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Consumers drive farmingBy John Schlageck Industrialization is an issue that is impacting agricultural producers in Kansas and their counterparts across the country. Without a doubt there are benefits from industrialization--less-expensive food. There are also costs--a declining rural population, and the concern that fewer and larger buyers of farm and ranch commodities can, and possibly will, use their market power to depress farm level prices. In case you're not familiar with the term, industrialization is the trend toward larger-sized units capturing economies of scale and managing risk in a growing global economy. Industrialization exists nearly everywhere in the food production industry. In 1900, there were 173,000 farms in Kansas with an average farm size of 241 acres. Today, the number of farms (64,000) is down 62 percent while farm size is up more than 300 percent (740-plus acres). In 1997, the largest hog producer controlled 4 percent of the nation's herd. By 2009, the largest hog producer controlled nearly half of the nation's hog herd. In 1976, there were 6,255 livestock processing plants operating in the U.S. and by 1999 that number dropped 45 percent (3,419). Today, that figure has dropped another 40 percent. The grain handling industry has also been impacted by industrialization. This can be seen with acquisitions by large grain companies, the seed and biotech industries and at the retail grocery and restaurant levels. The primary causes of industrialization in agriculture are society's desire for cheap food and the technological advances that have allowed us to produce and market more food at lower costs. From an individual standpoint, no consumer wants to pay more than they absolutely have to for quality food. Stability results in well-fed nations and morally no one wants to see people go hungry. Society wants cheap food and in our country that's what we have. The desire by society for cheap food leads to incredible pressure on both food and commodity prices that tighten ag-sector profit margins because input costs continue to increase with inflation. The result is an agriculture where less efficient farms fall by the wayside and well-managed, efficient farms survive and more often than not, grow. For agriculture to remain successful, this industry must increase efficiency, lower costs and/or add value. Without such progress, the average producer of today quickly becomes the low-end producer of tomorrow debating whether and when to quit farming. Today our society not only wants cheap food, but also better food. Consumers are changing. They're busier and less interested in food preparation. They want more choices. Food can no longer be merely cheap--it must be more convenient, consistent and wholesome. Agriculture has responded. Consumers today have more choices than ever before. There are more and more branded products. But a branded name alone does not guarantee consistency or quality. To do this, we must assure uniformity throughout the food production system. For meats, this implies uniformity in animal genetics, nutrition, handling and processing. In the case of crops, it might mean uniformity in plant genetics, fertility, pest control, handling and processing. Food supply chains have been developed. Supply chains attempt to more efficiently link food production, processing and retailing with the end result being greater uniformity, consistency and quality. Supply chains can provide a quality product at a lower cost by reducing transaction costs and potentially offering farmers an opportunity to add value to their product. Fewer farmers mean a less populated, less prosperous rural America with a weaker voice when addressing farm level concerns. Farmers and farm organizations must set priorities and choose their battles and use political capital wisely. The question isn't necessarily what are farmers and ranchers for or what are they against, it's how do they position themselves to prosper in this rapidly changing business environment? John Schlageck is a leading commentator on agriculture and rural Kansas. Born and raised on a diversified farm in northwestern Kansas, his writing reflects a lifetime of experience, knowledge and passion.
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