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Production agriculture is perhaps the world's most fundamental industry. The production of food will clearly not be made obsolete by an unforeseen invention. The structure of this industry, however, is likely to change at least as dramatically over the next 50 years as it has over the past 50 years. Our industry today is truly global and will remain this way into the future. The production of agricultural commodities is nearly a perfectly competitive industry where individual producers produce undifferentiated products and receive the price determined by world supply and demand for these products.
The entire agriculture industry is continuing to consolidate. Agribusiness firms tend to be highly vertically integrated today, encompassing within on firm many of the steps in the value chain of the final food product. Although farmers' role in the value chain has not changed, it is shrinking relative to the increasing roles of individual agribusiness companies. Farming or production agriculture, although not commonly participating in the vertical integration, is not isolated from the consolidation. Technology is allowing men and land to be more productive. Between 1997 and 2002, the number of farms in the U.S. in all classifications between 50 and 2,000 acres decreased, while the number of farms larger than 2,000 acres increased by 4,000. According to the 1997 census numbers, 1% of what are considered farms produced 41% of all the value of farm production. In this industry, growth largely depends on the control of land. The growth strategy of most Midwest farmers is to drive costs as low as possible, market well, control risks, and then bid their advantage into the rental or purchase of additional land and then repeat the process. Barring governmental distortions, this trend should continue as the barriers to entry continue to grow, fewer young people remain in the farm business, the average age of the farmers get older, and technology continues to improve.
Although economic factors are encouraging larger and larger farms, this trend is faced with a contradiction in the U.S. Public support for agriculture in general is fading and "big" agriculture is particularly unpopular. Two factors are the leading causes of this diminishing support. The number of people directly involved in production agriculture is shrinking and as time goes on, much of the population becomes further removed from what once were likely agrarian roots. The American society's affluence also allows the affordability of food and basic needs to lose priority to more secondary environmental, aesthetic, and egalitarian concerns. This sign of a mature economy can also be seen in Western Europe. Dependence on subsidies and the burden of regulation give this public opinion the power to create inefficiencies and affect the structure of the farming industry. The USDA has proposed the definition of the "family" farm to be any farm with sales less than $750,000 annually. Illinois's governor has proposed repealing the 71-year-old sales tax exemption for farm inputs on farms with sales over $1 million annually. Immediately the USDA proposal would only be pertinent to disaster aid and the Illinois proposal is not likely to pass, but these are examples of the unpopularity of large, efficient farms. Nowhere is the opposition to large operations more evident than in the livestock industry. Existing Confined Animal Feeding Operations (CAFO's) face increasing costs of compliance, and in many areas of the U.S. it is practically impossible to install a new operation or expand. Even at this, some Western Europe livestock producers are relocating to the U.S. because of the even more inhibitive regulations in their countries.
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