HISTORY OF
PROBLEM
Back in the 1940s and 1950s, agriculture was the heart of America's economy, and rural communities thrived and peaked in population. It wasn’t until after WWII that for the very first time in history, the majority of all Americans lived in metropolitan areas. So what caused this rapid decline in rural counties and communities? An increasing urban settlement system, long-term industrial restructuring away from agriculture and extractive sectors, and globalization are the three main sources of blame.
Urban Migration
Since WWII, the majority of Americans have lived in metropolitan areas, and the numbers in rural counties have continuously declined. Millennials have shifted urban settlement preferences, and at one time in history only a fraction of young college graduates wanted to move to cities; but now, about two-thirds do. The most current USDA Agriculture Census revealed that in 2017, the average age of the American farmer was 57.7 years old. In Iowa, for example, sixty percent of farmland is owned by people 65 years or older, and 35 percent of farmland is owned by people 75 or older. This isn't necessarily because all people in rural America aren't interested in farming; it instead has to do with the high costs and barriers to enter the industry. For most young people, the best job opportunities are located in cities considering 90 percent of our GDP and 86 percent of jobs are generated in 3 percent of the land area of continental United States.
Source: Rural Depopulation: Growth and Decline Processes over the Past Century
Industrial Restructuring
The shift away from an agricultural, extractive economy started decades ago in the wake of the industrial revolution. With increased automation and processing, more and more jobs are either located in bigger U.S. cities with innovative machinery and access to capital, or taken overseas. Over time, economies of scale have pushed out small, local farmers, and the majority of production is concentrated in larger, mass-production farms. According to a report by the USDA, 51 percent of the total value of American farm production in 2015 was generated by large farms with at least $1 million in annual sales. 24 years earlier back in 1991, that number sat at a mere 31 percent.
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As a result, small farms across the country are paying the price today. According to the St. Louis Fed, the second quarter of this year saw the 22nd consecutive quarter for farm income declines in the Eighth Federal Reserve District of St. Louis. Similarly, according to the USDA, nearly 3,000 U.S. dairy farms went out of business last year, and around 700, almost two a day, in Wisconsin. Rural America has received a lot of recent spotlight from President Trump, and back in December of 2018, Congress passed The Farm Bill which authorizes the food-stamp program, funds agricultural subsidies, and grants crop insurance.
Globalization
American farmers initially reaped tremendous benefits from globalization as the demand for U.S. agriculture exports increased. In an economy more and more reliant on global forces, local U.S. farmers are being marginalized and lost in the equation. Due to increased automation and globalization, a lot of agriculture jobs are being moved overseas and displacing American farmers. U.S. agriculture exports were valued at nearly $140 billion in 2018, a 1 percent increase from 2017. Imports, however, have grown at a faster rate than exports since 2016, and in 2018 the U.S. produced the smallest trade surplus it has seen since 2006.
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Additionally, macroeconomic issues such as trade wars and tariffs increase crop supply, decrease prices, and allow other countries to fill the gap left by American producers. The current trade war with China is a perfect example. The U.S., which accused China of unfair trading practices, launched a trade war against China in July of 2018. As a result, China issued retaliatory tariffs against the U.S., and total U.S. farm income fell 16% in 2018. A report from July 2019 revealed that the delinquency rates for commercial agricultural loans in both the real estate and non-real estate lending sectors are at a six-year high, and above the historical average of 2.1 percent.
