American Gothic – on the art of painting the reality of farmingEuropean insights for discussions in the USA

February 2017Krijn J. Poppe

Grant Wood, 1930: American Gothic

“An Iowa farmer and his wife” Based on a real cottage in Iowa, that

Wood found “pretentious” The Farmer was in reality his dentist The Wife is Wood’s sister (and much

younger than the dentist) Instantly a big hit, but Iowans weren’t

fans, to say the least

Source: Mentalfloss.com2

Source: Bonnen, 1975 3

Agriculture and farming

Management of biological processes (or nature) Not only Food or Feed: Fibre, Flowers, Pharma, Fuel, Fun,

Forests & nature; but not: yeast, microbes in sewage sludge

Not necessarily land-based: glasshouses, pig farming Definition can be translated into a list with activities. Some discussions:

●farming – tree nursery – energy plantation – forestry: where is the border?

●Farming – algae- aquaculture – fisheries: ibid●Illegal activities: coca, marijuana (with a high value)●Care farming with animals, management consultancy

with sheep (Boer Bos near Schiphol Airport)4

Problems are due to organisational forms

As we classify organisations, not their activities Specialisation: hiving off (cheese making to food

industry, contract work with machines, risk management bureaus): one sector is contracting, other is growing.

●This is reality that we want to show, not correct it●Are farms / states still comparable?: this is

interpretation and analysis, we should not change definitions in taking a picture of reality

●Is agriculture more than farming ? Lack of specialisation: mixed enterprises (mixed farms,

integrated companies etc). ●Some examples on next slide

5

What is a farm / farmer ?Dairy farm with 51% of sales in agri-tourismPig breeding farm buys a holding for pig fattening on

the other side of the road, or at 20 km distance...…. Or just across the border in another country Farm with a 75 year old farmer who earns 80% of his

income from a government pension .. Or with a 40 year old farmer that earns 80% in a

job at a Renault car plant? ... Or even 110% with BMW and spends 10% on the

farm to have a nice living and social security / tax facilities?

A slaughterhouse with own farms (or contractors?)6

Is the farmer the owner (the residual claimant) that probably takes the strategic decisions on investment, finance and structure of the farm ?

Is the farmer the manager (operator?) that takes the day-to-day operational decisions?

Can a farm have several farmers? Can one farmer be the most important one?

Can a farmer have several farms? How do we handle situations that are mainly set up for

reasons of tax, risk management or policy purposes:●Spouse that becomes juridically a farmer to benefit

from a tax credit●Famer with 3 “farms” in separate limited companies

for managing risk or prevent capping CAP payments7

Rules national accounts and need for satellite accounts Like in classifications of type of farming (arable,

horticulture, permanent crops, grazing livestock, intensive livestock pig and poultry): more than 50%, 66.67%, 80% as allocation rule. An organisation is linked to a sector / industry based on its majority of (estimated) sales (or value added). To keep data collection simple.

Due to that rule, and due to fact that agricultural policy influences more than farming itself, additional data is needed

●Estimate Agri-Business Complex: fertilizer plant (chemical industry) is segment of ABC, like part of Rabobank.

●Based on input-output tables8

Value added of the total agro-complex, 2013

9

AgroBusinessComplex Bln. Euro % of national economy

Inland and foreign raw material 48.0 8.3%

Based on foreign agricultural products

16.1 2.8%

Linked to inland agricultural products 31.9 5.5%Primary production (farming) 10.5 ~2%Food processing 4.5

Input supply 12.8

Distribution 4.1

Definition of the farm - Eurostat

A single unit, both technically and economically, which has single management and which produces agricultural products.

At least 1 ha. and those of less than 1 ha provided the latter market a certain proportion of their output or produce more than a specified amount of output

Critiques:●Can include ‘juridical farmers’, pensioners, private

plots●Sometimes farmers hold more then one holding

(economically inter-twinned, but registered separately: could be seen as a single unit?)

●Not in line National Accounts: includes mixed firms10

Micro level: what is a farm? This means that the lower threshold is higher than in the

USA ●Where it is “potentially $ 1000 sales”●Leading to increasing number of farms around

growing cities like Denver where some people want a ‘residential farm’ with two horses for the kids.

Threshold in EU is not really harmonised. Sometimes higher (e.g. DK 5 ha), sometimes a bit political influenced

Also influenced by the method of counting. E.g. a register also used for subsidies or not.

●In the NL 2016 saw a 10% drop in the number of farmers as we changed to self registration at Chamber of Commerce instead of register MoA and a higher threshold (Euro 10.000).

11

Total income farmer and spouse, Finland

Compare ERS: on the average US-farm the income from non-farming sources is larger than the income of non-farmers

Why Ministries of Agriculture need more (adm.) data than in the general statistics General government policies: National accounts,

Population census etc. Agriculture sector and policy have additional needs:

●Adm. management of sector on public values: food safety, animal diseases: you need every producer; also mixed ones, for stamping out etc.

●Collective action for family farms: e.g. price statistics to improve unbalanced, imperfect markets; cost prices for extension / advisory service

●Analytical tools to investigate effects of government policies (impact assessment)

●FADN / ARMS.: focus on policy targets.13

FADN is an observatory for monitoring The Farm Accountancy Data Network (FADN) is an

instrument for evaluating the income of agricultural holdings and the impacts of the CAP.

Policy tries to influence management decision in such a way that a better food supply, environmental impact and/or income is realised.

Policy evaluation asks for within-without analysis: what difference does the policy make. Needs data on all factors that potentially influences the management decision on the same farm(s), including trade-offs

Agricultural policy does not target hobby farms but commercial farms.

