By: Jeremy Cox, BayJournal.com
Eighteen dollars and 16 cents.
That’s how much money Forrest Pritchard cleared in the mid-1990s after his first harvest. His farm in Virginia’s fertile Shenandoah Valley produced five freight cars’ worth of corn that year. But a drought sharply reduced his yield, and the Midwest was having a bumper crop.
The math was simply not in his favor.
So, Pritchard took matters into his own hands. He scrapped the commercial fertilizers and heavy machinery and stopped trying to compete against the global marketplace. Today, he sells pork, beef, lamb and eggs directly to consumers and restaurants — and looks back only to observe how far his farm has come.
“How can anyone make money at farming when we’re growing the stuff with used $150,000 combines on soil that demands fossil-fuel nitrates to create a pound of product?” he asked.
His farm is one of more than 2 million in the six states that drain into the Chesapeake Bay: Delaware, Maryland, New York, Pennsylvania, Virginia and West Virginia.
In 1987, the multi-governmental Chesapeake Bay Program created its first specific pollution-reduction targets. Going forward, every industry would have to do its part to clean up the Bay. As the largest contributor of sediment and nutrient pollution to the Bay, agriculture would have to play a leading role.
But as Pritchard’s plight shows, those efforts unfolded against a backdrop of economic turmoil that is rarely acknowledged outside Tractor Supply stores and farm bureau functions.
Those economic factors could play a significant role in the success of Bay cleanup efforts in coming years. All states in the Chesapeake watershed are counting on greatly accelerated efforts to control farm runoff to meet their 2025 nutrient reduction goals. But if farmers are struggling economically, many warn they would not have the ability to implement needed conservation measures.
The figures in this story primarily come from two sources: the U.S. Department of Agriculture’s Census of Agriculture, which recently published its first update in five years, and reports compiled by the agency’s Economic Research Service.
Because the statistics aren’t tailored to the uneven geography of the Bay’s 64,000-square-mile watershed, the Bay Journal has used numbers that reflect the conditions of each of its states in their entirety. Nonetheless, the figures paint a stark portrait of agricultural life in the late 1900s and early 2000s — a time of rapid change and fraying safety nets.
First, a quick history lesson: Thirty years ago, many farms were overleveraged and began failing when commodity prices plummeted. The sector’s debt-to-asset ratio — the proportion of its assets financed by debt — peaked at 21% in 1986. The crisis led to a multibillion-dollar federal bailout of the farming industry.
Farms are generally more financially solvent today than they were in the late-1980s. But insolvency indicators are climbing again. This year, the USDA’s Economic Research Service projects the debt-to-asset ratio to reach its highest level since the early days of the Great Recession in 2009.
“Over the last three years, we’ve seen farming decrease to an insolvent level on many of our farms,” said Bill Kitsch, vice president and agricultural lending manager for Ephrata National Bank in Pennsylvania. “There’s a tremendous amount of stress.”
The bottom line
- In all states but one, farmers reaped more revenue in 2017 than in 1987 after adjusting for inflation. The gain was at least 13% in those states. The exception was West Virginia, where the typical farm raked in about 6% less than it did three decades earlier.
- Gross income may be on the rise, but net income — how much farmers actually take home — is another story. After subtracting expenses, roughly six out of seven farms in the Bay states make below the federal poverty level for a family of four, or $25,000 a year.
- Higher costs of machinery and equipment ate into farm profits. Nationally, the market value of farm products rose 35%, but machinery costs increased 50%. In four of the six watershed states, the typical farmer’s paycheck didn’t keep pace with such expenses.
- At first glance, Delaware looks like an outlier. Its average farm sold $636,000 in products in 2017, more than three times the value of its counterparts in any other watershed state. The state’s windfall is linked to having more-lucrative specialty crops, such as watermelons, and the chicken industry’s dominance.
Size and land value
- The typical Bay state farm is less than half the size of the national average: 178 acres vs. 441 acres. Smaller farms have greater difficulty weathering financial storms. Larger farms usually have more variable costs — such as labor and animal feed — from which to make cuts during lean times. With a higher ratio of fixed costs — such as real estate taxes and the mortgage — smaller farms don’t have the same luxury.
- Since 1987, the average Bay state farm has shrunk by 11 acres. That represents a 6% loss of farmland. The national average was slightly more than 4%. Kitsch attributes the steeper decline in the mid-Atlantic to greater pressure from development.
- With less land available for tilling and raising livestock, the price of farmland has shot up in certain areas. In Maryland, the market value of an acre of farmland jumped from $4,900 in 1987 to $7,900 in 2017, adjusting for inflation. That’s not necessarily a good thing for farmers, said Hans Schmidt, assistant secretary of the Maryland Department of Agriculture and owner of a 2,000-acre grain farm in Queen Anne’s County.
- “You do recognize your own land value is going up,” he said. “But that’s only on paper. That’s not equity you can use to pay your fertilizer bill, your seed bill or any of your inputs.”
- In Pennsylvania, farmland values grew from $3,400 to $6,500 per acre over the same three decades. “Farmers have seen many of their neighbors sell the farm to make way for housing developments, shopping centers and warehouses,” said Mark O’Neill, a spokesman for the Pennsylvania Farm Bureau. “Once a farm is sold off, it is gone forever.”
- As urban areas encroach on farms, farmers have seized new marketing opportunities. Whether at roadside stands, farmers markets or by subscription, many operations now sell their crops and meat directly to consumers. Such sales more than doubled from 2012 to 2017 in the Bay states, reaching $577 million.
- Organic farming has offered many operations a path toward higher returns. Pennsylvania farms piled up $707 million in organic sales in 2017, representing tenfold growth in the sector over five years. Maryland topped $30 million, tripling its returns over the same span.
The Chesapeake Bay watershed is home to some of the most progressive farming practices in the country because of the cleanup program, said the MDA’s Schmidt. But farmers, he added, couldn’t do it alone.
In Maryland, for example, regulations limit farmers to spreading manure as fertilizer at only certain times of the year, when nutrients are less likely to get washed into waterways that feed into the Bay. So, the state operates programs that help farmers finance the construction of storage sheds and transport the manure to fields that need it. Another program helps pay for cover crops, plants grown to prevent soil and nutrients from running off the land.
“If we didn’t have these cost-share programs, our farmers would not be able to compete outside of the watershed,” Schmidt said.
The future of farming in the Bay states, analysts say, will be linked to consumer demand. That means more direct-to-consumer sales, more organic conversions and greater emphasis on precision farming (using GPS systems to manage fields down almost to the foot).
For his part, Kitsch urges a note of caution. In the 1990s and 2000s, many farms sold off real estate or development rights to stay solvent. He worries that the latest generation of farmers will have less to fall back on when hard times inevitably come.
“We’re on much shakier ground economically than we are today than we were during the farm crisis of the ‘80s,” Kitsch said. With the specter of oversupply once again looming over the marketplace, he added, “we’re in the grinder cycle. It’s really a question of who survives.”