clearly reveal the relatively low capital intensity of farms in the early
1900’s.
Substitutions of this magnitude in farm inputs occurred only with
major relative changes in the state of technology, productivity, and
real prices of inputs. Land prices rose from the near-zero level pre-
vailing in the railroad building era. Labor prices rose sharply. But
prices for power, machinery, fertilizer, and liming materials (not to
mention high-quality management services) rose less rapidly. Indexes
of prices (1935-39 = 100) in 1955-59 were: output, 221; fertilizer,
151; machinery, 191; land, 325; and labor, 455. To the extent that
fertilizer and machinery could be substituted in large measure for
land and labor, without adversely affecting productivity, farming be-
came more (or more nearly) profitable over this period.
Agriculture in 2000
Some of these purchased inputs, especially power and machin-
ery, encourage expansion of farm scale. However, it now appears
that most of these efficiencies are achieved when farms reach the
scale of 2 to 4 man years of labor input per year. Also, very high
levels of technical competence are necessary on specialized farms to
realize the economies of size made possible by some of this power
and machinery, and this degree of technical competence among farm-
ers has been scarce. Agriculture has attracted relatively few well-
trained young men, and the average age of farmers and full-time
farm workers is still climbing. These factors may lead more and more
to specialized farming but with custom farming operations rather than
on-farm provision of services. So, as the process of making agricul-
ture more efficient in resource use proceeds, we can expect to see
increases in land leasing, nonowner management of land, customized
farming operations, and further capital intensification.
The question is, how fast will this specialization proceed? Pro-
jections by Rex Daly of the Economic Research Service indicate
that farms with annual receipts in excess of $10,000 will only in-
crease from 990,000 in 1965 to 1,060,000 in 1980 but that in 1980
such farms will include almost half of all farms. In 1965, they ac-
counted for only 29 percent of all farms. Large farms with cash re-
ceipts of $40,000 or more are projected to almost double, from
170,000 in 1965 to 335,000 in 1980. Small farms with cash receipts
of less than $5,000 are projected to decrease from 1,860,000 to
855,000.
This, then, is a view of the changing structure of agriculture and
why it is changing. As an economic activity, agriculture is finding
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