CHOICES
A publication of AAEA
Some economists (e.g., MacDonald, Hoppe, and Newton, 2018; Hamilton et al., 2021; McFadden, Njuki, and Griffin, 2023; Lee et al., 2024) question why we are witnessing a decades-long disconnect between the adoption of labor-sparing technology and application of precision agriculture (PA), artificial intelligence (AI) tools, and big data analysis. We begin exploring answers where Lloyd Fisher picked up in 1951 and proceed with the necessary conditions to move “the structureless market” into a market that is characterized by the skills of an organized workforce. In this article, we propose avenues of exploration where economists and economic principles may lead research efforts that identify labor-sparing, profitable, solutions that will be maximize benefits (not limited to wages) for the workforce and likewise incentivize adoption by U.S. producers.
In 2015, large and very large specialty crop farms employed 0.72 labor hours per sales dollar full-time-equivalents (FTEs) annually per $100,000 of gross cash farm income, three times higher than the number of FTEs per sales dollar employed on comparably scaled cash grain farms (MacDonald, Hoppe, and Newton, 2018). Much of this difference is due to the seasonal and perishable nature of fresh fruits and vegetables, which limit storability and shelf life. Though operating costs represent just one side of the profit equation, we contend that it is the unpredictable and wide-ranging variations that present growers with greater challenges in planning how to best reduce risk exposure. For example, the Florida adverse effect wage rate (AEWR) for H-2A workers is projected to go up 9.9%, effective immediately upon publication by the U.S. Department of Labor in December 2024 (Ayoub, 2024), directly in the middle of the Florida specialty crop growing season. While costs may be offset by increases in cash receipts, which rose 12% to $8.8 billion in 2022, labor expenditures alone increased 49% to $2.81 billion from 2022 to 2023 in Florida (USDA, 2024a,b). Specifically, access to reliable labor continues to plague Florida produce growers, who sourced 51,987 H-2A positions in 2023 to fill the industry-wide gap (U.S. Department of Labor, 2023). Nationwide concerns around labor accessand rising wage rates continue to motivate grower interest in the adoption of labor-reducing technology.
Since the turn of the century, economists have analyzed the trade-off between human work (labor) and automation or mechanization (capital) within the context of existing and available technologies. Hamilton et al. (2021) investigated the slow adoption rate of mechanical harvesting in U.S. agriculture and concluded, “If farmers are less willing to invest in capital that ultimately leads to higher wages, then long-term productivity growth is likely to be lower, and the problem will persist (p. 1456).” Additional research showed that, not surprisingly, adoption rates of digital agriculture (DA) technologies in row crops varied by farm size and that technology adopters are more likely to download public data when making farm decisions (McFadden, Njuki, and Griffin, 2023). The Cooperative Extension System (CES) is tasked with diffusing technical change to agricultural decision makers, yet insights from a survey of 255 CES educators “emphasize the importance of addressing the
human and social dimensions of knowledge transfer to overcome the historical challenges of delayed adoption (p. 18)” (Lee et al., 2024).
Following John Holt’s prescription in his 1989 AJAE article “Managing Change in Extension,” we must first assess “forces of change” to set expectations for results based on a long-term perspective. To acquire a sense of emerging niches and the competitive context, economists are uniquely positioned to evaluate the perishable food system to determine (1) how to distribute human resources and (2) how to grow human skillsets to enhance individual and farm-level wellbeing across the food system.
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Box 1. Economies of Skills Economies of skills are built in to humans and drive our capacity to co-create technologies and produce long-term competitive enterprise solutions. The fresh produce industry historically attracts students and stewards of the land, air, and water resources, who instinctively and rapidly adapt to the unknown. Learning is a two-way street between the business and the humans. Economic models must incorporate data beyond changes in average and marginal output levels. Now is the time for the agriculture industry, which is traditionally a 365/24/7 business model, to identify human factors beyond pay rates for hours worked. Instead, find where each person’s innate abilities and core values exist and can be captured to improve overall business performance. Driving the decision-making process with skill economies at the forefront allows a business to discover how best to select from choice sets of production practices that incorporate labor-sparing technical improvements. |
We contend that there exist “economies of skills” (see Box 1) with the potential to drive systems-wide solutions that utilize relatively cheap technology with the goal of maximizing human productivity. This approach requires that we view the entirety of fresh fruit and vegetable supply
chains, look at where people are, and use these observations to inform the development of technology with the goals of improving our most valuable and constrained resources—the people themselves.
