Allen, Joyce E.

English

Research Papers in Economics

SOUTHERN JOURNAL OF AGRICULTURAL  ECONOMICS  JULY,  1987
DISCUSSION:  THE ROLE  OF ALTERNATIVE
AGRICULTURAL  ENTERPRISES IN A  CHANGING
AGRICULTURAL  ECONOMY
Joyce  E. Allen
economic  forces,  and  (4) acceleration  of tech-
Much  attention  has  been  given  to  alter-  nology development.
native  agriculture  in  recent  years  by  pro-
ducers,  state departments of agriculture,  and  Financial Stress
agricultural economists.  Professors  Babb and  The premise  of continued financial stress in
Long  documented the  causes  of renewed  in-  agriculture  needs  some  justification  and/or
terest  in  alternative  agriculture,  effects  of  further explanation.  Agriculture is a dynamic
alternative  agriculture  on  farm  structure  in alternative  agiculture  on  farm  structure  in  industry, characterized by periods of prosper-
the  South,  nd  barriers  that may  affect  the  ity and economic  downturns. In the short run,
shift  toward  alternative  agriculture.  Their  iculture  will  likely continue  to experience paper  rep t a magriculture  will likely continue  to experience paper represents  a major contribution  to the  financial problems  but  will probably  recover. financial problems but will probably recover. limited  economic  literature  on  alternative limited  e  c  l  e  on  ae  Analysis  of recent  U.S.  Department  of Agri-
agricultural  enterprises. agricultural  enterprises.  culture data suggests that financial conditions
Babb and Long have prepared  an excellent  in agriculture  re slowly improving.
paper on alternative  agriculture and its likely  ata iicate tat totl  am  or
impact  in  the  South.  This  discussion  will at-  de  ad  e tha  llo  or
tempt to  offer a different perspective  on two  debt  decreased  by more than $7  billon  (or 4 percent)  between  January  1,  1985,  and  Jan-
of the premises  that were suggested  as rele-  r  16  (Banker). Preliminary  estimates
vant to the  shift to alternative  agriculture.  I  a  cntind to d  e in  . a.  p e a a  i  o  indicate that debt continued to decline in 1986. will  also  provide  additional  information  on  Moreover  the data show that net cash income some  topics raisedbyBabMoreover, the data show that net cash income
some  topics  raised by Babb and Long.  increased from  $39 billion  in 1984 to a record
$44  billion  in  1985.  USDA's  annual  Farm
PREMISES  Costs and Returns Survey indicated some im-
Babb and Long took considerable time to in-  provement  from  1984  to  1985  among  farms
troduce  and define the concept  of alternative  with  both  negative  cash  flows  and  debt-to-
agriculture.  They  used  the  term  to refer  to  asset ratios  above 40 percent.  In  1985, these
"adoption  of production methods  designed to  farms accounted  for 11.2 percent  of all farms
use fewer  purchased  inputs,  selection  of un-  in the survey,  down from  12.6 percent  in the
conventional  farm  enterprises,  and  diversifi-  previous  year.  The  share of total  farm debt
cation  of  enterprises  and  uses  of  family  re-  held by these farms also declined, from 45 per-
sources."  However,  not much time was given  cent to 37 percent (Banker).
to the discussion of trends which are the driv-  Cash flow data also show that there is some
ing  forces  behind  the  shift  to  alternative  improvement  in the financial  performance  of
agriculture.  The premises, which  the authors  the  agricultural  sector. For example,  49  per-
adopted  "with  little  questioning  of  their  cent  of  all  farms  had  positive  cash  flows  in
validity," were (1)  continued financial stress in  1984.  The  proportion  rose  to  55  percent  in
agriculture, (2) changes  in the pattern of food  1985  (Banker).
consumption  (i.e.,  increased  consumption  of  Although the financial situation  in the agri-
nutritious,  low-calorie  food),  (3)  continued  cultural sector may be improving,  some farm-
large  and  unpredictable  shocks  from  macro-  ers remain  in poor financial  condition.  Alter-
Joyce E. Allen  is an Agricultural Economist, Food and Agricultural  Policy Branch, Economic Research  Service, U.S. Department of
Agriculture.
Invited discussion paper presented at the annual meeting of the Southern Agricultural  Economics Association, Nashville, Tennessee,
February  1-4, 1987.  Invited discussion papers are routinely published in the July SJAE without editorial council review but with review
of the copy editor (as per Executive  Committee action June 25, 1982).
The views expressed  in this paper are those of the author and not necessarily those of the  USDA.
Copyright  1987,  Southern  Agricultural Economics  Association.
