Rebuilding America’s Economy with Family Farm-Centered Food Systems

“Now is the time for our country to recognize and call on family farmers’ ingenuity, strength and value to our past and our future. We can have strong local economies, green energy, a clean environment, healthy citizens and good food – all of these start with family farmers.”
– Willie Nelson, Farm Aid President

Table of Contents

The Ripple Effects of a Troubled Farm Economy
The Cost of Misguided Investments
Scaling Up the Seeds of Change
The Case for the Family Farmer
Conclusion: Growing More than Just Good Food
Key Terms and Concepts

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In the past few years, our country has endured an economic train wreck–failed banks, a tanked housing sector, pinched credit markets, escalating unemployment rates, crippling health care costs, and mounting environmental crises. In the context of such troubling headlines, we must examine every facet of our economy and consider how it can foster a more prosperous and sustainable future. This paper seeks to underscore what we at Farm Aid know as a simple truth: Supporting family farmers and family farm-centered food systems is a powerful strategy for jumpstarting our fragile economy and revitalizing communities across America.

The economic impacts of our nation’s food producers stretch far beyond the limits of their farms and ranches. America’s food system links farming with a variety of other enterprises, from input providers, like seed and fertilizer companies, to retail chains and restaurants, and everything in between. Each year, the food and agriculture sector employs around 14 percent of the U.S. workforce and constitutes almost 5 percent of our GDP. Meanwhile, consumers spend over $1 trillion annually on food grown by U.S. farmers and ranchers. These numbers begin to tell a story about the economic significance of food and farming, but only scratch at the surface of the real value our family farmers and ranchers have to offer our nation.

As Farm Aid’s founder Willie Nelson often reminds us, American family farmers are the backbone of the nation–the first rung on the economic ladder. When farms thrive, Main Street businesses and local communities thrive. As small business owners, family farmers can employ many individuals and support other businesses in their area. In fact, small businesses, family farms among them, have contributed 64 percent of all new jobs nationwide in the past 15 years.

Equally important to the economic benefits our family farmers bring are the many personal, social, and environmental contributions they make in their communities. Since the farm family is tied to the land, farmers have a vested interest in the economic vibrancy, social well-being, and ecological health of their community. As a result, they are natural stewards of the land.

As a nation, we have come to depend on a food system full of hidden costs and false promises. In reality, corporate concentration and industrialization do not bring appreciable gains to family farmers, our economies or public welfare.

Seeds of hope lie in America’s family farmers and ranchers despite the grim economic conditions facing the nation. A frequently overlooked source of economic development and job creation, these producers are standing on the cutting edge of flourishing local and regional food systems that are sustaining economies, nourishing communities and creating a strong foundation for a stable and prosperous future. In a time when we risk losing tens of thousands of family farmers and ranchers from our land, protecting and fostering their potential and properly investing in local and regional food system development offers our nation a sound path forward.

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The Ripple Effects of a Troubled Farm Economy

We stand at a critical crossroads in our agricultural economy: the very family farmers and ranchers best positioned to transform our food system are the ones most threatened by the nation’s credit crisis and trends of corporate concentration and consolidation in agriculture. These producers have a powerful impact on our economy—both through the boost they offer to local economies when they thrive and by the loss felt when they leave the land.

Today, family farms, like many other households and businesses, are suffering from the country’s dramatic economic downturn. With ever-increasing production costs and volatile prices for their products, many farmers and ranchers find it nearly impossible to keep up with their debts and operating expenses. Meanwhile, the availability of affordable credit–essential to the operation of any farm–is uncertain, and particularly difficult to access for many of the country’s entrepreneurial producers involved in local and regional markets or value-added and sustainable production methods. Struggling to stay afloat, the typical farm family must depend on off-farm employment to supply the bulk of its income. On average, nearly 90 percent of a farm family’s income is supplied by another source of employment. As such, the decline in U.S. employment further exacerbates farm budgets, making it even harder for many of America’s family farmers to stay on their land.

Communities that lose family farms lose a core of skilled producers with exceptional experience and practical insight. They lose a base of committed employers and consumers, causing more businesses to shut their doors, shrinking the local tax base and ultimately leading to population loss. In addition, a number of studies have documented trends of economic and rural community decline in areas with greater concentrations of industrial farms. The industrial system that so often replaces family farms siphons millions of dollars away from rural economies, purchasing inputs from corporate supply and service industries outside the region and sending profits to financial centers far from the farm. This pattern drains local businesses and can decimate the social fabric of rural communities, increasing unemployment rates and putting more pressure on public welfare services such as Medicaid and food assistance programs. Compounded with an aging farming population and an exodus of rural youth to urban areas, previously vibrant farming communities are in sharp decline.

