Wednesday, August 14, 2019

UW - In 2010s, Wisconsin farm economy down, but ag economy is up. Huh?

Given all of the news about how America’s and Wisconsin’s agricultural economy has been struggling recently, this may seem like a surprising bit of news from UW-Madison.
Altogether, farms and agriculture businesses in the state generated $104.8 billion in economic activity in 2017, according to the new data released Tuesday and published once every five years.

That’s up nearly 19% from $88.3 billion in 2012, despite the loss of several thousand dairy farms, many of them small, family-run businesses.

The dairy industry contributed $45.6 billion in economic activity in 2017 — up 6% from five years earlier. Dairy processing, which includes cheesemaking, accounted for roughly two-thirds of the amount.
That doesn’t go with all of the stories about dairy farms closing around the state over the last year. What gives?
Wisconsin lost more than 2,300 dairy farms during that time. But milk production climbed steadily to a record 30 billion pounds in 2016 as farms got bigger, the number of cows stayed roughly the same, and the amount of milk per cow increased.

"The cows did not go away. They were bought up by other farms," said Steven Deller, a UW-Madison agricultural economist and author of the report.
Let me also dive into a couple of other things in the UW report on Wisconsin’s agricultural economy. I’ll direct you to this chart, which shows that it’s been continual farm losses since the mid-2010s that turned a one-time annoyance into a full-fledged crisis.
This latter point is particularly important for understanding the current condition of farming in Wisconsin. Given the tendency of “down” years to be followed by a recovery year, most farmers are positioned to plan for and adapt to what are generally year to year swings in net farm income. But there are two periods of sustained “down” years, the period leading to the farm crisis of the early 1980s and most recently (for Wisconsin, 2013 to 2017). The successive “down” years is the primary cause for the current fiscal stress facing many Wisconsin farms.

Without an “up” year to rebuild assets (e.g., cash reserves) farmers are forced into The Contribution of Agriculture to the Wisconsin Economy: An Update for 2017 04 The Successive "down" years is the primary cause for current fiscal stress facing many Wisconsin farms dramatically reducing income to the farm household/family and/or accept higher levels of debt. The reduction in earnings flowing to the farmer (family/household) and workers (Figure 1B) creates an unsustainable fiscal situation for the farm family and the rising of farm debt can overleverage the farm enterprise.

While farm income (net earnings to the farm business and earnings to the farmer) is an important measure of the health of the agricultural economy, it is only one and focuses on-farm production and not the broader agricultural economy, particularly food processing. To gain a finer insight into the agricultural economy consider agriculture’s direct contribution (no multiplier effect is considered here) to gross state product (Figure 2A). These data begin in 1963 and run to 2016 (the most recent year available) and are adjusted to reflect prices in 2016 dollars. When looking at the growth rate of gross state product for all of Wisconsin and both farming and food processing, the lack of growth in the farming sector over this half century period is evident and complements the patterns in farm income (Figures 1A and 1B). When compared to the whole of the Wisconsin economy, which grew some 298% from 1963 to 2016, farm production is only 10.3% higher today than it was in 1963. Again the year to year instability in farming contribution to gross state product is evident. And the sustained downturn of the farm crisis of the early 1980s is not as evident over the past few years in Wisconsin. This is a simple indicator that the current stress in farming is not as severe as the early 1980s. When we compare Wisconsin’s farming contribution to gross state product to the national average and the Great Lakes States (Figure 2B) we find that Wisconsin is largely following national and regional trends.

So where's all this "agricultural growth" in the state? A lot of the canning factories and related food company productions. The UW-Madison study goes on to note that food processing has become a significant employer in the state.
Perhaps the more interesting employment pattern is in food processing. Somewhat surprisingly, there is little evidence of the Great Recession impacting food processing employment and there has been strong growth particularly since 2010 (Figure 3A). Employment in food processing is about 25% higher in 2017 than it was in 1969 with most of that growth occurring in the past decade or less. Indeed, the growth rate of employment in Wisconsin food processing since 2010 has been greater than the overall growth rate in total employment. This trend, however, appears to be a national trend (Figure 3C) and is consistent with the strong growth in gross state product derived from food processing (Figure 2C).

So if you look at the UW study, it illsutrates how the "bigger is better" ag economy strategy has been put in place by WisGOP over the 2010s. And it's another example of how local, smaller businesses are getting replaced by larger, more corporatized businesses, even in rural communities.

What's worrisome is not only that family farms go away and rural populations dwindle, but that a large-scale manufacturing slowdown combined with lower food prices could mean that the local food processing factory could close up. Which would lead to even fewer economic opportunities in rural Wisconsin, an area were few opportunities exist to begin with.

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