The U.S. food and agricultural sector is undergoing rapid change in production, distribution, and consumption of food and fiber, and in technology. There have been dramatic increases in production and marketing coordination, market contracting, concentration of agricultural output by fewer and fewer operations, and consolidation of agricultural operations. These increases are manifested in significant long- and short-term changes in farm size, number, distribution, and location. Production that once relied on small, independent, family-based farms increasingly occurs in large, consolidated, global operations. Small- and mid-sized operators often struggle to remain competitive and to adopt recent developments in technology and information.
The changes occurring in the modern food and agricultural system pose major challenges for public-sector agricultural research and education. One challenge is the complexity of serving and meeting the needs of agricultural producers—both the large commercial agricultural production sector and the multitude of smaller producers, including low-income and limited-resource producers, and producers of niche commodities. There is concern that publicly funded agricultural research has influenced the development of technologies that have been or will be biased toward changes in farm size and industrialization of the farm sector. There is debate about whether publicly funded agricultural research is equally accessible to all users and whether it is targeted to the full range of user and citizens’ groups.
This report analyzes publicly funded agricultural research and the structure of agriculture, and it offers recommendations for research and extension policies. It evaluates the applicability of publicly funded agricultural research across the agricultural distribution system: from small, poorly capitalized farms to large, well-capitalized industrial organizations. Although the committee acknowledges that the public sector has been encouraged, and in some cases mandated, to serve constituents, as illustrated by the increasing public policy support for small farmers and other underserved groups in the last four farm bills, the focus of this report is on analysis without judgment about the social desirability of particular distributions.
THE STUDY PROCESS
The U.S. Department of Agriculture (USDA) requested that the Board on Agriculture and Natural Resources of the National Research Council (NRC) convene a panel of experts to examine whether publicly funded agricultural research has influenced the structure of U.S. agriculture and, if so, how. The Committee to Review the Role of Publicly Funded Agricultural Research on the Structure of U.S. Agriculture was asked to assess the role of public-sector agricultural research on changes in the size and numbers of farms, with particular emphasis on the evolution of very-large-scale operations. The committee’s charge was as follows:
Review relevant literature, including pertinent rural development literature, on the role of research and the development of new technology in promoting structural change in farming, evaluating theoretical and empirical evidence.
Consider whether public-sector research has influenced the size of farm operations and, if so, by what means.
Provide recommendations for future research and extension policies, giving consideration to improving access to the results of public-sector research that leads to new farm production practices and technology.
The committee analyzed publicly funded agricultural research documented in the Current Research Information Systems (CRIS) database, which is the USDA’s documentation and reporting system for research projects in agriculture, food and nutrition, and forestry. It also considered information drawn from case studies and from the scientific literature. The committee gathered input and information from stakeholders during two public workshops held in conjunction with this study (Appendixes A and B).
Publicly Funded Agricultural Research
Publicly funded agricultural research comprises a complex variety of programs, users, and funding sources. The committee considered publicly funded agricultural research to be any agricultural research performed with financial and material support from the public sector. Sources of public-sector support include international organizations and federal, state, and local governments. The proportion of public funds in any research activity varies by institution and project. Publicly funded agricultural research is performed in public- and private-sector institutions.
The committee elected not to survey and analyze comprehensively all sources of publicly funded agricultural research, given the challenges in defining and disaggregating investments in agricultural research over time across different agencies and in determining their relationship to structural variables. The committee instead chose to limit the scope of its analysis to a subset of publicly funded agricultural research that could be used as a proxy for the wider scope of research described above. The committee chose to emphasize the principal components of USDA-supported agricultural research and extension, including extramural scientific research support to state-level partners and other research programs administered by the Cooperative State Research, Education, and Extension Service (CSREES); intramural biophysical science research conducted by the Agricultural Research Service (ARS); intramural social science research conducted by the Economic Research Service (ERS); the collection and analysis of agricultural data by the National Agricultural Statistics Service (NASS); and research conducted by the USDA Forest Service. The committee also considered state- and federally supported institutions, including land grant institutions, colleges of agriculture, agricultural experiment stations, the Cooperative Extension service, schools of forestry, historically African American land grant institutions, colleges of veterinary medicine, colleges of human sciences, Native American land grant institutions, and Hispanic-serving institutions.
