Farmers all around the country are experiencing difficulties recruiting and retaining agricultural workers. The farm labor scarcity problem is particularly acute for key sectors in the Southeastern United States like specialty crops (fruits and vegetables), the green industry (ornamental plants and other commodities), and livestock (cattle and dairy) which are heavily reliant on labor. As shown in Figure 1, a significant fraction of farmworkers is believed to be undocumented. There are two projects currently under discussion in the Senate (which passed the House) that if approved, would substantially change existing immigration rules. Both initiatives include legalization avenues for farmworkers.
The first project, the 2021 U.S. Citizenship Bill, was sent to Congress by the President on his first day in office. The bill substantially changes all the current immigration system and has three main goals: a) providing pathways to citizenship and strengthening labor protections, b) prioritizing smart border controls, and c) addressing the root causes of immigration.
The second project, the Farm Work Force Modernization Act, is specific to the agricultural sector. The bill has three main objectives. First, it creates a pathway to citizenship for unauthorized farmworkers. Second, it substantially modifies and expands the H-2A program by allowing some workers to stay year-round and granting overtime payments. Third, the bill requires all agricultural employers to use E-Verify to check that newly hired individuals are legally authorized to work in the United States.
Any changes to the current immigration system could affect producers of labor-intensive agricultural commodities via at least two channels. First, by affecting the number of foreign workers willing and able to continue farming (as opposed to switching jobs to competing sectors like construction). Second, the changes would alter the costs of hiring workers. The fate of these two projects may be defined in the following months.
Figure 1. Legal Status Breakdown of Hired Crop Farmworkers: 1991-2016
Source: Economic Research Service, U.S. Department of Agriculture using data from the U.S. Department of Labor.
Since 2000, Ag Co-ops have accompanied the growth of the agricultural sector[1]. With a business volume of $118.900 billion in 2000 and $203.047 billion in 2019, they expanded their activity by 2.68% per year on average, i.e. 0.57% when adjusted for inflation[2]. This is slightly lower than the 0.64% growth of output produced by farmers over the same period. In the same time, the concentration of the sector kept going: there were 3,338 co-ops in 2000 and only 1,779 in 2019, i.e. a decrease of 3.15% per year. The membership of ag co-ops decreased by 2.45% while the total number of farmers decreased by 0.37%[3]. As a whole, ag co-ops are losing ground in agriculture but remain prevalent: the total membership in ag co-ops is 1.89 million in 2017[4] while the total number of farmers is 2.04 million.
The dynamics of co-op demographics are different from one industry to another though. In the grain and oilseeds industry, cooperative memberships decreased by 2.37% annually (0.29%[5] less than the 2.66% decrease of farmers). As such, the proportion of cooperative members among grain farmers had increased between 2002 and 2017. By contrast, membership in dairy co-ops decreased by 3.67%, which is 2.17%[6] more than the 1.50% decrease of the number of farmers in the same period. In the livestock industry, the proportion of co-op members dropped. Indeed, membership in co-ops decreased by 3.77%, which is 3.23%[7] more than the 0.54% decrease of the number of farmers.
To understand the current dynamics, we may focus on more recent financial trends. In terms of business volume, grain and oilseeds co-ops experienced an 8% growth per year between 2015 and 2020, mostly gained in 2018. Dairy co-ops saw their business volume increase steadily since 2015 by 4% per year. By contrast, the business volume of livestock co-ops decreased by 6% per year over the same period.
While livestock co-ops have divested (-2% in fixed assets since 2015), dairy and grain and oilseeds co-ops have invested to grow. Since 2015, grains and oilseeds co-ops added 14% in fixed assets, and dairy co-ops added 10%. Interestingly, their investments outpaced their growth in business volume, showing that investment efforts not only follow the need to deal with higher volume but anticipate further growth (see figure 1).
Next, it’s important to determine how growth is financed, first by focusing on the level of long-term debt over equity (figure 2). The dairy co-ops increased significantly the level of long-term debt compared to equity, with a ratio rising from 0.80 to 1, between 2014 and 2020. Grain and oilseeds co-ops keep their ratio of long-term debt at a very steady and low level, with a ratio of long-term debt over equity around 0.3. The livestock co-ops have increased their level of long-term debt, albeit absent of growth.
While grain and oilseeds co-ops are able to finance their growth without altering their financial ratios, the dairy co-ops rely on a higher level of debt compared to equity. This higher commitment of banks in the financing of investments had been accompanied by an effort of co-op members to increase retained earnings instead of allocated equity: The increase of retained earnings has more than outpaced the level of debt; figure 3 shows that the ratio of long-term debt of retained earnings dropped from 3.87 to 3.10 since 2014. The dynamic is different for livestock co-ops, where the ratio of long-term debt over retained earnings is increasing since 2017 albeit absent of growth. It may be interpreted as a transfer of funds from banks to co-op members, a support which may be not sustainable over the long run.
Overall, these numbers illustrate the success of co-ops in the grain and oilseed industry. They are able to grow without altering their leverage ratios nor their margins, i.e. without adding financial risks. From this, we can conjecture that the co-op membership share will maintain or grow in the mid run in the grain and oilseeds industry.
Dairy co-ops seem to have experienced a rebound. Indeed, their very dominant position among farmers may have flinched, but the financial performances of the most recent years and the efforts of members to finance the growth of their co-ops may put an end to a relative loss of ground.
The diagnostic is less positive for livestock co-ops. While they have the possibility to create value by exploiting low but steady gross margins, their divestiture and decreasing retained earnings may reflect a lack of commitment (which may also result from financial difficulties) of members to their co-ops, a sort of resignation. This decline is tempered by the support of banks, but it cannot last forever.
