Rural America is "the new inner city," said Beth Ford, the CEO of Land O'Lakes, and it needs significant investment.
Land O'Lakes CEO calls for investment in rural America
Beth Ford says small towns, hit by ag challenges, "are rolling up on us."
January 10, 2020 at 2:39AM
Farm consolidation, oversupply, an aging farmer population, labor shortages, lack of access to high-speed internet and lender reluctance to finance agriculture are all conspiring against rural areas, and small towns "are rolling up on us."
Ford gave the keynote address at the 2020 Regional Economic Conditions Conference of the Federal Reserve Bank of Minneapolis on Thursday. She also spoke briefly with Minneapolis Fed President Neel Kashkari and took questions from the audience.
Here are 10 points she made about the agriculture economy at the start of 2020.
1. Consolidation is happening across agriculture because of oversupply.
"Trade is important, but what we have is supply/demand imbalances. Where we've seen this most directly is in the dairy sector," Ford said.
Wisconsin lost 10% of its dairy farmers in 2019, she said. Dairy consolidation is happening at a 6.5% annual rate across the country.
Consolidation is also happening at the corporate level in agriculture, with Monsanto and Bayer merging and Dow and DuPont merging to form the spinoff Corteva Agriscience, both in recent years.
"You can see tremendous consolidation occurring literally at the farm level going all the way into retail," she said.
2. Widows own about 60% of the farmland in Iowa.
The rising average age of farmers could be a real problem because it is awfully difficult for young farmers to get into the business, Ford said. Land prices remain stubbornly high, and banks are both retreating from agriculture and reluctant to lend to farmers who don't have land to offer as collateral.
"You know who the largest land owners in Iowa are, for instance?" Ford said. "It's widows. I think they own 60% of the land. And they lease that land out. There is a base of assets."
Farmland consolidation hasn't been primarily a case of outside investors snapping up land, Ford said, in response to a question from Kashkari.
"I haven't seen directly that outside forces are coming in," she said. "It's been more farmer to farmer."
3. Dairy farmers survive by taking other jobs.
Ford said she admires the resilience of dairy farmers in the Upper Midwest. They are enjoying a milk price rebound over the past 12 months, so that helps, but some of those who are staying in business are doing so by taking jobs off the farm, she said.
"You know how they're surviving?" Ford said. "They have second and third jobs."
4. Farmers are raising wages for help, but can't find people who want to do the work.
"Probably 50% of the labor that's involved in agriculture, and especially in dairy, they're immigrants. And, by the way, it's not because farmers aren't paying enough," Ford said. "The increase in wages has outstripped the increase in other areas, but the fact is nobody wants to do the job. That's the truth."
But she is not optimistic that there will be movement in Washington to open the door to more immigrant labor.
"I don't think anybody disagrees that we need labor. … It's not that it's not necessary and people don't see it, but it gets to be an emotional, political issue," Ford said. "I want to be optimistic about progress. I see some bright lights. … I feel like we're in an environment right now that it may be more challenging."
5. She views rural America as 'the new inner city.'
"The rural communities where farmers live lack investment," Ford said.
Rural America is struggling with hospital closures, doctor shortages and a lack of quality fresh food, she said. Telemedicine could be a solution on health care, but about 19 million rural Americans don't have access to high-speed internet.
"We need like a 1930s rural electric initiative going across this country," she said. "It's about a $150 billion gap to close this. And it shouldn't be a jump ball between USDA and FCC, and the states are looking in the couches for pennies and quarters to fill the gap. This should be a priority for an infrastructure investment."
Taking all this into account, Ford said, "I talk about rural America as the new inner city, because of lack of investment, because of lack of focus."
Rural Americans comprise 44% of the military, and the country needs to invest in their communities, Ford said.
"If we don't do that, in the next number of years, we will lose rural America," she said. "The towns are rolling up on us. That is the truth, and we don't want that."
6. Big corn and soybeans aren't going away soon.
Asked how financially sustainable conventional corn and soybean farming are long-term, she said the nation's farming incentive structure probably will have to change over time, but corn and beans aren't going away soon.
"We do see emerging markets where corn and beans are really critical. I don't see tomorrow that this is going to change," Ford said. "Do I think next year we're not going to need corn and beans? No, I do not think that."
But she said the government and ag sector should support innovation and promote biodiversity.
7. She backed government subsidies for farmers.
Farm income increases in 2019 were driven by direct government payments.
"Oftentimes it becomes a political issue. To me it's not a political issue," Ford said. "This is a security issue for the nation, I believe. Investing in agriculture, our own food supply, probably a good idea."
She said no farmers want to depend on the government. They want trade, and they want a free market, but they're in a disrupted environment so they need the help right now.
8. She razzed Cargill.
A man stood in the question-and-answer session to ask a question and said he worked for Cargill, calling it her "cousin down the way."
Ford didn't miss a beat.
"We always say it's Triple-A ball over there at Cargill and we're the big leagues here," she said. (It was a joke. Cargill's revenue is about nine times that of Land O'Lakes.)
9. Economies of scale are winning in farming.
"Scale matters. You see folks, when they have money, trying to get more scale," Ford said.
Whether milk prices go up or they go down, farmers are trying to add cows to reduce the cost of production.
"The supply/demand balance isn't the primary. It is about scale and production at the farm level, and unfortunately I think just that comment makes people use terms like 'industrial farming,' " she said. "There's a negative connotation to it, and it's unfortunate, because 96% of farms are still family-owned."
10. She prefers meat hamburgers to plant-based.
"I always get the question what are you going to do about plant-based and cell-based," Ford said. "I'm like, 'You do you, and I'm having a burger.' Great! You do you. The reality is that's a small part of the food supply."
Adam Belz • 612-673-4405 Twitter: @adambelz
The move means fast internet will extend to less populated areas in Crow Wing and Morrison counties.
