This entry is part 1 of 2 in the series Economics Of Small Scale Farming

Intro: This is my introductory post in my series on small farm economics. It sets the historical table, if you will. Talking about niche, premium products and fair prices for farmers and all of that is all well and good, but I think it’s important to have the historical perspective of how we got here.

The Agricultural Great Depression

I like to refer to the period from 1975 (which happens to be the year I was born) until now as the Agricultural Great Depression. The price of agricultural commodities failed to keep up with inflation. But like, completely and totally and epically failed to keep up with inflation. The price of a live hog was 47 cents per lb in 1976 and 47 cents per lb in 2007. Ouch.

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This chart shows what has happened with hog prices compared to the CPI – a national indicator of the average cost of goods and services in the US published by the Bureau of Labor Statistics. I’ve jokingly titled it “Price of Hogs vs Price of Soap”, which is a real world item tracked by the CPI. The point is that as everything has gotten more expensive, the relative price paid to pig farmers has greatly declined compared to the rest of our economy. Here’s how that looks in inflation adjusted terms:

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It’s not just pork that has gotten relatively cheaper. The price of corn has followed a similar trajectory. No farm commodities were spared the price collapse of the Great Depression.

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I like to say that traditionally in America a person could raise a few hogs, take them to market and sell them at a reasonable expectation of a profit. Let’s see what kind of difference a 40 year grind in pork prices made on the profitability of raising a pig. The following table is in 2010 dollars.

1976 2006
Revenue From a Pig 389 124
Cost Of Feed to Raise a Pig 228 70
Overhead and Other Costs 50 50
Profit From A Pig $111 $4

Wow! The same pig that netted $111 in 1976 netted $4 in 2006. To be sure, 1976 was a good year to be a hog farmer. Still, though, it is a fact that until the early 80’s a family could earn a significant amount of income by doing the labor of raising a few pigs or a few hundred pigs. At $100 profit per pig, a family that raised 500 pigs per year, which is a perfectly reasonable family sized herd and about the size of my current herd, cleared $50,000 a year! Most years weren’t that good, but you expect to earn at least $25,000 annually and occasionally significantly more. That’s pretty good income for a rural household. That same family in 2006 would earn two thousand dollars. That is an obviously untenable income for the amount of work required to raise 500 pigs. Then there was the old practice of keeping a couple of sows for side income. Two sows can produce 32 piglets in a year which in 1976 would have earned you about $3500 in spending money. In 2006 you would have earned $128. Just to be clear that I’m not exaggerating, Iowa State University publishes a “Monthly Swine Feeding Returns” report which shows that the average profit of a farrow to finish sow operation between 2004 and 2013 was $3.04 per hog.

This collapse in commodity prices had a predictable effect on the size and number of hog farms. The number of farms went down and the size of farms went up. It’s possible that it was the other way around – bigger farms led to lower prices. Either way, it’s a vicious cycle and the results are predictable. Here is the first chart that I showed overlayed with the number of hog farms in Iowa and the average number of hogs produced per farm. I stole these numbers from a fantastic 2012 Mother Jones article called How Big Pork Screws Small Towns. If you’re interested in this subject it’s a must read.

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This graph shows a consolidating industry. As prices collapsed, small farms were replaced with larger farms. But to what end? The 1970’s family hog farm that finished 500 hogs made a profit of between 25 and 50 thousand dollars per year (2010 dollars of course). The 2006 farm that finished 5,000 hogs at a profit of 3.04 per hog earned $15,200. Double Ouch.

This blog is about niche pork production, pastured hogs, small farms, local economies and how they all work together. My supposition is that if you visited Iowa in 1975 you would have found many of these things. Niche pork: many producers were still raising Duroc and Poland China hogs in the 70’s. Hogs raised outdoors: indoor finishing operations were too expensive. Small farms: just look at the last graph. Local Economies: If every rural household can make between 25 and 50 thousand raising hogs then you’ve got a pretty good thing going. Fast forward to today and you’ll find none of this. Just huge barns full of landrace hogs in farrowing crates.

So then the question: Can we turn 2015 upstate New York into 1975 Iowa? The question is ridiculous, of course. We’re talking about different times, different places, different cultures, different thinking. So maybe then: can we build some type of system that supplies the big East Coast markets with much of their pork in a way that is fair to farms and consumers and hogs, that makes us healthier, that rebuilds the soil, that helps rebuild the rural economy of upstate New York? Can we again make it so that a person can raise a few pigs with a reasonable expectation of a profit?

Read on.

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