17native  agriculture,  especially  the  production  increasing  public  awareness  and  concern
of vegetables  and specialty  crops, could be a  about  diet  and  health  due,  in  part,  to  the
means for some of these  farmers  to improve  publication  of the  dietary goals  in  1977  and
their  profitability  or  reduce  their  losses,  dietary guidelines in  1980.
However, the largest benefits would probably  Only women aged  19 to 50 were included in
accrue  to the  initial producers  of alternative  the  1985' survey.  Thus,  Peterkin  and  Rizek
crops. The entry of many farmers into a small  analyzed the  diets of women in  1985 relative
market  could  quickly  drive  profits  down.  to the diets of a comparable  group  of women
Farmers could form cooperatives  to influence  from  the  1977 survey.  Although the  analysis
entry,  production,  and marketing of specified  did not cover the general population, it is still
alternative  crops.  Financial  stress  may  pro-  a  valid  indicator  of  how  food  consumption
vide the impetus for farmers to consider alter-  changed over time because (1)  women are gen-
native  crops,  but lack  of a large  market  for  erally  the  food  managers  in  the  households
these  crops  would  imply  that  only  a limited  and  (2)  they  are  generally  more  concerned
number of farmers  would find the shift to  al-  than men or children about eating low-calorie,
ternative agriculture profitable.  nutritious foods.
Despite  nutrition  advice  to  consume  more
fruits  and  vegetables,  the  quantity  of  fruit
Consumption  Patterns  consumed  by  women  declined  by  7  percent
Further examination is needed of the second  from  1977  to  1985  while  the  quantity  of
premise-increased  consumption  of  fruits,  vegetables  consumed  also  decline dby 7  per-
vegetables,  and  poultry,  and  decreased  con-  cent (Peterkin and Rizek). Consumption of red
sumption of red meat will continue.  Babb and  meat and poultry decreased by 34 percent and
Long  cite  the  study  conducted  by  Capps  as  8 percent, respectively,  while consumption  of
support  for  this  premise.  Capps  described  fish and  shellfish  rose  by  18  percent.  These
trends  in  food  consumption,  based  on  con-  data do not take into account the consumption
sumption  data  from the  Economic  Research  of meat, poultry, and fish as an ingredient in a
Service (ERS), USDA. The ERS derived con-  food  product  (e.g.,  stews,  casseroles,  ham-
sumption  data  from  annual  production  and  burgers, sandwiches, frozen entrees). The con-
marketing estimates of food products and  ad-  sumption  of these  mixtures  increased  by  35
justed for imports, exports, and stock changes  percent  from  1977 to  1985.  Aggregating  the
(Bunch and  Simon). Capps found  a 29 percent  data on mixtures with data on the quantity of
increase  in per capita consumption of poultry  meat, poultry, and fish eaten separately could
from  1970-74  to  1980-84  and  a  5  percent  show a different trend, especially for poultry.
decrease  in  red  meat  consumption.  During  However, the data were not aggregated in the
this period,  fruit  consumption increased  by 6  study by Peterkin and  Rizek.
percent and vegetable consumption increased  Numerous studies (e.g., Hamm; McLaughlin
by 5  percent (Capps).  and  Hamm;  Bunch)  have  documented  the
A somewhat different trend emerges,  espe-  change  in  consumer preference  from  canned
cially for fruits and vegetables,  when dietary  to fresh  and frozen fruits and vegetables.  Al-
intake  data  (i.e.,  type  and  amount  of  food  though  Babb  and  Long  did  not  discuss  this
eaten)  are  analyzed.  This  difference  could  change, it has important implications for alter-
have  important  implications  for  alternative  native  agriculture.  Consumers are  willing  to
agriculture  because  fruits  and  vegetables  pay higher prices for fresh vegetables (Bunch)
comprise  an  important  share  of  the  alter-  which  could  generate  additional  interest  in
native  commodities  that  are being  produced  this market by southern producers seeking al-
or promoted.  ternative  enterprises.  An  important  factor
Recent dietary intake data from the Human  that may affect  alternative agriculture  is con-
Nutrition  Information  Service,  USDA  show  sumer  interest  in a greater  variety  of fresh
that women  19 to 50 years old decreased their  fruits and vegetables (McLaughlin and Hamm).
fruit and vegetable consumption from  1977 to  Research  suggests  that  southern  producers
1985  (Peterkin  and  Rizek).  The  consumption  are responding to this interest.  For example,
trends  reported by Peterkin  and Rizek  were  broccoli  has  been  adopted  in  many  south-
