PROBLEMS OF AGRICULTURAL ECONOMICS
§ 1. Size of farms, and total farming area. § 2. Influences acting
upon the size of farms. § 3. Self-sufficing versus commercial farming.
§ 4. Farming viewed as a capitalistic enterprise. § 5. Diversified versus
specialized farming. § 6. Conditions favoring diversified farming. § 7.
Intensive farming in Europe and America. § 8. Prospect of more intensive
cultivation of land in America. § 9. The new agriculture. § 10.
Difficulty of coöperation among farmers. § 11. Rapid growth of farmers'
selling coöperation. § 12. Some economic features of farmers' selling
coöperation. § 13. Coöperation in buying. § 14. Need of agricultural
credit. § 15. Recent provisions for farm loans.
§ 1. #Size of farms, and total farming area#. The average area of
farms has varied from a maximum of 203 acres, in 1850 (the first
figures), to a minimum of 134 acres in 1880, being 138 acres in 1910.
A better index, perhaps, is the average improved area per farm, which
has been more nearly stationary, varying from a maximum of 80 acres
in 1860 to a minimum of 71 acres in 1870 and 1880, being 75 acres in
1910. Here again the statistics require interpretation, for in the
spread of the frontier the addition of large farms in the arid and
semi-arid regions may raise the average, or the breaking up of large
plantations in the South may decrease the average, without this
indicating any essential change in the technical conditions of farming
in the country generally. Since about 1900 the total area in farms has
increased very slowly. Between 1900 and 1910 the increase was only 4.8
per cent; whereas a larger increase occurred in the area of improved
land, 15.4 per cent, and the unimproved area in farms decreased
5.6. Future changes of farm areas may be expected to be of this same
nature, mainly in the improvement of rough pastures, swamps, partly
cleared woodlands, and desert lands awaiting irrigation. An increasing
population will have to be provided with food and other products of
agriculture on a farming area that henceforth will be increasing less
rapidly than it has in the past and than the population increases.
§ 2. #Influences acting upon the size of farms#. In these averages
for the whole country many conflicting influences unite and neutralize
each other. Making for smaller farms is the breaking up of large
grazing areas in the West into smaller general purpose farms or
irrigated fruit districts, and of larger general farms in the North
and East into small poultry, flower, and fruit farms. Opposed to this
is a movement toward the merging of farms of 50 to 100 acres into
larger farms of 300 acres, more or less. The economic cause of this
movement is interesting and important. The typical and economic size
of farms when the Atlantic states were settled, was determined by the
use of hand tools, which permitted a man and his family to operate a
farm of about 75 acres of which about half was tilled and the rest was
in permanent pasture and woodland. The fields were small and were laid
out irregularly, which was no disadvantage for hand cultivation. But
for the most economic use of land in field crops and under more modern
conditions it is necessary to have pretty level fields, of regular
rectangular shape. The farm unit should be of such extent as to permit
of the proper use of the soil by rotation of crops, and to employ
fully the best modern labor-saving machinery for each purpose.
Numerous recent agricultural surveys point to the conclusion that for
general farming this unit is a comparatively large area of about 300
acres.
These conditions offer a reward to those agricultural enterprisers
who can purchase lands at a price based upon the high costs and lower
yields of the older methods and cultivate them at the lower costs and
with the larger yields of the newer methods. This movement, therefore,
toward the consolidation of smaller into larger farms is likely to
continue in many communities for several decades. This is likewise
an advantage to the community in increasing the production with less
labor. But the net effect upon the social life of the countryside is
more doubtful, and calls for careful consideration.
§ 3. #Self-sufficing versus commercial farming. The typical American
farming family once produced nearly everything it used, and used
nearly everything it produced. It was very nearly a self-sufficing
economic unit, "a closed economy," as it sometimes called. Food,
clothing, fuel, lumber, houses, furniture, tools, were on the farm
carried through the various processes from the first gathering of the
raw materials to the finished product. They were then consumed by the
farm household. It is true that even in the first settlements there
were some craftsmen, cobblers, millers, weavers, blacksmiths--whose
services and wares were got by trading some of the surplus products
from the farms--butter, cheese, eggs, wool, hides, furs, live stock,
grain lumber. A few rare commodities of foreign make found their way
to the farm through peddlers and merchants; but altogether the goods
produced outside the farm were a small fraction of the family's
consumption, and were exchanged for but little of the farm's
production. Most farmers tried to produce for themselves, as far as
possible, everything their families needed, when the soil and
situation were poorly suited to the purposes. True, there were early
some exceptions to the general rule, where only one kind of crop was
taken from the land. Such was the forest product of masts, shingles,
lumber, and turpentine, and the great southern staple, tobacco, and
later, cotton. The exceptions have been tending to become the rule
in more and more communities. Farmers have been specializing more
and more in the kinds of products to which their farms are adapted in
respect to soil, relation to market, and otherwise. These products are
taken to market and sold for money with which are bought the things
needed for use on the farm.