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The Cost of Misguided Investments

The industrial food system, which currently receives the lion’s share of public and private investment, focuses its attention primarily on the yield outcomes of just a handful of crops. In doing so, it dismisses the many environmental and public health costs associated with an increasingly global and industrial food supply. For example, concentrated animal feeding operations (CAFOs), which house hundreds or thousands of animals in close quarters and produce most of the meat, poultry and dairy consumed in the United States, receive subsidies to their feed and pollution costs while leaving behind staggering bills for taxpayers. The Union of Concerned Scientists estimates that these costs include $26 billion in reduced property values from odor and pollution problems, up to $4 billion in drug-resistant infections attributed to the overuse of antibiotics in livestock production, and $4.1 billion in soil and groundwater contamination. Whatever efficiencies CAFOs add to the livestock sector would be quickly outstripped if the operations were made to internalize these costs. Other researchers have implicated the industrial food system in costly public health problems, particularly diet-related illnesses like heart disease, obesity and type II diabetes. There is no source for projecting the impact of these expenses over time, but existing data suggest the costs are substantial and mounting. The Centers for Disease Control anticipate that obesity and type II diabetes already cost the country hundreds of billions of dollars each year, and could account for 20 percent of all U.S. healthcare expenditures by 2020.

These costs speak to the increasing inefficiency of an industrial food system driven by expansion, corporate consolidation, and the push to maximize profits, generally at the expense of farmer livelihoods, food quality, environmental health and community well-being. Most family farmers are squeezed by this system; today just 19 cents of the retail food dollar goes to the farmer. This share represents a drop of more than 50 percent from what farmers received in 1950, leaving razor-thin profit margins, if any, for their families, and less money to spend in their local economies. Furthermore, it is questionable whether the industrial food system still delivers on the promise of cheaper food—USDA data indicate that the cost of food to consumers has risen steadily since the 1980s, even while trends of concentration and industrialization in agriculture have quickened.

As a nation, we have come to depend on a food system full of hidden costs and false promises. In reality, corporate concentration and industrialization do not bring appreciable gains to family farmers, our economies or public welfare. Rather, we are more often suffering the negative impacts of unchecked market power and the subsequent loss of family farmers. In the context of rising fuel prices, growing environmental degradation, climate change and worsening public health crises, research supports arguments that the industrial food system will buckle under it own weight.

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Scaling Up the Seeds of Change

At a time when many economic sectors are slumping, farmers and consumers are organizing locally and regionally, creating innovative agricultural markets that yield jobs and generate wealth for their communities. Equally important, these communities are becoming more self-reliant and restoring social connections and cultural meaning lost during the push toward an industrial food supply.

Today, many farmers are marketing the fruits of their labor close to home — via direct markets like farm stands, farmers markets and Community Supported Agriculture programs—and helping money to circulate in their communities. In 2007, direct market sales rose 49 percent, reaching $1.2 billion from their 2002 level of $812 million. This growth demonstrates a clear and burgeoning consumer demand for local food from family farms.

While this trend is promising, direct markets account for just 0.4 percent of total U.S. agricultural sales and are generally accessed by the smallest farms, making a relatively minor dent on the food system at large. At the same time, the largest, most industrial farms are still getting bigger, with just 6 percent of U.S. farms now producing 75 percent of agricultural products. Hence these two sectors—one direct and local, the other industrial and global—coexist side-by-side, without creating the transformative change we so urgently need in this country.

Meanwhile, mid-sized family farms are disappearing at an alarming rate. The 2007 Census of Agriculture reported a loss of 80,000 mid-sized farms since the last census in 2002 and some researchers predict mid-sized farms will disappear completely within a decade. Often termed “agriculture of the middle,” these farms are too small to compete in highly consolidated commodity markets on their own, yet too large to access direct markets. Conventional wisdom has advised them to “get big or get out,” but given the growing demand for local, family farm-identified food, mid-sized farmers should be well-positioned to bring the benefits of direct markets to more consumers and communities. In fact, in his review of 70 years of research on farming and community well-being, Curtis Stofferahn of the University of North Dakota found consistent support for the conclusion that mid-sized family farms are the best source of community economic development among all farm types.

Emerging markets, what some researchers call “mid-scale food value chains,” are beginning to crop up for these mid-sized farmers. By pooling value-added goods and offering fair prices, these markets help mid-sized farmers access local or regional distribution networks in a cost-effective manner, bringing good food to more consumers. These new supply chains incorporate products with value-based or differentiated attributes that consumers have looked for in direct markets. In recent years, these attributes have taken the form of organic, free range, non-GMO, local, heritage breed, grass-fed, family farm-identified, hormone- and antibiotic-free, among others. Some researchers note that mid-sized farms are better able than small farms to produce these good at volumes needed to satisfy regional demands, and more nimble than larger, commodity farms to adjust to changing consumer choices.

