January 31, 2005, Janet
Adamy for the Wall Street Journal via CropChoice.com: American
agriculture is suddenly going through a lot of changes.
After decades as the world's biggest farm exporter, the U.S. farm
sector is facing new challenges. Overseas farming giants are emerging
to eat into America's business of supplying the world with crops
such as wheat and soybeans.
See the complete Trend report at http://online.wsj.com/page/0,,2_1129,00.html
And at home, American consumers are demanding that farmers change
the way they grow and sell their produce and livestock. Consumers
want pesticide-free produce, giving rise to new ways of cultivating
and processing food. They also are seeking new eating experiences.
Their appetite for Chilean sea bass, vanilla-flavored lattes made
with Italian syrups, and grapes in winter is erasing the U.S. farm
sector's unique ability to generate a trade surplus.
U.S. farmers are seeking new streams of income from their land,
such as developing wind power, and, most important, many are learning
how to be marketers for the first time.
Here are some major trends down on the farm.
1. The Shifting Global
Thanks to cheap land and labor, Russia, Brazil, Argentina, China
and other countries are emerging as powerful agricultural producers.
The burgeoning titans are building new roads and bridges that benefit
their farming infrastructure, and overseas farmers now have access
to U.S. equipment and sophisticated biotechnology that deters weeds
Russia, for instance, used to depend heavily on the U.S. for wheat,
but is becoming a rival wheat exporter. It's expected to ship almost
6% of the world's total wheat exports this year, according to the
U.S. Department of Agriculture.
The USDA predicts that there will be no trade surplus in agriculture
by the end of 2005. Just four years ago, the U.S. farm sector was
generating an annual surplus of $13.7 billion.
But U.S. farmers are working to stay competitive. "What we're
seeing among our best producers is embracing technology to reduce
their costs of production to become more efficient," says Keith
Collins, chief economist at the USDA. U.S. farmers continue to have
an edge in things like irrigation and risk-management tools such
as futures contracts and federally subsidized crop insurance.
2. Tasty Imports
U.S. consumers have increased their appetite for foreign food,
and retailers are capitalizing on the trend. Imported food was once
hard to find, but now retail chains like Cost Plus Inc. of Oakland,
Calif., are popping up in suburban strip malls, selling treats like
Swedish gingersnaps and Australian wine. The rise of new farm powers
also is shifting the balance.
Trade pacts, including the North American Free Trade Agreement,
make it easier for the U.S. to bring in food from other countries.
Meantime, European countries have blocked U.S. exports of some genetically
modified foods, and several other countries banned U.S. beef after
the first U.S. case of bovine spongiform encephalopathy, or mad-cow
disease, was discovered in December 2003.
Other countries also can produce raw ingredients at a lower cost,
prompting food companies to go overseas for supplies.
3. A Modified Success
After sweeping across the American Farm Belt, genetically modified
crops are making inroads overseas -- despite resistance in some
nations where critics contend they could pose unknown risks to the
food supply. Modified crops can tolerate weed-killing chemicals
and resist damaging pests, saving farmers money in labor and lost
Eighteen countries now grow biotech crops, with Argentina, China,
Canada and Brazil leading biotech growth outside the U.S. An additional
45 are researching and developing their use, according to a study
by C. Ford Runge, director of the University of Minnesota's Center
for International Food and Agricultural Policy.
Monsanto Co., of St. Louis, is pushing into India with biotech
corn and cotton, and into Brazil with biotech corn, cotton and soybeans.
And, while Europe imposed a de facto moratorium on the production
and import of gene-spliced foods, it's starting to ease some restrictions.
4. Organic Growth
As demand for organic food grows, so does the number of organic
farmers. Sales of organic food are growing about 18% a year, with
meat and fish experiencing the fastest growth, according to figures
from the Organic Trade Association. The amount of U.S. certified
organic cropland for corn, soybeans, and other major crops doubled
from 1997 to 2001, according to the USDA.
Instead of just growing organic strawberries and apples, farmers
are expanding into agricultural staples like organic corn, wheat
and soybeans as food marketers offer more organic products.
For farmers, the lure of going organic is a chemical-free work
environment and higher organic-crop prices. Organic produce sells
at about a 30% premium to traditional produce. However, much of
that premium gets eaten up by the higher cost of growing chemical-free
crops. Converting pesticide-tainted land into organic soil can cost
as much as $10,000 per acre.
Although the number of organic farmers continues to climb, there
are signs the growth may be leveling off. The number of organic
farms rose by about 12% each year from 2000 to 2003 in California,
the state with the most organic farmers. But last year, it grew
only 6% to 7%, for a total of about 3,000 organic farms in the Golden
5. Longer Life
Commodity processors are increasingly using sophisticated equipment
to improve the shelf life and taste of foods.
