ECONOMIC ANALYSIS: Farming on decline, but ag still offers opportunity

December 5, 2005

Drive less than 20 minutes from almost any crossroads in Indiana and you'll come across a feature of the Midwest landscape we take for granted: farmland. The vast open space in abundance between our state's urban areas remains dominated by the industry that once employed more people than any other: agriculture.

And while the sights of barns, cropland and animals grazing in pastures are familiar to us all, we should remember that looks can be deceiving. Plenty of changes are happening in the ag industry these days that we should all know about.

Farming is a business, but it's not like any other. Its roots in our nation's history run deep, and its political clout, while eroding, remains much larger than its economic footprint would suggest. The involvement of government in almost every aspect of the industry's operation-through subsidies, quotas, price supports and specialized tax treatment-reflects its special status in our cultural landscape. Yet no policy crafted in Washington has stemmed the sweeping tide that is altering agriculture before our eyes.

In a word, that tide is consolidation. In all but nine of the state's 92 counties, fewer farms were in existence in 2002, the most recent year for which full data are available, than just five years earlier. In half the counties with fewer farms, the decline was greater than 10 percent.

Those farms that remain are getting larger. In 1997, 5.2 percent of all farms in Indiana had more than 1,000 acres of land in production. In 2002, that grew to 6.3 percent. The average value of land and buildings of an Indiana farm in 1997 was $486,171, but grew to $637,645 in 2002.

The data available since 2002 show no signs of this trend abating. The 70,454 Hoosiers who owned, operated or worked on farms statewide in 2004 were about 3,000 fewer than those who were counted in 2002. And while farm income in 2004 was up strongly, thanks to significant price growth and a strong harvest, the $2 billion paid in profits and earnings in that year accounted for only 1.2 percent of the total for all industries in the state.

Those kinds of statistics doubtless explain why agriculture is rarely found on the lists of industries targeted for special emphasis in economic development these days, even in the state's most rural communities. Many of us who are waking up to the realization that durablegoods manufacturing can't be depended on to propel growth in the state think the heyday of farming as an economic driver is long past.

In a narrow sense, that's right-we're not an agriculture-based economy today, and we probably never will be again. But there's a lot more to food production than farming. And, besides, there are more uses for crops nowadays than just food. With so much healthy and productive farmland all around us, shouldn't we be thinking about ways we capitalize on that proximity and take a bigger role in exploiting those opportunities?

It's a question more Indiana communities are beginning to ask. The potential for higher value-added ag-related production processes-ranging from biodiesel plants to hog production facilities-adding to the local economic base are nothing to sneeze at for the smaller towns and rural regions who have been standing on the sidelines watching larger cities grow.

Barkey is an economist and director of economic and policy study at the College of Business, Ball State University. His column appears weekly. He can be reached by e-mail at pbarkey@ibj.com.
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