Farming for Profit and Quality of Life[i]
For decades, American farmers have been
told to either get bigger or get out of agriculture. More recently, farmers
have been encouraged to sign contracts with large agribusiness corporations as
a means of survival and success. Contrary to conventional wisdom, most farmers
haven't followed the advice of the experts. Most farmers have not gotten
bigger, they haven't given in to corporate contracting, and they haven't gotten
out of farming. Certainly, the very large farms and contract operations have
grown in numbers while the number of mid-sized independent family farms has
shrunk. Nonetheless, the vast majority of
USDA statistics for 2004 indicate that
84% of all
Most of the farmers who got out of farming were the mid-sized, full-time family farmers who followed the experts' advice to get bigger or get out. Some got out voluntarily, selling their land to neighbors who wanted to get bigger. Others didn't leave farming by choice; they were forced out of farming. The first to fail during the farm financial crisis of the1980s were farmers who had borrowed heavily at high interest rates during the 1970s in an attempt to gain economic efficiency through large-scale, specialized production. Those farmers who resisted the urge to expand, who diversified to cut costs and improve profits, or relied on off-farm income to supplement rising costs of living, weathered the crisis far better. Many smaller farms became “low input” farms and others became part-time family farms. Many people with small farms have survived the reoccurring crises in agriculture while their neighbors on larger farms have failed. They didn't get bigger and they didn't get out.
Today, the mid-sized farmers who survived the farm crisis of the 80s and economic slump of 90s are being told that they will have to become contract producers for some agribusiness corporation if they expect to survive. They are told they will have to find their place in the global corporate “food chain” in order to have access to the technology, the capital, and the markets that they will need to survive. They build large-scale contract confinement animal feeding operations or grow genetically modified crops under some corporate licensing agreement. Under such arrangements, the corporations make all of the important decisions and make all the real profits. Farmers become investors, building superintendents, or tractors drivers and it is questionable whether they have actually stayed in farming or have abandoned real farming for agribusiness.
The industrialization and corporatization
of American agriculture has left the future of real farming in peril.
Until a decade or so ago, few questioned the ability of American farmers to
compete with farmers anywhere in the world, even if it did mean ever-lower
prices and ever-tighter profit margins. We were the global leaders in
agriculture. We had the most highly educated and efficient farmers in the world
using the latest production technologies to cultivate the best agricultural
land in the world. In recent years, however, the
Abundant undeveloped land and favorable
climates, coupled with low-cost labor, have given
farmers are betting that ethanol will be the savior of
However, critics point out that ethanol is very energy
inefficient in comparison to other alternative energy sources. Some experts claim
the amount of “old” fossil energy required to grow the corn and process it into
ethanol is greater than the amount of “new” energy in the ethanol produced. Others
claim a new energy out/old energy ration is more like 1.5- or 2.0-to-one.
Regardless, several of the new fossil energy alternatives are much more
abundant and energy efficient than are biofuels. Tar sands, gasification of
coal, and oil shale are about four times as net
energy efficient as biofuels and the gap is more likely to widen rather than
narrow in the future. These other sources all require far less “old energy” to
create “new energy,” with net energy ratios in the 8-to-one range compared with
biofuels ratios of at best 2-to-one. Development of the other sources has been
slower because it takes far larger investments and far longer periods of time
to build the infrastructure necessary to bring these sources into production. More
than one-hundred ethanol plants have been built since latest energy boom began,
while the first oil from the tar sands of
As energy becomes the limiting factor of economic
development, the dollar and cent prices of energy from different sources will
be determined by their energy efficiency. At that point, bioenergy from
agriculture may well be the most costly energy in the marketplace and demand
for biofuels crops will likely drop like a rock. Even if there is a future for
ethanol, it's doubtful that
In the face of the growing global
challenge to the profitability of
Certainly, not all new American farms are small, but even the larger sustainable farms tend to smaller and more diverse than are their conventional counterparts producing the same commodities. For example, a sustainable cattle ranch is likely to be far larger than a conventional berry farm. But a sustainable cattle ranch or a sustainable berry farm is likely to be smaller than a conventional cattle ranch or berry farm that is managed strictly for the economic bottom line. Sustainable farming requires more labor and management per acre and dollar invested than does conventional industrial farming, meaning more farmers and more farms.
