Introduction to Agricultural and Natural Resources The Food and Fiber System FREC 150 Dr. Steven E. Hastings

The Food and Fiber System Major Topics – What is it? – Importance – Parts of the System Public Sector - Others Agribusiness – Penson et al Production Agriculture or Farming – Penson et al – Definition of a Farm – Characteristics of Farming – Trends and Characteristics in the Farm Sector – Summary

What is it? – Today, it means much more than “farming”. – “the food and fiber system comprises the economic activities of the farms and firms that assemble process and transform raw agricultural commodities into final products for distribution to US and foreign consumers.” – USDA, ERS

What is it? – “… the complex system that begins with natural resources and involves farms agribusiness and government organizations in providing products of the land to consumers.” - Seitz, Nelson and Halcrow – “… includes farms, ranches and agribusinesses.” and “from the farmer to the consumer.” – Penson et al.

Introduction to Agricultural Economics, 6e Penson | Capps | Rosson | Woodward Copyright © 2015, 2010 by Pearson Education, Inc. All Rights Reserved Food and Fiber Industry 1.Farm Input Supply Sector (e.g., John Deere, Ralston-Purina) 2.Farm Sector 3.Processing & Manufacturing Sector (e.g., Tyson Foods, Del Monte, Swift) 4.Wholesale & Retail Sector (e.g., Sysco, Kroger, HEB) 5.Consumer (us)

What is it? – Seed, fertilizer, soil and water > Corn > Corn Flakes – Hastings

Introduction to Agricultural Economics, 6e Penson | Capps | Rosson | Woodward Copyright © 2015, 2010 by Pearson Education, Inc. All Rights Reserved Figure 2–1 The food and fiber industry consists of the farm input supply sector, the farm sector, the processing and manufacturing sector, and the wholesale and retail sectors. These sectors are linked together by a series of markets in which farmers purchase production inputs and sell their raw products to processors and manufacturers, which, in turn, create food and fiber products that are distributed to customers in wholesale and retail markets.

How Important is the FFS? – Importance in our economy – Contribution to GDP – – In 2001, FFS contributed $1.24 trillion (or 12%) to GDP. – In 2007, FFS contributed $1.6 trillion (or %) to GDP. (Penson, page 17) Think of it a $1 in every $10! This is the FFS, not just production agriculture (1%)!

How Important is the FFS? Contribution to Employment – In 2001, FFS employed 24 million people (or 17%). – Historically, FFS accounted for 1 in 6 jobs in America. (Penson, page 17) Think of it as 1/ 5 th of the jobs in America. This is the FFS, not productions agriculture (1%)!

From the ERS, USDA

Parts of the FFS Important Sectors – The Public Sector – Numerous local, state and national government agencies – United States’ Department of Agriculture – Environmental Protection Agency – Delaware Stat Department of Agriculture

Parts of the FFS System Educational and research institutions – Morrell Act (1862) – established UD as a “land grant” university

Hatch Act (1887) Smith-Lever Act (1914) Lever_Act_of_1914

Parts of the FFS – Hatch Act (1817) – Smith-Lever Act (1914)

Parts of the FFS – The Agribusiness Sector “…all aspects of agricultural production, processing and distribution.” – The Agribusiness Council “ …firms and industries that produce and sell goods for use in farm production and firms and industries that buy, store, and process farm commodities and distribute them to domestic and export markets” - Seitz, Nelson and Halcrow (old text) “.. the farm input supply sector, [the farm sector,] the processing and manufacturing sector, and the wholesale and retail trade sector. “ Penson et al, page 16.

Parts of the FFS Types of Agribusiness Firms – Farm Input Suppliers – Food Processors, Wholesalers and Retailers – Fiber Manufacturers – Shippers and Handlers

Introduction to Agricultural Economics, 6e Penson | Capps | Rosson | Woodward Copyright © 2015, 2010 by Pearson Education, Inc. All Rights Reserved Figure 2–8 Purchases of farm inputs in farm labor markets, farm financial markets, fertilizer and chemical markets, and farm machinery and equipment markets represent major linkages between farmers and farm input suppliers. (Source: U.S. Department of Agriculture.)

Introduction to Agricultural Economics, 6e Penson | Capps | Rosson | Woodward Copyright © 2015, 2010 by Pearson Education, Inc. All Rights Reserved Figure 2–10 Percentage of disposable personal income spent on food, 1935 to 2011.

Introduction to Agricultural Economics, 6e Penson | Capps | Rosson | Woodward Copyright © 2015, 2010 by Pearson Education, Inc. All Rights Reserved Figure 2–9 Share of the food dollar for food eaten at home and for food eaten away from home. (Source: Economic Research Service, U.S. Department of Agriculture.)

We Want Convenient and Safe Food! Year: 2006

In 2008 – Even Less to the Farm Sector In 1950, farmer got 42 cents per dollar!

Major Companies (Employers!)

– The Farm Sector (Farming, Production Agriculture) Production Agriculture is a variety of heterogeneous entities (farms) that produce the raw food and fiber products – – Big and small, – Family to corporate, – Florida to Alaska, and – Growing apples to zucchinis; chickens to turkeys and cotton to wool! Very diverse industry!