§ 4. #Farming viewed as a capitalistic enterprise#. Thus the farm
comes to be looked upon more and more, not just as a home, but much as
if it were a commercial enterprise or a factory, by which products are
made for sale. This change, to be sure, is far from complete, as the
figures for the average farmer's income show that a large share of the
family living still comes from the farm. It has gone on much further
in some districts than in others, as is indicated in the types of
farming discussed below. But just to the extent that the farmer grows
crops to sell, his outlook on his work undergoes a change. He is
less exclusively a farmer, concerned with the technical processes of
farming; he must be more largely a business man. Like a manufacturing
enterpriser, he buys the factors of production, combines them into
new products, and sells them again. He becomes interested in market
conditions and prices. He grows more commercially-minded. He views
the farm no longer as a fixed area, but one that may be enlarged by
purchase or by rental, and that may be reduced by selling or letting
the less needed parts. One-fifth of farm owners now rent additional
land. In commercial farming the land is not contrasted with capital as
something apart, consisting of the value of the equipment and stock;
but the whole complex of land and other goods is thought of as a
capital-investment. The greater ease of transferring landed-property
in America and the greater mobility of our population have always made
it more natural here than in Europe to look upon land as a capital
investment. This view is now becoming more general as a result of the
commercializing of farming enterprise.
This change has been favored by other influences. Particularly has
the use of machinery and of other equipment, calling for a larger
investment per man and per acre, been making agriculture, in its
form of enterprise, more and more like manufacturing and commercial
undertakings.
§ 5. #Diversified versus specialized farming#. To be self-sufficing a
farming family must carry on general farming, that is, must produce
a diversity of products. As farming becomes more commercialized it
necessarily becomes somewhat more specialized, and produces a smaller
variety of products. In some parts of the country and on particular
farms this specialization is extreme: in California, citrus fruits, or
prunes, or beans, may be the only crop raised; wheat in Kansas and
the Dakotas, and dairy products in thousands of farms surrounding
the great cities, are the main, tho not the exclusive products. Many
farmers in these districts have no gardens or orchards, keep no cow,
and buy much or all of the grain for their horses, as well as milk,
butter, vegetables and fruits for their own use. Poultry and eggs
are shipped in trainloads two thousand miles from the Middle West to
California to be consumed by orange growers. Many farmers in the East
no longer keep sheep, pigs, or beef cattle, and they buy out of the
butcher's wagon all the meat except fowls used by their families. This
partly explains the decrease of live stock in the whole country in
recent years and the increase in the price of meat.
§ 6. #Conditions favoring diversified farming#. There are, however,
limits to the net advantage of specialization in crops, and competent
authorities on agriculture question whether in many cases that limit
has not been readied and passed. Most farms have a variety of soils
and of conditions--hilltops, slopes, bottom lands--which are suitable
for different purposes. A rotation of crops is necessary to get good
yields. Live stock must be kept to maintain the fertility of the land,
which deteriorates fast if hay and grain are continually sold. Some
live stock can be kept on every farm very cheaply with the food that
would go to waste otherwise. The specialization in stock raising in
the prairie states ceased to be profitable when lands became more
valuable. Specialization in wheat production in the states just west
of the Mississippi is possible only so long as wheat will grow on
the virgin soil without costly fertilizers. The cotton farmers of
the South, especially the negro farmers, have been forced by debt and
thriftlessness into a one-crop policy that is now seen to be wasteful
in the long run. A variety of production is necessary to employ labor
somewhat regularly on a farm throughout the year. These and other
conditions will make most farming always an industry of comparatively
diversified products. Only 1 per cent of the farms get as much as 40
per cent of their receipts from fruit; 2 per cent get that much from
tobacco; 3 per cent from vegetables; 6 per cent from dairy products;
and 19 per cent from cotton. The remaining 60 per cent of receipts
were in most cases from various sources, and these figures did not
include the value of produce consumed by the farmer's family.