Large farms make more money by managing more land, investing more money, and hiring more laborers. Even if their profit margins are small, they generate larger total profits by increasing the size of their operations. A smaller farm, on the other hand, must be managed more intensively. A smaller farm has fewer resources and produces less than does a larger farm. Thus, a small farm must make a higher return per acre of land or per dollar invested to be economically competitive with a larger farm. By managing fewer resources more intensively, the small farmer is able to make more profit per unit of output, and thus, may make more total profits, even though total production or output is less than on a larger farm. By giving more time and attention to each acre of land and each dollar invested, the small farmer is able to generate a larger return from a smaller farm, and thus, to make the smaller farm more profitable.
Sustainable farmers must fit their farming operation to their land and climate rather than try to bend nature to fit the way they might prefer to farm. In most regions, this requires a variety of crop and animal enterprises which must be integrated spatially and sequentially to maintain soil fertility and manage pests. In some regions, diversity in achieved through crop rotations and cover crops – without livestock. In other regions, diversity means managing livestock grazing to achieve diverse plant species or with multiple species of grazing animals. Through diversification, these new sustainable farmers substitute management of on-farm resources for the off-farm inputs that squeeze farm profits and threaten the natural environment.
Many of the new sustainable farmers are able to realize higher prices for their products by marketing directly to individual customers. They realize that each of us value things differently, as consumers, because we have different needs and different tastes and preferences. They produce the things that their customers value most, rather than try to convince their customers to buy whatever they might prefer to produce. And these higher values are reflected in premium prices for their products. They market to people who care where their food comes from and how it is produced – locally grown, organic, natural, humanely raised, hormone and antibiotic free. They market to customers who value the way their food is produced as much as the food itself.
In addition, these new farmers think for themselves and make their own decisions. Their farming operations reflect the things they like to do, the things they believe in, and the things they have a passion for, as well as the things that are profitable. Their products are better and their costs are less because by following their passion they end up doing what they do best. These new farmers are able to earn a decent income, but more important, they have a higher quality of life because they are living a life that they love.
In the process of farming, these new sustainable farmers build relationships, among each other, with their customers, and with their land. Their relationships are interdependent relationships of choice, rather than relationships of dependency or necessity. They share ideas and information. They are not trying to drive each other out of business; they are trying to help each other succeed. Some form partnerships and cooperatives to buy equipment, to process and market their products, to do together the things that they can't do as well alone. They are not trying to take advantage of their customers to make quick profits; they are trying to create lifelong social and economic relationships. They buy locally and market locally, bringing people together around a common interest in food and farming. They refuse to exploit each other or to exploit the land.
The economics of this new type of farming is fundamentally different from the economics of conventional production of agricultural commodities. A conventional farmer's net incomes generally run about 15% to 20% of gross sales. Thus, a farm with $50,000 in gross sales would net only about $7,000 to $10,000 – certainly not enough to support a family. That's why the USDA categorizes such farms as “non-commercial” farms. The only hope for farms grossing even up to $100,000 per year, and netting $15,000 to $20,000, would seem to be to rely on non-farm sources for most of their income.
However, by managing more “intensively” the new farmers are able to net far more profit from each dollar of sales. They reduce their costs of purchased inputs through diversification, increase the value of their products through direct marketing, focus on doing things that they do best, and work together to do the things that they can't do as well alone. As a result, their net return per dollar of sales may be 40% to 50% rather than the 15% to 20% for a conventional farm. Thus, the net returns on a farm with $100,000 in annual sales may be $40,000 to $50,000 and even a farm with $50,000 in annual sales may net $20,000 to $25,000 to support the farm family. The bottom line is that 10 acres, intensively managed to produce high valued products, may generate more profits than 1,000 acres used to produce bulk agricultural commodities, such as corn, wheat, cotton, cattle, or hogs. Many small farms make some fairly big profits.