We propose an examination of the opportunity costs inherent to the
human and machine co-learning environment, where humans and technology evolve dynamically to achieve the goals of the farm and the people on whom the farm depends. Or as explained by Extension economist Kenny Burdine (2024), when he calculates profitability specific
to understanding how to address unpaid operator labor:
I tend not to treat labor as an expense but instead make the point
that any return must be sufficient to adequately compensate the operator for the time they spend. Sometimes an hour of operator labor is not just an hour of operator labor, especially if there are a lot of other expenses being incurred during that hour.
In his discussion, he noted that these “other expenses incurred” beyond the operator’s time may vary in proportion from low-tech fence clearing tasks using pruning shears to baling hay using a tractor and hay baler.
Building on Burdine’s observations, we extend our awareness to envision how the opportunity costs of integrating humans and technology are not limited to direct trade-offs, rather, they move codependently and dynamically. To postulate what economic realities are needed to support the fresh produce supply chain going forward, grower interviews provide invaluable insights:
I recognize the younger generations are tech savvy. That’s partly true. The more specific truth is the younger generations are technology dependent. So they look for and place a high degree of trust in information sources from technological feeds. They’re not like an agronomist who feels the ground with their fingers to determine moisture; They want a sensor to provide that information. So how do we collect the data through technology to allow smart decision makers to utilize that, to drive efficiencies? (Wilson, 2023a).
From this viewpoint, it is no longer a question of X machine solving Y problem for decades to come, all other things held constant; rather, it is using what you have (a tech-trusting workforce) to get what you want most (competitive enterprises).
Economists define inputs belonging to a farm business as either land, labor, or capital, which they allocate according to scarcity constraints. Beginning at the long-run production planning stage, growers account for land allocation and usage, the amount and type of (skilled/unskilled) work, and the existing technological investments. As cost-minimizing agents, growers seek production systems-level solutions that utilize the cheaper inputs. Philip Martin, in his keynote talk at the 2024 “Changing Landscape of Farm Labor Conditions in the US” event, shared proxies for these resources, where imports (land), migrant workers (labor), and machine (capital) allocations motivate specialty crop growers’ decisions. His observations were built on evidence that human resources employed by the agricultural industry may achieve economics of skills should growers choose to focus on recruitment, remuneration, and retention (Martin, 2017).
Growers echo Fisher and Martin by clarifying exactly where the solution point is in bringing along human skillsets and technical tools:
The labor needed to drive a tractor is not what’s killing me; the labor killing the weeds is what’s killing me. If you’re going to charge $1.4 million for a device, we’re perfectly fine attaching it to a tractor that already has a power source and putting a human in charge of keeping that equipment safe. (Wilson, 2023b)
In the specialty crop world, labor is the number one explanation behind a grower’s interest in alternative technologies. The driving forces may be the constantly changing regulations related to labor, degree of access to quality labor, unpredictable wage rates, limited training, housing, or medical care for employees in the community, etc., which affect a grower’s decision to adopt a new production system. Growers who find ways to achieve skill economies year-round on the farm are much more likely to diversify through adoption of an emerging technology, whether it be a new machine, an environmentally friendly technique, or a storage and distribution management process.
There is a need for improved understanding of the roles and dynamic interactions among participants in the fresh produce supply chain to improve industry coordination and competitiveness, expand U.S. market demand, and build in supply chain resiliency (Morgan et al., 2022). U.S. farms growing perishable and seasonal food have achieved gains through economies of scale and scope, largely dependent on production management decisions. Many produce farms have a corporate structure and grow nearly year-round on owned and leased land throughout the United States and abroad. Such operations have farms strategically located and follow the progression of seasons to provide a year-round supply of produce as demanded by retail and foodservice buyers. Medium-sized farm operators are finding ways to collaborate to meet buyer needs, and technology-driven tools offer savings in time and resources needed to gather market information. Given that market access and market share drive profitability, technologies built to gather and organize data along the supply chain, from farm to fork, are emerging that reduce the cost of knowing and empower economic agents to make timely, informed decisions (Morgan, 2023).
