THE PRODUCTION AGRICULTURE SECTOR
At the hub of our food production and marketing system is the production
agriculture sector. Production agriculture includes the farms and ranches that produce
the crop and livestock products that provide inputs to the food and ranches are the
customers of the firms that make up the input supply sector. As mentioned earlier,
relatively few individuals are responsible for a staggering quantity of output in the U.S.
production agriculture sector. Today’s U.S. farmer produces enough food and fiber in a
year to feed and clothe 155 people. Mode than 40 percent of the corn grown in the world
is produced in the United States.
Every industry in the food system is impacted in some way by production
agriculture. And like the food and input supply sectors, the production agriculture sector
has been undergoing profound change in response to a variety of market forces. In this
section, we will explore the dynamic production agriculture sector of our food production
and marketing system.
Farm demographics
The United States Department of Agriculture (USDA) defines a farm as “any
establishment from which $1,000 or more of agricultural products were sold or would
normally be sold during the year” (Ahern and Weber 2010). This definition includes many
part-time farmers with limited acreage and very modest production. The USDA definition
of a farm includes the small hobby farmer that sells one horse or ten lambs per year as
well as the commercial operator that farms 8,000 acres or produces 700,000 head of
hogs annually. The definition includes those who farm part-time and those who have
farmed full-time for generations. The Economic Research Service (ERS) of the USDA
classifies farms into three groups: rural residence farms, intermediate farms, and
commercial farms. Rural residence farms include limited resource, retirement, and
residential/lifestyle farms. Intermediate farms include operators reporting farming as the
major occupation and gross sales under $250,000 while commercial farms with income
over $250,000 or non-family farms (Ahearn and Weber 2010).
The past century was a period of huge change for production agriculture in this
country. Changes in farm numbers and farm size are reflective of this change.
Historically, individual families or extended families have owned and operated the
nation’s farms. The family provided the land, labor, and other capital necessary to run the
business. As market prices fluctuated, farm families adapted by doing without or
diversifying in some way. As mechanization or finances allowed, more land was
acquired—ideally to send a child to college, or to provide a living for additional family
members coming into the business.
As time moved on, farm expansion required additional inputs such as seed,
fertilizer, chemicals, credit, animal health products, or farm machinery be purchased.
Technology fueled expansion made it possible for farmers to operate and productively
manage ever larger farm businesses, and farm size grew. However, when fluctuations in
price or crop losses caused lean years, farmers still had obligations to pay suppliers.
Financing became a necessary and critical component of the family farm business. As
we will see later in this book, such debt financing also carries a risk.
