Rural America is Gearing Up For a Generation of Change

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Crop price deflation will no longer rule.

Rural America Today

Most Land is For Animal Feed or Fuel

In the United States, roughly 10% of agricultural land grows non-animal products eaten by people. The rest of agricultural land is for grazing, animal feed, biofuel, or industrial feedstocks. Corn, soybeans, and wheat dominate planted acreage. Grasslands for grazing (mainly cows) dominate total acreage.

Data from USDA

Most of the corn and soybeans that are grown are not human-edible. The human varieties like sweet corn and popping corn or what you get in edamame are a tiny portion of the acreage. The demand for animal protein drives demand for farmland.

Farm Productivity and Demand Elasticity

For at least 150 years, commodity crop prices have been strongly deflationary.

Farm productivity has increased rapidly. Mechanization, improved crop genetics, synthetic fertilizers, pesticides, and herbicides have all boosted how much an acre of land can produce and how many acres a farmer can farm.

The demand for farm products is inelastic. Inelastic demand means even sizable changes in price have little impact on demand. A human stomach is only so big! If food prices go down, most people buy other things rather than stuff more food down their gullets. Prices must decrease significantly to match supply and demand after productivity increases. Even with an increased global population, increased grain demand from meat consumption, and government programs, land under cultivation has decreased in the US.

Source: Jayson Lusk

Source: Jayson Lusk

Increasing productivity with significant price deflation creates a depressing environment. Farmers have to invest in new methods and equipment just to stay even. Their debts are in dollars, not bushels of wheat, meaning it can be increasingly difficult to pay the bills. This impact is doubly true for tenant farmers (who skew young) that rent instead of own land.

William Jennings Bryan's "Cross of Gold" and the Green Corn Rebellion are just two examples of how farm product price deflation leads to unrest and radicalism in rural areas. Once politicians could afford to pay off farmers with massive subsidy programs, they did.

Intensification of Agriculture is Unpopular

While the cost of food has been decreasing, the industrialization of agriculture has increased. Increasing usage of chemicals and concentrations of farm animals make life near farms less pleasant.

Concentrated animal feeding operations (CAFOs) have come to dominate meat and dairy production. CAFOs pack animals tightly together to reduce costs. Pigs and chickens are produced almost exclusively in CAFOs, while cows start on grassland and finish in CAFOs. These operations have large open-air waste holding ponds. The stench is terrible. Most CAFOs have more manure than they can safely spread on their land. Tankers and pipelines transport manure to surrounding land for application. Over application and leaks can poison the drinking water for rural residents that rely on well water. No one hates CAFOs more than rural residents stuck living nearby.

The perception of farm chemicals has also changed. When industrial farm chemicals became available in large quantities, farmers used them with no protection or concern about their health. After health problems, more farmers take precautions like using chemical suits when loading their sprayers and riding in sealed cabs. That concern spreads to their own homes and others living near fields. Even if they find it unpleasant, farmers have to stay on the productivity escalator or risk handing their land over to the bank.

Meat Alternatives are Inevitable

There are other options than growing meat in a test tube.

Manipulating Plant Proteins

Veggie burgers used to be a sad excuse for a burger. Now companies like Beyond Meat exert a lot of effort to replicate the features of meat. Instead of pressing together a random black bean and wheat slurry, an array of ingredients are put through a sophisticated process to replicate the texture and cooking experience of meat products. There are similar products for a wide range of animal products.

Yeast Do it All

Yeast is the workhorse of industrial microbiology. Startups are programming yeast in new ways to produce animal proteins.

Making proteins with yeast is incredibly efficient. Scientists and engineers have spent decades producing yeast strains that require few resources to stay alive. Compare this to a cow that has to maintain thousands of pounds of living mass and walk around.

Perfect Day is a startup that uses yeast to make milk proteins. Instead of feeding sugar to cows (corn and grass), the yeast eats sugar in a big tank. The yeast turns the sugar into dairy proteins identical to what cows produce.

