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A Backward Glance Forward

Fred Schmedt

By Fred Schmedt

Posted Dec. 1, 2005

As I attempt to envision the future of agriculture and agricultural producers in Oklahoma and Texas - states and an industry I grew up in and have worked in for the past 33 years - numerous events come to mind that changed things rather dramatically. I have observed that individuals react differently to the same circumstances. Some find opportunity in the same situations that wreak havoc on others. A few "major events" I recall are outlined below. In the interest of time, both mine and yours, I am not going to reference the events I mention, so my years may be off somewhat from the actual occurrence.

To set the stage, I came to work at the Noble Research Institute on Nov. 1, 1972. Gasoline was 28 cents per gallon. Anhydrous ammonia was $71.50 per ton. Ammonium nitrate was $58.50 per ton. The pesticide DDT (banned after Dec. 31, 1972) and the herbicide 2,4,5,T were still in use. Wheat price at harvest in June 1972 was $1.35 per bushel. There were 2.4 million cows in Oklahoma in 1972, and calves averaged about $44 per hundredweight. Total U.S. cattle numbers continued to increase as they had every year since 1967. The 1969 Census of Agriculture counted 83,037 farms in Oklahoma with an average size of 434 acres and an average value of $194 per acre. Nationally, farmers were about 4.5 percent of the labor force.

Dramatic change was already underway. The first big Russian wheat sale occurred in 1972, and, by years' end, Oklahoma wheat was $2.50 per bushel. Increased exports to the Soviet Union, and elsewhere, absorbed grain and oilseed surpluses. National magazines proclaimed that agricultural exports would solve the United States' negative balance of trade problem. (Agricultural exports averaged about $20 billion per year from 1970 to 1979. This was 19 percent of total U.S. exports.) Farmers responded by planting "fence row to fence row," and some even took out fences so they could plant up to the roadside. Across the region, native grass that had been established on fields during the Soil Bank era of the 1950s was again plowed out and sowed to wheat. Cattle numbers continued to increase, reaching a national peak of 131.8 million on Jan. 1, 1975. (This compares to 95.8 million on Jan. 1, 2005.) Oklahoma "all cows that have calved" numbers reached 2.8 million in 1975, an increase of 13 percent over 1974. But, along the way, cattle prices took a devastating tumble. Wheat pasture calves purchased in the fall of 1973 didn't bring back their first cost in May 1974 after gaining 350 to 400 pounds. Feeder cattle futures were new and not widely used, and many cash contracts were not honored. It was financially disastrous for some, but others doubled up on cheap calves and produced their way to the good years of the late 1970s.

The next monumental change was in 1979 when the Federal Reserve Board rightly decided, for the long term, to allow interest rates to "float," or be determined by the market. Interest rates rose from 7 or 9 percent to 10 to 13 percent to 15-plus percent by the early to mid 1980s. The 1980s financial crisis slammed everyone, farmer and non-farmer, who came out of the 1970s in a highly leveraged position. Land prices peaked in 1981 at more than $700 per acre in Oklahoma and then fell for six straight years, reaching a bottom below $500 per acre in 1987. To compound matters, the federal government decided to use agricultural exports as a "weapon" and imposed embargos against several countries, most notably the Soviet Union. U.S. agricultural exports peaked in 1981 at $43.8 billion and declined until 1987 when most embargos were lifted. It was too late. By this time, the Conservation Reserve Program, a major component of the 1985 Food Security Act (Farm Program) was well on its way to "retiring" 30 million acres of farmland nationwide by planting it back to grass. The opportunists in this region put back to grass the land they plowed out in the early 1970s and continued farming by renting additional land.

The decade of the 1990s saw concentration in farm input industries and processors and suppliers. The farm population declined to 2.6 percent of the labor force. Technology of all kinds, from computers to seeds, offered early adapters an edge on their neighbors. Increased competition for land comes from non-agricultural sources. Nationwide, farm families make up less than 10 percent of rural population. Large farms get larger; there are more small, part-time farms, and middle-sized farms decline in number.

The 2002 U.S. Census of Agriculture counted 83,300 farms in Oklahoma with an average size of 404 acres. What had changed since 1969? What will change between now and 2038? Rural communities have changed. They are clustered around "regional Wal-Marts." People want to live in the "country" not because they want to farm or ranch, but because they want to live in the country.

In closing, I believe there is a future in U.S. agriculture for those who truly want to be in it. It won't be easy, but there have been only a few brief eras in the history of U.S agriculture when it was easy. Commercial farms, those with gross sales well in excess of $250,000 annually, will continue to get larger and, through economies of scale, compensate for ever-increasing petroleum-based input costs. Smaller agricultural enterprises will continue to flourish as one or more family members work off the farm as they combine the "best of both worlds" in terms of desired lifestyle and dependable income and benefits packages. Farmers and ranchers in the middle, those who, for whatever reason, have not increased the size and scope of their agricultural enterprise or sought sources of off-farm income, will continue to have a hard time surviving. For many desiring to remain in agricultural production, regardless of size, the greatest threat may be the decline of local infrastructure to support agriculture.

Thought for the month: Your future is shaped by how change impacts what your knowledge and past experience brings to the present. T. F. Schmedt