Economic

Information 

Bulletin

Number 3 

United States

Department

of Agriculture

Economic

Research

Service

Carolyn Dimitri, Anne Effland, 

and Neilson Conklin

Electronic

Report

The 20th Century

Transformation of

U.S. Agriculture

and Farm Policy
United States

Department

of Agriculture

www.ers.usda.gov

Electronic Report from the Economic Research Service

Economic

Information

Bulletin

Number 3

The 20th Century

Transformation of 

U.S. Agriculture 

and Farm Policy

Carolyn Dimitri, Anne Effland, and Neilson Conklin

June 2005

Abstract

The structure of farms, farm households, and the rural communities in which they

exist has evolved markedly over the last century. Historical data on a range of

farm structure variables—including the value of agricultural production,

commodity specialization, farming-dependent counties, and off-farm work—offer

a perspective on the long-term forces that have helped shape the structure of agriculture and rural life over the past century. These forces include productivity

growth, the increasing importance of national and global markets, and the rising

influence of consumers on agricultural production. Within this long-term context

of structural change, a review of some key developments in farm policy considers

the extent to which farm policy design has or has not kept pace with the continuing transformation of American agriculture.

Keywords: farm policy, farm structure, policy adjustment, structural adjustment,

mechanization, productivity growth, global markets, consumer stakeholders, price

and income support, farm policy history 

Acknowledgments

The authors would like to acknowledge the academic and ERS reviewers of the

larger manuscript from which this report is excerpted. Their comments on that

work were helpful in preparing this shorter version. We also thank Lou King for

his valuable editorial assistance and Susan DeGeorge for the cover design, layout,

and final charts.
Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

Changes in Farms, Farm Households, and Rural Communities 

Across the Century . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

Longrun Forces Behind the Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

U.S. Farm Policy in the Context of Sectoral Change . . . . . . . . . . . . . . . .9

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

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Economic Research Service/USDA

The U.S. Department of Agriculture (USDA) prohibits discrimination in

all its programs and activities on the basis of race, color, national origin,

sex, religion, age, disability, political beliefs, sexual orientation, or

marital or family status. (Not all prohibited bases apply to all programs.)

Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should

contact USDA's TARGET Center at (202) 720-2600 (voice and TDD). 

To file a complaint of discrimination, write USDA, Director, Office of

Civil Rights, Room 326-W, Whitten Building, 14th and Independence

Ave., SW, Washington, DC 20250-9410, or call (202) 720-5964 (voice

and TDD). USDA is an equal opportunity provider and employer.

National Agricultural Library Cataloging Record:

Dimitri, Carolyn

The 20th century transformation of U.S. agriculture and farm policy.

(Economic information bulletin; no. 3)

1. Agriculture—United States—History—20th century.

2. Agriculture and state—United States. I. Effland, Anne B. W.

II. Conklin, Neilson Chase. III. United States. Dept. of Agriculture.

Economic Research Service.

IV. Title.

HD1761 
Introduction

A common point in the debate over U.S. farm programs has been that

current policies were tailored for a time in American agriculture that no

longer exists. The structure of farms and farm households—and of the rural

communities in which they exist—has changed enough over the last century

to raise questions about the efficacy of policies with roots in an agriculturally based economy. How have policies adapted to change in the agricultural

economy? How are they similar to Depression-era forms? What are the

effects on farmers and the U.S. economy?

To answer these questions, we gathered historical data on a range of farm

structure variables and reviewed some key developments in farm policy. The

data offer a perspective on the long-term forces that have helped shape the

present structure of agriculture and rural life, including productivity growth,

the increasing importance of national and global markets, and the rising

influence of consumers in agricultural production. This long-term view of

structural change provides some insights into the questions now being raised

about the efficacy and impacts of current farm policy in the 21st century.

