The U.S. agriculture sector has been hard hit in recent years due to changing global demand and the onset of the Trump administration’s trade conflicts. Growth of real net farm income in 2019 dollars has been negative in nine of the past 19 years. Since 2011 the major agriculture states in the Midwest have experienced negative growth, while California—the largest producer of agriculture income by a factor of four—and Florida, Georgia and North Carolina have all been positive.
To say these are trying times for the agricultural sector is an understatement. Producers must simultaneously deal with policy-driven dislocation, climate change, the emergence of a global network of producers and consumers, and the impact of growing supply and demand on pricing of agricultural products. Finally, they must also contend with the impact of an aging demographic and the emergence of nationalism in developed economies and its effect on the availability of labor.
(Reference: https://irishadvantage.com/white-paper/agritech-the-future-of-profitable-farming/)
What can and should be done? And why is farming more profitable in California than in the Midwest?
California’s agriculture is diversified and centered on tree crops (nuts and fruits), vegetables, and dairy products. In particular, the expansion of exports of milk products to Asia and Mexico and investment in efficient production practices provided a partial buffer to falling prices. But the recent failure of U.S. trade negotiations and the imposition of retaliatory tariffs became disruptive to the supply chain.
The Midwest—the largest producer of corn and soybeans—finds itself facing rising production costs and plummeting market prices. Soybean profitability has been mostly in decline since 2012; the crop was a money loser in 2018 after the imposition of China’s tariffs. It’s the same story for corn plantings, although corn began an upward trend in 2014.
The lessons from our quick California-Midwest comparison might be that diversity, technology and the export market could make the difference between profitability or the demise of small, accountable and clean local farming. Smart, forward-looking public policy would nurture farming; it would not necessarily center on promotion of outgoing technologies (i.e., ethanol and the combustion engine). Rather it would focus on providing the means to use technology to safely extract the most food products from the least amount of space with the smallest amount of labor.
Agriculture policies might therefore:
- Provide funds to allow smaller farms to benefit from precision farming techniques.
- Provide the knowledge base (via state university systems) for farmers to adopt agritech methods of efficient farming.
- Facilitate collaboration among business sectors (e.g., partnership of producers and transporters to get crops to the market faster and more efficiently).
- Provide incentives for development of robotic crop harvesting (to alleviate labor shortages).
- Provide incentives for and adoption of greenhouse gas reducing techniques (e.g., turning manure into compost, precision tractor use, efficient use of water and fertilizers, etc.).
- Provide federal incentives and support to facilitate the financing necessary for a gradual and orderly transition.
‘Lose-lose propositions’
Some of these issues are clearly above our pay grade to change. For example, recent events have shown that trade conflicts are inherently lose-lose propositions. They are easy to start, difficult to end and everyone loses. Yet, we find ourselves ensnared in an expanding trade spat that carries deleterious implications for the agricultural sector and the broader economy. As a consequence, one could expect Midwest soybean producers and California milk producers to have at least some difficulty reestablishing their supply chains to Asian and Mexican markets once the current period of trade tensions ends. Prices now set within a global marketplace, which is impossible to regulate, augers for a different set of policies with respect to domestic agriculture than has been the case over the past generation.
So while the Midwest is suffering from the effects of climate change, including spring floods and other extreme weather patterns, California will be held hostage by the lack of snow mass and a dwindling supply of water. Estimates posit that agriculture accounts for anywhere from less than 10 percent to 25 percent of greenhouse gas emissions. Regardless of one’s normative preferences, it might be in everyone’s best interest to think about producing a sufficient amount of foodstuff in the most efficient and clean manner.
