Page 13 - Farm and Food Policy Strategies for 2040 Series

Consolidation: Since the 1930s, the number of farms has declined, the average size has
increased, and the amount of farmland in agriculture has remained generally flat. Of the 2.1
million farms in the last Census of Agriculture, only about 15% are at-scale production farms,
and they control 80% of the acres. “We think by 2040, there will be fewer than 100,000
production farms, and 5% of farms will produce more than 75% of the agricultural
output,” Sciotto says. “Mid-size farms are under the most financial pressure and are declining
the quickest as they get bought up by larger operations.”

“However, there’s more to the story, and the ‘big get bigger’ statement is oversimplified. There
are two classes of farms emerging - production agriculture and direct-to-consumer. According to
USDA, the U.S. has seen a 61% increase in small farms from 1992 to 2012. Not every farmer
will fit into today’s definition of production agriculture, and ag institutions will have to consider
how they will serve both classes of farmers,” explains Sciotto.

Farmer psychology: Data suggest that more farmers may be unwilling or unable to stay in
business if current economic conditions continue. US ag debt totaled $410 billion in 2019, a
level that’s not been witnessed since the 1980s.

Farm operations have been “largely propped up by low interest rates and higher than average
land values. We are starting to see the operating profitability of these farms declining and it’s
making it harder and harder to pay back loans,” Sciotto says.

Last fall, research conducted by Aimpoint Research found that nearly 60% of farmers were
concerned about their ability to repay operating loans.

“More lenders are thinking about their risks and more farmers are going to find it difficult to
repay what they’ve already borrowed,” Sciotto says.

Compounding the situation is the transition of farmland and succession planning. USDA
estimated between 2015 and 2019 that 10% of the farmland would change owners.

“In 2017, farmers told us 28% of the acres would transfer to a new owner in the next five years
and 22% will have someone other than the current decisionmaker making decisions on cropping
practices, inputs, and harvest. So, many farmers are perceiving a faster rate of change than what
USDA estimated,” he adds.

“Sixty-five percent say they have a succession plan, but for many, that’s often a hope that a
family member will come back to farm,” Sciotto says, “When you dig deeper, it’s likely less than
half of farmers have a succession plan.

“There’s a correlation between whether producers have a family member coming back or not and
how driven they are. For example, if you have a family member coming back to the farm, you
tend to continue to invest in the operation. You find new efficiencies and expand and grow. If
you don’t have someone coming back to the farm, you tend to pull your foot off the gas pedal
earlier.”

Technology: A lot of young people are interested in agriculture, and when Aimpoint Research
asked what excites them most, new technology came up loudest. USDA says nearly 69% of
young farmers will have college degrees.

www.Agri-Pulse.com 11