Impossible Foods uses yeast to make a protein called Heme. Heme makes products look and taste like meat without as many complicated ingredients and processes.

Both of these companies employ a hybrid approach. Yeast produces hard to imitate animal proteins. Those proteins are mixed with other plant fats and proteins to make a comparable product.

Meat in Vats

Growing fat cells or muscle cells in a test tube is easy. Growing fat and muscle cells that approximate animal meat at an affordable cost is not. We have Impossible Foods and Beyond Meat in grocery stores but have yet to see many products grown from animal cells.

Meat cells connect in complex ways. Cultured meat startups have to replicate that structure in growing cells to match the texture of real meat. Chicken breasts and carnivorous ocean fish with a high price to texture complexity ratio are popular targets as a result. Other startups are targeting hard-to-make but high-priced items like beef.

Growing the cells is also more complicated than using yeast. Instead of a hardy industrial species doing the work, it is actual animal cells growing. There is still a lot of work to do reducing costs, but the technology is so new it is very early on the learning curve.

Price Competiveness

Animals' biological directive is to stay alive and reproduce. It is not constantly laying eggs, being a milk factory, or growing ridiculously big. Through selection, humans have produced farm animals that produce meat and other products much more efficiently. Some animals are more efficient than others.

Source: BioNinja

Meat alternatives have a theoretical cost structure advantage because they convert feed into edible weight more efficiently. A factory can also reduce labor hours and substitute electricity/natural gas for corn.

Beef and pork are popular targets because they use a lot of costly feed, which also means a lot of land area. Making milk proteins using yeast is about 10x more feed efficient than doing it in a cow. It is a priority product along with beef and pork for startups.

Market Adoption

These alternatives will become cheaper than traditional animal products. The companies are sub-scale and can sell their capacity at higher prices to consumers uncomfortable with harming animals. As scale increases, costs will decrease.

Sales for startups are growing fast. Once companies match the taste of animal products, price decreases drive adoption. Surveys find that early adopters are not regular meat-eaters. But once at price parity, alternatives can gain significant market share. Few surveys show impacts of alternative meat being 50% or 75% cheaper without stretching early adopter cross-price elasticity data.

Variation in production difficulty means individual pricing could get weird. Ground beef, ground pork, sausage, chicken breast, and chicken nuggets could see rapidly reduced prices while actual chicken wings and tomahawk ribeyes become delicacies. Look for Buffalo Wild Wings to lead a campaign touting the merits of boneless chicken wings and funding R+D into 8-winged chickens.

Blend Walls and Electrification Impact Corn Ethanol Fuel

In the early 2000s, high oil prices and rural politics created an irresistible policy choice for the government. They mandated blending ethanol with gasoline and erected tariffs on imported ethanol to block imports. The ethanol content of gasoline has reached 10%, the safe limit for most vehicles, known as the blend wall.

As electrification reduces fuel demand, the demand for ethanol will fall with it. The government has resisted increasing the blend limit because consumers favor gasoline. If the government wants to subsidize corn production, it will have to use other programs.

What Happens to the Land?

Declining demand for traditional animal agriculture means new uses emerge.

Remote Work and Transportation Drive Demand

Every rural community could be a bedroom community.

Improved Transportation

Rural America has seen several leaps in transportation technology; Railroads, cars, and modern highways/interstates. As transportation improves, several shifts occur. Local service hubs are replaced by larger service hubs further away. The tiny towns die while the bigger ones consolidate. Population declines from increasing crop productivity prevent dead towns from coming back.

Land within an hour of big labor markets starts to behave like an exurb or a bedroom community. More residents work in the city instead of farming. Population grows, plot sizes decrease, and land prices increase as more accessible jobs and services make the land more desirable.

Self-driving cars impact rural areas more than urban ones. In cities, lowering driving costs results in more congestion or requires congestion taxes (or tunnels!). In rural areas, there is no shortage of road capacity. Long drives to doctor's appointments or stores can be more enjoyable.