§ 7. #Intensive farming in Europe and America#. No other farm problem
interests the city man so much as that of increasing the production
of the land. To most city men farming hardly seems to be an occupation
giving livelihood and life to the farmer; it seems rather to exist
for the sole purpose of feeding men living in cities. The city man,
therefore, measures the success of farming not by the farmer's income,
by the level of countryside prosperity, but by the number of bushels
per acre raised to ship to town. Every city newspaper and magazine
contains articles pointing to the fact that larger crops per acre
are raised in Europe than in America, and broadly suggesting that the
American farmer could do as well, if only he would. Foreign travelers
comment in like vein on the wasteful use of land in America as
compared with farming methods in Europe.
Land is used most extensively, with respect to labor, when it is in
forests; somewhat less so when in pasture as care must be given to the
live stock; and still less when used for hay, grain, and other crops.
But the use of machinery in large fields is far more extensive than
the patient work of peasants with their hand tools. The more labor or
the more equipment (or both together) that is put upon an acre, the
larger the product, but the larger the cost per unit. It is a familiar
economic principle.[1] It would bankrupt any farmer, excepting the
millionaire amateur, to farm in America by European methods. American
farmers, at least many of them, could raise as many bushels per
acre and keep their farms as thoroly cultivated as do the European
peasants, if wages were as low here as are the peasants' incomes.
§ 8. #Prospect of more intensive cultivation of land in America#. As
the aggregate need for food increases in America there must come a
steady pressure upon our stock of land uses, resulting in decreasing
returns to labor in agriculture, unless this movement can be
counteracted by the spread of better methods in agriculture--not
European peasant methods, but new American methods consistent with
high labor-incomes. A good deal of our farm land is undoubtedly too
intensively used now in view of present and prospective commodity
prices and wages. Maladjustment of land uses has resulted
from mistaken judgment, from changing conditions as to prices,
transportation, and markets, and from loss of soil fertility. There
are thus, on nearly every old farm, some fields that would better be
in pasture and much hillside pasture that would better be woodland. It
is often declared extravagantly that our country could support easily
the total population of China, or as great a population per square
mile as that of Italy. If it did so it would be only on the penalty
of lowering wages toward, if not quite to, the level of the Chinese
coolie or of the Italian peasant. Great metropolitan dailies gravely
present as an argument in favor of unrestricted immigration, the
proposition that "if" the cheaper immigrants would but go upon our
"waste" land (which they refuse to do), and raise food by European
methods the problem of the rising cost of food in the cities would be
solved. This urban ideal of a frugal, low-paid agricultural peasantry
can hardly be adopted in America as the national ideal. Rather,
it would seem, any movement toward more intensive agriculture that
necessitates a lowering of the standard of living of the masses of the
American people will, when it is recognized, be condemned and opposed.
§ 9. #The new agriculture#. Agricultural method, the technic of
farming, has been constantly progressing for two hundred years in
Europe and in America, Were it not for this, the great growth of
population on this combined area would have been quite impossible.
But the betterments since about 1890 in America have been especially
great. They are mostly the first large fruits of the scientific study
made possible by the land-grant colleges and agricultural experiment
stations fostered by state and national, legislation. These many
diverse improvements are grouped under the general title of "the
new agriculture." Its chief features are: new machinery and other
labor-saving methods; better methods of cultivation of the soil;
better selection of seed; introduction of new plants and trees from
abroad to utilize low-grade lands; plant-breeding to develop new
varieties of better quality, heavier bearing, or immune to disease;
more efficient and economical ways of maintaining soil fertility;
better methods of marketing; and better technical education of the
individual farmer. Each of these topics, and a number of other minor
ones, would require a chapter in a complete treatise on agricultural
economics. Here this mere enumeration must be allowed to convey its
own suggestion of far-reaching results for the whole political economy
of the nation and of the world.
Indeed, so much has been written in a Barnumesque way of the
wonders of the new agriculture, that its actual results and further
possibilities are in many minds absurdly exaggerated. It has not as
yet been potent enough to prevent diminishing returns in respect to
the great staple foods and raw materials obtained by agriculture.