FADN is not the solution to everything. For some statistics or research data a special survey suffices

14

Definition of the farm - FADN ‘Commercial’ farms:

A commercial farm is defined as a farm which is large enough to provide a main activity for the farmer and a level of income sufficient to support his or her family.

In practical terms, in order to be classified as commercial, a farm must exceed a minimum economic size. However, because of the different farm structures and income levels across the European Union, a different threshold is set for each Member State.

Field of observation: represent largest possible proportion of farms with a market orientation.

●old rule of thumb: > 90% of production●one third of farms is not in the field of observation

An upper threshold officially not exists (but is defendable: CAP is not developed for very large farms) 15

Complex farms: firms or establishments ?

Is a Farm:●A Firm (“an organisation conducting a business [..].

A firm may operate one place of business or more”)●An Establishment (“a single physical location

where a firm’s business is conducted..”)

If a farm is an establishment we need another word for the complex farms that are firms:

●Agricultural (family) firms ?●Agricultural Economic Entities (AEE – Dutch FADN)

16

Data model for the traditional farm1 farm = 1 farmer = 1 household = 1 place

FarmHolding,

Householdand

Family

Family Member

* Entrepreneur yes/no

Works in

Related to

Data model of farm in the FADN tables

[Agricultural] Holding• Number· Location· Altitude· Legal structure

Unpaid labour• Holder /

manager· Family relation· Regular /

casual· Spouse yes/no· Year of birth

Works at

Assets and Liabilities• Name· Value

Activity• Size (ha)· Turnover €· Period

Classification /Typology• Farm type

Owned by

LaborCapital (land)Management

Farm Operators&

Households

Supply

FarmBusiness

Earn

IncomeIncreases in Asset & Equity Values

Factor markets

Agricultural chaincontracts

• specialization family members

• pluri-activity• asset management• rural housing and hobby farming

• increasing scale

• risk management• chain management by contracts• transaction costs shapes structure• separation management and work

InfluencesAllocation decisions

Influences:Management structure

Decision making processClaims on returns

Farm-households allocate resources to farm and non-farm uses and source inputs from multiple farm, household, and non-farm businesses

Krijn Poppe [LEI], James Johnson [USDA-ERS], Mitchell Morehart [USDA-ERS], David Culver [AAF Can.], Cristina Salvioni [Un.Pescara]

Household: principal operator

Households: family members

Household: non-family members

Businesses and other entities

Farm Ownership Structure

Farm Management Structure

Principal operator

Principal operator’s spouse

Principal operator’s household members

Operators outside principal operator’s household, e.g.,

partners, shareholders

Hired operators or managers

Joint ownership and

other ventures

Contracts

Business Arrangements Introduce Participants to Decision Making Process

Farm Organizational/ Governance Structure

Owners: from one to many

Managers/Operators: from one to manyContracts/business arrangements may alter decision processes

----

--

Informal participants or other managers

Farm Organizational/Governance Structures May Range from One to Many Owners and Operators

Organizational structure affects claims on returns• Fixed return

or payment• Physical output

claim• Wages & dividends• Net income

Chain organisation changes (©Gereffi et al., 2005)

inpu

ts

E

nd p

rodu

ct

PRICE

Shops

Complete Integration

Lead company

Leadcompany

Turnkey supplier

Relationalsupplier

Market Modular Relational Captive Hierarchy

Low Degree of explicit coordination and power asymmetry High

Leadcompany

Farmers

Development of farm systems

Net value / ha

Time

Agricul-tural

Family Firms (sme)Family

farming

Lati-fundia

socialist state farms

Subsis-tence

farming

Ag. policy

AKIS.gov

Food supply networks

3rd gen. uni

Market integration

Supply chain integration

Urban farming

Residen-tial

farming

Metropolitan agriculture

Data model to support fact finding (used in the Dutch FADN):

[Agricultural] Holding• Name• Number

Natural Person• Name• Family relation• Year of birth

Household• Name

Works at

Legal structure• Legal form

Location• GIScode• ZIPcode

Assets and Liabilities• Name• ValueActivity

• Size (ha)• Turnover €• Period Classification /

Typology• Farm type

Non-agr.business• type

Off farm in-come source• Type• Regular

y/n• Income in

€

OwnsFamily relation• Type

Type of legal form eg: Partnership, co-operative, individual

OwnsLives in

0

10

20

30

40

50

sole proprietor partnershipman/spouse

otherpartnerships

limitedpartnership

limitedcompany

farms production subsidies investment capacity

Share (%) of the types of farms by legal organization in production, subsidies and total flow of funds (investment capacity) the

Netherlands, 2007

Source: Dutch FADN, 2007

Conclusions Changes in organisational forms create issues for statistics,

but not much for agricultural accounts, agricultural censuses (and descriptors in general statistics)

Policy needs determine the data needs in agriculture●Full registers for public management (animal

diseases, food safety)●Data sets to help (family) farmers to take decisions or

promote functioning of markets (prices, stocks)●Data set(s) like FADN (and ARMS?) as an observatory

of farm management decisions for policy impact analysis (‘what – if’?).

● not an instrument to create statistics ● hobby farms and very large (international) farms are not

the target group of ag. policy.25

Conclusions and future work

Modern databases support more complicated tables than an A4 form to paint the reality and enrich policy analysis.

Modern (ICT-based) options for data collection can help to fill such databases

Potential future contributions to the panel:●A paper based on this powerpoint, with some

updated data for the Netherlands●Some extensions with e.g. Statistics Netherlands

and Statistics Sweden on use of registers in the agricultural census

●The use of ICT in data collection in the FADN26

Thanks for your attention

krijn.poppe@wur.nl

www.wur.nl

Thanks to Dr. Hans Vrolijk (Wageningen Economic Research)for comments and contributions