based on data from the Continuing Survey of  eastern  states as  an  alternative  crop.  Texas
Food Intakes by Individuals, 1985 and the Na-  led all states in expanding broccoli production
tionwide  Food Consumption  Survey,  1977-78.  since the mid-1970s (Love).
The period between the surveys was a time of  The existing research  on trends in fruit and
18vegetable  consumption  can be summarized as  agriculture  is  the  manipulation  of  plant
follows:  growth  and  development.  Altering  chemical
*  Recent  USDA  studies  on  food  eaten  by  composition  of the  plant  product,  improving
women  show that fruit and vegetable  con-  processing quality, and altering plant size are
· sumption  did  not  increase  from  1977  to  examples  of  some  of the  potential  advance-
j  1985.  ments  that  biotechnology  provides  (Clarke).
*  Consumers  increasingly show a preference  The speed with which these new technologies
for fresh products.  are developed and adopted will,  of course,  af-
*  Consumers  prefer  to  choose  from  a  wide  feet the shift from conventional  to alternative
variety  of fruits and vegetables.  agriculture.
These  are some  of the  relevant  consumption
trends that could  affect  a shift toward  alter-
native  agriculture.  Understanding  these  con-  INFORMATION
sumption  trends  is  important  because,  as  Babb  and  Long  succinctly  discussed  the
Babb  and  Long  emphasize,  "demand,  includ-  need  for information  on production  practices
ing the identification of niches and unsatisfied  and marketing  strategies for  alternative  en-
needs,  will be the driving force for aternative  terprises.  Information  is  needed  regarding
agriculture."  consumer  demand,  enterprise  specific  costs
and returns,  sources  of  credit,  management
Technology  Development  practices,  and market  outlook.  Budget reduc-
Babb  and  Long  noted  that  technology  tions could affect the availability  of this infor-
development will accelerate and discussed the  mation,  much  of which  is not currently  avail-
lags  in the  impacts of new technology.  They  able  for alternative  agricultural  enterprises.
suggest th  ththose with superior management  For example, budget reductions limited collec-
skills  and those who  are  engaged  in conven-  tion of data in ERS's annual study on food con-
tional farming methods are most likely to ben-  sumption,  prices,  and  expenditures.  Since
efit from biotechnology.  1983,  data  are  no  longer  available  for  some
It  has been stated that biotechnology  offers  fresh  and  processed  vegetables,  processed
the opportunity for U.S. agriculture to restore  fruits,  and melons (Bunch  and  Simon).  Babb
and enhance its competitiveness  in the world  and  Long  indicated  that  the  demand  for re-
market  (Clarke).  The  American  Association  search  and extension  services will increase  if
for the Advancement  of Science has referred  there is a shift toward alternative agriculture.
to genetic engineering as one of the four major  However, this demand is likely to come during
scientific  revolutions  of the  twenty-first  cen-  an era of austere budgets.  It  is not clear how
tury  (Clarke).  Agriculture  has  been  charac-  research  and information  on alternative agri-
terized  as energy  and labor intensive.  Costs  culture  will  be  funded,  if this  increased  de-
for these inputs could be reduced through bio-  mand is to be met.
technology. For example, genetic engineering  The new USDA  Office of Small Scale  Agri-
has the  potential  to  reduce  the  cost  and  in-  culture could help  increase  the availability  of
crease the effectiveness  of plant pest control  information  on  alternative  agriculture.  This
through the development of genetic resistance  office was established to provide technical and
to disease.  marketing  information  to  farmers  seeking
Inherent  resistance  to  pests  and  disease  new  markets  for  specialty  crops.  The  office
could  reduce  the  use  of chemical  pesticides  will  work  with  USDA  agencies  to focus  de-
(Clarke).  As  Babb  and  Long  pointed  out,  partment  expertise  and resources concerning
yields in the South are adversely affected by  alternative  farming.  An important mission of
less  productive  soils  and  greater  risk  of  the  new  office  is  to  assess  information  on
damage from pests and disease. Thus, genetic  research,  education,  and technological  devel-
engineering could have a significant impact on  opments.  The  office will publish  a bimonthly
southern  agriculture  and  slow  the  shift  to-  technical  newsletter  to disseminate  informa-
ward  alternative  agriculture.  According  to  tion on alternative farming.
Clarke,  disease  resistance  is  controlled  by
