Recently, a great deal of concern has been expressed about challenges resulting from the conversion of agricultural land to non-agricultural use. On the whole, the challenges from a loss of farmland might seem benign given increases in productivity, but on a local level these changes can be devastating to agribusinesses whose volume is tied to crop acreage. Nationally, approximately 4% of working land (including land used for crops, grazing, timber, and wildlife management) has been lost to non-agricultural use over the last twenty years. However, the problem is stronger in Texas and the south and along coastal areas.
Mainly the problem stems from increased land values, which provide greater incentives to sell or subdivide agricultural land. This might be especially problematic when we consider that the demographics of the farm population is skewed toward an older generation looking to retire or provide an inheritance. Land values continue to increase with trends toward urbanization fueled by population growth. The Texas population has increased 42% since 2000, compared to 18% growth for the entire United States in the same time.
Data from the Texas A&M Natural Resources Institute shows that the losses in working land are primarily in crop land and grazing land. Anecdotally, cooperative managers in coastal Texas report that much of the land lost from agricultural production was good productive farmland. Reportedly, much of the decision to sell land has been from landowners, not farmers.
Cooperatives being impacted by these trends have basically four strategic alternatives:
- Restructure or downsize
- Exert greater control over land use
- Gain economies of scale through consolidation
- Expand into new markets
A successful strategic response may incorporate one or all these alternatives. They each have their merits. Restructuring or downsizing recognizes that the cooperative may have assets that are no longer providing an adequate return. However, this strategy on its own seems to admit defeat. Some cooperatives in the citrus industry exert greater control over the land use by offering grove management services, thus providing landowners the motivation and expertise needed to keep land in production. Mergers and acquisitions are likely when there are economies of scale to be gained. However, for mergers to be a successful strategy, cooperatives must engage in these discussions while there is still value in both organizations. The cooperative that waits until there are no other options will not be an attractive partner for a merger. Finally, a cooperative could reinvent itself to meet the changing demands of members and the needs of new customers. This will require an evaluation of the mission of the cooperative and its value proposition. This is perhaps the most difficult of the strategic options, but also the choice with the greatest potential benefit. Changes in land use may come with new market opportunities. For example, some working land has been converted from crop land and grazing land to wildlife management, including hunting leases. These landowners will likely have some needs similar to farmers. The land is still there. Its use has changed. The successful cooperatives will be those that can remain relevant to the business opportunities around them.
Park, John. “Agricultural Land Conversion a Concern for Cooperatives.” Southern Ag Today 1(50.5). December 10, 2021. Permalink