Cochranes Treadmill and Helping the New Generation of Farmer

Over the course of the past century the average farm size has tended upwards, from just under 150 acres in 1910 to roughly 420 acres in 2010. An oft cited justification for this upwards trend in farm sizes is Cochrane’s treadmill. To simplify, Cochrane’s treadmill is the idea that in an effort to remain cost competitive, agricultural firms must have enough capital to adopt new technologies quickly, which causes small farms (with lower amounts of capital) to become uncompetitive and to fall out of the market.

Consider the example of adopting a tractor. The first farmer with the funds available to purchase a tractor would’ve been able to save large amounts of labor cost. They would’ve passed on these cost savings through lower prices. In order to compete with the first tractor owners’ lower prices, the remaining farmers would either have to purchase a tractor, or choose to leave farming for some other profession. The larger farms would have the cash available to choose the first option and remain in business, whereas the smaller farms would be forced to leave the industry. This process repeated itself with every major technological innovation, such as chemical fertilizers, pesticides, herbicides, GMO’s, and the development of factory farming in general. With every new technology the largest farms franticly race to adopt it in order to stay in business, whereas the small farmers pursue other careers. This is the problem of Cochrane’s treadmill.

Despite this, roughly 85% of first generation farmers under 40 years old farm less than 100 acres. Keeping these farmers involved in agriculture is essential to U.S. food security, as they are outnumbered nearly 6 to 1 by farmers over the age of 65, who will likely not be farming for many more years. How can we overcome Cochrane’s treadmill and create an agricultural industry in which small farms can afford to continue farming, and profit by doing so?

The theory of Cochrane’s treadmill involves the assumption that the good being sold by farmers is identical, and thus the only way to compete for consumers is to offer a lower price. If you only have the option to buy two bushels of corn grown identically, you’re going to choose to buy the cheaper bushel. If however the two bushels of corn were grown differently, your decision will be based not only on the price, but on your preferences for different growing styles of corn. Maybe you’re willing to pay a premium for organic or non-GMO corn (as you are subscribed to this newsletter, I’d assume this is the case!). By creating an agricultural industry which offers variety, we can allow farmers a way to compete for customers other than simply offering lower prices, eliminating the problem of Cochrane’s treadmill.

This is the other side of our goal at This Old Farm. On the consumer end, we want to be able to offer a variety of products which meet the needs of a variety of consumers. On the producer end, we want to make farmers aware of the variety of goods consumers desire, allowing them to produce a product for which they can receive a price which makes farming a worthwhile enterprise. By doing so, we can create an agricultural industry which is welcoming to young farmers, ensuring that the next generation will be able to feed itself in a way beneficial to both producers and consumers. This is a goal I think we can all agree is worthwhile, whether or not you’re willing to pay a premium for organic goods.

Conner Smith

Sources
Ackoff, Sophie, National Young Farmers Coalition. Building a Future with Farmers II: Results and Recommendations from the National Young Farmer Survey. November 2017. retrieved from http://www.youngfarmers.org/wp-content/uploads/2017/11/NYFC-Report-2017.pdf

Mitchell, Paul. Technological Change in Agricultural Production: Dealing with Cochrane’s Treadmill. retrieved from https://aae.wisc.edu/aae320/AgPolicy/Treadmill.pptx

One Comment

  1. Ed Crowley

    This was a great article! I grew up on a large, specialised Dairy farm that was constantly chasing after ‘volume’ and size. Now I have a part-time, small farm, where we raise poultry products, dairy goats, farm to table beef, and sheep and Alpaca’s for wool. We do all of our marketing through the internet and directly to end customers. As a result, we get up to a 100% price premium versus selling through middle men. Now, I’m not knocking large scale commercial agriculture. It gives us incredibly inexpensive food and a strong commodity base for export. However, from the producer side, I really enjoy the benefits of getting off Cochranes Treadmill and taking my products directly to the market. It means I have to ‘market’ my products, and it is more work – but to me – it’s much more fun and allows me to farm which I couldn’t do if I was trying to start a commercial farm from scratch today.

    Reply

Leave a Reply