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Regional Economic Development Opportunities in Agriculture

Lindsay L. Smith



The State of Michigan is experiencing a rapid loss of farmland due to development pressures and the decreasing profitability of conventionally grown commodity crops in the global marketplace. Its situation is not unique relative to other states. Recognizing Michigan's agricultural heritage and expertise (it is the second most agriculturally diverse state after California), as well as increasing opportunities in value-added processing, organic and niche markets, several regional economic development initiatives are underway. A brief discussion of these cases follows a treatment of the economic benefits to be had from strengthening local food systems.


Photo by Tim McCabe from USDA website:

According to the American Farmland Trust, America loses two acres of farmland to development every minute.[1] The same organization estimates that Ohio, Michigan and Indiana have an accumulated, combined loss of more than one million acres of farmland, for a loss rate of nearly 500 acres per day.[2] One expert explains the difficulty that conventional commodity farmers have remaining solvent as follows:

"Profits to American agricultural producers are being squeezed. For an increasing number of commodities, price is global, production cost is local. Thus profits vary by location with a single competitive world price ceiling affecting producers of a global commodity, it means that local costs determine the profit per unit for producers dispersed across the globe; therefore, costs determine which producers will survive in the long run." [3]

As labor costs are higher in the United States than in many other nations, so are the local costs of agricultural production here. Only farmers with large industrial operations subsidized by the U.S. government, and/or agribusiness firms contracting hundreds of producers, can hope to compete in this system. According to the National Family Farm Coalition, many smaller conventional producers have no choice but too contract with large agribusiness companies whose profit-seeking goals do not align with efforts to build a strong regional agricultural economy. These contracts often result in environmentally destructive production methods such as monoculture cultivation, and intensive levels of pesticide use.[4]

The profitability of agribusiness corporations has led to increasing consolidation in the food industry and as a result, intense pressure on other actors in local economies such as small processors and retailers of conventional products. In an article written in 2000, William Greider reported that sector by sector, four firms control 82 percent of beef packing, 75 percent of hogs and sheep, and half of chickens. Major supermarket chains are concentrated regionally, though not nationally. Four firms hold 74 percent of market control in ninety-four large U.S. cities. [5]

Many producers, whether conventional or organic, also face increasing property taxes as urban sprawl increases land values around them. Furthermore, for conventional producers, data from the USDA indicates that between 1990 and 2000, output decreased at the same time that the cost of agricultural inputs increased.[6]

Current federal agricultural policy perversely supports decreasing profits for conventional producers by encouraging overproduction instead of the reverse.[7] The wisdom of this policy has been called into question for years by small farmers and many others, as the evidence of its negative impacts on family farms, land, local economies, etc. continues to accrue. And in recent years, the very legality of federal farm policy has been called into question by other member nations of the World Trade Organization (WTO). They assert that farm subsidies create an unfair competitive advantage for U.S. and European producers on the world market. Faced with these realities, and some encouraging signs from consumers in recent years, increasing numbers of producers are turning toward healthier production methods, new uses for their products, and innovative ways of marketing and selling products.

Growing Markets, Local Benefits

Data from the USDA indicates that consumer demand for organic products grew steadily throughout the 1990s at a rate of 20 percent or more annually.[8] Furthermore, Willer and Yussefi report more recently that

"The North American market for organic products is reporting the highest growth worldwide. Organic food and drink sales were estimated to have expanded by 20 percent in 2003 to reach US $ 10.8 billion. Consumer demand for organic products remains buoyant and the region is expected to account for most global revenues in the foreseeable future."[9]

Data from both sources confirms that more farm acreage is thus being converted to organic cropland on a yearly basis. This conversion is not just a positive development from the standpoint of ecological and human-health. Organic farming reaps a number of economic benefits for producers and their local economies as well.

