Agriculture, Trade and Rural Development

Transcription

1 Agriculture, Trade and Rural Development Robert L. Thompson Professor Emeritus, University of Illinois and Visiting Scholar, Johns Hopkins University School of Advanced International Studies September 17, 2013

2 Committee Mandate Challenging develop a framework for assessing the health, environmental and social effects (positive and negative) associated with the ways in which food is grown, processed, distributed, and marketed within the U.S. food system Effects relative to what? Static? Dynamic? Deterministic? Stochastic? At what level? Individual? Household? Community? Region? Nation? World?

3 Socioeconomic Effects of Food System Human health Nutrition over- and under- Residues Microbiological contamination Occupational safety Price of food Farm household income Value of farm land Farm family wealth Community tax base

4 Socioeconomic Attributes of Rural Communities Social and economic mobility of farm kids Quality of education and health services Broad-band internet Non-farm employment opportunities Existence of competition among farm input suppliers and output buyers Quality of the environment Other quality of life indicators

5 National At the Aggregate Level Contribution to GDP Export revenue Food component of CPI Sustainability and efficiency of resource use International World agricultural commodity and food prices level and variability Earning potential of farmers in other countries Sustainability and efficiency of resource use

6 Dimensions of Food Security Household food insecurity Caused mainly by lack of purchasing power. The rich in no country go hungry, except in times of war, natural disaster or politically-imposed famine. National Food Security Potential for self-sufficiency that is economically efficient and environmentally sustainable Land and water constraints Potential for research to relax the physical constraints Essential that public policy facilitate, not impede, agricultural development. To import food a country has to be able to sell the goods in which it has a comparative advantage. Global Food Security Can the world s farmers feed its larger population better than today at reasonable cost without damaging the environment?

7 Food vs. Agricultural Products Agricultural products as used here refer to the raw products in the form in which they were harvested on the farm where produced. Some agricultural products are consumed as food by people in raw form, however most food products that people consume embody some value-added after the raw product(s) left the farm, e.g. processing, packaging, storage and transportation. In high income countries as much as 90% of the retail price of food is value-added after the product left the farm where it was produced.

8 Farm Share of Retail Food Dollar

9 Official Definition of a Farm Make Statistics Uninformative Congress imposed the definition of a farm as any place that could sell $1,000 worth of agricultural products per year. When more than half the entities counted as farms are rural residences of retirees and people employed outside agriculture but like to live in the country, the resulting average farm bears little resemblance to farms whose occupants are trying to make their living in farming.

10 Farms in the United States, 2010 Category/Value of Sales Number (1000 s) % of Farms % of Sales Retirement: <$350K Off-farm occupation: <$350K Farming occupation: <$150K Farming occupation: $ K Midsize: $350K-$1M Large scale: $1-5M Very large scale: >$5M Non-family farm (any size) Totals Source: USDA/ERS. Updating the ERS Farm Typology, Economic Information Bulletin 110, April 2013.

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12 Agricultural Development or Rural Development? Agricultural development: transforming farming in a region so that it produces as much food or fiber as is compatible with economic efficiency and environmental sustainability. Rural development: creating non-farm employment opportunities within nonmetropolitan areas and within commuting distance of farmers homes, so that not all of the shift from farm to non-farm employment requires moving to cities.

13 Farm Household Income in U.S. Exceeds Average, but Most Comes from Non Farm Sources Source: USDA/ERS Farm Income Forecast, 27 August 2013

14 Composition of Gross Farm Income, by Source, *

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16 Farm Price Supports a Poor Way to Reduce Rural Poverty Supporting market prices is a weak tool for addressing rural poverty or facilitating agricultural development. Benefits are distributed in proportion to sales, so the largest farmers get the largest benefits, but they are rarely the people who suffer rural poverty. Over time, these benefits inflate land values, so the ultimate beneficiaries are the largest land owners. Hurts low income consumers who spend the largest fraction of their income on food. The most effective rural poverty reduction policies are direct needs-based payments and rural development, creating non-farm jobs within commuting distance of where the rural poor live.

17 Two Fundamental Philosophical Questions Re Future Farm Policy Of the public investments allocated to agriculture and rural areas, how much should go to farmers as individuals & how much should be invested for the greater good of agriculture and the rural areas? Of the fraction that goes to farmers as individuals, how much should be linked to the production of specific commodities & how much should be decoupled from what the farmer produces?

18 The Great U.S. Agricultural Productivity Success Story

19 Exports Are Essential to Future Profitability of U.S. Agriculture 2013 is 4 th consecutive year of agricultural exports over $100 billion. American agriculture exports ¼ to 1/3 of its production of many commodities. Without these exports, U.S. agriculture would have to downsize significantly. Exports can grow by expanding the total size of the market or by increasing market share. The only large potential growth market is in presently low income countries

20 U.S. Agricultural Trade, Source: USDA/ERS. Outlook for U.S. Agricultural Trade, 29 August 2013.

21 Evolution of Importance and Composition of U.S. Agricultural Exports Source: USDA/ERS. Outlook for U.S. Agricultural Trade, 29 August 2013.

22 Trade Prospects Expect larger fraction of world agricultural production to move through international trade. The arable land and fresh water are distributed around the world in very different proportions than population; with rapid growth in population, income and cities, their demand for food is likely to outstrip their production potential and they will become larger importers. With climate change all agro-ecosystems will be shifting, increasing the ag production potential of some, while reducing others.

23 Long-Run Prospects Since Malthus, prophets of doom have argued population growth will increase food demand faster than agricultural production can grow. Public and private sector investments in agricultural research have increased productivity faster than demand growth, with resulting 150- year downward trend in real price of grains. Need big increase in world food production by 2050 using less water and little more land than today and also produce biofuels feedstocks. Future world market price trends will depend on whether land and water productivity rise faster or slower than world demand grows.

24 Need General Equilibrium Analysis Simultaneities and feed-back effects have to be taken into account within agricultural sector and with other economic sectors. Need for strong physical and biological empirical content requires multidisciplinary teams. Computable general equilibrium modeling is now feasible, e.g. Purdue-based GTAP

25 Thank You.