The committee relied heavily on data reported to the CRIS database by USDA intramural research agencies, state agricultural experiment stations, 1890 and 1862 land grant universities, state schools of forestry, schools of veterinary medicine, and USDA grant recipients. Although the committee acknowledges limitations of the CRIS in comprehensively reporting research conducted by other non-USDA agencies, CRIS is the most reliable and consistent database available.
The committee acknowledges that private sources of funding for agricultural research have grown significantly relative to public sources
(Huffman and Evenson, 1993; See table in Appendix C). The committee recognizes that mutual influence exists between private and public research, both through the input of public research results into private-sector research and through the influence of the private sector on the public-sector research agenda through funding provision. Public-private partnerships are increasingly used as a mechanism for technology transfer (discussed in greater detail in Chapter 3). The committee acknowledges that linkages between the public and the private sectors are important and are likely to have significant implications for the structure of agriculture. However, an analysis of the relationship between privately funded agricultural research and the structure of agriculture is beyond the scope of this report. It is an important issue that should be the focal point of further analysis.
The Structure of Agriculture
The “structure of agriculture” is a broad phenomenon involving both the characteristics of farms (the system of agricultural production) and the relationships of farms to other sectors and institutions. “Structural change” refers to the change in those characteristics over time. While there is no universally accepted definition, there is considerable agreement that farm structure involves matters such as:
The size (measured in acreage or gross farm sales) and size distribution of agricultural operations, including the concentration of agricultural production—the increasing share of agricultural output by fewer firms.
The number of agricultural operations.
The spatial character of production systems.
The technology and production characteristics of agricultural operations, including the level of specialization and diversification.
Resource ownership arrangements, including tenancy and leasing.
The relationship among ownership, management, and labor.
Dependence on primary resources, or the relative degree to which an operation depends on capital, labor, or knowledge.
Inter- and intrasectoral linkages, including contractual relationships for marketing and production.
The extent and pattern of vertical and horizontal integration.
Production, marketing, and financial management strategies.
Business organization (including sole proprietorships, partnerships, corporations and cooperatives) and arrangements (including joint ventures, leasing, independent production, and contracting).
Characterization of the workforce, including age, gender, ethnicity, education, experience, skill level, and part-time versus full-time status of the operator.
In recent years, the dimensions of agricultural structure of greatest interest in public policy discussions have been farm numbers, the size distribution of farms (and concentration of farm production), and relationships of vertical integration among input providers, farm producers, and agricultural processors. This report will emphasize these structural characteristics but will also consider other dimensions of structure such as the spatial distribution of production, spatial specialization of production, and part-time farming. There is very little comprehensive, quantitative research on the relationship of research to many structural variables.
CONCLUSIONS AND FINDINGS
A focused analysis of the first two portions of the committee’s charge leads to the following conclusions:
Conclusion 1: Public-sector agricultural research is an important, but not an exclusive, factor in structural change. The commodity and production orientations of public-sector agricultural research have contributed to concentration in the industry.
Innovation leads to change, and, almost invariably, that change has a structural dimension. Agricultural research, including publicly funded efforts, will influence structural change. Very little empirical evidence exists on the effects of publicly funded agricultural research on structural variables. What little exists demonstrates that the amount of and rate of change in publicly financed agricultural research and development and education are correlated with increases in average farm size, with the number of very large farms (1,000+ acres), with large farms as a percentage of all farms, with livestock specialization, and with farmers’ off-farm work participation (Busch et al., 1984; Huffman and Evenson, 2001). A detailed analysis of individual research areas indicates that, although some research areas, such as those involving mechanical innovation, are more likely to encourage concentration, many others (biologic, chemical, and managerial innovations and innovations that address environmental issues) can have mixed effects on structure. The overall relationship between publicly funded agricultural research and structural change is not clearly defined.
