Academic journal article Agricultural and Resource Economics Review

Can Local Farms Survive Globalization?

Academic journal article Agricultural and Resource Economics Review

Can Local Farms Survive Globalization?

Article excerpt

(ProQuest: ... denotes formulae omitted.)

Today, the vast majority of food in the United States is consumed far from where it was produced. It is estimated that less than 2 percent of all gross farm sales in the United States can be considered as locally marketed food sold directly to consumers or to local intermediaries (Low and Vogel 2011). Even in areas with intensive agricultural production, such as Santa Barbara County in California, more than 95 percent of the fruits and vegetables consumed are imported and 99 percent of the production is exported (Cleveland et al. 2011). With increasing specialization in the agricultural industry and falling transportation costs, today's food system is dominated by large industrialized farms1 that supply consumers separated by a vast number of "food miles."2 Put simply, consumers are physically disconnected from their food as a result of globalization of the economy.

Despite increasing concentration of agricultural production, interest in local food among consumers is growing. Local foods-foods grown nearby or supplied locally-are seen as providing greater nutrition, taste, and freshness than nonlocal foods (Martinez et al. 2010). In addition, many wish to keep money in local economies, strengthen social relationships between producers and consumers, and minimize food miles while gaining social benefits from preservation of agricultural land. All of these forces have led to growing support for increased "localization" of food production (Halweil 2004, King 2010).

Can local farms survive the growing pressures generated by globalization? In the United States, the number of small commercial farms has been declining sharply (Hoppe, MacDonald, and Korb 2010, Stanton 1990). Globalization has led to an integration of market prices, but production costs remain primarily local because most farming resources are immobile. Among local farmers facing high labor costs, there is growing concern about whether they can remain economically viable in a market increasingly dominated by cheaper nonlocal foods. Nevertheless, even in regions with extremely high wage costs, some local farmers continue to operate despite the inherent production disadvantages. They may be producing high-quality goods and/or have an advantage in terms of better serving consumers; others choose to continue to operate despite suffering financial losses (Arita, Naomasa, and Leung 2012, Naomasa, Arita, and Leung forthcoming). In general, little empirical study has been done on how globalization affects the future economic viability of relatively small local farms.

The decline of local agricultural production in advanced economies has received much attention and concern, but its links to international trade have rarely been explored empirically. Our study empirically investigates the impacts of import competition and globalization pressures on local farms using the open island economy of the state of Hawai'i and its fresh fruit and vegetable farms. Linking micro-level farm data from the U.S. Census of Agriculture (National Agricultural Statistics Service (NASS) 1997, 2002, 2007) to detailed crop-level information on imports from the U.S. mainland and foreign countries, we econometrically test the impact of import competition on the growth and survival of individual farms.

Hawai'i presents a particularly interesting case for examining the impacts of globalization on the economic viability of local farms for several reasons. Because it is isolated from cheaper sources of labor, Hawai'i faces some severe production disadvantages. Farm labor costs there are 40 percent higher than on the mainland and, on average, Hawai'ian farms are less than half the size of mainland farms in terms of sales and two to three times smaller in terms of acreage (Arita, Naomasa, and Leung 2012). Compared to its export competitors, Asia and South America, Hawai'i suffers from significantly higher labor, energy, transportation, and other input costs (Parcon, Loke, and Leung 2010). …

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