Author interviews with growers revealed that those who owe more on their capital than they own of their primary asset (land) did not have funds available to support a decision to adopt and further invest in automation or mechanization technology. Likewise, those who rented land did not find value in capital investments aimed at improving productivity of the land itself, as they themselves were not gaining the added long-run value and the landlord often raised the rent as increased returns were capitalized into their land’s value. Educators and researchers alike need to listen when a grower tells us so: “Try to learn without losing too much. Farming is a science-based profession and anytime you modify practices it could pose a significant threat to your livelihood” (Wilson, 2023c). Growers add that while innovations are always attractive, the upfront and ongoing costs of adopting may result in near-term inability to pay bills.
Without a credible answer to “where are the technical minds and time needed to find and adjust to my farm needs?” most growers will not expend time and resources exploring alternative ways to doing things differently. The newest gadget might be capable of saving a grower many hours of headaches or generate substantial projected increases in the grower’s bottom line, but the farm owner’s major investment is in the land. In a recent focus group with large-scale Midwestern row crop growers, we discovered each participant actively supports shared long-run goals of sustainability and soil health but reminds researchers that their families need to put food on the table today. These growers also noted that they need advisors willing to stand in fields and equipment barns to assist in all stages of technological solutions development. Given diminishing numbers of Extension professionals, coupled with reduced programming budgets and increased workloads (Wang, 2014; Narine, Harder, and Zelaya, 2019), most farm advisors are in the form of input supplier representatives or consultants. Further, Lee et al. (2024) concluded that “With the current agricultural challenges and the increasing demand from farmers to use technology… it would be challenging to expect Extension change agents to promote agricultural innovations to clients without effective training (p. 21).”
In numerous Extension-led stakeholder meetings, growers clearly communicate that they are willing to pay exactly what a new piece of technology is going to add to their bottom line, no more and no less, which tracks with our economic model assumptions that growers make rational decisions. As economists we can look at it this adoption question differently. When a grower considers investing in any fixed asset, the decision is not limited to the purchase price, or whether they can cash flow the monthly payment, no matter how convincing an argument the salesperson tries to pencil out or the interest rate. Instead, their decision has everything to do with their perceptions of what the next new machine may be in the immediate future, which indicates their understanding that technologies are changing at faster and faster rates.
As educators it is imperative that we first understand the context facing an individual grower and frame the decision to adopt based on the farm’s available human resources and real-time knowledge, skills, and abilities. Instead of asking what will they pay for XYZ tech, build in return on investment timelines that includes answers to “How does it plug into existing human skillsets? What are the synergies with existing equipment? How long until it becomes obsolete and what is the replacement plan? Does it require electricity or internet and is there another way to make sure we have backup energy sources?” These and many other key questions are all part of the decision making that extends well beyond the large amounts of data collected from farm equipment or smart applications offered by input suppliers (McFadden, Njuki, and Griffin, 2023). Viewed through the eyes of a grower, it is apparent that U.S. food supply chain vulnerabilities as identified by the USDA (2022) Agri-food Supply Chain Assessment are driven by disconnects, delays, and misunderstandings across the spectrum of available people, knowledge levels, and constrained skillsets.
People working in agriculture are tasked with assessing the five major agribusiness risks, which include issues specific to production, marketing, human resource, legal and regulatory, and financial components (Neill and Morgan, 2021). It is critically important that educators recognize the entirety of our learner audience extends well beyond farm owners and managers, college students, or folks who just want to grow their own food. Indeed, our wider audience incorporates all who touch the global food and fiber system, all of whom need practical skills and a portfolio of expertise. Our dynamic perspective widens to recognize the importance of produce buyers and retail store managers who want their consumers to have the best produce yet have no exposure to food production realities, financial institutions, and venture capital investors who may see the opportunity but misread the regulations, policy makers tasked with describing social welfare across all economic agents, middle managers of global food companies tasked with sustainably sourcing foodstuffs, private consultants with narrow and wide-ranging degrees of knowledge depth, nongovernment organizations (NGOs) with a mission to advocate for human needs and wants, environmental activists with differing yet parallel goals to agriculture, all alongside a population dependent on health care professionals and community leadership. To create and capture skill economies, newly imagined partnerships and liaisons across this interrelated paradigm of actors await the dynamic thinkers and doers within our midst.
