Family farms. The foundation of America’s food security. According to the USDA, 97 percent of farms are family farms, and they grow 90 percent of the food produced. But national policies to keep food affordable (American’s spend less than 7 percent of their paycheck for food) and the boom and bust cycles of farming have resulted in larger, more concentrated farming practices.
Farmers consolidate and incorporate to stabilize their income and find ways to pass on the 70 percent of farmland that will change hands over the next 20 years. Every census finds fewer and larger farms, but many people are opposed to the concept of corporate farming and the impact it may have on farms
When the trend toward larger, more specialized farms began in the 1970s, policymakers in nine states instituted statutes or constitutional provisions that restricted corporate farming. The laws either restricted corporate land ownership or livestock contracting by corporations. These anti-corporate farming laws have subsequently been weakened by exemptions or lawsuits over the years. For example, in 1975, Iowa’s legislators restricted vertical integration, preventing a meat processor from owning livestock through the growing phase, but a federal court declared the law unconstitutional. Even though the legislature amended the law, the Iowa Attorney General eventually entered into consent decrees agreeing not in enforce the law for 10 years and providing that any long-term contracts signed prior to the decrees’ expiration would continue to operate under the decree, even after it expired (which it did last year). Iowa has continued its restrictions on the ownership of agricultural land by corporations, while exempting family farm LLCs, owned by a majority of persons related to each other.
This year, three of the remaining anti-corporate farming laws are the subject of intense discussions in their state legislatures. Of the remaining corporate farming laws, only North Dakota had no exemptions for corporate livestock farming.
Ham and Cheese Law
That changed in 2015, when SB 2351 was passed exempting dairy- and hog-farming operations from the state’s ban on corporate-owned farms. Senator Terry Wanzek, the bill’s sponsor carefully crafted the law to protect family farms, but address his concern about the future of the state’s dairy industry. “My cousin owns a dairy farm next door to our crop farm, he is investing heavily in updated facilities, but if we wanted to incorporate together to add value to my crops, any corporation we set up would be illegal should our children inherit it, because they are not closely enough related for the current law. We have to provide ways for family farms to grow and continue to the next generation.” The compromise legislation he developed only allows corporations to own up to 640 acres for a dairy or hog farm, corporate ownership of any other type of farming operation, or of farm land, remains illegal in North Dakota.
However, the North Dakota Farmers Union (NDFU) successfully enacted a petition drive to put the legislation on the June primary ballot. Their Constitution gives residents the right to force a statewide vote on bills and now voters will make the final decision. A “no” vote supported by the NDFU means corporate dairy and hog farms owned by individuals further apart than 3 degrees of kinship will continue to be illegal. A 9000 hog farm planned for rural Cass County has enflamed emotions about the law, but it is set up as a Limited Liability Partnership and is not impacted by the legislation or the vote.
Vertical Integration
In Nebraska, a constitutional amendment, I-300, stipulating that family members must either reside on the farm or be actively engaged in the day-to-day labor and management of the farm, was declared unconstitutional, so corporate ownership of livestock is legal in Nebraska, but a ban on meatpackers owning livestock (vertically integrating) still stands. This has kept a Nebraska-based meat processor from owning livestock and paying farmers to raise them. Currently, 30 percent of the hogs in the U.S. are owned by packers, but not in Nebraska.
Nebraska meat packers could pay farmers in Iowa to feed hogs and then process them in Nebraska, but could not contract with Nebraska farmers. Legislation to allow this practice, LB 176 recently passed that removed the prohibition for hogs. An amendment to allow contract cattle production was defeated.
Nebraska Senator Al Davis was one of the lawmakers that opposed LB176. His concern is that any “pricing structure requires open market to determine pricing, and as contract hog production increases, farmers lose that open pricing. Nebraska’s ban on packer ownership keeps hog farms under the control of family farmers, not dominated by companies like the chicken industry is.” There are also concerns about handing that future of farming and food security in Nebraska to corporate owners.
Specie Equality
The South Dakota house is considering SB98, which will remove the regulations regarding hog farm ownership in the South Dakota Family Farm Act. Bill sponsor, Senator Gary Cammack says that singling out hogs in Family Farm Act is unconstitutional. “SB98 makes it so that all species are treated equally, ending the practice of additional restrictions on hog farms” says Cammack. The legislation passed the Senate and is currently under discussion in the House.
One thing for sure, the face of farming is changing, new technology and economies of scale have restructured the industry. Farmers seeking economies of scale, a way to fairly and efficiently pass the farm to the next generation or just liability protection are increasingly organizing as a partnership or corporation. Still, today these are family owned and operated. Only about 3 percent of farms are managed by full time managers or are organized as non-family corporations or cooperatives. The number of corporate controlled farms is fairly consistently nationally, ranging from 2.8 percent in North Dakota to 4% in Illinois, but the topic continues to be a controversial one across state legislatures.