Labor input substitution decisions and business sustainability strategies under changing farm labor market conditions: comparative economic viability analyses of organic and conventional farming systems

Labor input substitution decisions and business sustainability strategies under changing farm labor market conditions: comparative economic viability analyses of organic and conventional farming systems

Summary

A survey on farm labor-related issues was conducted among farm operators in Georgia, Alabama, Mississippi, North Carolina and South Carolina. The survey is designed to determine any significant structural and demographic determinants of farm labor hiring requirements and practices among organic, transitioning and conventional farms. It also elicited the operators’ perceptions and opinions on the Immigration Bill and its effects on wage rate determination and strategic changes in hiring decisions. The ensuing completion of analyses of survey data and case studies are expected to produce economic viability implications of changes in the farm labor market conditions.

Objectives/Performance Targets

1) To determine and compare the strategic plans (or decisions) adopted (or intended to be adopted) by organic and conventional farm businesses in most of the Southeast region in maintaining overall business profitability and viability as farm wage rates increase due to changes in the government’s immigration policies;

2) To identify structural, demographic and economic determinants of farm labor input substitution decisions (i.e. substituting family with hired labor, and vice versa) made by conventional farms and organic farms at various stages of business maturity (such as established versus transitioning organic farms);

3) To supplement the quantitative research (survey and econometric analyses) approach of objectives 1 and 2 with qualitative case studies designed to analyze relationships of business decisions and strategic actions under a whole-farm perspective, and determine other operational constraints, strategies and their business implications not captured by the other (quantitative) research method used in this study.

Accomplishments/Milestones

During the first year of the grant, the survey instrument and case study questionnaire were finalized and the necessary IRB approval for human subject compliance was obtained. The survey was implemented in the latter half of 2007. A total of 518 farm operators of conventional, transitioning and organic farms in Georgia, South Carolina, North Carolina, Mississippi and Alabama were targeted for the survey. Of this total, a response rate of 15.8% (82 out of 518) was obtained. The respondents were paid the stipulated $50 honorarium. A graduate student was hired for one semester (Fall 2007) to assist in the implementation of the survey. In January 2008, a new graduate student was hired to collate and analyze the survey data. Data analysis is currently underway and is expected to be completed this summer.

A poster proposal “Settling where jobs are aplenty, thriving where the grass grows” was accepted and presented at the 2008 Southern Agricultural Economics Association annual conference in Dallas, Texas. The poster discussed possible linkages between the proliferation of organic farms, population distribution of illegal immigrants and farm wage rate determination.

On the second year, analysis of survey data is expected to be completed and will be disseminated to academic and extension audiences through journal article, bulletin and/or popular press publications. Initial contacts are also being made to conduct the interviews for the case studies which will be undertaken during Fall 2008 and Spring 2009.

Impacts and Contributions/Outcomes

The analysis of results from the recently concluded survey is expected to shed light on the structural and demographic determinants of farm labor hiring decisions as well as perceptions and expectations of organic, transitioning and conventional farms of the impacts of more stringent immigration laws on farm labor hiring and wage rate determination.

Organic farms, most especially those involved in more labor-intensive production activities, will benefit from the study’s economic viability analyses. Existing enterprise budget models for conventional farm enterprises (such as peanuts, blueberry and certain vegetable crops) already developed by some land grant educational institutions will be updated and modified to accommodate changes in the farm labor market conditions due to the new immigration regulations. These enterprise budget models will be tailored as well to suit the organic farming mode. These modifications will rely on inputs from case study farms to determine critical values for farm labor hiring rates as well as optimal business size, investment and production decisions that promote growth and sustainability under impending farm labor shortages and wage rate hikes.

Enterprise budget models generally serve as decision aids for farmers as they develop and implement production and financial plans for their businesses. Organic farms, which are relatively more labor-intensive operations, will certainly benefit a lot from these decision aids as they can be more affected by expected radical shifts in labor hiring practices, compensation rates and labor supply conditions.

Moreover, this research will fill in organic farming data gaps in the Southeast, which has been poorly represented in survey data collected by the Organic Farming Research Foundation (OFRF) (Walz, 2004).

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