The Economics of
Production Agriculture
Dr. Gary Brester
Dept. of Agric. Econ. and Econ.
Montana State University
ECNS 101
1
Number of Farms and Farm Workers
Millions
14
12
10
8
6
4
2
1910
1915
1920
1925
1930
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
0
Farm Numbers
Source: USDA NASS
Farm Workers
2
Agricultural Population
Agricultural Population (% of total population)
Figure 2: Agricultural Population as percent of Total
Population in Various Countries, 1950 and 2010
1
0,9
1950
2010
0,8
0,7
0,6
0,5
0,4
0,3
0,2
0,1
0
The US and many other developed and developing countries experienced a decline in their agricultural population over the last half-century. Source: Author's graph based on
United Nations Food and Agriculture Organization FAOSTAT database.
3
Measures of Living Standards
Country
GNI/Capita
% Rural
Pop
% Labor
Force in Ag
% Income
On Food at
Home
U.S.
$46,350
18
0.7
5.7
8
Australia
$40,240
11
3.6
10.7
6
China
$2,940
57
39.5
India
$1,040
70
52.0
32.4
69
Japan
$38,130
34
3.9
14.6
4
Nigeria
$1,170
52
70.0
40.3
186
Ukraine
$3,210
32
15.8
42.3
16
Under 5
deaths/1000
21
4
30
17
26
India
40
Ivory
Coast
40
39
Kenya
Hungary
17
Japan
20
France
12
United
Kingdom
0
11
Canada
10
10
U.S.
Percent of Income
Percent of Income Spent on
Food by Country
60
52
50
5
U.S. Agribusiness
• World’s Largest Agribusiness Sector
• Largest Part of U.S. Economy
• Huge Integrator of Technology
• Biggest User of Biotechnology
• Safest Food
• Lowest Cost Food
• Largest Assortment of Food
• 11,000+ New Food Products per Year
6
Percent of U.S. Disposable Income
Spent on Food
25
24.2
20.7 20.6
20
17.5
9.9
9.7
9.5
9.4
9.5
2004
2007
2008
2009
11.1
2000
13.9 13.2
15
10
5
1990
1980
1970
1960
1950
1940
1930
0
7
Consumer Expenditures for
Food 1950-2009
1000
800
600
400
200
Consumer Expenditures
2005
2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
0
1950
Billion Dollars
1200
Farm Value
8
Components of
2006 Food Marketing Bill
9
Input
2004
2000
1996
1992
1988
1984
1980
1976
1972
1968
1964
1960
1956
1952
1948
Index 1948 = 100
U.S. Farm Productivity
300
250
200
150
100
50
0
Output
10
Productivity Growth Rates
1.
2.
Average annual growth rate of output
a.
Agricultural output =
1.7%
b.
All U.S. output =
3.2%
Increased input productivity
a.
Agricultural input =
b.
All U.S. inputs =
116.8%
13.4%
11
Technological Change
1.
The amount of inputs used in
agriculture has not increased
a.
2.
Total agricultural output has
more than doubled
Certainly, the composition of inputs
has changed
a.
Capital/Labor substitutions
b.
Chemical/Labor substitutions
c.
Chemical/Capital substitutions12
Labor
Mechanical
2004
2000
1996
1992
1988
1984
1980
1976
1972
1968
1964
1960
1956
1952
1948
Index 1948 = 100
Farm Input Usage
600
500
400
300
200
100
0
Chemicals
13
Technological Change
3.
Technological change has been a
function of
a.
Commodity markets are
highly competitive
b.
Basic research provided by
public entities
c.
Private research by
agribusinesses
4.
These efforts have kept the U.S.
competitive with the rest of the world
5.
Concerns about future funding
14
Corn
Soybeans
2011
2010
2009
2005
2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
1950
Bushels/Acre
U.S. Crop Yields
180
160
140
120
100
80
60
40
20
0
Wheat
15
Productivity of U.S. Beef Cow
Breeding Herd
Lbs
750
Carcass Weight Pounds Per Beef Cow, Annual
700
650
600
550
500
450
16
Source: Livestock Marketing Information Center & MSU Agricultural Marketing Policy Center
2011
2009
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
400
U.S. GMO Adoption Rates
Cotton 90%
Soybeans 94%
90
80
Corn 88%
70
60
50
40
30
20
10
Source: USDA ERS
2010
2008
2006
2004
2002
2000
1998
0
1996
Percent Adoption
100
17
Percent Adoption
World GMO Adoption Rates
100
90
80
70
60
50
40
30
20
10
0
75%
26%
Soybeans
Source: isaaa.org
82%
Cotton
Canola
2011 Adoption Rates
32%
Corn
18
Hours of Farm Work
Per Acre Planted
55
60
Hours/Acre
50
40
30
17
20
10
0
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
1998
19
Number of Farms and Dollar
Sales By Annual Sales
80
74.4
70
Percent of Farms
Percent of $ Sales
Percent
60
50
44.9
40
30
19.1
20
11
10
9.1
9.1
15.9
10.1
4
2.6
$250499,999
$500,000
and over
0
<$50,000
$50,00099,999
$100249,999
Annual Sales
20
U.S. Farm Ownership: 2007
Family or
Individual
86.5%
Other
1.3%
Other
Corporation
0.5%
Source: NASS
Family
Corporation
3.9%
Partnership
7.9%
21
Montana Farm Numbers/Size
1.
2.
3.
Montana Farm Numbers Have
Increased Over The Past 20 years
a. 1987: 24,568 Farms
b. 2009: 29,400 Farms
c. Largest Increase Is In The
Number Of Farms Smaller Than
180 Acres
Total Land In Farms Is Virtually
Unchanged (61.4 Million Acres)
Average Farm Size Has Decreased
a. 1987: 2,482 Acres
22
b. 2009: 2,068 Acres
Montana Farm Ownership: 2007
Family or
Individual
76%
Partnership
10%
Other
2%
Source: NASS
Corporation*
12%
*About 1% Non-Family Corporations And
11% Family Corporations
23
U.S. Farm Ownership: 2007
Family or
Individual
86.5%
Other
1.3%
Other
Corporation
0.5%
Source: NASS
Family
Corporation
3.9%
Partnership
7.9%
24
100%
80%
60%
40%
Farm Numbers
> $500,000
$100,000$499,999
$50,000$99,999
$25,000$49,999
$10,000$24,999
$5,000$9,999
20%
$2,500$4,999
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
< $2,500
Number of Farms
MT Farm Numbers And Sales
0%
Percent Of Sales
Source: NASS 2007 Census 24% of farms (7,100) produce 88% of output
25
Farm Assets And Debt
Debt/Asset Ratio:
9.2%
1,400
1,200
$1,000
1,000
800
Debt/Asset Ratio:
17.8%
600
400
200
0
1990
Assets
Source: Montana Agricultural Statistics
2009
Debt
26
All Land
Source: Montana Agricultural Statistics
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
900
800
700
600
500
400
300
200
100
0
1997
Dollars/Acre
Montana Farm Land Values
Dryland
27
Production Agriculture And
Agribusiness Returns
10 Year Average Return on Assets by Industry, 1997-2006
15%
10%
9.38%
8.32%
9.10%
8.20%
5%
0%
Agriculture
Food
Food
Food
ProcessingWholesaling Retailing
28
Questions?
29