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Changes in Farms, Farm Households, and

Rural Communities Across the Century

American agriculture and rural life underwent a tremendous transformation

in the 20th century. Early 20th century agriculture was labor intensive, and

it took place on a large number of small, diversified farms in rural areas

where more than half of the U.S. population lived. These farms employed

close to half of the U.S. workforce, along with 22 million work animals, and

produced an average of five different commodities. The agricultural sector

of the 21st century, on the other hand, is concentrated on a small number of

large, specialized farms in rural areas where less than a fourth of the U.S.

population lives. These highly productive and mechanized farms employ a

tiny share of U.S. workers and use 5 million tractors in place of the horses

and mules of earlier days. 

As a result of this transformation, U.S. agriculture has become increasingly

efficient and has contributed to the overall growth of the U.S. economy.

Output from U.S. farms has grown dramatically, allowing consumers to

spend an increasingly smaller portion of their income on food and freeing a

large share of the population to enter nonfarm occupations that have

supported economic growth and development. As a part of the transformation spurred by technological innovation and changing market conditions,

production agriculture has become a smaller player in the national and rural

economies. While the more broadly defined food and agriculture sector

continues to play a strong role in the national economy, farming has

progressively contributed a smaller share of gross domestic product (GDP)

and employed a smaller share of the labor force over the course of the

century (see box, “Farming’s changing role in the Nation’s economy”). Over

the same period, the share of the U.S. population living on farms also

declined (fig. 1), as did agriculture’s central role in the rural economy; while

farming-dependent counties once comprised most of the rural economy,

only 20 percent of nonmetro counties were considered farming-dependent in

2000 (fig. 2). 

The altered role of farming in the overall economy reflects changes at the

farm and farm household level. Since 1900, the number of farms has fallen

by 63 percent, while the average farm size has risen 67 percent (fig. 3).

Farm operations have become increasingly specialized as well (fig. 4)—

from an average of about five commodities per farm in 1900 to about one

per farm in 2000—reflecting the production and marketing efficiencies

gained by concentration on fewer commodities, as well as the effects of

farm price and income policies that have reduced the risk of depending on

returns from only one or a few crops. All of this has taken place with almost

no variation in the amount of land being farmed. 

Farm households have adapted as dramatic increases in productivity have

reduced the need for household labor on the farm, and as alternative

employment opportunities have developed in nearby rural and metro

economies. Although measures of off-farm work and income have varied

over the century, making comparisons over time difficult, about a third of

farm operators worked off the farm for at least 100 days in 1930 (the

earliest such data are available) (see box, “Off-farm income/work”). By

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1900

41 percent of workforce

employed in agriculture

1930

21.5 percent of workforce

employed in agriculture

Agricultural GDP as a share

of total GDP, 7.7 percent

1945

16 percent of the total labor

force employed in agriculture

Agricultural GDP as a share

of total GDP, 6.8 percent 

1970

4 percent of employed labor

force worked in agriculture 

Agricultural GDP as a share

of total GDP, 2.3 percent

2000/02

1.9 percent of employed

labor force worked in

agriculture (2000) 

Agricultural GDP as a share

of total GDP (2002),

0.7 percent

Source: Compiled by Economic

Research Service, USDA. Share

of workforce employed in agriculture, for 1900-1970, Historical

Statistics of the United States; for

2000, calculated using data from

Census of Population; agricultural

GDP as part of total GDP, calculated using data from the Bureau

of Economic Analysis.

Farming’s changing role

in the Nation’s economy
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1970, more than half of farms had off-farm income, and by 2000, 93 percent

of farms earned off-farm income. Off-farm work has played a key role in

increased farm household income; while farm household income was once

below the national average, in 2002 it exceeded the national average by

nearly $8,000.

1900 10 20 30 40 50 60 70 80 90 2000

Percent

Both the U.S. farm population and rural population have 

dwindled as a share of the Nation's overall population

Farm share of total population

Rural share of total population

0

10

20

30

40

50

60

70

Sources: Share calculated by Economic Research Service, USDA using data from Census of Agriculture, 

Census of Population, and Census of the United States.

Figure 1

Year

1930

30 percent of farmers

worked off farm for an

average of 100 days

1945

27 percent of farmers

worked off farm

1970

54 percent of households

had off-farm income 

2002

93 percent of households

had off-farm income

Source: Compiled by Economic

Research Service, USDA, using

data from Census of Agriculture

and Census of the United States.