The USDA notes that producers that market directly to consumers earn more than those that do not. Not only do organic products bring a higher price than do conventional products, but organic producers market directly much more often than do conventional farmers. [10] Organic farms tend to be small, though large scale operations continue to grow to take advantage of growing consumer demand. (The growth of large-scale organic operations, and consolidation in the organics industry, lead to largely the same social and economic problems found in today's conventionally-grown food market. For more information on efforts to promote small-scale, local, organic production over large-scale production, see the Organic Consumers Association website.) Finally, a network of multiple, small farming ventures provides economic benefits to local communities that fewer industrial operations do not. An oft cited study by Anthropology Professor Walter Goldschmidt on three California farming towns found just this.[11]

Organic farming is not the only market that merits attention when in comes to thinking about agricultural products and economic development, however. America's Farmland Trust argues that saving farmland is a worthy investment for another reason: tourism. Distinctive agricultural communities are magnets for tourism they say, pointing to cases such as Vermont, Napa Valley, and perhaps the lesser known Lancaster County, Pennsylvania . In the latter, agriculture still reigns as the leading industry, however, the Amish and Mennonite cultures behind this industry's success are strong draws; making tourism the second most important economic activity there.[12]

In Portland, Oregon, the city's Portland-Multnomah Food Policy Council not only strives to strengthen the health of the regional farming community, but that of the urban center as well. In one report the Council asserted that downtown farmers markets energize business districts and add vibrancy to urban culture.[13] This suggests that there are potentially many positive externalities and spill-over effects to be had from promoting a strong regional food system, above and beyond the more obvious economic benefits of preventing leakage from the local economy, creating support service jobs from local agricultural enterprises, etc.

Photo by Bill Tarpenning from USDA website:

Case Study: Southeast Michigan Agricultural Economic Development Initiative

County-level governments in Jackson, Lenawee, Monroe, Washtenaw, and Wayne Counties, farm business organizations, retailers, public institutions, community groups, etc., are working with the non-profit organization Food Systems Economic Partnership to identify economic opportunities to improve market infrastructure for regional farm products.

Under the guidance of a leadership team representing the diverse players in the local food system (i.e. farmers, food processors, distributors, retailers, institutional procurers, consumers, etc.), a regional network of these actors is forming. Building upon data collected from surveys, statistical analysis, GIS-mapping, and economic modeling, a feasibility study and market analysis will be completed to:

One example of the type of business development that this initiative is proposing is an ethanol plant for Lenawee County . To create a new market for local corn producers, plans call for the plant to convert 18 million bushels of corn per year to 55 million gallons of ethanol.[14]

A very similar initiative is underway in Northwest Michigan in 7 counties around the Grand Traverse Bay Area. The UM, MSU, MSU Extension, the Northern Lakes Economic Alliance, and the Michigan Land Use Institute, are among the major partners in the project.

Many Tools for Planners to Use in Strengthening Local Agriculture

Planners with skills in community and economic development, as well as land use planning, can play a critical role in building a regional food system. Recognizing the interdependence of rural and urban economies, and the benefits that each provides to the other (i.e. markets for necessary products, rural landscapes and opportunities for tourism and recreation, etc.); a number of creative enterprises and policy tools for promoting local agriculture continue to be pioneered in communities around the country. In addition to some of the ideas mentioned previously, a review of popular and academic literature yields the following suggestions. Some of these tools can be employed more directly by planners in making recommended changes to zoning ordinances, while others require forming partnerships with multiple organizations to promote policy change.