Definition of a Farm Defined by the US Census Bureau – “The definitions of a farm have varied through time. Since 1850, when minimum criteria defining a farm for census purposes first were established, the farm definition has changed nine times. The current definition, first used for the 1974 census, is any place from which $1,000 or more of agricultural products were produced and sold, or normally would have been sold, during the census year.” Source: U.S. Census Bureau, Statistical Abstract of the United States: 2009U.S. Census Bureau, Statistical Abstract of the United States: 2009

FREC 150 – Economics of Agricultural and Natural Resources

2012 Census of Agriculture

Unique Characteristics of the Farm Sector Source:

Headlines

FREC 150 – Economics of Agricultural and Natural Resources Headlines

Trends and Characteristics in the Farm Sector – Penson et al – Chapter 2 – The 20 th Century Transformation of US Agriculture and Farm Policy – Statistical Abstract (last one is 2012)

Introduction to Agricultural Economics, 6e Penson | Capps | Rosson | Woodward Copyright © 2015, 2010 by Pearson Education, Inc. All Rights Reserved Figure 2–2a Two significant trends in the changing structure of the farm sector are the declining number of farms and the rising average size of farms. The number of farms in this country has declined from nearly 6 million in 1950 to roughly 2.2 million currently. (Source: U.S. Department of Agriculture.) 1950: 6 Million Farms 2012: 2.2 Million Farms

Introduction to Agricultural Economics, 6e Penson | Capps | Rosson | Woodward Copyright © 2015, 2010 by Pearson Education, Inc. All Rights Reserved Figure 2–2b Two significant trends in the changing structure of the farm sector are the declining number of farms and the rising average size of farms. The average size of farms has roughly doubled during this period. (Source: U.S. Department of Agriculture.) : 215 Acres 2012: 420 Acres

Introduction to Agricultural Economics, 6e Penson | Capps | Rosson | Woodward Copyright © 2015, 2010 by Pearson Education, Inc. All Rights Reserved Figure 2–3b Indices of capital, labor, and materials used in agricultural production, 1948 to 2009 (1996 = 1.00).

Introduction to Agricultural Economics, 6e Penson | Capps | Rosson | Woodward Copyright © 2015, 2010 by Pearson Education, Inc. All Rights Reserved Figure 2–4 Index of agricultural productivity, 1948 to 2009 (1996 = 1.00). The productivity, or level of farm output per unit of farm input, has increased sharply during the post–World War II period. One reason for this rising productivity has been the technological advances embodied in farm inputs. (Source: United States Department of Agriculture.)

Introduction to Agricultural Economics, 6e Penson | Capps | Rosson | Woodward Copyright © 2015, 2010 by Pearson Education, Inc. All Rights Reserved Figure 2–5a Index of total output from the farm sector, 1948 to 2009.

Introduction to Agricultural Economics, 6e Penson | Capps | Rosson | Woodward Copyright © 2015, 2010 by Pearson Education, Inc. All Rights Reserved Figure 2–6a Gross farm income and production expenses, 1960 to (Source: U.S. Department of Agriculture.)

Introduction to Agricultural Economics, 6e Penson | Capps | Rosson | Woodward Copyright © 2015, 2010 by Pearson Education, Inc. All Rights Reserved Figure 2–6b Net farm income and real net farm income, 1960 to (Source: U.S. Department of Agriculture.)

Headlines

Trends and Characteristics in the Farm Sector – The 20 th Century Transformation of US Agriculture and Farm Policy – ERS EIB #3, 2005 The 20 th Century Transformation of US Agriculture and Farm Policy – Farming-dependent Counties – Number of Farms and Size Since 1900 – U.S. Ag Exports

Farming-dependent Counties

Number of Farms – Long Term

Agricultural Exports (Index)

Agricultural Exports ($)

Distribution of Farms and Sales

New Technology – Always!

Trends and Characteristics in the Farm Sector – Delaware Agriculture Best source of Information: – National Agricultural Statistics Service – Delaware – Number of Farms - 2,500 Land in Farms (acres) - 500,000 Average Farm Size (acres) Value of Ag Products - $1Billion + in 2008 Top Crops: Corn and Soybeans Top Animal: …….

Delaware’s Top Livestock and Ag Product - Broilers – 51 million produced in 2008! Sales > than $800 million or 77% of Delaware farm product sales! Has positive and negative impacts!

Summary The modern view of agriculture is that of a complex and extensive “food and fiber system”. The system converts natural and other resources into goods and services for domestic and foreign consumption. Like all industries, the sectors of the food and fiber system are affected by political, social and economic events in the U. S and the rest of the world. Production agriculture also has unique issues! Many of you will find a career in the food and fiber system! Lecture Sources: Text and Miscellaneous Materials

Introduction to Agricultural Economics, 6e Penson | Capps | Rosson | Woodward Copyright © 2015, 2010 by Pearson Education, Inc. All Rights Reserved Changing Complexion of Farming Physical structure  Fewer number of farms but larger-sized farms  Increasing use of capital relative to labor  Increasing productivity or output per unit of input