Transportation improvements like small electric airliners flying out of general aviation airports, VTOL taxis, and HyperLoops could create another step change. It might be possible to live in rural South Dakota yet commute multiple times per week to Minneapolis for work. A night visiting the big city could be done within a babysitting time frame. The trend of services concentrating in hubs would continue.

Remote Work and StarLink

It is difficult for people living in cities to imagine just how terrible internet service is in much of rural America. Basic things like video conferences are out of reach. StarLink and other Low Earth Orbit constellations offer low latency high-speed internet, opening the rural labor market. If someone in a farm family wants a job for extra spending money, it usually means working for near minimum wage in retail or back-breaking labor like throwing hay bales in a truck. There is a vastly underutilized rural labor force waiting.

Artisanal Farming

Regenerative, sustainable, humane, and organic are all buzzwords for emerging agricultural techniques. Several categories could see increased demand from consumers who prefer their beef on the hoof.

High-Density Grazing

High-density grazing is at the heart of "regenerative agriculture." It is known as rotational grazing, mob grazing, and holistic management. The common thread is that animals graze in a herd, then move on, letting the grass rest. Invented and promoted by scientists like Allan Savory, its goal is to improve grassland health while lowering costs for raising ruminants like cows and sheep.

Ranchers noticed that over time, grazed pastures had less grass, especially in semi-arid regions. If left alone, they would go through desertification and develop bare spots. Topsoil would erode on exposed ground. Lower grass yields force ranchers to use fertilizer, buy supplemental feed, or plant row crops to maintain their herd.

Savory realized free-roaming animals ate their favorite grass species first. Grass species have coevolved to fill various niches to maximize energy capture from the sun. Healthy prairie grass has many species present. When one species disappears from overgrazing, it makes the land less productive. If pastures are left alone to "repair," old, dead grass blocks sunlight for new grass.

The solution is to force the grazing animals to herd up by keeping them in small enclosures. After they have consumed most of the grass, they move to a new paddock. The animals can't selectively eat grass without going hungry, their hooves break up the soil surface, and their waste fertilizes the soil. Animals eat the grass to a length that allows sunlight to reach new growth. Savory says this is effective because it mimics how wild ruminants herd to protect themselves from predators and move to get away from those predators.

The quality of grass increases and drought tolerance is improved. Traditional grazing leads to hardpan soil that can't absorb water and loses nutrients. High-density grazed soil is more porous and holds water instead of causing runoff. Bacteria and insects in the soil ecosystem create a nutrient lifecycle with the grasses, improving grass health. Drought tolerance and diverse species reduce or eliminate the need for fertilizer and supplemental feed.

Source: Alexine Keuroghlian

It can be challenging for ranchers to switch. There are a lot of details in the implementation. A failed conversion project drives ranchers into debt buying feed or forces them to sell animals. Creating many small paddocks requires capital investments in more fencing and watering points. Yields don't always recover immediately. It can take several years to return to the previous production, presenting problems, even if pastures are much more productive five years later.

High-density grazing is most effective in semi-arid areas like Australia, the Sahel, or drier areas of the Great Plains. Successful ranchers will slowly acquire more land due to more consistent income, premium meat prices (marketing!), and more productive pastures.

No-Till Fields and Cover Cropping

No-Till and cover cropping are the other leg of regenerative agriculture for large-scale operations. Traditional crop fields lie fallow most of the year, allowing weeds to grow. The age-old solution is plowing to remove the weeds. The trouble with plowing is that it damages the topsoil, and more inputs like fertilizer are required to maintain yields.

No-Till was first made possible by genetically modified crops. Farmers plant fields with a seed drill, with minimal soil disturbance, maintaining topsoil. Instead of plowing, farmers control weeds by spraying herbicide on fields. The crop seeds are resistant to the herbicide, hence "Roundup Ready Corn." The adoption of Roundup Ready crops has been astounding. But weeds have become resistant to Roundup, meaning farmers have to use more herbicides or add others like Dicamba, which are more toxic. Using large amounts of fertilizer, herbicide, and insecticide disrupts the soil ecosystem.