There lies before us a huge opportunity to revitalize our rural economies and transform our food system by investing in both the growing direct market sector and emerging “mid-scale food value chains” that together sustain small and mid-sized farmers. These local and regional food systems offer potent sources of economic and community revitalization.

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The Case for the Family Farmer

How do we quantify the economic benefits of local and regional food systems with family farms and ranches at their center? There is no single answer to this question, but many researchers have begun modeling the possible benefits of growing and marketing food within a region. Those interested in addressing the nation’s economic downturn should strongly consider these findings and how family farm-centered food systems can revitalize our economy.

Farm and food system analyst Ken Meter has studied the economics of agriculture for 35 years, emphasizing the importance of community food systems when analyzing the national farm economy. In a 2001 report, he determined that each year Southeast Minnesota farmers were spending about $400 million on farm inputs from outside the region, while consumers were spending about $400 million on food from outside the region. Imagine the economic impact if even a fraction of those dollars were spent locally, supporting local farmers, farm suppliers, and businesses. Meter modeled this scenario, and found that if Southeast Minnesota consumers were to shift just 15% of their food dollars to regional farms, they could generate $45 million in new farm income, which would in turn contribute $88.5 million to the region’s overall economy.

Such striking results are rooted in what has been termed the “local multiplier effect.” Every time money changes hands within a community, it boosts income and economic activity, and fuels job creation. This is because locally owned businesses are more likely to re-spend their dollars locally. A growing body of evidence demonstrates a dollar spent on a locally owned business circulates two to four times more in the community compared to that same dollar spent on an equivalent non-local business.

Researcher Viki Sonntag of Sustainable Seattle analyzed the local multiplier effect of food-related businesses in the Central Puget Sound region of Washington State and found that shifting 20 percent of food dollars into “locally directed spending” would inject nearly $1 billion into the region’s economy each year. This impact was exemplified in the restaurant sector, where Sonntag found that spending $100 at a chain restaurant results in $31 of income for local businesses. Yet, the same $100 spent at a locally owned restaurant would offer $79 for local businesses. By the same token, food grown by local farmers for export earns $1.70 in community income for every dollar of sales. But a dollar spent at a farmers market can generate $2.80 for the community’s economy. Sonntag’s findings are being echoed in several studies across the country, though multipliers tend to be region-dependent. The critical takeaway, however, is the power of local spending in promoting more stable and prosperous economies and communities.

Other research suggests that the economic benefits of investing in local and regional food systems are rooted in whatis grown, which can also pay huge dividends in public health matters. For example, some studies have focused on reintroducing fruit and vegetable production within a state or region. For farmers, the benefits of growing more fruits and vegetables include an increased per-acre value to the farm business compared to what is earned from commodity grain or oilseed production. For the community at large, benefits include job creation and boosts to local businesses. Increased consumption of fruit and vegetables can also promote a healthier, more productive population that requires fewer sick days and healthcare expenditures.

David Swenson of Iowa State University, in conjunction with the Leopold Center for Sustainable Agriculture, recently examined the local foods potential of a six-state Midwestern region including Illinois, Indiana, Iowa, Michigan, Minnesota and Wisconsin. Isolating 28 fresh fruits and vegetables and estimating consumer demand in the region, Swenson found that increased fruit and vegetable production could boost regional farm sales by over $882 million, and spur retail-level sales as high as $3.31 billion. The effort would also generate 9,032 farm-level jobs and 9,652 retail-level jobs, and a corresponding $395.1 million in farm-level labor income and $287.6 million in retail level labor income, suggesting the strong potential of the food system for economic rejuvenation of the region.

In some cases, harnessing the food system’s potential is simply a matter of marketing. This has sparked the interest of many researchers, including Patty Cantrell at the Michigan Land Use Institute, David Conner and Michael Hamm of Michigan State University, and George Erickcek of the W.E. Upjohn Institute for Employment Research, who teamed up to examine how a strong local marketing campaign, like the many Buy Local programs sprouting up nationwide, could revamp Michigan’s economy.

The state of Michigan has ranked poorly in economic and public health indicators for decades. Importantly, much of the $1.9 billion worth of fresh fruits and vegetables consumed by Michigan residents comes from outside the state, despite the fact that state farmers produce the second-widest variety of farm products nationwide, just behind California. The authors estimate that Michigan farmers could generate almost 2,000 new jobs and $200 million in new income if they sell up to three times more fresh produce via in-state direct and wholesale markets. This scenario assumes no necessary shift in production, just the impact of re-localizing food dollars by utilizing Michigan’s existing cornucopia to meet consumer demand for fresh produce. In a state with many economic woes, a more localized and sustainable food system can play a critical role in establishing a stable economic future.