Significant distributional and structural changes are associated with factors other than publicly funded agricultural research, including market forces, public policy, and the changing role of knowledge and information. Market forces, including changes in the availability of financial capital, changes in international capital flows, and the increasing price of labor relative to capital tend to encourage expansion of larger, capital-intensive firms (Cochrane, 1979; Hayami and Ruttan, 1985; Kislev and Peterson, 1981; 1982; 1996). Factors that lower the profit margin per unit of product also tend to increase the size of production units.
Public policies other than for research and development also can influence structure. Commodity payment policy, crop insurance policy, conservation policies, farm loan policies, federal income and estate tax law, and labor and environmental regulatory policies can have significant structural implications (Carman, 1997; Durst and Monke, 2001; GAO, 2001; Goetz and Debrtin, in press; Lichtenberg et al, 1988; Sisson, 1982; USDA, 1998a; Williams-Deny and Cook, 2000; Zilberman, et al., 1991).
Knowledge and information are also becoming increasingly important drivers of control and structural change in the agricultural industry, and access to information and intellectual property rights are becoming sources of conflict and controversy as the value of information increases and as that value can be captured by the private sector.
The framing of agricultural research within the context of these other drivers demonstrates that distributional effects result from many factors (Chapter 5). Structural change should not surprise us—it is a consequence of market forces, public policy, and other factors at work in a commodity industry.
Conclusion 2: Public-sector research and technology transfer are not always scale neutral; thus, different groups adopt research results disproportionately.
The ability of agricultural operations to make use of research is unequal because of differences in farm size; regional land quality; and the age, wealth, education, access to credit, and human capital resources of the operators. Heterogeneity among producers influences what technology is adopted, to what extent, and when. Larger operators who have access to sufficient human resources and financial capital are more likely than smaller operators to use the products of research, including scale-neutral technologies. Smaller operators may take more time to adopt technologies (Just and Zilberman, 1988). Thus, by developing new technologies and introducing change throughout the agricultural system, public research can favor dynamic, usually larger farmers. Given the perceived-risk, fixed-cost, and credit constraints of adopting new technology, small- and mid-sized operators often find it difficult to compete with larger businesses.
Conclusion 3: Technology transfer is a factor in structural change.
Cooperative Extension, the technology transfer arm of the public sector, is an important link between research and the structure of agriculture. A major function of the extension service has been to communicate research results to farmers and other citizens through adult education. Extension can affect agricultural structure through what is communicated, to whom, and how it is communicated. Evidence suggests that extension works disproportionately with some groups: by race and gender of the operator, by the size of the farm, and by the type of agriculture (Flora et al., 1993; Ostrom et al., 2000).
Conclusion 4: Publicly funded research is important to the public good. Public-sector agricultural research institutions are beginning to shift their focus to a broader research agenda that supports the production of public goods.
Substantial research funding has been reallocated to goals other than productivity that contribute to the production of public goods—goods from which revenue cannot be captured. Environmental issues, sustainable production systems, resource conservation, and rural development have gained importance. The committee found that a modest but growing share of resources is now allocated to research on techniques and technologies that are of interest to small-scale farmers, organic farmers, and others outside the commercial mainstream. This broader research portfolio is likely to benefit constituents in a variety of circumstances.
Conclusion 5: Public-sector agricultural research is an important element of an integrated policy for addressing distributional inequities. Although distributional issues increasingly are becoming a focal point of publicly funded agricultural research, it is unlikely that changes in public-sector research policy would completely offset or neutralize distributional inequities, given that other forces also encourage structural change.
Public research and development are critical to promoting innovation in and the maintenance of a vibrant agricultural industry. Public support can ensure the development of new research paradigms, technology, and structures; encourage broad access to research results; and secure stakeholder participation in the research effort. The public sector is critical because it can acknowledge distributional issues and target underserved populations that often are overlooked by private-sector research and development.
Public agricultural research is changing to serve and engage input from a variety of stakeholders at the same time that it continues to serve its traditional clientele. Structural and distributional issues have been key areas of legislation,
such as the Federal Agriculture Improvement and Reform (FAIR) Act of 1996 (U.S. Congress, 1996), and the Agricultural Research, Extension, and Education Reform Act (AREERA) of 1998 (U.S. Congress, 1998). Public funding for structural and distributional research, including research that monitors structural change as well as that designed to target the needs of specific constituencies, has begun to increase in intramural and extramural public agricultural research programs.