[4] Note that farmers can be member of several cooperatives, first-tier cooperatives are considered as members of second-tier cooperatives and some members may be not included in the count of farmers in the USDA census report. As such, we can compare evolution but the data does not allow us to estimate proportion.
[5] Ibid. Based on these data, co-op members represent more between one third and one half of the grain industry.
[6] Ibid. Based on these data, co-op members represent about three quarters of the dairy industry.
[7] Ibid. Based on these data, co-op members represent less than 5% of the livestock industry.
We all want the information we need when we need it. We want it to be easy to find and easy to understand. And we want to know we can trust it. That’s not too much to ask for.
The Texas Food Education & Discovery network (TXFED) aims to help local food producers and farmers markets to increase customers and sales and develop new market opportunities through online, on-demand training. Online courses provide content created by and for farmers & farmers market organizers, along with trusted organizations.
TXFED’s first 9 courses, available with closed captioning and Spanish subtitles, cover topics ranging from whether selling at a farmers market is right for your business and how to make money at a farmers market to using social media to promote your farm. Multi-course series provides opportunities for more in-depth learning. Several additional courses are in development. For a limited time, these courses are free.
Thirteen collaborating organizations provide consistency in creating course outlines and content with input and additional videos and other content provided by more than 50 knowledgeable new farmers and farmers market organizers with different types of businesses and experiences relevant to each course. Courses are relatively short but include assessments, worksheets, and outside resources to help farmers put lessons to work.
TXFED is funded in part by a grant from the USDA Agricultural Marketing Service, Farmers Market Promotion Program. The program is led by the Texas Center for Local Food. Other educational collaborators include the Texas A&M AgriLife Extension Service, The University of Texas – Rio Grande Valley Texas Rural Cooperative Center, the National Center for Appropriate Technology, the Small Producers Initiative at Texas State University. Business and association collaborators include Farmshare Austin, the Farmers Market Coalition, the Farm & Ranch Freedom Alliance, Grow North Texas, Terra Preta Farm, Texas Farmers Market, Texas Organic Farmers & Gardeners Association, and Texas Small Farmer & Ranchers Community-Based Organization.
USDA released the results of the recently completed 2020 Local Food Practices Survey in April 2022. The survey results revealed continued growth in local food sales across the country. Over one-hundred and forty-seven thousand farmers and ranchers across the U.S. sold $9 billion of local edible food commodities directly to consumers, retailers, institutions, and intermediaries. The reported level of sales reveals a three percent increase from 2015. While reported sales increased, the number of operations selling directly decreased by twelve percent (12%). Direct farm sales across different buyer types are shown in Table 1 for the U.S. and Southern region only. In 2020, direct sales to retailers represent 46% of U.S. total direct farm sales, yet account for only 27% of Southern Region direct farm sales. To explore all of the data from the results of this survey, visit https://www.nass.usda.gov/Surveys/Guide_to_NASS_Surveys/Local_Food/
Table 1. Total U.S. and Southern Region Direct Farm Sales, by Buyer Type, 2015 and 2020
SOURCE: 2020 AND 2015 Local Food Marketing Practices Survey, USDA NASS.
While direct farm sales market continues to grow, farm operations using this marketing strategy have declined overall. A close examination of the data shows slight changes between producer locations and the targeted marketing channels. For example, the Southern region reported an increase in the number of farms selling direct and a decrease in sales volume over the same period. Nationally, 77% of farms with direct sales (consumers, intermediaries, and retailers) sold through direct to consumer channels (Fig. 1).
Figure 1. U.S. and Southern Region Direct-to-Consumer Sales by Marketing Practice 2020 ($ million).
A majority (57%) of farms selling food directly were located in metropolitan counties, and these farms accounted for sixty-two percent (62%) of all direct food sales. Lastly, 78% of farms selling food directly marketed their products within a 100-mile radius of their farm operation.
Many specialty crops are cultivated in nurseries including flowers, shrubs, seasonal vegetables, and fruit trees. During the spring and early summer seasons nursery products are in high demand for landscape contractors, landscape architects, and people working on their yards and gardens. Nurseries also supply wholesale and retail distribution firms, such as garden centers, home stores and distribution centers.
The last couple of years nurseries face added stress to keep up with increased demand while securing key production resources. An increase in nursery products and services can be attributed to (i) a spike in demand that started during the pandemic as more people turned to home gardening, (ii) adapting to new production practices such as adopting sustainable practices, and (iii) switching to soilless systems such as container production. The nursery industry faces same increasing cost and input supply issues as other agricultural sectors. Figure 1 presents information on farm production expenses with labor and fertilizers being two inputs that we have seen increases the last year. Persistent supply chain disruptions, price fluctuations caused by the pandemic and volatile energy prices, as well as increased labor costs particularly for those operations depending on H-2A labor are well documented.
In the nursery industry, labor costs, and fertilizers and pesticides are two costly production inputs. Jeb Fields reports that a $600 barrel of herbicide in 2021 now costs at least $1,500 so differences between 2021 and 2022 would be even more extreme. Another resource that is high in demand and low in supply is growing media and containers, with orders taking more than one year to be fulfilled. In nursery and greenhouse ~85-90% of all ornamental production nationally is containerized. The only non-container-grown ornamentals are some large trees, but even those are shifting to containers.
While the nursery products and services are high in demand, the challenges the industry faces are persistent, and the new ones are daunting with ripple effects experienced in the green industry.
Figure 1: Selected US farm production expenses, 2020-2021F USDA, ERS
Maria Bampasidou is an assistant professor in the LSU AgCenter Agricultural Economics and Agribusiness Department, and Jeb Fields is an assistant research coordinator and extension specialist at the LSU AgCenter Hammond Research Station.