Lastly, some of the best research on the benefits of public investments in local and regional food systems is being directed by policymakers. Recently, the State of Illinois created a task force to analyze the economic stimulus potential of its food and farm system. Its findings are staggering. First, it found that Illinois citizens spend $48 billion annually on food, nearly all of which leaves the state economy. It also determined that the state’s food system relies heavily on growing commodity crops for export from the state, while importing the food needed to feed its own citizens. The task force estimates that a 20% increase in local food production, processing, and purchasing would generate $20-30 billion of new economic activity statewide and create thousands of jobs for state citizens.

Highlighted above are just a few of several available studies showcasing the enormous potential of local and regional food systems to spur economic growth, all supported by the hard work of family farmers and ranchers. While some of these results are hypothetical in nature, they should be taken seriously. Any efforts to revitalize the nation’s economy should include family farm-centered local and regional food system development as a central strategy.

Conclusion: Growing More than Just Good Food

The structure of today’s food economy is not inevitable; rather, it is a reflection of choices. The future we seek is a matter of making the choice to create and strengthen local and regional markets that support family farmers, and in turn fortify the health and prosperity of all Americans. The challenge before us, then, is to think creatively about policies, funding resources, prospects for cross-sector collaboration and community mobilization strategies that can best achieve this vision.

The growth of local and regional food systems relies heavily on building physical infrastructure and expanding access to affordable farm credit to help farmers transition into these markets. This will require a coordinated policy agenda among a wide range of public and private stakeholders—an agenda that helps farmers make choices based on local economies, environmental stewardship, community and health, and that rewards them when they do so. For more information on critical federal policies needed to improve both physical and financial infrastructure for local and regional food systems, we recommend contacting Farm Aid’s national partners: the National Sustainable Agriculture Coalition ( and the National Family Farm Coalition (

Farmers will also need greater technical assistance, aid with business planning, and an increased flow of research dollars to effectively reorient family farms toward local and regional marketing opportunities. Scholars and economists will need to account for the full range of costs related to our food system to inform these discussions.

A variety of funding resources are currently available for those interested in developing family farm-centered local and regional food systems. Farm Aid’s online Farmer Resource Network has catalogued such opportunities, which can be accessed directly by visiting

Now is the time to invest in a new future–a future in which family farmers are recognized as key resources in solving the surmounting economic, environmental and public health challenges facing our nation. Ultimately, an investment in family farm-centered food systems is a critical investment in our economy, our communities, and our future: an investment that returns in spades.

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Key Terms and Concepts

  • Family Farm: Most sources settle on broadly defining family farms as farming operations where a family unit owns a majority of capital resources, makes the majority of managerial decisions, and provides the bulk of labor. For the purpose of this discussion, we extend the definition further to include a commitment to farmer livelihoods, community well-being, environmental stewardship and public health. Not all family farms currently address all of these concerns, but they all have the potential to do so. The family farm-centered food systems envisioned in this paper are based on these values and the farms that employ them.
  • Local and Regional Food Systems: Denotes a food system where food is produced and sold within a certain geographical area. This report emphasizes the important role local and regional food systems have in deepening relationships between farmers and consumers, and circulating money and creating jobs within a geographic area.
  • Industrial Agriculture: A system in the farming sector whereby farm numbers decrease and farms themselves become appreciably larger, mechanized and chemical-intensive, integrated into contracting relationships with processors through vertical integration, and increasingly specialized in one commodity or stage of production.
  • Concentration: Describes the control that a small number of corporations have over the entire food and farm system. For example, four companies dominates 83.5% of the beef market, 66% of the hog industry and 58.5% of the broiler chicken industry. At the same time, 93% of soybeans and 80% of corn grown in the United States are under the control of just one company.
  • Small Farm: There is no widely accepted definition of a small farm. The National Commission on Small Farms defines it as a farm with annual gross sales below $250,000, though this is meant to distinguish between small and large farms, without classifying mid-sized farms. USDA farm classifications suggest that a good approximation for a small farm is one with gross sales below $100,000. For the purpose of this paper, we note that these farms are frequently involved in direct markets.
  • Mid-sized Farm: There is no widely accepted definition, but researchers at the Agriculture of the Middle Project define mid-sized farms as farm operations that “operate in the space between the vertically integrated commodity markets and the direct markets.” These can be approximated as full-time family farms with annual gross sales between $100,000 and $250,000, or USDA’s “farming occupation—high sales” category, though there are likely several farms of higher or lower gross sales levels that can also be considered “mid-sized.” This group is most vulnerable in the current agricultural economy.

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