In the Long Run:Growth in Agricultural Productivity Limits Price Increases
Prices across the U.S. economy rose an average of 3.4 percent per year between 1948 and 2007. Prices for agricultural inputs such as seeds, fertilizers, agricultural chemicals, equipment, and labor rose 3.6 percent annually over the same period. In contrast, prices of agricultural outputs such as crops and livestock rose 1.7 percent per year. The gap between agricultural input and output prices reflects productivity growth. Between 1948 and 2007, the agricultural output generated from a bundle of inputs increased significantly, largely offsetting input price increases. Faced with growing worldwide demand for agricultural products, the benefits of continued high productivity growth include the capability to expand output while reducing commodity price escalation and volatility.