PULLMAN, Wash. — Reaction of agricultural economists to Steve Blank’s prediction of the end of American agriculture ranged from “dangerous” to acknowledging some benefit in its shock value.
Blank, author of the book, “The End of Agriculture in the American Portfolio,” is a financial and risk management economist at the University of California, Davis. He spoke here Wednesday afternoon and Thursday morning at the Washington State University Cooperative Extension Conference 2000.
Thomas Schotzko, a WSU market economist who specializes in apples and potatoes, kicked off a panel response to Blank’s lecture by saying, “I do not agree with him.”
A. Desmond O’Rourke, recently retired director of the WSU IMPACT Center and an authority on international marketing, acknowledged the book’s shock value to bring attention to real dangers in agriculture, but also found danger in the book.
Larry Makus, a University of Idaho agricultural economist, said it’s dangerous to extrapolate historic trends 50 to 100 years into the future, as Blank does.
Makus agreed with Blank that traditional investment theory says assets flow to higher rates of return, but questions that the theory applies in agriculture. Blank says economists can’t explain why farmers remain in the business despite low rates of return on their investments.
Blank’s theory is that low profits in agriculture cause farmers to eventually sell out and invest their assets in higher-paying non-agricultural activities. He predicts that America will wind up relying on foreign nations for food, unless public policy provides subsidies to help American farmers stay in business.
Agricultural economists at the Palouse universities said American agriculture has changed a great deal and will continue to change, but will continue to be an important part of the nation’s economy.
Schotzko said both the apple and potato industries are starting to change market strategies, but that it is old thinking, not apple and potato production, that will disappear.
The economist said companies like Wal-Mart and Costco are changing the way apples are marketed, and that Washington orchardists can profit from the new way of selling to consumers.
The new way involves lots of opportunities for growers who are willing to enter into new kinds of contracts and produce what retailers want and are willing to pay for, Schotzko said.
O’Rourke, who was schooled in classical history, chided Blank for a short-sighted view of history. Blank’s data goes back 50 years. O’Rourke’s historical perspective covers 3,000.
Although agriculture is becoming more global, O’Rourke said local factors remain “a huge factor,” and that farmers can take advantage of local factors.
He cited wheat production in the Palouse, which offers nearly ideal growing conditions. “I don’t see a demise in Palouse wheat production,” O’Rourke said. He also noted that Washington apple growers are feared by competitors around the world.
Fresh from a trip to Asia, O’Rourke said an Australian farmer who grows salad vegetables in China said he can’t compete with large-scale California growers, who sell their vegetables all over the world.
“The demise of U.S. agriculture is not something that is very near at hand,” O’Rourke concluded.
“No matter whether you are talking about potato chips or micro chips, you see the same overproduction” that Blank talked about in his lecture. O’Rourke said they are just normal cycles.
But O’Rourke warns American farmers that they don’t “own” markets for their products. Markets are only “on loan,” and farmers have to continually compete to sell in them.
Makus questioned Blank’s assertion that America is moving towards more reliance on food produced overseas. He said his analysis of data shows that foreign trade in food has increased, but we are both buying more and selling more in international trade.
In response, Blank defended his analysis, saying that only 1.3 percent of Americans are employed in agricultural production. That’s one of the lowest rates in the world.
“This is an economic indication that agriculture is an inferior good,” Blank said. Although the agricultural life style is valued, other investments have a higher value and assets are moving out of agriculture, he maintained.
He said the data show that the best way to stay in agriculture is to diversify out of agriculture. In other words, to take off-farm employment or invest in non-agricultural ventures that will produce money that allows the family to remain on the farm.
Blank said the world’s largest strawberry grower is leaving agriculture, not because he wasn’t making a profit, but because he could make a much bigger profit by selling out and investing his money somewhere else.
James Zuiches, dean of the WSU College of Agriculture and Home Economics, credited Blank with doing “an extraordinary job of pointing out a problem,” and that recognition of the problem is the first step towards resolution.
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