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• FEDERAL RESERVE BANK OF CHICAGO _1s_s_N_oo_o_2_-_,s_,2_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _..,.. February 20, 1981 THE AGRICULTURAL LAND BASE has recently attracted considerable interest. According to the National Agricultural Lands Study (NALS), land has been converted to nonagricultural use at the rate of 3 million acres per year, including about 1 million acres of crop land annually. The study suggests that the conversion rate be slowed in order to retain a sufficient agricultural land base needed to meet future growth in domestic and foreign demand for farm commodities. As a result, the NALS suggests greater efforts should probably be undertaken to protect good agricultural land and assure the production of food and fiber at reasonable prices. The most recent National Resources Inventory of land prepared by the Soil Conservation Service (SCS) was cited by the NALS. It showed the total land base is 2,263 million acres (as of 1977). Of this, 1,361 million acres were designattd agricultural land-land currently used to produce agricultural commodities or land that had the potential to be brought into production-including 413 million acres of cropland, 414 million acres of range land, 376 million acres of forest land, and 133 million acres of pasture land. The cropland base encompassed 321 million acres used for crops and 92 million acres in summer fallow, hay, or rotation pasture. About 127 million acres of the agricultural land not included as cropland had an average or better potential for conversion to cropland. That is, the land has the physical characteristics favorable to crop production and could be converted at reasonable costs. Changes in land use between national SCS surveys in 1967 and 1975 have provoked the greatest attention. In that eight-year period, the inventory of agricultural land was estimated to have fallen over 23 million acres (3 million acres/year) as land was converted to nonagricultural use-for urban, built-up, transportation, or water impounding facilities . A comparable amount of the cropland base was also lost to other agricultural uses. But not all studies show a similar rate of loss. Instead, some data series suggest that a slower rate of co nve rsion may have been experienced. For exa mple, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Number 1545 ~1 ~ I. U U 1.1.1.J::S .1....!, 1 the annual series on the acreage of cropland used for crops-acres intended to be harvested-and cropland left idle-because of set-aside programs, death or illnesses, or wildlife feeding-indicated a modest decline in the early 1970s. Although differences are apparent in the magnitudes of land use changes, the direction of land use trends, nevertheless, is clear. Regional losses varied during the period. The north central region-which contributes almost half of the value of all agricultural products-lost 5 million acres of agricultural land to nonagricultural use between 1967 and 1975. The south accounted for over half of the land converted to other uses but has about half of the potential land available for conversion to cropland. The loss in the northeast was smaller, amounting to about 3 million acres of agricultural land. About 3 million acres were converted in the west during the period. Though perhaps not substantial, these losses often occurred in a Existing and potential cropland base in selected states, 1977 Potential Croeland•• Croeland• Thousand Acres Percent of land area Thousand Acres Percent of land area Illinois 23,836 67 1,935 Indiana 13,320 1,794 8 Iowa 2,165 1,814 6 Michigan 26,431 9,484 58 74 Wisconsi n 11,741 District st.lites 26 34 2,596 Other st.ates New York 5,969 Alabama 4,499 3,189 20 14 1,410 9 4,147 14,573 11 ,762 33 45 3,613 6 ,600 1,868 Kansas 28,806 Texas 55 18 5,558 14,226 California 30,439 10,073 10 2,577 United St.ates 41 2,970 18 126 ,729 Florida Missouri Ohio 13 10 15 11 8 SOURC E: NALS. •Land used 10 produ ce crops for harvest either alone or in ro tation with grasses and legumes . ••Pasture land , range land and fo rest land rated suitable for conversio n to cropland . 