Off-farm income/work
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Figure 2

Nonmetro farming-dependent counties, 1950 and 2000

2000

1950

Nonmetro farming-dependent

Other nonmetro

Metro

Source: Economic Research Service, USDA. Farming-dependent counties are defined by ERS. 

For 1950, at least 20 percent of income in the county was derived from agriculture. For 2000, 

either 15 percent or more of average annual labor and proprietors' earnings were derived from 

farming during 1998-2000 or 15 percent or more of employed residents worked in farm occupations. Metro/nonmetro status is based on the Office of Management and Budget (OMB) June 

2003 classification.
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0

100

200

300

400

500

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Number Acres per farm

As the number of farms declined, their average size increased

Figure 3

1900 10 20 30 40 50 60 70 80 90 02 2000

Number of farms

Average farm size

(acres per farm)

Source: Compiled by Economic Research Service, USDA, using data from Census of 

Agriculture, Census of Population, and Census of the United States.

Year

Figure 4

As farms have become more specialized, the number of commodities 

produced per farm has decreased

Commodities per farm

1900 1930 1945 1970 2002

0

1

2

3

4

5

6

Note: The average number of commodities per farm is a simple average of the number of farms 

producing different commodities (corn, sorghum, wheat, oats, barley, rice, soybeans, peanuts, 

alfalfa, cotton, tobacco, sugar beets, potatoes, cattle, pigs, sheep, and chickens) divided by the 

total number of farms.

Source: Compiled by Economic Research Service, USDA, using data from Census of Agriculture, Census of the United States, and Gardner (2002).

Year
Longrun Forces Behind the Changes

As with the rest of the U.S. economy, the transformation in American agriculture and rural life over the last century has been driven by longrun

economic developments, as well as periods of economic crisis. Among the

most influential trends: technological development, the rise of consumer

influence in agricultural production, and the increasing integration of American farming into national and global markets.

Technological developments in agriculture have been particularly influential

in driving change in the farm sector. Following World War II, technological

developments occurred at an extraordinarily rapid pace. Advances in mechanization and increasing availability of chemical inputs led to ever-increasing

economies of scale that spurred rapid growth in average farm size, accompanied by an equally rapid decline in the number of farms and in the farm

and rural populations. From complete reliance on animal power in 1900,

farmers rapidly embraced mechanical power (see box, “Mechanization”).

Tractors had essentially replaced animal power by 1970, and mechanical

harvesting of crops (sugar beets, cotton, and tomatoes, for example) became

routine by the late 1960s. Advances in plant and animal breeding

throughout the century facilitated mechanization and increased yields and

quality, enhanced by the rapid development of inexpensive chemical fertilizers and pesticides since 1945 (fig. 5). As a result of these advances,

growth in agricultural productivity averaged 1.9 percent annually between

1948 and 1999. Productivity growth in manufacturing over the same period

averaged 1.3 percent annually, although it ranged from 0 to 2.3 percent,

depending on the industry (Gullickson).

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0.0

0.2

0.4

0.6

0.8

1.0

1.2

Total factor productivity (Index 1996=100)

Farms are growing more productive

Figure 5

1948 52 56 60 64 68 72 76 80 84 88 92 96

Note: Productivity captures the increase in production not accounted for by the growth in 

quantity of inputs used, and is expressed as total factor productivity (the ratio of total outputs to 

total inputs). When total factor productivity is rising over time, a greater level of production can 

be obtained from the inputs used. Productivity changes result from changes in efficiency, the 

scale of production, and technical change.

Source: Economic Research Service, USDA, Agricultural Research and Productivity Briefing 

Room, http://www.ers.usda.gov/briefing/AgResearch/.

Year

1900

Number of work animals

21.6 million

1930

Number of horses, mules

18.7 million

Number of tractors

920,000

1945

Number of tractors

2.4 million

Number of mules and

horses used for work

power on farm

11.6 million

1960

Number of tractors

4.7 million

Number of horses and

mules used for work power

on farm

3 million

Note: Data on work animals were

no longer collected by the Census

after 1960.