It apparently has barely kept pace with the needs of the growing
population of Christendom. It has enabled a larger population to exist
in about the same, if not in a worse condition, on the same area,
while progress in cheapness of goods has come almost entirely from the
side of the chemical and the mechanical industries. It does not
give the promise of an indefinite amelioration of the lot of an
indefinitely multiplying population. But to a population slowly
increasing, a new and ever newer agriculture, utilizing constantly the
achievements of the natural sciences and the mechanic arts, ensures
the possibility of a steady betterment of the popular welfare in city
and in open country alike.
§ 10. #Difficulty of coöperation among farmers#. Rural communities
are proverbially conservative; the American farmer is proverbially
an individualist. No wonder, then, that the new ideas and plans of
coöperation in business matters have made headway in agriculture
slowly and with difficulty. The need of mutual aid among American
farmers is especially great, for, as has often been, said, isolation
is the problem of the farm as congestion is that of the city. On the
frontier a coöperative spirit manifested itself frequently in mutual
helpfulness, in house raising bees, husking bees, threshing bees, and
other similar gatherings.
But this spirit seems to have almost disappeared in the older
communities, the more rapidly doubtless in the period of decaying
agricultural prosperity.[2] To-day, for example, it is impossible on
a certain Pennsylvania road for one more progressive farmer to get
his neighbors to coöperate in so simple a matter as hauling their
milk cans to the creamery, and so every day in the year ten horses are
hitched to ten delivery wagons carrying two or three milk cans apiece,
and driven by ten drivers along the same road to and from the railroad
station. One driver and two horses could easily carry as much or
more, as is done now in many other dairy districts. Even of successful
coöperation among farmers sympathetic critics are forced to say: "Many
students of rural economics assert that coöperation as applied to the
distribution and marketing of farm products is not very successful
unless it is founded upon dire necessity. When the records of the
organizations of the country are analyzed it becomes almost necessary
to accept that statement. So long as farmers do fairly well in their
own way they are not inclined to coöperate."
§ 11. #Rapid growth of farmers' selling coöperation#. Despite what has
just been said, coöperation among farmers now is more developed and is
growing faster than all other kinds of coöperation in America. This
is most marked in farming communities in the West, especially in
California and in the Middle Western or Northwestern states (e.g.,
Minnesota and Wisconsin). There the farmers are younger, and many have
been educated in the state agricultural colleges. They all produce
nearly the same kinds of crops of staple produce which must be shipped
to distant markets. The need of uniting to get what they thought
would be fair treatment from the railroads, and to protect themselves
against the abuses of the competitive commission salesagents, seems to
have given the first impetus to farmers' coöperation.
The most notable developments were those of the California Fruit
Exchange and of coöperative societies of the Northwest for marketing
grain. The membership of the former is made up entirely of the
local citrus growers' associations in California. It has a complete
organization of selling agents in the Eastern cities and a remarkably
efficient, tho simple, system of equalizing and expediting shipments.
Now the agricultural coöperative associations of various kinds are
multiplying all over the country, for shipping live stock, fruits,
butter, cheese, and other farm products. Coöperation for these
purposes called forth new activities; packing houses were built, and
grain elevators and creameries and dairies, and now a goodly number of
the simple manufacturing processes are undertaken by these societies,
now numbering thousands.
§ 12. #Some economic features of farmers' selling coöperation#. This
type of producers' selling coöperation is proving in America to be far
more successful than producers' coöperation among workingmen;[3] and
certain important economic features in it should be noted. The local
producers' selling coöperative society is composed of farmers who as
enterprisers own and carry on their own separate businesses; they
are not, as in the other case, wage workers. Any productive processes
undertaken by this kind of society are subordinate to the main
business, being such as picking, packing, drying, preserving, and
making boxes for packing. This form of coöperation with the related
form of consumers' coöperation that is fostered by it, promises to
have a wide extension.
Some of these societies, as those dealing in citrus fruits, regulate
with some success the picking and the marketing so as to distribute
them more evenly throughout the year. They watch the markets and
direct their agents by telegraph to divert cars _en route_ away from
markets that are glutted with products and into markets where prices
are higher. They take some of the products, as eggs in the spring at
the period of low prices, and pack or refrigerate them, to be sold
when prices are higher. For thus withholding the supply they are said
by some to exercise a monopolistic power. But this is a more than
doubtful view. So long as only the seasonal variations are equalized
and the total supply of the year is not reduced it is, on the marginal
principle, an economic service to the consumers, comparable to
insurance in its utility. Any reduction of the area planted or of the
entrance of others into the industry would be a monopolistic act but
this as yet has not occurred.