Chiquita Brands International Inc., of Cincinnati, last fall invested
$3.5 million in a company that makes packaging designed to keep
bananas fresher. Landec Corp., based in Menlo Park, Calif., has
developed a membrane that regulates the flow of gases through the
packaging. When shipped and stored in the packaging, the shelf life
of a banana about doubles, making its quality more consistent.
6. The Safety Challenge
The industrialization and globalization of farming is making food
safety more challenging. Food travels farther, spends more time
in transit and is touched by more hands, increasing the opportunity
for problems as well as the potential scope of any outbreak.
With the U.S. getting more food from overseas, detecting an outbreak
and finding its source becomes more complicated and costly. The
USDA estimates that five common food-borne illnesses cost the economy
$6.9 billion annually in medical expenses, lost productivity and
Food-safety advocates also worry that new farming practices are
having unintended consequences. Livestock are increasingly raised
in confinement, a technique that allows producers to control their
environment and diet in order to speed growth. But raising a large
number of animals this way can make it easier for diseases to spread.
Many producers resort to antibiotics so often that medical experts
are growing concerned. The problem is that the practice can increase
the opportunity for bacteria to develop resistance to antibiotics
used in human medicine.
New technology is helping processors screen for bacteria. Minneapolis
commodity-processing giant Cargill Inc. is installing a system of
blue lights in its meat plants that can detect traces of chlorophyll
on beef carcasses -- a sign that stray animal guts may have spread
E. coli onto the beef. Previously, this job was largely handled
by inspectors relying on keen eyes to spot problems with the meat.
7. Keepings Tabs on Trees
In a key food-safety advancement, the government and technology
companies are laying the groundwork for a nationwide livestock-tracking
system that would help prevent the spread of diseased meat.
By tracking animals from birth to the supermarket, regulators would
be better able to find those that are potentially exposed to diseases
and keep them out of the food supply.
The USDA has said it will put $51.8 million toward an identification
system. Many technology companies are vying to supply the gear,
and some farmers are already adapting it. Digital Angel Corp., of
South St. Paul, Minn., makes a livestock ear tag that contains a
data-rich microchip. The company sold more than one million units
last year, five times as many as in 2003.
Some farmers fear such a system would bring to their doorstep liability
for a food-safety problem. Cattlemen "tend to be very independent,
and they are always concerned about Big Brother inserting itself
into their business," says Kevin McGrath, president and chief
executive of Digital Angel.
8. The Answer in the Wind
Seeking new streams of revenue, farmers are leasing land to energy
companies that erect towering turbines with wind-spun blades to
Such projects are a small but important source of income for farmers,
particularly in poor rural counties. One turbine can generate as
much as $5,000 in lease payments a year, according to a report by
the U.S. Government Accountability Office.
The Department of Energy is aiming to make wind power the source
of 5% of the nation's electricity by 2020, up from less than 1%
in 2004. The department estimates the shift will provide $1.2 billion
in new income for farmers and rural landowners and create 80,000
One challenge will be to match wind supply with demand. States
that are best suited to produce wind power, including North Dakota
and South Dakota, have seen little investment because they lack
big cities to use the power and the transmission capacity to deliver
it to small, remote towns, according to the GAO. State tax incentives
have speeded projects in California, Texas and Minnesota, and federal
funding that stretches through 2007 likely will spur more investment.
9. Aging Farmers
Young people continue to eschew farming, changing the demographics
of the typical American farm household. The average age of principal
farmers has risen steadily since 1978; in 2002 it was 55, up five
years from 1978.
Experts say that thin profits in most years and steep upfront costs
are keeping many young people from starting their own farms or even
taking over the family farm. A poll conducted by Iowa State University
last March found that 57% of Iowa farmers would not encourage young
people to become farmers.
The state is working to change that. An Iowa State University program
pairs aspiring farmers with ones who want to retire yet don't have
heirs to take over their farms. Prospective farmers work as apprentices
and get advice on securing loans to help them buy land. Since 1992,
the program has matched about 90 farmers.
10. Fewer Farms
The continuing decline in the number of U.S. farms is reshaping
the Farm Belt. The number of American farms peaked in 1935 at 6.8
million. As of 2003, there were 2.1 million farms nationwide, largely
because of widespread farm consolidation. Improvements in farming
equipment have reduced the amount of labor needed on farms and made
it easier for farmers to handle large plots of land.
The declining farm numbers have been chipping away at the population
of rural areas. That has broad implications for small-town America.
Once-thriving downtowns are struggling in part because they have
fewer farmers to patronize their stores.
The trend also is reshaping the political landscape for the agricultural
industry. While the Farm Belt still has substantial clout in Washington,
state farm legislation is increasingly being drafted by people who
lack ties to agriculture, says Paul Lasley, chairman of the sociology
department at Iowa State University.
Ms. Adamy is a staff reporter in The Wall Street Journal's