relatively  few  genes  which  means  that  the  HUMAN  CAPITAL
development  of  genetic  disease-resistant
plants is likely to be one of the earliest applica-  Alternative  agriculture  has  human  capital
tions of biotechnology  to plants.  implications  for  agricultural  labor  and  the
Another  application  of  biotechnology  in  agricultural  economics  profession.  Babb  and
19Long emphasized that many of the alternative  shift to alternative enterprises.  These human
enterprises  are labor intensive  and suggested  capital  implications  suggest  that  alternative
that  displaced  workers  and  retired  persons  agriculture may not substantially improve the
could constitute an important part of the addi-  economic  well-being  of low-income  producers
tional labor that will be needed. This potential  or displaced workers.
source of labor could become  vital to the suc-  As  Babb  and  Long  indicated,  much  of the
cess of alternative  agriculture,  given the new  human capital related to conventional agricul-
federal immigration law.  The law will make it  ture may not be directly transferable to alter-
illegal  for all employers  to hire  illegal  aliens  native  agriculture.  Research  is  needed  on
and  could  have  significant  ramifications  for  credit, risk management, production,  market-
the supply of agricultural labor in the South.  ing,  etc.,  as  it  relates  to  alternative  agri-
Another key point made by Babb and Long  culture.  Public  institutions  will  be  increas-
is that the returns to labor employed in alter-  ingly asked to invest in human capital relative
native  agriculture  are  likely  to be  relatively  to  alternative  agriculture  while  maintaining
low.  Thus,  while  alternative  agriculture  will  their  human  capital  in  conventional  agricul-
offer  some  employment  opportunities,  the  ture. Agricultural  economists  can play an im-
workers  are  likely  to receive  relatively  low  portant role  in providing  analyses  and  infor-
wages. Moreover,  it will be difficult for many  mation  that  could  affect  decision  making  on
small,  limited-resource  producers  to  make  a  alternative  agricultural issues.
REFERENCES
Banker, D.  "Agriculture's  Financial Profile:  A Look Behind the Aggregates."  Farmline, U.S.
Department of Agriculture,  Economic Research  Service, 8,1(1987):6-7,  14.
Bunch,  K.  L.  "Consumption  Trends Favor Fresh, Lowfat,  and Sweet."  National Food Rev.,
U.S. Department  of Agriculture,  Economic  Research Service,  32(1986):1-5.
Bunch,  K.  L.,  and  G.  Simon.  Food Consumption, Prices, and Expenditures, 1964-84.  U.S.
Department  of Agriculture,  Economic  Research  Service,  Statistical  Bulletin  No.  736,
December  1985.
Capps,  0., Jr.  "Changes  in  Domestic  Demand  for Food: Impacts  on  Southern Agriculture."
So. J. Agr. Econ., 18,1(1986):25-36.
Clarke,  N.  P.  "Implications  of the  Biotechnology  Revolution  for Agriculture."  Research for
Tomorrow, Yearbook of Agriculture, 1986, U.S.  Department of Agriculture,  pp. 37-41.
Hamm, S. R. "Profile:  Consumption and Production of the U.S. Vegetable Industry."  Proceed-
ings of Analyzing the Potential  for Alternative Fruit and Vegetable  Crop Production
Seminar, N.C. Agr. Res. Ser.,  November 1985,  pp. 4-13.
Love, J. "U.S. Vegetable  Industry  in the  1980's."  National Food Rev.,  U.S. Department  of
Agriculture,  Economic  Research  Service,  31(1985):7-11.
McLaughlin,  E.  W., and  L. G. Hamm. "Consumers Demand Quality Produce." National Food
Rev.,  U.S. Department of Agriculture,  Economic  Research  Service, 28(1985):6-9.
Peterkin,  B. B. and R. L. Rizek. "Diets of American Women:  Looking Back Nearly a Decade."
National Food  Rev.,  U.S.  Department  of  Agriculture,  Economic  Research  Service,
34(1986):12-15.
20

Agriculture's Financial Profile: A Look Behind the Aggregates.&quot; Farmline,

Changes in Domestic Demand for Food: Impacts on Southern Agriculture.&quot;

Consumers Demand Quality Produce.&quot; National Food Rev.,

Consumption Trends Favor Fresh, Lowfat, and Sweet.&quot; National Food Rev.,

Diets of American Women: Looking Back Nearly a Decade.&quot; National Food Rev.,

Food Consumption, Prices, and Expenditures,

Implications of the Biotechnology Revolution for Agriculture.&quot; Research for Tomorrow, Yearbook of Agriculture,

Profile: Consumption and Production of the U.S. Vegetable Industry.&quot;

U.S. Vegetable Industry in the 1980's.&quot; National Food Rev.,

DISCUSSION: THE ROLE OF ALTERNATIVE AGRICULTURAL ENTERPRISES IN A CHANGING AGRICULTURAL ECONOMY

DISCUSSION: THE ROLE OF ALTERNATIVE AGRICULTURAL ENTERPRISES IN A CHANGING AGRICULTURAL ECONOMY

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics