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Farm Programs, Natural Amenities, and Rural Development
Lynn Betts, USDA/NRCS
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Do farm program payments boost the vitality of
rural communities? We might suppose that, by maintaining farm incomes,
these payments allow participating farms and their households to
remain viable and to continue purchasing local goods and services.
Thus, these payments may help sustain the local economy and its
population base, even though they were not designed for that purpose
(see Farm Programs Provide Different Types of
Support). Yet, despite decades of farm program payments, economic
researchers have been unable to establish that these payments help
sustain farm-based communities. Many areas that have consistently
garnered high payments from farm programs have lost population decade
after decade, even during periods when most other rural areas were
gaining population.
Recent ERS research on the differences in population change between
counties receiving high government payments and other rural counties
found that these differences were associated with several nonagricultural
factors. In particular, natural amenities—temperate climate,
a mix of forest and open space, lakes—are highly correlated
with population and employment growth, and these amenities are relatively
scarce in agricultural areas with substantial farm program payments.
Other factors, such as remoteness from major cities and sparseness
of settlement, also limit the ability of these areas to attract
new residents and nonfarm businesses. In short, the constraints
on economic growth in these areas are less related to agricultural
jobs and income than to geography and landscape. Farm programs,
as they are currently structured, do not address the causes of long-term
population decline experienced by many farming communities.
Farm
Programs Provide Different Types of Support |
America's
farmers receive government assistance through a number of
different programs and policies, including direct farm program
payments, indirect support through programs that enhance
domestic and international demand for U.S. commodities or
constrain domestic supplies and imports, crop insurance
premium subsidies, farm loan subsidies, and Federal tax
provisions. This article examines the impact of direct farm
program payments—those that
are delivered directly to participating farm operators and/or
farmland owners—which totaled
over $44 billion in 1999-2000.
Direct government payments take several forms:
- Fixed income transfers (sometimes referred
to as "decoupled payments") do not depend on
the farmer's production choices, output levels, or market
conditions. These include production flexibility contract
and fixed direct payments (23 percent of total direct
government payments in 1999-2000).
- Marketing loan and other miscellaneous program
benefits augment market receipts when commodity prices
are low and, thus, depend on the farmer's production and
market conditions. These include loan deficiency payments
(33 percent).
- Ad hoc emergency payments compensate eligible
farmers for economic or natural disasters. These include
crop disaster payments, dairy indemnity and market loss
payments, livestock compensation and emergency assistance
payments, among others (37 percent).
- Conservation payments reimburse participating
farmers for all or part of the cost of implementing conservation
practices. These include Conservation Reserve Program
(CRP), Wetland Reserve Program, and Environmental Quality
Incentive Program payments, among others (7 percent).
Farm programs are not designed to support rural
economic development. Even the CRP, with its beneficial
effects on the rural landscape and environment, is not aimed
at rural development. Potential scenic value is not an eligibility
criterion, there is no provision that CRP land be accessible
to the public, and there are no incentives to create larger
conservation areas by having farmers with contiguous properties
apply as a unit.
Indeed, farm program payments have had some unintended consequences
from a rural development perspective. For instance, higher
payments can increase farmland prices, making it more difficult
for beginning farmers and land-intensive nonfarm businesses
to get started. To the extent that land is owned by absentees,
farm program payments may benefit absentee owners more than
local farm operators and farming communities. Finally, with
most payments going to the largest farms, higher program
payments may have encouraged farm consolidation and fewer
farms over the long run. |
High Farm Payments No Cure for Population Loss
Adjusted for inflation, farm program payments in 1999
and 2000 were the highest in 30 years, with the exception of 1987
when the farm sector was going through a major financial crisis.
While the payments were not explicitly targeted toward rural development
(over 20 percent of payments in 1999 and 2000 went to farmers in
metropolitan counties), over a third of payments went to 387 rural
(nonmetro) counties where the ratio of payments to total county
household income exceeded 10 percent. On average, each of these
counties received $18 million per year in 1999 and 2000. If farm
payments help sustain local communities, it should be most apparent
in these "high-payment" counties, which are concentrated
in the Great Plains.