Traditional degree programs require large commitments of time and finances to complete and are focused on one or two major areas of study, and geographic access and practical applications are often limited. After conversations with members of the agricultural community, there is a clear need for foundational training in risk management that better prepares students to deal with dynamic challenges that demand holistic solutions under time constraints. Specifically, a recent panel of Southwest Florida producers identified and described major limiting factors when adopting technologies. First, producers struggle to locate and hire workers who can operate the technology and then collate the massive amount of data into a useful form (i.e., reliable information) needed to inform better decisions. Second, producers lack trained technicians who are available when needed to fix expensive machines when they break. In the absence of such technicians, producers must idle the broken machinery for extended periods, which generates revenue losses that can be exacerbated if market prices are declining day by day. Other growers shared that they are unable to retire from daily farm operations as they cannot find anyone qualified to take over their duties or interested in a lifelong career in production agriculture. Further evidence supporting their concerns are college scholarships offered by agricultural companies to high school students with the guarantee of employment after graduation that remain unfilled due to a lack of interest.
After decades of delivering economic risk management extension programs, we are familiar with the need for shelf-ready programs built and delivered by trusted Extension professionals. Labor markets tell us they value and reward people whose skillsets are verified through assessments conducted by a third party, as this communicates the added value each graduate brings to their employer and/or clientele. We at the land-grant universities, research and education centers, and county offices tasked with managing change in our extension roles have a natural advantage in long-standing cultivated networks within rural communities, yet we are often bogged down by the weight of our own habitual ways of doing and standard metrics of success. Given our understanding of these pressure points along food supply chain, we are positioned to answer key questions, such as:
As extension economists, we are capable of “capitalizing on today’s strengths while building tomorrow’s niches (p. 869)” (Holt, 1989). With input from the clients and environments wherein we serve, we can (and DO!) attract learners and provide skills-based tools and training to people on the frontlines of change who must identify, manage, and mitigate elements of economic risks, known and unknown. Economies of skills that are built-in to the humans of our industry drives our capacity to co-create technologies and produce long-term competitive enterprise solutions. As Fisher (1951) stated, “These are not novel suggestions…The reasons for their rejection are too many… but technical infeasibility is not one of them (p. 491).” Now is the time for the agriculture industry to focus first on those factors that motivate human wants and needs and then how to manage production decisions with technical improvements. Bridging the gap between labor-sparing technologies and progressive fresh produce systems demands that we find “the will to continue to develop products that are not yet being demanded, but which we know are needed (P. 873)” (Holt, 1989).
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———. 2024a. “Annual Statistical Bulletin: Florida Agricultural Overview.” USDA National Agricultural Statistics Service. Available online: https://www.nass.usda.gov/Statistics_by_State/Florida/Publications/Annual_Statistical_Bulletin/2024/FloridaAgriculturalOverview.pdf
———. 2024b. “Southern Region News Release Farm Production Expenditures.” USDA National Agricultural Statistics Service. Available online: https://www.nass.usda.gov/Statistics_by_State/Regional_Office/Southern/includes/Publications/Economic_and_Demographic_Releases/Farm_Expenditures/FARMEX2024.pdf
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———. 2023b, 27 September. “Money Is Polluting the True Innovation.” Farm Progress. Available online: https://www.farmprogress.com/farm-business/-money-is-polluting-the-true-innovation-
———. 2023c, 28 September. “People Are Losing Their Mind over Carbon Right Now.” Farm Progress. Available online: https://www.farmprogress.com/conservation-and-sustainability/-people-are-losing-their-mind-over-carbon-right-now-