Land Use Planning and Zoning Amendments

One way to protect farmland from encroaching development is through a PDR (purchase of development rights.) A PDR allows for the compensation of property owners, generally at an amount reflecting the difference between a parcel's development value and its worth as agricultural land. In exchange, property owners must keep the land in farming. The entity holding the PDR is legally guaranteed that the parcel will not be developed. Furthermore, matching funds are available in the Farm Security and Rural Investment Act of 2002 for governments, tribes, and land trusts to defray the costs of purchasing these easements.[15]

According to Patty Cantrell of the Michigan Land Use Institute, Michigan's Peninsula Township was the first in the State to change its zoning code to promote agro-tourism, and on-farm value-added processing activities and marketing to the public. Cantrell reports that in Farm Processing Amendment 139, "the township [moved] a set of processing and retail activities from special uses on farms to uses of right and [defined] retail sales and processing as part of the farm operation itself."[16]

The City of Portland has codified agricultural land as an industrial use in its land use planning.[17] This rightly transforms the notion that agricultural land is a holding category waiting for development into the idea that agriculture provides a vital service to the local economy.

Economic Development

In terms of economic development initiatives, the following points offer suggestions for ways to put more money in local producers' pockets, and even spawn new agriculturally-related businesses:

Community Planning and Involvement

Finally, University of Wisconsin-Madison Professor Marcia Canton Campbell[18] suggests that planners can also use their skills to strengthen the local food system in the following ways:

For Additional Information:

Information for Planners on Programs and Policies to Strengthen Local Farming

Farm-to-School Programs:

The City of Portland's Food Policy and Programs:

The Michigan Land Use Institutes 2002 Report: The New Entrepreneurial Agriculture. Available at:

National Farm Policy Reform to Protect Farms and/or Support Small Producers

American Farmland Trust:

National Family Farm Coalition:

North American Organizations Dedicated to Building Local and Regional Food Systems

Community Food Security Coalition:

Food Share:

Organic Consumers Association:

In Southeast Michigan

Food Systems Economic Partnership:

Growing Hope:

Other Resources:

Journal of Planning Education and Research. Issue 23, June 2004.

Planners Network Magazine. Progressive Planning. Winter 2004 Issue: Food & Planning. Select articles available at:


[1] Around the country: Great Lakes Region American Farmland Trust. Retrieved: February 15, 2005

[2] Ibid.

[3] Blank, Steven. (2002) A portfolio of threats to American agriculture. Contemporary Economic Policy. 20(4): 381-393.

[4] For more information, see the National Family Farm Coalition website at

[5] Greider, William. (2000) The Last Farm Crisis. The Nation. Retrieved December 21, 2004.

[6] See Blank.

[7] A brief, popular treatment of U.S. Agricultural History can be found in Michael Pollan's October 12, 2003 article in the New York Times: The (Agri)Cultural Contradictions of Obesity.

[8] Greene, Katherine and Amy Kremen. U.S. Organic Farming: A Decade of Expansion. USDA Economic Research Service. Agricultural Outlook. November 2002. http://ers.usda/Data/Organic/ Retrieved March 23, 2005.

[9] Willer, Helga and Minou Yussefi (2005). The World of Organic Agriculture: Statistics and Emerging Trends 2005. International Federation of Organic Agriculture Movements (IFOAM), Bonn , Germany . 7th, revised edition Retrieved: May 10, 2005.

[10] See Greene and Kremen.

[11] Goldschmidts much cited study is his 1947 "As You Sow: Three Studies in the Social Consequences of Agribusiness."

[12] Fact Sheet: Why Save Farmland American Farmland Trust. Retrieved: February 15, 2005

[13] Food Policy Recommendations. Portland-Multnomah Food Policy Council. October, 2003. Retrieved March 23, 2005.

[14] Mulcahy, John. 2005. Use 'food system' to allay problems, agriculture leaders urge. Ann Arbor News. 9 March.

[15] Berton, Valerie. (2002) Keeping 'em down on the farm. Planning 68(7): 24-27

[16] Cantrell, Patty. (2003) Zoning Changes Boost Entrepreneurial Agriculture. Michigan Planner 7(11): 1

[17] See Portland-Multnomah Food Policy Council.

[18] Suggestions taken from Campbells Building a Common Table: The Role for Planning in Community Food Systems. (2004) Journal of Planning Education and Research 23:341-355.