Numerous factors other than public-sector research and development and extension, including market forces and government policies, also promote structural and distributional change. Thus, modification of public research and development policy alone would not be sufficient to offset changes.
A public-policy approach is provided that responds to the committee’s third charge, to develop recommendations for future research and extension policies, giving consideration to improving access to results of public-sector research that leads to new farm production practices and technology.
Recommendations are provided in three categories. The first relates to research approaches and broad guidelines for research decision making and priority setting. A second group relates to extension policy. The third category provides a public-policy response for monitoring and analyzing structural change and its causes. Specific opportunities are identified for research in the area of structural change in Chapter 5.
There is a legitimate concern that adoption of the committee’s recommendations might result in reduced economic surplus in the aggregate. However, the committee submits that how losses or gains are distributed is also an important question. This issue of distribution among participants in the agricultural industry is a critical and largely missing component of the public-policy debate concerning R&D and innovation investments.
Broaden Public Research Goals Beyond Production and Efficiency
Publicly funded research and development in agriculture historically have emphasized production of commodity products and, over time, production of these commodities for a global market. The committee noted, however, that the public agricultural research system has an obligation to attain multiple
objectives, including, but not limited to, the traditional mission of productivity improvement in commodity products sectors, the provision of public goods, and service to a diverse group of constituents who are entitled to access to the fruits of the public research system. Although the publicly funded research agenda has increasingly emphasized areas in addition to commodity production, a broader package of research and development activities might more effectively serve a diverse range of stakeholders who are unlikely to be competitive in commodity markets and who are not served by the private sector. This package could include a greater focus on improving farm income through production of higher value products and on improving farm management to reduce capital expenditures. The committee recognizes that there are limits to the degree to which developing technology for “niches” is sustainable, since increased research and development on a niche product will increase the size of the market, invite entry by other producers, and thereby turn the niche product into a commodity product. The quest for higher value niche production technology and products is thus a perpetual one. Nevertheless, a more broadly defined publicly funded research agenda could serve an increasingly diverse industry that includes small-scale producers, producers using ecologically based agricultural practices, and others outside the commercial mainstream. The committee believes research should be conducted to serve those constituencies.
The goals of public-sector research should continue to be broadened beyond productivity and efficiency. Federal and state research should improve technology and information systems that benefit farmers in diverse production systems and circumstances, including part-time farmers, small-scale farmers, organic farmers, and value-added producers. However, limiting public-sector research to scale-neutral technologies is not sufficient to meet the needs of a diverse producer constituency. The public sector increasingly should assess the opportunities for R&D and technology transfer for those who are not served by the private sector.
Biophysical and Social Sciences Research
Developing an interdisciplinary research approach that integrates social science and humanities perspectives is critical to setting priorities and to understanding the relationships that influence structural change. Examples from international and domestic contexts illustrate how integration of social science approaches has broadened the research agenda to serve constituents, particularly smaller growers, more effectively (Feldstein and Poats, 1989; Mountjoy, 2001; Rhoades and Booth, 1982). The committee envisions an important role for social science research on agribusiness and entrepreneurial enterprises other than farm
management; the costs, benefits, and consequences of technology, including social, human, and community factors; and rural development, including lifestyles and opportunities for individuals and communities. Social science research on farm structure and production systems also can contribute to establishing a needs-assessment baseline in research decision making.
The public sector should use an interdisciplinary approach integrating biophysical science, social science, and humanities perspectives to determine structural consequences of research and to assess the research needs of a diverse clientele. The public sector, particularly ARS, should strengthen social science expertise in the areas of setting research priorities and assessing the distributional implications of research and new technology.
Public Research, Stakeholder Participation, and Accountability
The committee suggests that publicly funded agricultural research should be more accountable to the public, and it endorses public participation as a vital step in ensuring that diverse stakeholder needs are met through public-sector research. Participatory methods have been used successfully in the Consultative Group on International Agricultural Research (CGIAR) and in other international contexts to determine the agenda for plant breeding, crop, and natural resource management research that benefits small-scale agricultural operations. The committee recognizes the public sector’s efforts to increase stakeholder participation in decision making. The committee submits, however, that to the degree that public involvement and stakeholder participation in setting research priorities focus on existing commodity groups, this input will not lead to results different from the traditional emphasis of the public research system on developing new technology for commodity production. Public involvement of a broader representation of stakeholders should be promoted, and the process for involving the public analyzed to improve effectiveness and transparency.
To improve accountability to constituents, the public sector, at both the federal and state levels, should continue to incorporate the knowledge and needs of stakeholders through genuine public participation in setting priorities for research and in implementing research projects; encourage broad-based participation on research and extension advisory boards to assess the relevance and importance of proposed research and extension programs and to ensure that priority setting is responsive to a variety of needs, particularly those that cannot be met by the private sector; conduct critical analysis and assessment of the methods used for engaging, interpreting, and incorporating
stakeholder input into decision making; and take action to make the participation process more understandable and transparent to the public.
Assess the Structural Impacts of Publicly Funded Agricultural Research
Data and research on the relationship between public research and structural change are limited. Ex ante impact assessment research on prospective technologic thrusts and ex post research on recently commercialized technologies are most urgent when these technologies are likely to have major impacts on the structure of agriculture, the environment, food safety, or the relations between agriculture and consumers.
Public-sector research institutions, at both the federal and state level, should develop expertise and research programs devoted to analyzing the distributional implications and impacts of agricultural R&D for various groups of producers, using both ex ante and ex post research designs. The study committee endorses the public sector’s earlier efforts in this regard and encourages continued development of this research base.
The Smith-Lever Act of 1914 established a role for extension personnel to disseminate useful and practical information to farmers and farm families. Over time, that role has changed, as much of the technology information once provided by extension is now provided by the private sector, particularly suppliers of agricultural inputs such as seeds and fertilizer. In addition, the public now needs information on a greater diversity of issues, such as environmental and public health issues.
Respond to Broad Variety of Producers, Particularly Underserved Populations
The ability of farmers to take advantage of public-sector research results depends on many factors, including farm size; land quality; access to markets, labor, capital, and land; and the race, ethnicity, age, gender, and education of the operators. The public sector should enhance outreach to meet the needs of this heterogeneous group, particularly of those who have not been well served by the current research agenda. The committee acknowledges that some publicly funded research and outreach programs and projects do target specific
underserved populations. Examples include the USDA Small Farms Program, the Hispanic-Serving Institutions Educational Grants Program, the Tribal Colleges Research Program, and the 1890 Institutional Capacity Building Program. The committee encourages the public sector to continue to expand programs that fund research on the topics, processes, and audiences represented by these minority-serving institutions. However, the committee also submits that the public-sector response to these populations has been less than proactive and initiated only in response to considerable public pressure and such litigation as the 1997 class action lawsuit filed against USDA by African American farmers (Pigford v. Glickman, 1997).
Many factors that characterize underserved groups, including size of farm, race, or ethnicity, are intangible policy parameters for research decision making. For example, there is such a diversity of small and medium-sized farms that it is difficult to generalize what they share in terms of research needs. It is much easier for a public research system to respond to needs of underserved populations if it can target concrete production systems that have promise and can be funded readily. If coupled with rigorous needs assessment to identify the production systems used by underserved populations, targeting nonmainstream or niche types of production systems can sometimes be a good proxy for reaching underserved populations.
Public-sector outreach activities, including extension, should serve a variety of producers—including limited-resource producers, organic producers, direct-marketing producers, transition farmers, full- and part-time farmers, and cooperatives—with continued special efforts to reach underserved or minority communities.
Public-sector outreach, including extension, should take a proactive role in assessing the research and development and technology transfer needs of a variety of producers, including underserved and minority groups; designing appropriate strategies, such as applied on-farm research, for serving those constituencies; and providing production assistance and other appropriate services, such as market development education for differentiated product markets, entrepreneurship education, financial strategies, value-added processing, and identification of opportunities for those working part time in agriculture.
The public sector, at both the federal and the state level, should expand its programming focus with minority-serving institutions, which have unique access to underserved groups.
More effective communication with these groups would help research institutions move toward conducting research and extension that are relevant to their circumstances.
