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February 26, 2020

(Infographic) The U.S. Farm Labor Shortage

The impact of the farm labor shortage on U.S. agriculture and farm financing.

As of 2016, hired farmworkers made up 35.3 percent of the total hours worked on a farming operation, second only to the principal operator. These workers perform essential daily tasks needed to keep a successful farm running, such as caring for livestock, working in the fields, and maintaining farm machinery. As the population of farm labor continues to decline, primary operators are feeling the pressure to find alternative solutions to keep up with production for the growing demand of fresh produce.

Why is the Agricultural Workforce Shrinking?

There isn’t one sole cause of this growing issue, but rather a series of attributable factors.

A Decline in Agricultural Interest

The average age of principal operators is 59.4. As more operators reach retirement age, there are fewer young farmers coming in to fill their shoes. Farmers under the age of 35 account for only 9 percent of the total population. This declining trend in agricultural interest is mostly due to:

  • High real estate and land prices;
  • Steep initial investment cost of machinery and agrotechnology;
  • Volatile commodity pricing;
  • Unpredictable weather;
  • Unequal work-life balance; and
  • The physical demand of the industry.

Wage Requirements Lead to Higher Input Costs

The National Agriculture Statistical Service’s Farm Labor Survey (NASS FLS) reported a 73 percent decline in self-employed and family farmworkers from 1950 to 2000. The number of hired farm hands declined 52 percent within the same time period. This downward trend is translating into higher labor wages for these workers. For instance, in 2018 the agriculture industry experienced a 7 percent decline in hired help and a 5 percent increase in labor wages.

Increase in Education and Job Opportunities

Even with the increase in hourly wages, it’s becoming increasingly difficult for primary operators to find farmworkers due in part to other job opportunities becoming available. As the percentage of immigrants with postgraduate degrees and global literacy rates increase, so do their opportunities for less labor-intensive careers. The agriculture industry is having trouble competing with corporate jobs that offer higher pay and work-at-home options.

Immigration Policies Limit the Available Workforce Pool

The growing opportunity in careers for documented immigrants has left farmers searching for alternative farm labor options. Nearly half of all farmworkers are undocumented immigrants, 25 percent being of Mexican descent. However, more stringent deportation rules and a substantial increase in border control enforcement have led to a decline in undocumented immigrants. From 2007 to 2015, there was a reported 19 percent decrease in undocumented Mexican immigrants living in the U.S.

H-2A Program Inefficiencies

In 1952, the H-2 category was introduced through the Immigration and Nationality Act to allow U.S. employers who meet specific requirements to bring foreign laborers in for temporary work. The agricultural subcategory, H-2A, was created in 1986 under the Immigration Reform and Control Act to allow for an uncapped number of temporary agricultural workers. Since then, use of this program has skyrocketed. From 1997 to 2014, the number of H-2A visas quadrupled from 16,000 to 89,000. This surplus has created several inefficiencies within the program. For example,

  • It is a time-consuming process that requires farmers to submit their requests 60-75 days ahead of their “date-of-need”;
  • It limits long-term extensions that requires a 3-month waiting period to reapply;
  • Requires high costs associated with paying for home-country transportation and training; and
  • The Adverse Effect Wage Rate (AEWR) which requires farm operators to pay H-2A workers the highest prevailing hourly rate determined by regulatory bodies, which is often higher than domestic worker hourly pay.

U.S. farm labor infographic How the Farm Labor Shortage Affects U.S. Producers and Farm Owners

As farmers struggle to find and fund adequate labor coverage, they’re losing their competitive advantage to foreign countries. Imported goods are now compensating for the increase in demand for fruits and vegetables in the U.S. The New American Economy reported a 73.9 percent increase in fresh produce imports from the time periods of 1998-2000 and 2010-2012 and an increase of 6.6 billion pounds of produce consumed in the U.S. comparatively.

The farm labor shortage has also resulted in wasted produce. The Natural Resources Defense Council (NRDC) reported in 2012 that nearly 20 percent of U.S. produce never left the farm due to a lack of farm labor. The increase in farm labor expenses outweighed the potential revenue for crops. If farmers were able to keep up with production, it had the potential to add 89,000 jobs in 2012 and generate $4.9 billion in annual farm revenue.

How U.S. Farmers are Coping with the Labor Shortage Crisis

While the USDA is working on new legislation to address these impacts, U.S farmers are turning to alternative options to compensate for their current labor shortage predicament.

Smart Technology Advancements

The Internet of Things (IoT) industry has exploded as farmers use innovative technology to keep up with demand and remain competitive in the global market. The American Farm Bureau Federation (AFBF) reported 56 percent of U.S. farms have begun using agritech, with more than half stating labor shortage as the reason. Innovative agrotechnology includes,

  • Wireless sensors;
  • Predictive forecasting models;
  • Advanced automation;
  • Robotics; and
  • Data analytics

Smart farming technology allows farmers to work at full or near-full capacity with fewer workers, but not without certain drawbacks. The current technology can only accommodate certain crops, excluding nearly 200 specialty crops. This forces specialty farmers to make the difficult decision to either consolidate their operation or transition to machine-serviceable crops. Transitioning to smart farming technology also requires a high initial cost investment. This is particularly difficult for small to medium-size farms, which are the ones hit hardest by the effects of farm labor shortage. Despite these drawbacks, many U.S. farmers are realizing the investment is worth the initial cost to enhance crop quality and quantity through precision automation, pest control, and crop-health monitoring.

Operational Changes

As integration of innovative agrotechnology increases, production of high-labor and precision crops like strawberries, broccoli, lettuce, and vine-ripe tomatoes will decrease. In order to cope with the changing landscape of agriculture, primary farm operators are offsetting labor costs by scaling back their operation or leasing a portion of their farmlands. Many are holding off on farm expansion or choosing instead to invest their working capital in new technology. There are even some operators making the difficult decision to move their operation abroad.

To attract more domestic farm laborers, operators are increasingly providing employee benefit package incentives like 401(k) plans, paid vacation, subsidized housing, working allowances, and profit-sharing bonuses. By offering more competitive employee benefits, operators hope to drive domestic workers back to the industry.

Changes Needed to Improve U.S. Farm Labor Shortage

Continued lobbyist efforts from organizations like the American Farm Bureau Federation are working towards creating legislation that represents the farmer’s needs. Immigration reform is needed to provide a more direct pathway to legalization for potential farmworkers. Legislation like the Farm Workforce Modernization Act introduces a restructuring of the H-2A guest worker program to make it easier and more efficient for farmers to have access to foreign agricultural workers.

As government officials and lobbyists work towards improving the current legislation to suit U.S. farmer’s needs, available opportunities for alternative funding and financing is imperative to keep many farming operations afloat in the midst of uncertainty. As a nationwide lender, AgAmerica provides farmers and ranchers with the working capital necessary to integrate innovative technology and ensure future success. Speak with one of our farm finance lending experts today to learn more about our spectrum of loan options.

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