that the National Commission on Small Farms is asking the Congress and
USDA to act on the needs of America's small farmers. USDA Response
Secretary Glickman immediately appointed a Small Farm Action
Team headed by Deputy Secretary Rominger when the report was provided
to him. Other members on the action team include the heads of the following
mission areas:
Research, Education and Economics
Natural Resources and Environment
Rural Development
Farm and Foreign Agricultural Services
Marketing and Regulatory Programs
National Office of Outreach.
Eight policy goal teams will be established to create action plans on all 146
recommendations and the work will be further guided by a group of small
farm coordinators representing all mission areas and Department offices to
carry out implementation of the recommendations. In September 1998, the
Commission will reconvene to review the progress made by the Department
on the recommendations.
The report can be found on the Internet at
http://www.reeusda.gov/agsys/smallfarm/ncosf.htm and some copies are
available today. Thank you for your interest and support.

"A TIME TO ACT"- HIGHLIGHTS OF A REPORT OF THE USDA NATIONAL COMMISSION ON SMALL FARMS

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