A third option is cover crops paired with No-Till. The cover crops grow instead of weeds. They can be varieties that fix nitrogen and add other nutrients to the soil. Farmers plant a mix of species to fill all the niches that weeds might inhabit. At traditional planting time, farmers stop growth by rolling the cover crops flat and using a small dose of narrow-spectrum herbicide. Farmers plant the cash and companion crop seeds with a seed drill.

Like high-density grazing, these methods improve the soil and reduce the need for herbicides, insecticides, and fertilizer. Crops are more drought-tolerant. Similar disadvantages also surface, including the need for new farm equipment, reduced initial yields while the soil improves, and the risk of implementing a new system. Even the most aggressive adopters take years to switch their entire operation over.

Boutique Farms

Farming techniques often have tradeoffs between labor, land, and input productivity. Traditional agribusiness growing corn, wheat, and soybeans has high input intensity but very productive labor and land. Some techniques can provide very high value per acre with few inputs but require significantly more labor hours. They go by names like Permaculture, Agroforestry, Polyculture, Natural Sequence Farming, and Silvopasture. These methods use symbiosis between plants, trees, and animals plus manual care to create productive landscapes that produce high-value products.

These small-scale regenerative agriculture approaches require extensive planning and care. Their diversity means harvesting is a manual process instead of a giant combine. These methods can be a good fit for smallholder and hobby farms.

Direct Marketing

The success of artisanal farms often relies on selling products directly to consumers or retailers. Traditional crops sold to large distributors are commodities that earn little markup. Artisanal farms can create a brand that justifies higher prices and cuts out distributors. Who doesn't want to watch a Facebook Livestream of chickens frolicking in a pasture, eating bugs, then laying the eggs you buy?

Renewable Energy

In energy policy circles, there is concern about the footprint of wind and solar farms. Renewable electricity will significantly reduce the demand for farmland devoted to energy production.

Something like 10 million acres of solar is needed to meet US electricity demand and electrify transportation. Around 35 million acres are used for corn to make ethanol. Some estimates suggest other biofuels use another 15 million acres. Solar-charged electric vehicles would take this close to zero.

Currently, wind meets almost 10% of US electricity demand. The turbines and roads occupy roughly 90,000 acres. The wind farms, including undisturbed fields in between turbines, occupy around 5 million acres. Even if wind turbines dot the countryside, they will use almost no agricultural land.

A 100% renewable electricity economy would reduce demand for cropland by 15%-20%, even if we build every solar panel and wind turbine on cropland instead of rangeland, empty land, or roofs.

The Great Rotation

Demand for Large Plots is Elastic

Shrinking demand for traditional crops, aging farmers, and improving connections to cities mean land usage will change. Hobby farms, remote workers, and artisanal farms will slowly grow at the expense of traditional agriculture.

Owners will not abandon large plots because their demand is very elastic. Most farmland will return to grasslands and meadows, with fewer cattle going to feedlots. Shifting back to rangelands reduces meat output but lowers non-land costs. Remote workers will buy smaller parcels.

If grass-finished meat is unpopular, the land will fall into more alternative uses. In rural areas with low-quality agricultural land but good deer hunting, locals are already being outcompeted by out-of-towners buying land for hunting camps. Remote workers will be able to buy a 400-acre hobby farm instead of an 80-acre one. And if things get dire, there will be people buying huge tracts for buffalo/wolf preserves.

The exact ratio will vary with better transportation links favoring remote/commuting workers and higher demand for grass-finished meat boosting regenerative agriculture.

Small Town Plots Risk Continued Abandonment

Before cars and tractors, farms had little mechanization and were smaller in size as a result. Families were large to provide labor for the farm. Town sites were in the horse range of every farm and provided services like doctors and saloons. Automobiles, tractors, increasing farm sizes, and smaller families have made many of these towns redundant. They shrink and essentially die. Demand for lots is low. Proverbial $500 houses attract anti-social behavior (a.k.a. meth tweakers). The low value of the land combined with the tiny plot sizes makes purchasing and consolidating lots rarely worth the cost. Previous legal structures limit land use.

