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Needed: New Rural Strategy for Small Farmers

January 06, 2011 By Lee Egerstrom, Economic Development Fellow

Part Two of a Two-Part Series (read part 1)

When west central Minnesota farmer Dave Frederickson gave up his Minnesota Senate seat to become president of the Minnesota Farmers Union, and later moved up to National Farmers Union president, his espoused goal was to help family farmers survive turbulent times and prosper on the farm.

Now, as the Minnesota Agriculture Commissioner-designate prepares to lead the state’s agriculture department, new goals and new strategies are needed. Some family farmers did achieve those earlier goals, but, overall all, earlier policy initiatives had little impact on the majority of small farmers.

Off-farm jobs, not traditional farm programs, have kept people on the land and living in rural communities. Still there is potential for rural job growth, especially in processing agricultural commodities, as proven by the estimated 8,000 jobs associated with Minnesota’s corn-based ethanol plants. Rural communities’ continued growth and development depends on their ability to diversify and adapt to future trends.

“We’ve moved from a corn export driven farm economy to a corn processing economy,” said Tom Sand, a veteran rural Minnesota observer and former aide to U.S Rep. and later U.S. Secretary of Agriculture Bob Bergland. This transformation, Sand said, has provided rural Minnesota extremes of wealth and poverty “and a shrinking ‘middle’ in agriculture.”

Kent Olson, an applied economist and farm management expert at the University of Minnesota, cites 2007 Census of Agriculture data and more recent financial data from farm management programs that show the disparities in the sizes and incomes of Minnesota farms.

In 2007, for example, the average household income of Minnesota farm families was $83,050, or 123 percent of U.S. average household income. Income from farming operations, however, accounted for only 17 percent of income for these farm families; off-farm jobs, outside investments, pensions and other revenue accounted for 83 percent of income.

Of course, there are always problems with an “average.”

Small farmers with gross sales of less than $100,000 had average household income of $70,356 of which a negative 8 percent came from farming; 108 percent was from off-farm sources.

Meanwhile, Minnesota farms with more than $500,000 in gross farm income in 2007 had an average household income of $278,566 of which 87 percent came from farming operations and only 13 percent from other sources.

Other data show the number of small farms and large farms are increasing while small- to mid-sized enterprises continue disappearing. Furthermore, the data highlights that Minnesota has increased numbers of small farm operators who eke out supplemental income from agriculture, and a growing “landed gentry” class of big operators for whom state and federal farm programs have limited to negligible benefits.

While increased numbers of especially small farms do help stabilize rural populations, it is also clear they can do so only when there are jobs and other income opportunities nearby.

Going forward, Sand contends, rural Minnesota will need more state coordination with the federal government, nonprofit organizations and private investments to keep jobs and opportunities for rural residents.

This is where programs at the Minnesota Department of Agriculture overlap with those of the Department of Employment and Economic Development (DEED), among other state departments and agencies. Such programs provide jobs for rural people who farm part-time and want to live on farmsteads and in small towns.

However, these off-farm opportunities become even more complicated by the broader Minnesota and U.S. economies, especially with the housing market spillover. In a year-end letter to friends and supporters of the Farmers Legal Action Group (FLAG), executive director Susan Stokes noted that farm families needing state debt mediation services have now reached 1987 levels. The state’s Farmer-Lender Mediation program saw farm debts needing mediation service nearly double in 2010, from $322 million to $624 million.

Where this goes in 2011 and beyond will depend on economic conditions far more complex than commodity market trends. At the same time, people who want to farm continue to explore niche markets, more diversified crops, specialty crops and livestock products, and value-added processing. They’re also creating integrated farm to table community food systems with consumer coops.

One example of such progress is the growth of organic farming in Minnesota (see table).

For the past 15 years and through three state administrations, former Commissioner Gene Hugoson provided a steady hand at the Minnesota Department of Agriculture. A good synopsis of MDA programs and what the department has been doing can be found at http://www.maes.umn.edu/strategic-ag-plan.asp.

As Frederickson and a new state administration take office, and as new legislators take public policy posts, it is appropriate to evaluate what current programs are doing and where a fresh focus might be helpful.

Clearly, rural development aimed at people and rural communities should be high on any list of possible changes in state agriculture policy. This should seek to build on more value-added processing of Minnesota crops and livestock products, both to create rural jobs for small farm household members and to help shrinking mid-sized farm household to move up and gain stronger financial footing.

This needs a coordinated effort with MDA and other departments, such as DEED, and with USDA agencies. Such collaboration currently exists with MDA and state health agencies for plants, animals and humans.

One helpful guide for such an evaluation comes from the joint federal-state Minnesota Agricultural Experiment Station at the University of Minnesota. It is a study conducted by a private consulting firm, Informa Economics, a Memphis-based group with offices in Eagan, Winnipeg and McLean, Va.

It identifies future research areas for renewable fuels, the environment, agriculture’s labor force, sustainable and organic production, and broad areas of research and Extension Service work.

These research areas go to the heart of the evolving rural economy and the demographic shifts occurring in rural Minnesota. Therefore, they should point directions for the Minnesota Department of Agriculture and state programs as well.

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