Small Vs. Large Farms In Minnesota’s Corn-Fed Agricultural Economy

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Minnesota’s mid-sized family owned and operated farms are rapidly disappearing, small cottage industry agricultural plots are holding their ground, and large operators continue consolidating into even larger economic enterprises.

This is the state of Minnesota’s countryside as leadership at Minnesota's Department of Agriculture passes from farmer and former legislator Gene Hugoson to another former farmer, state lawmaker and farm leader, Commissioner-designate Dave Frederickson.

Many of these demographic and economic trends were in place when Hugoson became commissioner 15 years ago, starting the nation’s longest tenure as head of a state agriculture department.

However, the extremes it’s produced are wildly different for most Minnesotans who remember younger day’s visiting parents and grandparents’ farms. It might be an appropriate time for Commissioner-designate Frederickson and the new Legislature to reassess state agricultural programs with an eye toward those they serve.

Here’s a look at key farming numbers from the U.S. Census of Agriculture showing how Minnesota’s farming structure has changed since 1997. This census, separate from the U.S. Census conducted every 10 years, is taken twice a decade, and was most recently conducted in 2008.



Average farm size measured in acres means almost nothing anymore. Now, about half of Minnesota farmers are hobbyists, or rural residents with some farm income, or specialty crops and truck farmers in an around urban centers who combine some farming with other professions.

Meanwhile, the farmers generating more than a half-million a year in farm revenue have more than doubled in the past 15 years. Anecdotal information from land surveys suggest this segment of Minnesota agriculture will have increased greatly when the next farm census is taken in 2012.

Back when Hugoson took office, farm commodity exports drove farm economics. When exports were strong, farm commodity prices responded and grain prices rose. This would at times squeeze profits for cattle, hog, dairy and poultry farmers. Similarly, changing animal numbers within different livestock cycles could also raise or lower crop prices, making grain farmers even more dependent on export markets.

Fifteen years later, ethanol demand for corn drives the commodity markets; grain exports add pressure on market prices but are not the main determinant of farm profitability. Since Minnesota farmers and other investors have built 21 ethanol plants, although not all are currently operating, Minnesota farmers now have nearby markets for corn that used to be shipped out of state. This strengthens corn prices for local farmers within regional markets even as it raises corn prices on the commodity market.

Su Ye, a Minnesota Department of Agriculture analyst, found that exports still accounted for 41 percent of Minnesota’s 2009 corn crop while ethanol plants accounted for 29 percent. For 2010, she projected 40 percent of corn heading for export and 34 percent staying at home to make ethanol. What’s more, she estimated Minnesota feed corn – the historical use of the corn crop – would slip to 17 percent, down from 19 percent in 2009.

As of Monday’s USDA Market News report, Minnesota ethanol plants were bidding from $5.79 per bushel to $6.01 per bushel – up an average of 5-cents per bushel – to keep corn at home amidst strong export markets. With ethanol prices for the plants unchanged at $2.24 to $2.34 per gallon, current corn prices will stress some ethanol plants and Minnesota’s livestock producers that depend on corn market supplies.

For various reasons, dairy production drifted westward away from Minnesota and Wisconsin in the past decade and a half; the turkey industry stayed put in Minnesota and poultry (broilers and eggs), in general, has seen an uptick in production from a highly concentrated farming sector.

A safe assumption can be made that feed costs will continue to squeeze profits for livestock producers in 2011, but there could be a mild rebirth developing in the Upper Midwest’s dairy industry. Nate Donnay, senior analyst at the Informa Economics market research and consulting group’s Eagan office, said shipping feed from the Midwest to large, desert-based dairy farms in the Southwest and West used to be cheaper. That is changing, he said; there is “movement to put the cows back close to the feed.”

Regardless of how this plays out, Minnesota agriculture at the start of 2011 focuses on the big bucks that come from mid-size to large scale farm production. That is not where farm and rural populations still have roots.

“Small Farms in the United States: Persistence Under Pressure,” a February 2010 USDA report, categorized farms into several sizes. Those with less than $10,000 in gross cash farm income (GCFI) were classified as “noncommercial” farms. Sales of $10,000 to $250,000 received a “small commercial” farms designation. Farms with $250,000 to $1 million were considered “large.” More than $1 million in gross cash farm income qualified operations as “very large.”

The two smaller categories account for 91 percent of all farms in the U.S. but only 23 percent of agricultural production, the report said. “Very large” farms accounted for 59 percent of total production in latest census year.

The graphic shown above suggests that three-quarters of Minnesota farms are in the “small” and “noncommercial” categories. Dependent on off-farm income, niche market sales and activities, and retirement incomes, these rural and farm household residents have needs for services that aren’t provided by commodity programs in federal farm legislation.

Economic development and cooperative development programs offered by USDA do help these rural people who call themselves “farmers” – along with their small town neighbors. But there is room for state programs--administered by the Minnesota Department of Agriculture, often in collaboration with other state departments, state academic researchers and educators, and the USDA--to fill in these newly created service gaps.

Such opportunities and challenges will be discussed in the second part of this series.

By Lee Egerstrom, Economic Development Fellow, Minnesota 2020



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