Washington State University

Small Farms Team

Making a Living on a Small Farm

Dr. John Ikerd, University of Missouri
Published in "Sustaining People through Agriculture" column, Small Farm Today, November/December, 2000 issue, permission to use granted.

In times past, forty acres, a mule, and a lot of hard work were all that it took to make a living on a farm. But those times are gone. A family could live well on a lot less money in those times, but hard work also was worth a lot more back then—regardless of whether it was done by a mule or by a man. The conventional wisdom was that anyone who was willing to work hard enough could make it on the farm. During the financial crisis of the 1980s, many farmers virtually "worked themselves to death" trying to save their farm. If they could just work hard enough, they could make it. But, they couldn't—they went broke.

Farm evolution

Work simply isn'’t worth as much as it once was—at least not on the farm. Tractors took the place of horses and mules. Other machinery and equipment took most of the work out of most jobs around the farm. Physical labor isn't worth any more than the cost of using a machine to do the same job—maybe even less because machines are less bothersome to fix or replace and far easier to manage than are humans.

Mechanization made farming easier. Farmers became machine operators rather than laborers. But a mechanized farmer could farm a lot more land or raise a lot more livestock than could a farmer doing everything by hand. And farmers still had to expect to put in full-time on the job if they expected to make a full-time living. So a full-time mechanized farmer had to have a lot more land and a lot more capital tied up in machinery and equipment just to make a living. With mechanization, farms became larger and it became more difficult to make a living on a small farm.

Agricultural chemicals also made farming easier, taking some additional labor out of farming, but mostly, making a farm far easier to manage. A farmer didn't need to know nearly as much about maintaining the natural fertility of the soil—they could take a soil test and apply the right fertilizers. They could specialize in crops or livestock—they didn't need manure to go back onto the fields to maintain fertility. Farmers didn't need to know how to till the fields to control weeds—they could spray with herbicides. They didn't need to understand how to use crop rotations to control weeds, insects and other pest—they could use commercial pesticides.

Livestock farmers didn't need to know how to keep their animals healthy and growing, they had antibiotics and hormones to fill in the gaps in their knowledge. Farmers now could farm by recipe. As farms became easier to manage, each farmer was able to farm more land or raise more livestock. However, a farmer still had to expect to put in full time on the job to earn a full time living. So with increasing use of agricultural chemicals, farms grew still larger, and it became still more difficult to make a living on a small farm.

In economic terms, there are only four basic factors of production, or four basic ingredients in any production process—land, labor, capital, and management. Over time, machines, agri-chemicals, and other technologies have resulted in substitution of capital and land for labor and management. Consequently, a typical full-time farm today requires far more land and capital today than fifty years ago. It takes far more money to buy and operate a farm today because of high land and equipment costs and expenses for fertilizers, pesticides and other commercial inputs. But, in a typical farm today, labor and management are far less important than fifty years ago. If a farmer has enough land and enough money to buy the latest equipment and technology, they don’t have to work much or even think much—except about how to manage their money.

In economic terms, each of the four factors earns something in return for its contribution to productivity. Land earns rent, labor earns wages, capital earns interest, and management earns a salary. Profit or loss is the reward or penalty for taking the risk associated with investing land, labor, capital, and management in an enterprise without knowing whether the net results will be positive or negative. Profit is the reward for taking the risk of farming rather than renting the land, putting the money in an insured CD, and working for someone else. In general, each factor of production earns a return in relation to its contribution to the production process.

Inputs and returns

As the nature of farming has changed, the returns to land and capital have grown and the returns to labor and management have declined. It isn't necessary to quote statistics; it's just plain common sense. Returns to labor and management are returns to the farmer—to the human investment in a farming operation. The land and capital can be owned by anyone—increasingly by someone other than the farmer. Actual farming is about working and thinking—labor and management. And in general, the return to farming can be no more than proportional to the working and thinking done by the farmer. If there isn't much working and thinking going into producing a crop or a batch of livestock, there isn't going to be much in it for the farmer—and it will be tough to make a living without a lot more land and capital. Farmers who don't do much working or thinking simply can't expect to make a living on a small farm.

Contract production

The ultimate low-return agriculture is contract production. Farmers are being told that the only way they can remain competitive in agriculture is by signing a comprehensive production contract with one of the giant agribusiness corporations. But, farmers need to stop and think—who can logically expect to benefit from contract production? Under most contracts, the corporation arranges for capital—mostly loans to be repaid by the grower. The corporation provides all of the technology— genetics, equipment, feed, health care, etc. And the corporation provides virtually all of the management—the growers mainly do what they are told to do. The grower provides the labor, but the highly mechanized operations require little labor. Contract livestock or poultry operations require little land, although the grower is expected to find some place to dispose of manure. In summary, the grower provides a small amount of equity capital, a small amount of land, and some low-skilled labor. The corporation provides everything else. The grower gets a fixed amount per animal produced, regardless of costs or price, so the contractor even takes most of the risk. So who is going to benefit from a corporate contract operation? Certainly not the grower—the grower doesn't do anything that would justify making a living in such an operation.

Management intensive

So what does all this say about making a living on small farms? It says small farmers have to put a lot more of themselves into their operations—a lot more management and labor—than do most farmers today. It says a farmer can't expect to make a decent living if someone else makes all of the important decisions and they only contribute some low-skilled labor. It says that farmers must rely on management and labor far more and rely on land and capital far less if they expect to make a living on a small farm. It says that the way to turn a small farm into a full-time farming operation is to find ways to substitute management and labor for land and capital.

There is a limit to how hard anyone can work or, more important, would want to work on a farm. Working harder is still not the secret to making a living on the farm—even though most of us would be better off if we did a bit more physical labor and a bit less sitting. However, thinking is potentially far more productive and is far less limiting than is working. So the key to making a living on a small farm is more intensive management mixed with an appropriate amount of skilled labor. A small farmer has less land and capital so they have to do more thinking and decision making per acre or dollar invested—and they have to be willing to work when working is the logical thing to do. They have to put more of themselves into it if they expect to get more for themselves out of it. The successful farmer of the future might quite accurately be labeled a thinking worker or a working thinker—the key is to do both together, simultaneously, in harmony.

It takes more thinking to work with nature to reduce costs of inputs and increase profits while taking care of the land—more eyes per acre as Wes Jackson says. It takes more thinking to find and keep customers who want, and are willing to pay for, the things a small farmer can produce in harmony with nature—relationship marketing as Joel Salatin calls it. It takes more thinking to fit your unique talents and skills as a farmer to the needs of your land, to your particular customers and your community—linking people, purpose, and place.

Literally thousands of these thinking workers are on small farms today all across the land—putting more of themselves into their operations and are getting more for themselves in return. Each is doing something different, but one by one they are finding ways to make a good living on a small farm.

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