Source: Compiled by Economic

Research Service, USDA, using

data from Census of Agriculture

and Census of the United States.

Mechanization
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Since 1900, new technology and development of rural infrastructure have

linked farm households ever more tightly to increasingly integrated national

markets for labor and capital as well as goods and services. The growing

use of purchased inputs for farm production has required cash income, as

has the growing demand for consumer goods by farm households. As farm

work and household consumption have required more cash and less labor,

members of farm households have had both incentive and opportunity to

seek off-farm work, which has made rural areas increasingly attractive to

nonfarm industries. 

Consumer influence in agricultural production has also grown over the

years, as consumers have become more time-pressed and affluent, creating

new pressures on the farming sector. Demand has shifted toward products

that meet convenience, ethnic, and health-based preferences, while efforts to

meet these new demands have led to new relationships between food

producers, processors, and retailers. Contracting and vertical integration for

supply and quality control, and development of special-use, high-value

commodities, have changed the structure of agricultural markets, further

increasing the specialization and scale, particularly of livestock and

specialty crop operations. (See MacDonald et al.) 

Consumers have also recently demanded attention to environmental issues

in agriculture. Growing interest in environmentally friendly production practices has expanded markets for organic and other specialized products and

has influenced the direction of environmental policy for agriculture.

Programs have moved from a focus on soil conservation and fertility, largely

aimed at boosting farm productivity, to include measures addressing water

and air quality, wildlife and landscape protection, food purity, and animal

welfare, phenomena whose effects are felt and manifested away from the

farm. (See the ERS web briefing room on Conservation and Environmental

Policy.)

While increasingly integrated market structures have developed to meet the

quality and safety demands of American consumers, global markets have

introduced new consumers and new competitors. Global markets were

increasingly important to U.S. farmers as the first wave of globalization—

propelled by steam and the telegraph—was at its peak, and exports helped

to fuel rising prices that helped to make 1910-14 the “golden age” of American agriculture. However, as world market prices began to drop in the

1920s, farmers joined manufacturing interests to push for increased tariff

protection. These efforts culminated in the passage of the Smoot-Hawley

tariffs in 1930. The United States was not alone in escalating tariffs, and

world trade plunged. In the 1930s, the volume of U.S. agricultural exports

fell by more than 20 percent from the previous decade. 

Agricultural exports remained flat until the 1960s but began to rise dramatically by the 1970s (fig. 6), propelled by adjustments in exchange rates as

the dollar was freed from the gold standard and by the Soviet Union’s

growing appetite for imported grains and oilseeds. Global markets have

proved volatile at times, however, and disruptions in foreign demand helped

to precipitate a farm financial crisis in the 1980s.
By the 1990s, a second wave of globalization was in full swing and American agriculture was becoming part of an increasingly integrated global

market, with both agricultural imports and exports rising rapidly. As

emerging competitors reformed their policies and adopted technologies

already being used in the United States and other developed countries,

global competition for international markets grew, pressuring U.S. producers

in both export and domestic markets. (See “The U.S. Trade Balance,”

Amber Waves, February 2004, and “Dynamics of Agricultural Competitiveness: Policy Lessons From Abroad,” Amber Waves, April 2003.)

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Agricultural exports (indexed, 1987=100)

U.S. exports grew dramatically in the last half of the century

Figure 6

0

20

40

60

80

100

120

140

160

1915 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 2000

Note: Standard techniques were used to combine four series of data for quantity of goods 

exported.

Source: Compiled by Economic Research Service, USDA, using data from Agricultural 

Statistics.

Year
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U.S. Farm Policy in the Context 

of Sectoral Change

Since the passage of the first Agricultural Adjustment Act (AAA) in 1933,

farm price and income support programs have been the core of agricultural

policy in the United States. This policy initially arose as an emergency

response to post-World War I economic distress in agriculture that worsened

with the onset of the Depression. However, the programs have been adjusted

over time as policymakers have responded to the political, social, and

economic pressures that agricultural productivity growth, market integration,

and structural change have imposed on the farm sector. (See box, “Milestones in U.S. agricultural policy.”) 