That said, many small farms don't make profits – at least don't report any net farm income at tax time. According to the USDA statistics, only 67% of small, “limited resource” farms and 63% of small, “lifestyle” farms reported positive net-cash incomes in 2004. For “primary occupation” small farmers (with less than $100,000 annual sales) only 69% reported positive net-cash incomes. For these three USDA small farm groups combined, only 65% reported any profit from farming. So, many small farms lose money. Obviously, some of these were hobby farmers or are rural residents, but many of these farmers were “primary occupation” farmers and they were not working for nothing.
A lot of small farms are “quality of life” farms – their primary purpose is to contribute to the quality of life of a farm family in ways other than by making money. Ask farmers on small farms why they farm and they virtually all will mention that a farm is a good to live and to raise a family. A good farm is a place that nurtures life – plants, animals, and people – and the lives of children can be nurtured as well by growing up on a farm. Farm parents have more influence on their children, because families spend more quality time together – work and family life happens at the same place. Children that grow up knowing they are valued, productive participants in the work of the family seem more likely to grow up with a healthy sense of self-worth. How much money does a family have to earn in a city to ensure quality learning opportunities for their children, the create opportunities for the family to grow together, and opportunities for children to build self-esteem? How much time and money is spent by families in cities just to keep the children “occupied” by “non-destructive” activities? The things that build strong families just come naturally in day-to-day life on a good family farm.
Ask farm families why they farm, and many will mention that they like the open spaces, fresh air, scenic landscapes, and the opportunity to live in a natural setting. How much money does a person have to earn in a city to live in a scenic, natural environment with fresh air and open spaces? Even small farms provide families very large “residential lots.” How much money does a person have to earn in a city to “buy” the open space, personal freedom, and privacy of a typical small farm?
Ask farm families why they farm, and many will mention that they like being part of a farming community. Farming communities may not be as close as they were back in the days when farmers shared work, and when the social life of farm families was pretty much limited to community activities. However, many farming communities are still places where everyone knows just about everyone else, and everybody has an opportunity to pursue whatever community role they choose to pursue. How much time and money does a person in a city have to spend to develop and maintain a social network of friends? How much time and money does a person in a city have to spend to develop name recognition and credibility, if they decide to take on a leadership role in their “community?” Farmers just naturally find a place to belong, in a community with other farming families.
On a family farm, the open spaces, the place to raise a family, and the community, all come as part of farming. Farmers don't have to pay extra for a place to raise a family, because the place they raise the family is the farm. Farmers don't have pay extra for the extra space because they need the same space for the farm. And farmers don't have to pay extra to be a part of a farming community, because they become a part when they decide to live there and farm. These are valuable benefits that are just part of the “quality of life” that comes with a good farm.
As a bonus, the costs of many such “quality of life” benefits are considered as farming costs. The cost of owning farmland is a farming cost, although the farm provides a place to live. Many food costs are also farm costs, such as some of the costs of a vegetable garden and animals for meat, eggs, or milk. Some family transportation costs are farm costs – every farm needs a pickup truck. Many recreation costs, such as maintaining wildlife habitat for hunting and fishing, all-terrain vehicles for work and play, a stable for riding horses, and pets that “work” on the farm also are farm costs. For each dollar spent for personal expense, we have to earn anywhere from $1.35 to $2.00, depending on our tax bracket. Farmers only have to earn a dollar to spend a dollar on legitimate farm expenses, including those that create valuable personal benefits. In addition, every dollar “lost” on the farm may save from $0.30 to $0.50 in reduced taxes on off-farm income. So, many small farms that report “negative” net incomes still may be providing very valuable economic benefits to farm families.
