New "growing" pains?
America has a cheap and plentiful food supply. The
reason: U.S. agriculture is among the most productive
sectors in the U.S. economy. Not only does this sector
produce high volumes of output, but it does so with
less and less inputs. In other words, agricultural productivity
is very high. For most of the last five decades, U.S.
agricultural productivity growth averaged just under
2 percent a year. That growth means the U.S. is producing
over 250 percent more food—with fewer inputs—than
it did 50 some years ago.
This growth also contributes to our competitiveness
in international markets. U.S. agricultural productivity
growth exceeds that of most developing and many developed
countries. Though a country’s competitiveness
can be linked to many factors—agricultural policies,
exports, resource endowments—high productivity
growth is advantageous when competing with countries
with lower productivity.
With this growth has come some growing pains. Farms
have declined in number but increased in size. Specialization
of production is now the norm. And economic opportunities
abound in some rural areas, but are elusive in others.
Despite the disparities, consumers continue to benefit
from an abundant and affordable food supply. And the
farm sector is riding a crest of record-high income.
But, some signs point to a recent slowdown in agricultural
productivity growth: From 1996 to 2002, productivity
grew at a modest 0.6 percent per year. For the U.S.
to stay ahead of its competitors, it must maintain or
improve upon its pace of productivity growth. This pace
is driven, in large part, by our knowledge base. Thus,
higher productivity growth rates reflect how well we
know how to make things, using our financial and other
resources efficiently. This knowledge can come from
experience and practice, but it primarily comes from
investment in scientific research and education.
With the beginning of the land grant system of colleges
in the 1860s and later with Federal research labs, the
U.S. has recognized the importance of investing in people
and research. Since the early 1980s, however, the amount
of inflation-adjusted funds invested in U.S. public
research has been relatively flat. Investments in research
take time—usually 8 to 15 years—to bear
fruit. Interestingly, productivity started flattening
in 1996, roughly 8-15 years since investments flattened.
Also, since 1996, the agricultural trade balance has
trended downward. Though driven largely by rising imports
and the falling U.S. dollar, this decline begs the question
about our continued competitiveness. Viewing a slowdown
in productivity growth in the context of rising farm
income, a declining trade balance, and other changes
raises questions about the future. How long will farm
income continue to rise? Will productivity growth stay
flat or return to its former growth path? And what new
pains, growing or otherwise, lie ahead for U.S. agriculture?
Robbin A. Shoemaker
Associate Director
Resource Economics Division, ERS
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