Future of Virginia Farming

Farm Business Management Update, December 2004/January 2005

By Wayne Purcell, Alumni Distinguished Professor, Agricultural and Applied Economics, Virginia Tech

The Power Point presentation found at http://www.reap.vt.edu/publications/reports/Future%20of%20Farming.pdf was developed for a presentation to the Natural Resources Conservation Service this fall. The sections below are presented as subsets by slide numbers, the theme, and a brief description of what was said during the presentation. The slides can be viewed/downloaded for use in educational activities or other programs. If you have questions please contact me at purcell@vt.edu or call (540) 231-7725.

Slides 1-13 Background for Economic Development Needs in Rural Virginia

The intent here was to show how important effective economic development efforts and programs in rural Virginia will be to the future of farming in Virginia. Farm size in Virginia shows that 4.7% of Virginia farms, as defined by the Ag Census, generate over 70% of farm sales and that 8.3% generate over 80% of farm sales. The smaller farms with sales under $100,000 yearly generally do not make a major contribution to farm family income so quality off-farm jobs in our rural communities are very important. I go through some measures of how rural Virginia is lagging along several dimensions and present the $189 million annual subsidy to some 42 rural counties that was uncovered by the Rural Virginia Prosperity Commission. (You can get more detail at www.rvpc.vt.edu in the final report of the Commission. You might want to also look at the "Continuing Story of Rural Virginia" and then go to "pictorial version" where I am keeping this set of measures updated).

If economic development efforts are not successful in growing existing businesses or in other ways stimulating economic activity in our rural communities, some communities will struggle keeping stable ownership of land and families on the small, part-time farms because the off-farm jobs are not there or are not providing sufficient income.

Slides 14-27. The U.S. in a Global Commodity Market

The U.S. is struggling to maintain share of the world commodity market. With free trade under NAFTA and GATT, world supplies will expand until prices are driven down toward costs of production in the low cost country just as prices in the U.S. are driven down toward costs in the low cost producing region. The balance has already changed in soybeans. It will also change over time in wheat and corn. Without much detail, I mention that meats and dairy and similar higher value products are seeing increased exports and, by implication, suggest the importance for us to move into the high value areas and not always just try to compete in low-value and globally grown commodities.

Slides 28-72 Virginia in a U.S. and Global Commodity Market

Acreages in the U.S. and Virginia are shown for a number of Virginia grown commodities. Virginia is struggling in trying to compete in a low-price and low-cost commodity orientation in crops like corn for grain and that the lack of technology to improve our competitiveness in corn is putting the poultry, dairy, and swine sectors at risk. (And this situation adds to the importance of a winter grown feed grain like the new hull-free barley, but I do not mention this in the slides.) We are struggling in corn for grain and in turkeys where it will be important to get out of the commodity business and start to move to high value, but the state has not supported needed research efforts in these areas. Demand development and margins in turkeys show why the turkey sector is struggling in the commodity business with a void in new product offerings for years. This lack of new product development is very important in Virginia were corn costs are well above other states. In the growing wine sector, I see no concern to date with demand, rather they are focusing production toward an identified market and a profile of the Virginia consumer. Demand for wine has been increasing since 1993, but the increases that cover up the problems of high costs production and/or a commodity orientation are, maybe, still in front of us. Periods in 2003 after a world-wide surge in wine production in response the higher prices through the 1990s left producers in California's Napa Valley in a position where they could not even get a bid on their grapes. It is imperative that Virginia not try to compete in a commodity wine market. Mention of greenhouse/nursery and similar opportunities is made with reference to the fact that being located close to population makes a difference in these products.

Slides 73-80 Planning, Support for Research, Farm Policy, A Look Ahead

This section identifies issues like land use planning, farm policy subsidies, support (or lack of support) for new research and technology to get to high foodstuffs. Although I haven't provided much detail, I do not mean to suggest these factors will not be important to the future of farming in Virginia and each could use complete development.

The final three slides suggest the trends I see in farming in Virginia as I look to the future. I expect to see the downward trend in inflation-adjusted farm commodity sales continue in the future. I do believe we will see efforts for some of our smaller scale farmers to get out of the commodity business scale since I think the notion of permanent part-time farming in Virginia, which is so important to our rural communities, will grow in the future. My worry about the continued commodity orientation is that too few appreciate the inherent problems and pressures, and we will not, therefore, pay enough attention to the importance of moving to high value food and fiber products. Making the transition will require public support of research; development of network of retail outlets for farmer grown produce, nuts, berries; etc., and an appreciation of how important robust economic development is in our rural communities. I do not see widespread recognition across state leaders of the importance of all this.

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