2 region·'s most productive counties. The top 100 counties ranked according to the value of their farm products have been the areas where population has grown at twice the national rate. Pressure to convert land to nonagricultural use has existed for several reasons. In recent years there has been a substantial increase in the number of households coupled with a significant migration of population away from the urban areas-more than 40 percent of housing constructed in the 1970s was built on agricultural land. In some instances communities have experienced a rise in the number of households despite a declining population as lower density growth patterns replaced past trends of urban concentration and development. New commerce, industry and support facilities, accompanying the rural sprawl, have eaten up even more land. Public policies as well as private efforts have impacted on overall availability of land for agricultural production. Over 90 federal programs, identified by NALS, which promoted economic development, capital improvements, housing, environmental protection, or natural resource development have influenced the conversion of agricultural land. Land purchases or capital improvement projects have encouraged subsequent nonagricultural development, and some single-purpose programs have ignored the farm base concern. Until these federal programs subside or sociodemographic factors change substantially, nonfarm uses will undoubtedly continue to compete for agricultural land. In contrast, pressures will mount to keep land for agricultural production. The USDA projects that domestic demand for food and fiber will rise about 1 percent annually. One-third of the projected growth is attributed to rising income and the likelihood of higher per capita consumption. The remainder is attributed to growth in population, which could reach 253 million by the year 2000. More agricultural production may be needed as an energy source. Rapid expansion is expected in the use of corn as the principle feedstock for ethanol production (and gasohol). Forecasts by the USDA and others place ethanol production in excess of 5 billion gallons by the end of the century. If that is the case, 7 million or more acres of additional row crops would be needed, taking into account substitution between crops and prospects for higher corn yields. Though these estimates are tentative, they imply that higher levels of agricultural production will be needed to support domestic energy and food consumption. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Foreign demand for agricultural commodities continues to grow, too. Global population growth and greater purchasing power in developing nations could contribute to a steady increase in demand for U.S. production by the year 2000. This situation would impact strongly on the cropland base as Third World countries seek food grains and the more developed countries want feed grains and protein supplements to expand their livestock. The U.S. share of world agricultural trade is already high. About one of every three acres of harvested cropland is exported. U.S. exports now account for 72 percent of the global trade in feed grains and 45 percent of world trade in wheat. By 2000 agricultural exports could more than double, according to the USDA, from 1980's volume of 164 million metric tons. This scenario, however, is subject to a number of uncertainties in foreign demographic, economic, and political events. The U.S. share of world trade could decline if substantial productivity gains are realized and sufficient new land is brought into production in other countries. As it stands now, though, most of the rise in demand for agricultural commodities between 1980 and 2000 is predicated on the anticipated growth in foreign demand for U.S. farm commodities. If U.S. farmers and ranchers have to satisfy the demand levels projected for the next 20 years, more acreage a.nd higher crop yields will be necessary. In the 1960s gains in the volume of production were sustained by increases in per acre crop yields as total cropland harvested fell from the stable period of the 1940s and Per acre crop yields rose sharply in the last 30 years index 1967=100 140 L, I' I I I I I 1940 I I, I I I' I I I, '50 •Preliminary estimate I, '60 I I I I I I I I I,' '70 I I I I I I 'I '80* 3 1950s. Cropland used for crops in 1969 was 6 percent below 1960, but per acre crop yields increased one-fifth. To the contrary, in the 1970s as per acre crop yields rose by a fourth, cropland used for crops increased 14 percent. Some analysts are optimistic that over the next 20 years future technological innovations may result in even faster gains in per acre crop yields. Other analysts, however, anticipate slower growth rates in crop yieldsciting high costs of fertilizer and other inputs, necessary conversion of less fertile land, diminishing supplies of water, normal loss of soil fertility, and reduced university research. This in turn casts doubt on the estimates of the acreage of principal crops needed to satisfy a higher demand. Several scenarios on crop yields imply that anywhere from 80 million to 150 million additional acres would be needed for principal crops in order to meet projected