As a rough test of whether recent farm payments may have
helped sustain rural communities, we compared population changes
between the high-payment counties and other rural counties during
different periods. These high-payment counties had also received
about a third of total farm payments in the late 1980s, when payments
were at record-high levels. But, the timing of the rise in farm
payments was different in the 1980s. In the 1980s, program payments
spiked only after farm incomes had fallen and a crisis
was underway. In the late 1990s, by contrast, farm program payments
rose as other income from farm operations fell, possibly
averting a crisis. If the recent high payments contributed to rural
vitality, then the difference in population change (our measure
of vitality) between high-payment and other rural counties should
be smaller in recent years than it was in the 1980s. Recent differences
should be more like the early 1990s, when farm incomes were relatively
high.
Despite their near-record levels in the late 1990s, farm program
payments were not associated with reduced population loss in high-payment
counties compared with other rural counties. Instead, population
change in high-payment counties has been consistently 12-15 percentage
points lower than in other rural counties. And, high-payment counties
sustained high rates of population loss (9-10 percent) in both 1981-88
and 1998-2003. This was true even though the high rate of farm foreclosures
of the 1980s was not repeated in the late 1990s.
A similar analysis of the number of farm proprietors over the same
periods shows a different pattern. ERS researchers identified 344
counties where the ratio of average farm program payments (1999-2000)
to farm market receipts exceeded 30 percent. These counties lost
farmers at a rate of 19 percent per decade in 1981-88, but in 1998-2003,
their rate of loss was much lower (6 percent), about the same as
in other rural counties. In fact, the rates of loss were about the
same as in 1988-98.
The persistence of the gap in population change between high-farm-payment
and other rural counties should not be taken as evidence that farm
program payments have no long-term bearing on rural economic
development. Owners of farms and farm-related businesses base their
business and migration decisions on future prospects as well as
present opportunities. Given the long history of Federal support
for agriculture in some areas, these decisions are likely to be
based on the assumption that farm program payments will continue
in some form. Thus, during the 1980s, the expectation that payments
or prices would rise may have kept people and businesses in high-payment
counties who might otherwise have left. We have not been able to
gauge the importance of farm support payments as a relatively permanent
system. Nonetheless, the size and persistence of the population
gap does suggest that farm programs, at least as currently structured,
are not guaranteeing the long-term survival of local economies dependent
on farming.
Explaining the Gap
To identify sources of the gap in population growth between
high-payment and other rural counties, a statistical model developed
at ERS was used to account for county differences in population
change between 1990 and 2000. The model suggests that four factors
account for most of the observed differences:
- Natural amenities
- Population density
- Economic characteristics
- Demographic attributes
Natural amenities. The first and perhaps
most basic factor pertains to a region's climate, landscape, and
other features that attract not only tourists, but retirees, entrepreneurs,
and others whose arrival generates new jobs. Natural amenities are
highly correlated with population and employment growth—they
even shape agriculture. Over the past 25 years, the number of farms
has declined in counties with few amenities—counties
with cold, wet winters and hot, humid summers, flat land, and few,
if any, lakes. On the other hand, the number of farms has increased
in counties with high levels of natural amenities. While these amenities
are not the only factor affecting farm numbers, it is clear that
many beginning farmers want to farm—and
live—in a pleasant outdoor setting.
Studies of landscape preferences have found that people
rate landscapes with open vistas and groves of trees more highly
than those with either few trees or complete forestation. Except
for farmers, who have a professional interest, people tend to rank
landscapes dominated by farmland relatively low in appeal (although
above developed land). Cropland in particular tends to have relatively
little variation and to be inaccessible to the public. Consistent
with landscape preferences, rural county population growth has been
highest in counties that are 40-60 percent forested. Counties with
little or no forest have lost population; those more than 80 percent
forested have had relatively low rates of growth. Even among counties
lacking natural amenities like lakes and temperate climate, those
with some but not complete forestation have tended to gain substantial
numbers of new residents over time.
Population density. Thinly settled areas that are
far from large urban centers are unattractive to both employers,
because of their small labor markets, and householders, because
of poor access to services and employers. Rural areas near cities
gain residents who commute to as well as shop in the larger centers.
Economic characteristics. Counties with considerable
mining and/or agricultural employment gain residents more slowly
than those with developed recreation industries. Also, areas with
full employment attract more new residents than those where the
job market is weaker.
Demographic attributes. Population growth in counties with
a high proportion of the population ages 8-17 slows as this age
group leaves to attend college, join the armed forces, or search
for jobs.