In the 1930s, the economic, social, and political (the AAA played an important role in solidifying rural and southern support for the New Deal)

rationale for a new approach to farm policy was clear. Farm household

incomes were low even by Depression-era standards and off-farm employment opportunities were few—farming dominated the rural economy. The

Federal approach to dealing with these problems—commodity-specific price

supports and supply controls—were a product of the farm sector’s structure;

farms were generally small, diversified operations selling primarily to

domestic markets behind high tariff walls. In this environment, the original

AAA and subsequent farm legislation into the 1960s relied heavily on price

supports and supply controls to increase returns to farmers. (See History of

Agricultural Price-Support and Adjustment Programs, 1933-84 for a

detailed history of farm legislation.) 

After World War II, rising productivity, driven by the rapid adoption of

mechanical and chemical technology, led to growing surpluses even as the

number of farms and production agriculture’s share of economic activity

continued to decline. For over a decade centered in the 1950s, the farm

policy debate focused on whether to continue high price supports and

supply controls or get the government out of agriculture. A compromise

solution was reached in the Food and Agricultural Act of 1965, which

retained elements of supply control but relied on a combination of reduced

price supports and new income support payments to protect farm income. At

the same time, it became obvious that a more market-oriented policy was

necessary to help American farmers take advantage of the rising export

demands of global markets. The loan rates used to support prices never

again rose to the high levels of the 1940s and 1950s. The 1985 Food Security Act and the 1990 Food, Agriculture, Conservation, and Trade Act helped

create incentives to encourage marketing commodities (rather than forfeiting

them to government-held surpluses), as well as some flexibility in planting

decisions. Supply controls ended with the 1996 Federal Agriculture

Improvement and Reform Act, and new forms of income support payments

not tied directly to farmers’ current production decisions— “decoupled”

payments—replaced the older income support programs. The evolution of

farm policy from one based on supply controls and high price supports to

one based primarily on direct Government payments has undoubtedly

reduced the economic inefficiencies of resource misallocation and price

distortions associated with farm programs.
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Milestones in U.S. agricultural policy

1933

Agricultural Adjustment Act: First “farm bill” established the New Deal mix of commodity-specific

price and income support programs.

1936

Soil Conservation and Domestic Allotment Act: First direct links created between soil

conservation and commodity programs.

1949

Agricultural Act: Established policy of high, fixed-price supports and acreage allotments as

permanent farm policy. Programs revert to the 1949 provisions should a new farm bill fail to pass.

1954

Agricultural Act: Introduced flexible price supports to commodity programs.

1956

Agricultural Act: Established Soil Bank, which introduced use of conservation reserve in addition 

to acreage control for supply management. The program ended after only 2 years.

1965

Food and Agricultural Act: Introduced new income support payments in combination with reduced

price supports and continued supply controls.

1970

Agriculture Act: First inclusion of title for Rural Development in a farm bill.

1973

Agriculture and Consumer Protection Act: Introduced target prices and deficiency payments to

replace price supports, coupled with low commodity loan rates, to increase producer reliance on

markets and allow for free movement of commodities at world prices.

1977

Food and Agriculture Act: First inclusion of title for Food Stamps and other commodity distribution

programs in a farm bill.

1985

Food Security Act: Introduced marketing loan provisions to commodity loan programs to reduce

forfeitures by allowing repayment of loans at lower rate when market prices fell, with the intention 

of aiding in reducing Government-held surplus grain. Re-established a conservation reserve.

1996

Federal Agriculture Improvement and Reform Act: Replaced price support and supply control

program with program of direct payments based on historical production. Introduced nearly 

complete planting flexibility.

2002

Farm Security and Rural Investment Act: Introduced counter-cyclical payments program triggered

when current prices fall below a target level, but paid based on historical production. Introduced

working-lands conservation payments through the Conservation Security Program. Continued

planting flexibility and program of direct payments based on historical production, allowing

updating of historical base acres and adding historical soybean acres.