Extension and Engagement
The committee endorses new models of engagement that may help extension more effectively serve an increasingly diverse clientele. For example, Cooperative Extension is increasingly forming novel partnerships with the private sector, particularly with regard to the production of public goods. Extension also is developing public-sector partnerships, both within universities and among other federal institutions, to access the expertise needed to respond to an array of problems that go beyond agricultural production or farm programs. Extension is increasingly engaging farmers and others in the research process and improving accessibility to information for many constituencies.
A more broadly defined extension service may ensure greater use of research results and technology by more diverse clientele.
Extension should continue to reach out to other programs within universities, to draw wider networks of human resources, and to work with broader arrays of partners in the federal, private, nonprofit, and client sectors. CSREES should continue to facilitate more interdisciplinary and interagency activities involving its state extension partners. CSREES should evaluate the potential and effectiveness of these extension approaches to serve diverse constituents.
The study committee envisions research in three major areas: to monitor and analyze structural variables; to serve the needs of diverse constituencies; and to further explain how other factors—including market forces, government policy, and knowledge and information—drive structural change.
Monitor and Analyze Structural Change
The committee acknowledges recent public-sector efforts to monitor and analyze structural variables. ERS, for example, has developed a significant body of research on structural trends, including a new farm classification system to divide U.S. farms into mutually exclusive and more homogeneous groups for more refined analysis (Hoppe et al., 2000). This and other research results are
included in a Farm Structure Briefing Room on the ERS website (http://www.ers.usda.gov/briefing/FarmStructure). It is important to note, however, that funding for such programs is still minimal relative to funding allocated to production agriculture. The public sector should continue and expand its efforts to track the changing structure of agriculture.
The other drivers and determinants of structural change are numerous: pressure from consumers and end-use markets, changing demographics and work habits of U.S. families, changing attitudes about food safety and quality, increasing competition from global market participants, economies of size and scope in production and distribution, risk mitigation and management strategies of buyers and suppliers, strategic positioning and market power or control strategies of individual businesses, and private-sector research and development and technology transfer policies. The committee recognizes the public sector’s efforts thus far to investigate these driving forces and the effects of alternative policy instruments on structural change. The committee encourages an even greater public-sector commitment to studying the structural effects of these drivers. Three of them—market forces; public policies; and knowledge and information, including the increased privatization and globalization of information and research and development markets—have particularly significant structural effects, and all of them have critical implications for the design of research and development policy.
The public sector should continue to acknowledge the importance of structural change in agriculture. ERS and NASS should continue to monitor and analyze structural change and its causes.
Serve Diverse Producers
Public research targeting the needs of diverse constituencies has begun to increase, and the committee acknowledges these efforts. The 2001 Request for Proposals (RFP) for the USDA Fund for Rural America encourages research projects that “help increase farm profitability among small and minority farmers” (Federal Register, 2001a). The 2001 RFP for the USDA Initiative for Future Agricultural and Food Systems also highlights distributional concerns related to the viability and competitiveness of small and medium-sized farms as one of six priority programs (Federal Register, 2001b). ERS has conducted research relevant to niche farmers, including a comprehensive analysis of organic farming and marketing (Fernandez-Cornejo et al., 1998) and an assessment of certified organic acreage by state and by commodity (USDA, 2001c). ARS dedicated the October 1999 issue of Agricultural Research Magazine to research projects relevant to small farmers and ranchers (USDA, 1999b). Finally, in 1999, USDA
awarded $9.6 million in grants for research, training, and education to implement HACCP (Hazard Analysis and Critical Control Point) and other food safety advancements, of which $1.35 million was targeted specifically to assist small meat-processing plants and small farmers (USDA, 1999d). Nevertheless, the committee argues that funding for such programs is still extremely low relative to that devoted to production agriculture research.
The public sector should continue to experiment with research approaches—including multifunctional partnerships that link research and extension, partnerships that link the public sector with the private and nonprofit sectors, multi-state cooperation, and multidisciplinary collaboration—as instruments for serving small farms, minority farmers, and other underserved producers. The public sector should evaluate the potential and effectiveness of these research approaches to serve these constituents.