Old townsites will have very low utilization as a result. If there is a gain in rural population and income, it will likely go towards regionally significant towns and small C-stores. If the best consumers have VTOL taxi access or self-driving electric cars that expand their travel range, this effect will be even more pronounced.

Implications for Rural Culture

Adding non-deflationary export income to rural America is counter to the last 150 years of trends. It can upend cultural structures in several ways.

In rural areas, land ownership defines status. The highest-status people tend to own the most land. Gross land ownership is a direct measure of wealth. It is challenging to build a land position because only so much land comes up for sale, credit can be hard to obtain, and returns are relatively low. Younger farmers and ranchers end up leasing land and trying to save to buy their own. Many farms stay within families for generations. The family patriarchs and matriarchs often have power over any family that decides to stay in the area.

Remote workers and social media bring intangible capital that competes with traditional land ownership. Remote work can bring city-level income while keeping rural cost-of-living. A startup farmer with 50,000 social media followers can sell their products at a premium to commodity crops. A small farm would produce more revenue, and leasing land could be profitable. Status signaling will have to move beyond the county ownership plat map.

People with ties to an area can stay or return instead of being forced to leave for better opportunities. Because it is so difficult to acquire land, staying meant starvation wages trying to start on leased land or working for parents/grandparents that control the family land. Access to outside, higher-paying jobs or the ability to put a multiplier on farm earnings means a comfortable life is possible without being forced to work with family.

Areas with other features like outdoor activities or natural beauty might attract newcomers that change the social makeup.

Farm Programs Impact

If farm product demand crashed, the government would probably increase subsidies. But, trends work against the popularity of traditional farm subsidies.

Many modern farms have become industrial operations that generate NIMBY responses from other rural residents. As income-earning alternatives increase for the median rural resident, the stiffer the local opposition will be to subsidies.

It wouldn't be surprising to see labeling laws that favor farm products over pure factory products. Grand schemes like massive subsidies for heating oil to ethanol furnace conversion might not be desirable to farm-state voters in 15 years.

Change is Coming One Way or Another

Increasing farm productivity has been the dominant force shaping rural America over the past 150 years. Improving transportation has offset some of the population decline (and its ill effects) by improving access to jobs and services, especially near cities.

Improved communications, increasing acceptance of remote work, and new transportation options are poised to turn every rural community into a bedroom community for cities, providing more income opportunities. Physical transportation systems like VTOL taxis, electric airplanes, and HyperLoops take things to the next level by providing access to in-person city jobs and services.

As the cost of animal protein declines, farming and ranching will see shifts. High-density grazing can increase the productivity of grasslands, reducing the demand for feed from cropland. It also produces healthier cows that need less finishing in feedlots to taste good. Further farm consolidation and conversion of cropland to grazing land seem likely. The impact will vary widely by location. In Georgia, where cotton is the dominant crop, and Atlanta is a powerhouse city, negatives will be few and far between. High plains land that benefits from improved grazing techniques could flourish. In an isolated river valley in Iowa with land ideally suited for industrial production of corn and soybeans, things might not be so pleasant for big farms. Life could improve for the median resident that has more income earning options. The worst-case scenario is that demand for traditional animal products falls while improvement in work options ends up being limited. The worst-case scenario seems much less likely with StarLink coming online and COVID-19 normalizing remote work.

While farm operations will probably consolidate, the average land parcel size could decline as every rural community becomes a bedroom community. 10-acre to 80-acre plots could proliferate. If farming and grazing acreage declines, negative environmental impacts could result. In previously forested places, a return makes sense. But in the high plains, residents may have to organize roaming ruminant herds or prescribed burns to maintain their prairie and prevent desertification.

Things rarely change very fast in rural communities, but the coming decades could be a lot more fun and pleasant than the past 15.