Why Mega-Farms May Ruin Illinois Farmland

Monday, February 2, 2015

What is a mega-farm?

That’s a colloquial term, not an official designation used by the U.S. Department of Agriculture, nor any other agricultural authority for that matter. Yet it’s often bantered about in reference to the Corn Belt—the corn-producing states in the Midwest—where the consolidation of commodity farms continues at an unprecedented pace.

Last December, the U.S. Department of Agriculture Economic Research Service released data from its 2013 Agricultural Resource Management Survey, a statistically representative survey that collects production and financial information annually in 15 key agricultural states. Once again there was no mention of mega-farms.

The data for Illinois are particularly compelling: a region with some of the richest and most fertile soil in the world continues to undergo a major structural transformation, and the unintended consequences of this shift are rippling across the state.

At first glance it appeared that the size of farms in Illinois was shrinking: in 2013 the average size of an Illinois farm was 361 acres, somewhat smaller than the 2003 average of 388 acres.

The real story lies far beneath those statistics. Sales revenue is a major indicator: the physical dimensions of Illinois farms that generated more than $1 million in revenue increased five-fold. The average size of these farms was a whopping 2010 acres.

Incredibly, in 2013, 37 percent of Illinois farmland -- totaling more than 10 million acres -- was comprised of farms with revenues of $1 million or more, compared to 2 million acres in 2003. While the number of million-dollar mega-farms in Illinois grew over the decade, the number of mid-sized farms decreased.

When the category is broadened to include all farms with more than $500,000 in revenue, 53 percent  of all Illinois farmland -- more than 14 million acres – is bound up in mega-farms,  double the 2003 acreage in $500,000-plus revenue generators. As of 2013, the average size of a farm in the half-million-dollar plus category was close to 1,700 acres.

Have inflation and rising corn prices significantly boosted farm revenues, leading to this dramatic shift to more lucrative farms in Illinois? The answer is no, according to the ERS. Rather,  higher revenues per farm are a logical consequence as some farming operations continue to increase their holdings by buying up land from farmers as they retire or from families who inherit the land but are not interested in agriculture.   

Unsurprisingly, corn rules in Illinois. The larger the farm, the more likelihood it is planted with corn. Corn covers nearly 90 percent of the acres on farms in the $1 million-plus revenue range and almost 80 percent of the farms in the revenue tier between $500,000 and $1 million.  

One reason for the increasing consolidation of farmland in Illinois is the ownership-operating structure. Farmland with absentee landlords -- individuals or institutions that own land and lease it to others who farm it  -- is believed to be on the rise. I say “believed” because a 1999 ERS study found that Illinois had more farms with absentee owners than nearly any place in the U.S.  The ERS is now in the process of updating those numbers.   

The 1999 study unearthed a remarkable insight: people who farm on land with absentee owners are less likely to take conservation measures and employ other practices to ensure that they operate in a sustainable way.  Protecting soil and water may cost more in the short term, but it preserves the land over the long haul. 

Today, to the dismay of everyone who wants to protect the environment and preserve the rich, fertile soil in America’s heartland. there’s mounting evidence that the norm among those operating on mega-farms is not to use environment-friendly practices. This excerpt from my book, The Transformation of American Agriculture, digs into the troubling reasons for this development.

 

Kathy O. Brozek is a consultant to nonprofit organizations and to businesses that aspire to create positive social change. She held finance and marketing positions in Fortune 100 companies and holds an M.B.A. from Northwestern University’s Kellogg School of Management. Her articles on impact investing and corporate philanthropy have been published by Stanford Social Innovation Review, the Federal Reserve Bank of San Francisco’s Community Development Investment Review, The Guardian and GreenBiz.com.

 

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