It's conceivable that the costs of providing the same quality of life benefits that occur on many small family farms might require a $30,000 to $50,000 in non-farm income, or even more. The costs of such things as acreage in an upscale, gated community, enhanced private educational and recreational experiences for children, involvement in civic affairs, maintaining social relationships, membership in sport's club, and so on don't come cheap. So, a farm that just “breaks even” might be contributing as much to the quality of life of the family as a job that pays $30,000 to $50,000 in town. Furthermore, many families that live in cities need more than one income, and sometimes more than one job per person, just to make ends meet. Some families that bring in more than $100,000 a year are still unable to pay for their desired quality of life, as they go deeper into debt. A full-time farming family that just breaks even is doing as well economically as a city family that is just making ends meet. The bottom line, it would cost a lot of money for people living in cities to buy the quality of life benefits that are an inherent part of a good family farm, and some quality of life benefits of farming are truly “priceless.”
Farming for profits and quality of life is about the pursuit of happiness, rather than the pursuit of wealth. Happiness has always been the ultimate objective of life and people historically have understood the difference between the pursuit of happiness and the pursuit of wealth. Certainly, some level of material well-being is necessary for happiness, but both philosophers and ordinary people have always understood that happiness in about relationships, within families and communities, and happiness is about ethics and morality. Happiness is a consequence of our overall way of life. Real farming is not just an occupation; it's a way of life.
University psychologists Ed Diener and Martin Seligman reviewed more than 150 scholarly studies relating wealth to happiness. Their 2004 report confirmed a growing consensus that beyond some very modest level of income – around $10,000 per person, they suggest – increases in income do not necessarily bring greater happiness. A 2003 British cabinet office report also confirmed, “Despite huge increases in affluence compared with 1950, people throughout the developed world reported no greater feelings of happiness.” These studies consistently found that personal relationships – friends, family, and community – are necessary for happiness, as is a sense of being treated with equity and justice within society. And perhaps most important, they concluded our happiness depends on our having a clear sense of purpose and meaning in life to define what is right or wrong and good or bad – our sense of ethics and morality.
Farming for profit and quality of life is about building strong, healthy relationships within families, friendships, communities, and societies. Farming for profit and quality of life is about taking care of the land, taking care of animals, and being good stewards of nature while meeting the basic needs of human society. It's about living a life or purpose and meaning. Ask a quality of life farmer why the farm and he or she just might tell you, “I farm because I feel I have to. I feel like this is what God meant for me to do.” Farming with purpose is about the pursuit of happiness.
Profits are important but those farmers who focus solely on making profits have lost sight of their true purpose in life because money is never anything more than a means to some greater end. If in the pursuit of greater profits, farmers end up diminishing their quality of life, they will have gained nothing because they have taken the happiness out of farming. The new sustainable American farmers are proving that farming can be profitable as well as a desirable way of life, and that farms don't have to be big to be profitably. Farming for sustainability is about building relationships, living with purpose, and making enough profits to support a desirable way of life. Farming for profits and quality of life ultimately is about the pursuit of happiness.
[i] Prepared for presentation at the 2007
[ii] John Ikerd is Professor Emeritus, University of Missouri, Columbia, MO – USA; Author of, Sustainable Capitalism, http://www.kpbooks.com , A Return to Common Sense, http://www.rtedwards.com/books/171/, Small Farms are Real Farms, Acres USA , http://www.acresusa.com/other/contact.htm,and Crisis and Opportunity: Sustainability in American Agriculture, University of Nebraska Press http://nebraskapress.unl.edu;
 Robert A. Hoppe and
Penni Korb, “Large and Small Farms: Trends and Characteristics,” in Structural
and Financial Characteristics of
 Christopher Cook, “Business as Usual,” The American Prospect, online edition, April 8, 2006, http://www.prospect.org/web/page.ww?section=root&name=ViewPrint&articleId=11322
 For 50
real life examples, see “The New American Farmer – Profiles in Agricultural Innovation,”
the SARE Program, USDA,
 Farm Income and Financial Performance, in Structure and Finances
 Ed Diener and Martin EP. Seligman, “Beyond Money. Toward an Economy of Well-Being,” Psychological Science in the Public Interest, 5 (1), 2004, 1–31.
 Oliver James, “Children before cash; better childcare will do more for our wellbeing than greater affluence,” The Guardian, May 17, 2003.