Nineteenth century German economist, Ernst Engel, postulated that as household income rises, expenditures on food rise, but the proportion of income spent on food declines, with the proportion of income spent on other goods rising. “Engel’s Law” has proven to be correct, as the world’s wealthiest nations have experienced steady declines in the proportion of household incomes spent on food.
According to U.S. Department of Agriculture data, the share of American disposable income spent on food in the U.S. has been steadily declining to about 10%, apportioned between spending for food at home and food away from home. With higher incomes, total family expenditures for food have risen, but the proportion of income spent on food has declined. For example, USDA estimates that the lowest income quintile spent about $4,000 annually, or 30% of their disposable income on food, while the top quintile spent nearly $14,000, representing only about 7% of their disposable income.
A significant change in food expenditures is that since 2007, expenditures on food away from home — restaurants, educational and other institutions — have exceeded expenditures for food at home. This phenomenon has a significant bearing on the discouraging spectacle we are seeing today, namely dairy farmers dumping milk, producers euthanizing chickens and baby pigs, and farmers plowing under perfectly good vegetable crops while customers experience shortages in supermarkets, and record numbers of people wait in line at food banks for food they cannot afford to buy.
With its abundant natural resources including the productive Corn Belt, the expansive wheat belt, and its variety of land and climate conducive to a wide range of fruit and vegetable crops, the U.S. has long been characterized by ample food production. Indeed, surpluses of milk and grains have characterized much of the 20th century. Agricultural exports have been a significant factor in our international balance of trade. So what has happened to bring us to this present depressing situation?
Many readers of this column, and I, have experienced firsthand the radical change in the structure of agriculture. Farms in this neck of the woods, for example, once were mainly small family dairy farms that used the whey, a byproduct of cheese making, to feed hogs as a complementary enterprise. Most farms also had a flock of chickens and a vegetable garden. Our farm also had a large berry patch and an orchard with apple, cherry and plum trees.
In those days milk went to one of the many family operated cheese factories that dotted the countryside. Hogs were sold at a local stock yard, and sent off to the Dubuque Packing Company, to Oscar Mayer in Madison, or to one of the Chicago packing houses. Eggs were sold to a local market. My mother had an egg route in town. She enjoyed visiting with the “city women,” as she delivered her eggs.
The supply chain from the farm gate to market was relatively short and, by today’s standards, unsophisticated. Dairy and livestock producers grew their own hay and grain. Labor was performed by the family, including children that my readers and I once were.
Many readers of this column recall childhoods filled with many hours handling a silage fork, pitch fork and a manure fork. As economists, we call it “labor intensive.” As children, we called it “hard work.” It was, with no exaggeration, physically demanding, exhausting and seemingly never-ending.
With post World War II advances in mechanical technology, combines replaced neighborhood threshing crews, hay balers replaced the drudgery and inefficiency of making loose hay, the last of the work horses were replaced by tractors, and many farmers adopted mechanical silo unloaders and barn cleaners.
Crop technology changed radically. The traditional 40 inch rows of corn were replaced by vastly increased plant populations that increased yield. Two row planters disappeared, replaced by four, eight, 12, 16 and now even 24 row machinery. The boring task of cultivating corn with the tractor-mounted cultivator was replaced by chemical weed control, with attendant environment consequences.
Pipeline milking technology replaced the milking machines that many of us grew up with. That was soon replaced with milking parlors, and even by computer generated robotic operations, something that none of us farm kids could have foreseen with wildest imagination.
With labor-intensive technology replaced by capital intensive technology, economies of scale were essential to justify the increased financial outlay. Farms and cheese factories became fewer and larger, with more hired labor. Small dairy farms disappeared. As existing dairy farms became larger and more specialized, complementary hog operations disappeared, no longer associated with dairy farming. Pork is now the product of huge factory farms. Feed, no longer totally produced by these large operations, became another purchased input.
Instead of family labor, the larger hired labor force became another purchased input. According to the National Milk Producers Federation, over half of the nation’s dairy workers are immigrants. Farms that employ immigrant labor produce nearly 80% of the nation’s milk.
Small chicken flocks have disappeared long ago. Eggs and poultry meat are now produced by huge factory farms.
Picturesque dairy barns and small silos that once dotted the countryside, now obsolete, are crumbling and disappearing. Pasturing cows is no longer part of field rotations that were alternated between corn, oats, hay and pasture. Other than a few heifers and dry stock, grazing Holsteins are a less common sight for Sunday drivers compared to days gone by.
This is not to suggest that we would go back to days of old, even if it were possible. But the point is that production agriculture of today bears little resemblance to days gone by. It was not just the production aspect of the food chain that has changed. Changes in processing and marketing, including “just-in-time” links in the food chain, created some efficiencies. But change, as so often happens, comes with unforeseen consequences.
Next week: Broken links in the food chain.
— John Waelti of Monroe, a retired professor of economics, can be reached at jjwaelti1@tds.net. His column appears Saturdays in the Monroe Times.