Quantifying Influences on County Growth
During 1990-2000, high-payment counties lost an average of 3 percent
of their population, while other rural counties gained an average
of 11 percent, a gap of 14 percentage points. The ERS population
change model accounts for all but 1-2 percentage points of the 14-point
gap in population change.
According to the model, differences in landscape and, to a lesser
extent, climate account for about half of this gap. High-payment
counties tend to have cold winters, flat land, few trees, and about
twice as much farmland and cropland as other rural counties.
In addition, high-payment counties tend to be more remote from urban
centers than other rural counties and to have very low population
density. The very rural nature of high-payment counties as a group
accounts for an additional 3-4 percentage points of the gap in population
change between these and other rural counties.
Differences in local economic bases, however, were relatively unimportant
in 1990-2000 according to this model, accounting for only 2-3 percentage
points in the gap. Moreover, the model indicates that high-payment
counties were less disadvantaged by specialization in agriculture
in the 1990s than by their lack of recreational industry (which
in turn depends somewhat on amenities).
The most important demographic difference was in the proportion
of the population over age 64 in 1990, which was much higher, on
average, in counties with high farm payments, and was associated
with a 2-percentage-point lag in population growth for high-payment
counties. With long histories of outmigration, many of these counties
have more deaths than births.
In sum, there is little evidence that the farm sector itself had
a substantial bearing on the population losses experienced by high-payment
counties in the 1990s. The large difference in population trends
between the high-payment and other rural counties appears to have
stemmed instead from the less appealing climate and landscape, greater
remoteness, and sparser settlement of the high-payment counties.
Young Adults Leave, But Few Return
In classic cases of population loss, plants or mines
close, unemployment rises, and workers and their families start
moving out. In high-farm-payment counties, however, unemployment
rates have generally been among the lowest in the country. In 2003,
for instance, the average annual unemployment rate was 4.7 percent
among these counties but 6.7 percent among other rural counties.
While low unemployment is consistent with the finding that noneconomic
factors, rather than job losses, underlie much of the gap in population
change between high-payment and other rural counties, it does not
fully explain the mechanism through which population loss occurs.
It seems unlikely, for instance, that people are simply closing
up shop, packing up their families, and moving on.
One way to analyze the issue is to relate rural migration to the
life cycle. Many young adults leave rural areas upon high school
graduation. They enter college, join the armed forces, or find a
job somewhere new. This outmigration is especially evident in highly
rural areas, but occurs in most rural counties without major colleges
or ski slopes. When people have graduated or finished their military
service, gotten married, and begun to have children, rural areas
become attractive as places to settle. Later, a second round of
rural inmigration occurs as people retire and can choose an area
to live without having to consider employment prospects.
High-farm-payment counties had an influx of young families in the
1990s. The cohort of children ages 10-14 in 2000 was 10 percent
higher than it had been in 1990 (when the cohort was ages 0-4).
And the cohorts ages 30-39 were larger than they had been in 1990.
But this inmigration was small relative to the tremendous loss of
the cohorts in their 20s in 2000. Moreover, there was no inmigration
of retirement-aged population as there was in the very rural but
higher amenity counties. Unlike their higher amenity counterparts,
the high-farm-payment counties did not attract enough young families
and retirees to balance the exodus of young adults. Thus, unemployment
appears to be low in these counties with outmigration because young
adults leave without looking for jobs, and families are not drawn
to these counties without assurance of employment.
Rural Amenities Attract Residents
Assessments of program impacts in rural areas tend to focus directly
on jobs, or, as above, presume that programs, such as farm programs,
affect population change largely by affecting local economic opportunities.
The analysis of the gap in population change between high-farm-payment
and other rural counties suggests, however, that rural
amenities, such as climate, landscape, and access to services,
are major explanations for why high-payment counties have tended
to lose population decade after decade, even as other rural areas
have grown. Other research also indicates that, while new rural
jobs bring people, it is equally true that new rural people bring
jobs. Rural counties, particularly high-farm-payment counties, lose
a substantial proportion of their young people after they finish
high school. Young adults with children or older adults in retirement
will not flock to rural areas for high income. Instead, they will
do so to seek a high quality of life, which encompasses schools,
community life, pleasant landscapes, and opportunities for outdoor
recreation, all of which will contribute to the economic vitality
of the area.
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