§ 13. #Coöperation in buying.# Coöperative buying (called also
consumers' coöperation or distributive coöperation) has had a large
growth in the British Isles, since 1844, when the society called the
Rochdale Pioneers was founded by a group of factory workingmen. The
coöperative stores, both in Great Britain and on the Continent, have
continued to develop mainly among the industrial classes in urban
centers. However, this has not been exclusively the case, and
particularly in Denmark and Ireland coöperative buying has increased
in agriculture in connection with selling associations. Since 1890
the growth of consumers' coöperation among European industrial
wage-earners has been phenomenal, especially in Belgium, Germany, and
Switzerland. American wage-workers, however, have made few and feeble
efforts in this direction.
In the period beginning 1867 many coöperative stores were founded in
America by farmers in the Grange movement, who operated also grain
elevators, warehouses, and steamboat lines. But the movement failed
about 1877. This result is easily explained by lack of commercial
knowledge and lack of harmony among the members, selling on credit,
and inefficient management. A new era in consumers' coöperation for
farmers began about 1900 and now in several widely separated parts
of the country--Minnesota, Kansas, California, Washington, and
elsewhere--the movement is spreading rapidly, supported in large part
by the same persons who are members of the selling associations.
§ 14. #Need of agricultural credit.# Banking originated in cities and
for the use of the merchant-class. It still retains pretty faithfully
its commercial character. The change of farming toward a more
commercial form[4] has been little aided by banking credit. National
banks and many others were forbidden in their charters to lend on the
security of real-estate, the farmer's one business asset.[5] A great
number of farms are always in course of being purchased, the balance
of purchase money being borrowed by the purchaser. A group of private
agencies such as life insurance and mortgage loan companies and local
money lenders has supplied in somewhat costly ways the need of farm
credits. Tho rates of interest have become more equalized throughout
the whole country, they still range between 7 and 10 per cent in the
Southern and Western states, averaging 7 per cent in the whole country
for interest and commission. The need of better opportunities for
credit in the agricultural districts has long been recognized. The
high rate of interest for borrowed money necessarily placed a limit on
improvements in equipment and methods of farming.[6]
§ 15. #Recent provisions for farm loans#. The Federal Reserve Act
made two important changes to improve agricultural credit.[7] Soon
afterward some of the states took more vigorous action to provide
a special system of agricultural credit, especially New York and
Missouri. In the latter state, on the initiative of a public-spirited
citizen of St. Louis, was passed in 1915 a notable act of legislation
known as the Gardner State Land Bank Act (effective December 1, 1916,
provided a constitutional amendment is adopted in November, 1916).
This authorizes the establishment of a land bank, with power to lend
on the security of farming lands, for buying farms and for productive
improvements, and to issue bonds to be sold to investors.
Following this general plan the Federal Farm Loan Act became law
July 17, 1916. It authorized the establishment of twelve Federal Land
Banks, each with a capital of not less than $750,000 to make loans
through national farm loan associations organized somewhat after the
model of the building and loan associations. The bonds issued by these
banks are to bear not to exceed 5 per cent interest. It is hoped that
they will have the high credit of municipal bonds so that they may
be sold at parity, bearing interest at 4 or 4.5 per cent. The loan
is repaid by the farmers under a regular plan of amortization. The
practical results of these measures are yet to appear. They are
expected to give to loans that are made on the security of farms as
wide a market and as high credit as state and municipal bonds now
have. They bid fair to bring the rate of interest on long-time loans
to farmers down to 5 per cent or less in the remotest parts of the
land. This will stimulate agricultural improvement, and facilitate
the purchase of land by tenants. Where the interest rate has been
the highest it should raise the value of farm lands as it brings them
within the circle of a lower-interest-rate economy. This may hasten
the transfer of the lands from less provident to more provident
owners, who are willing to take the land at a higher capitalization.
But the system of loans will probably help to develop greater thrift
in the younger farming population.
[Footnote 1: See Vol. I, chs. 12 and 13 on proportionality and
usance.]
[Footnote 2: See ch. 25, secs. 4 and 5.]
[Footnote 3: See above, ch. 19, secs. 13, 14, 15.]
[Footnote 4: See above, sec. 3.]
[Footnote 5: See ch. 8, sec. 8.]
[Footnote 6: See Vol. I, pp. 495-497, on the relation between lower
interest rates and productive processes.]
[Footnote 7: See ch. 9, sec. 7 on time deposits, and sec. 9 on farm
loans.]