Agriculture and rural life in America underwent an extraordinary transformation in the 20th century. Agriculture at the beginning of the 20th century was intensive and 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 nearly half of the U.S. workforce, along with 22 million working animals, and produced an average of five different commodities, according to a presentation from the U.S. Department of Agriculture.

Increasing Efficiency

The 21st-century agricultural sector, on the other hand, is concentrated on a small number of large, specialized farms in rural areas, where less than a quarter of the U.S. population resides. These highly productive and mechanized farms employ a small fraction of the American workforce and use 5 million tractors instead of horses and mules from earlier times.

As a result of this transformation, U.S. agriculture has become increasingly efficient and has contributed to overall economic growth. Production from U.S. farms has increased dramatically, allowing consumers to spend a smaller portion of their income on food and freeing up a significant portion of the population to enter non-agricultural occupations that have supported economic growth and development.

As part of the transformation driven by technological innovation and changing market conditions, production agriculture has become a smaller player in national and rural economies. While the food and agricultural sector, broadly defined, continues to play a strong role in the national economy, agriculture has progressively contributed a smaller share of the gross domestic product (GDP) and employed a smaller share of the workforce over the century.

Decreasing Dependence

During the same period, the proportion of the U.S. population living on farms decreased, as did the central role of agriculture in the rural economy. While agriculture-dependent states once comprised the largest part of the rural economy, only 20% of them were considered agriculture-dependent in 2000. The altered role of agriculture in the overall economy reflects changes at the farm and household levels.

Since 1900, the number of farms has decreased by 63%, while the average farm size has increased by 67%. Farm operations have also become increasingly specialized, from an average of about five commodities per farm in 1900 to about one per farm in 2000, reflecting production and marketing efficiencies gained through focusing on fewer commodities, as well as the effects of price and income policies that reduced the risk of relying solely on the profits from one or a few crops.

All of this has occurred without any change in the amount of cultivated land. Farm households have adapted as dramatic increases in productivity reduced the need for farm labor and created alternative employment opportunities in nearby rural and metropolitan economies.

Labor Volume

Although measurements of off-farm work and income have varied over the century, making time-comparisons difficult, about one-third of farm operators worked off the farm for at least 100 days in 1930 (the oldest such data available).

By 1970, more than half of farms had off-farm income, and by 2000, 93% of farms had off-farm income.

Off-farm work played a key role in increasing farm household incomes; while farm household income was once below the national average, by 2002 it exceeded the national average by nearly $8,000.

Consumer Influence

Consumer influence on agricultural production has also increased over the years as consumers have become more time-pressed and affluent, creating new pressures on the agricultural sector.

Demand has shifted toward products that meet comfort, ethnic, and health 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, as well as the development of high-value, specialty products, have changed the structure of agricultural markets, further increasing specialization and scale, particularly in livestock and specialty crop operations.

Consumers have recently demanded attention to environmental issues in agriculture. Increasing interest in organic production practices has expanded markets for organic products and other specialized products and influenced environmental policy direction for agriculture.

Programs have shifted from a focus on soil and fertility conservation, largely aimed at increasing 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 off the farm.

While increasingly integrated market structures have developed to meet American consumers' quality and safety requirements, global markets have introduced new consumers and competitors.

Global markets have become increasingly important to American farmers, as the first wave of globalization, driven by steam and telegraph, was at its height, and exports contributed to rising prices, making the period from 1910-14 the golden age of American agriculture.

The Effect of Falling Prices

However, as global market prices began to decline in the 1920s, farmers joined production interests in efforts to increase tariff protection. These efforts culminated in the adoption of the Smoot-Hawley Tariffs in 1930.

The United States was not alone in escalating tariffs, and world trade declined. In the 1930s, U.S. agricultural export volume fell more than 20% from the previous decade. Agricultural exports remained constant until the 1960s, but they began to grow dramatically in the 1970s, driven by adjustments in exchange rates as the dollar was released from the gold standard and the increasing appetite of the Soviet Union for imported grains and oilseeds.

Global markets have sometimes proven volatile, however, and disruptions in foreign demand contributed to a farm financial crisis in the 1980s.