Source: Compiled by Economic Research Service, USDA. The complete texts of U.S. farm bills from 1933 to

2002 are available on the website of the National Agricultural Law Center

(http://www.nationalaglawcenter.org/farmbills/).
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Agricultural policies not only moved in a more market-oriented direction,

they also broadened beyond commodity programs in the postwar period.

Food stamps had roots in the rural relief and commodity distribution policies of the 1930s and 1940s, but became a highly visible national antipoverty program with the 1964 Food Stamp Act. Beginning with the 1977

Food and Agriculture Act, food stamps and other commodity distribution

programs were included in farm bills that governed the more traditional

commodity programs as well as related conservation programs. Rural development programs, also with roots in the 1930s, first appeared in a farm bill

in the 1970 Agricultural Act, which was followed by the 1972 Rural Development Act, offering a broad range of services, loans, and technical guidance to rural communities adjusting to change. 

Although farm policy and related programs have evolved since the 1930s,

commodity programs have retained two key features: commodity specificity

and a focus on income support. Today, in a farming sector characterized by

highly specialized operations, fewer than 25 percent of farms receive

payments from programs tied to a limited number of “program crops.”

Moreover, in an environment in which more than 90 percent of farm household income is derived from off-farm sources, the impact of farm programs

on the well-being of farm households continues to decline. These circumstances are very different from those of the 1930s, when farm policies

achieved broader coverage of farm households that depended on farming for

their livelihoods. 
Conclusion

Overall, farmers found ways to adapt to the changes of the last century.

Those who remained in agriculture increased their efficiency by expanding

and specializing their operations to take advantage of economies of scale, or

by identifying niche markets to maintain profitability. Others moved out of

farming and into other enterprises or occupations, or combined farming with

off-farm work, with other family members tapping different sources of

income. In some cases, farming has become a secondary occupation,

providing a preferred lifestyle rather than a primary source of income. 

Certainly, not all adjustments have been voluntary or preferred, and regional

differences have affected the outcomes. Areas closer to centers of economic

growth or to attractive natural amenities have benefited, while areas far from

urban development and natural amenities, and areas of persistent poverty—

associated with higher concentrations of racial and ethnic minorities—in

most cases have not. (See ERS briefing rooms on Rural Population and

Migration and on Rural Income, Poverty, and Welfare.) 

Farm policies have never fundamentally altered the trajectory of change, but

they have in some cases affected its pace. For example, the institutionalization of what began as emergency income support in the 1930s has likely

slowed the movement of labor out of the farm sector. In other cases, policies

have spurred change—for example, the risk-reduction effects of price

supports and the planting rigidities imposed by supply controls encouraged

specialization. 

As the new century gets underway, technological development and market

integration remain forces of change, and their influence, along with that of

consumers, appears likely to continue. The structure of farming continues to

move toward fewer, larger operations producing the bulk of farm commodities, complemented by a growing number of smaller farms earning most of

their income from off-farm sources, all increasingly affected by global

events. Although many details of U.S. farm programs have changed over the

last 40 years in response to new economic and political circumstances, two

key features of commodity programs—commodity specificity and focus on

income support—have remained constant. Today, cash receipts for

supported commodities (wheat, feed grains, rice cotton, oilseeds, dairy, and

sugar) account for only 34 percent of total farm cash receipts. Direct

government payments for income support reach only about 500,000 farms

(around 25 percent of all farms). The extent to which farm policy meets

contemporary objectives for maintaining the well-being of farm households

and for sustaining the agricultural economy is a matter for public debate. 

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U.S. Department of Agriculture, Economic Research Service. Briefing room

on Rural Income, Poverty, and Welfare. www.ers.usda.gov/Briefing/IncomePovertyWelfare/.
U.S. Department of Agriculture, Economic Research Service. Briefing room

on Rural Population and Migration. www.ers.usda.gov/Briefing/Population/.

U.S. Department of Agriculture, National Agricultural Statistics Service.

2002 Census of Agriculture.

U.S. Department of Agriculture, National Agricultural Statistics Service.

Agricultural Statistics, published annually. 

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The 20th Century Transformation of U.S. Agriculture and Farm Policy / EIB-3

Economic Research Service/USDA