demand by 2000. But if current estimates are correct, approximately 100 million acres of land suitable for cropland-either now idle or in rotation pasture already exists in addition to cropland that was used for crops. That suggests most of the cropland needs in this century would not draw from the inventory of land that entails steep conversion costs from higher tillage, frequent crop failures, or yield variability. This less productive land would not likely come into cropland use anyway unless farmers and ranchers receive prices for farm commodities sufficient to offset the conversion costs. Higher commodity prices and profits that raise the returns to resources employed in farming probably offer the ultimate program to retain land for agricultural use and stem the conversion of land to nonagricultural uses. But as the cumulative effects of conversion to nonagricultural use have been observed and the public costs have been weighed, public efforts geared to the protection and preservation of agricultural land have already been undertaken. A few programs have been directed toward land use control such as agricultural zoning or districting and transfer of development rights. Others have involved tax relief programs which help maintain farms or incentives to encourage young or new individuals into farming. It is estimated that almost 400 jurisdictions-state, local, or municipal-are now engaged in one or more of the programs. https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Cropland acreage used for crops may have exceeded 1949's peak million acres 450 1940 '50 '60 '70 '80* SOURCE : USDA . •Preliminary estimate In District states there have been substantial local efforts and some statewide initiatives. Illinois has provided for right-to-farm protection, limitation on special assessments, and the harmonizing of state agency regulations with agricultural land retention goals. The Wisconsin Farmland Preservation Program of 1977 has provided annual tax credits to farmland owners who contract not to develop their land. These credits will continue after 1982 only if their respective counties adopt agricultural preservation plans or zoning ordinances. The credits are applied against state income taxes to the extent that property taxes are deemed excessive. A similar program allowing tax credits against state income taxes is in effect in Michigan. Iowa may seli tax exempt bonds to assure financing is available to help individuals get into farming. Fewer initiatives have been taken at the federal level. The USDA and EPA have explicit policies designed to insure the consideration of program impacts on agricultural land. The tax reform act of 1976 has some provisions to soften the impact of taxes on farm families. But more efforts are likely in view of recent administrative requests and guidelines. Jeffrey Miller 4 Selected agricultural economic developments Percent change from Subject Prior period Year ago 263 275 253 - 0.8 + 1.1 - 2.3 +11 +25 0 January January 299 294 + 2.4 + 1.4 +11 +11 1%7=100 1967=100 1%7=100 1%7=100 1967=100 January January January January January 260 251 252 266 274 + + + + + 1.1 0.7 0.6 1.1 1.5 +11 + 8 +10 +10 +10 1967=100 1967=100 December December 258 264 + 0.9 + 0.7 +12 +11 dol. per bu. dol. per bu. dol. per bu. dol. per cwt. dol. per bu. dol. per cwt. dol. per cwt. dol. per cwt. cents per lb. cents per doz. January January January January January January January January January January 3.32 7.54 4.22 5.51 2.03 64.60 40.80 14.10 30.2 64.8 .- + 4.1 - 3.3 0 + 0.4 + 5.7 - 1.2 - 7.1 0 + 1.7 -10.7 +36 +18 +13 +36 +46 - 5 +12 +10 +11 +14 bil. dol. bil. dol. bil. dol. 4th Quarter 4th Quarter January 146 22 2,249 + 2.0 + 1.4 + 0.9 + 8 -26 +11 Unit Latest period Index of prices received by farmers Crops Livestock 1%7=100 1%7=100 1967=100 January January January Index of prices paid by farmers Production items 1967=100 1%7=100 Producer price index* (finished goods) Foods Processed foods and feeds Agricultural chemicals Agricultural machinery and equipment Consumer price index** (all items) Food at home Cash prices received by farmers Corn Soybeans Wheat Sorghum Oats Steers and heifers Hogs Milk, all sold to plants Broilers Eggs Income (seasonally adjusted annual rate) Cash receipts from farm marketings Net farm income Nonagricultural personal income Value *Formerly called wholesale price index. **For all urban consumers. FEDERAL RESERVE BANK OF CHICAGO Public Information Center P.O. Box 834 Chicago, Illinois 60690 Tel. no. (312) 322-5112 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis FIRST-CLASS MAIi US POSTAGE PAID Chicago. II. Pl•rmit No. 1942
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