The Farm and Food System Chapter 2

Agriculture’s Role in US Economy What do you consider Agriculture? Agriculture includes: Family Farms Corporate Farms Credit Organizations Input Suppliers Marketing Firms and Processors Retailers

Agriculture’s Contribution to US Economy 15.8 % of US Labor Force 14% of US Gross Domestic Product What is GDP? GDP - the total value of goods and services produced within the US by either foreign or domestic resources. Farming’s Contribution 3 % of Labor Force 2 % of GNP

Agriculture’s Role in the US Economy Type of IndustryNational Output Employed Labor Force Farming 23 Mining and Construction 55 Manufacturing 1714 Transportation, Communication and utilities 85 Wholesale and retail trade 1623 Finance, Insurance and real estate 196 Services 2029 Government (state, local and federal 1315

Agriculture’s Role in the US Economy In total however, agriculture indirectly accounts for much of the employment in other sectors. Agriculture is thus responsible for providing about 21.6 million jobs, constituting 15.8 percent of the total employment in the US. In addition the farm and food system contributes 14 percent of the nation’s GDP.

Types of Farms in US Family Farms 86% Partnerships10% Corporations 4% 30% of Farmland 27% of Product Sales All others<1%

Farming Facts Average size of farm in US is 447 acres This number is increasing Number of farms in US is 2 million This number is decreasing Number of people living on farms is decreasing and now around 4 million Why is this the case. (In 1920 there used to be 32 million people living on farms)

Family Farms Because many of the partnerships and corporations are family organizations, about 96 percent of our farms are really family farms.

Why Incorporate? Lower cost of transferring wealth Employee benefits tax deductible Management can be separated from ownership Reduce Liability

Revised Tax Rates (as of 1995) Corporate Tax RateIncome Level 15 %Taxable income up to $50, %Incomes between $50,000 and $75, %Incomes between $75,000 and $100, %Incomes between $100,000 and $335, %Incomes between $335,000 and $10 million 35%Incomes between $10 and $15 million 38 %Incomes between $15 million and $18,333, %Income over $18,333,333

Revised Tax Rates (as of 1996) Individual Tax RateIncome Level 15 %Taxable income up to $24, %Incomes between $24,000 and $58, %Incomes between $58,150 and $121, %Incomes between $121,300 and $263, %Incomes over $263,750

Economic Size Classes of Farms Expanding Sector of Agriculture Farms with sales greater than $100,000 annually Make up 16.7 % of the number of farms with 343,000 of them Make up 81.9 % of the cash receipts of all farms Off farm income in this category has grown from $10,635 in 1980 to $37,392 in 1997

Total of all income is $191,426 Net Income is $52,896 Direct Government Payments $13,628 Economic Size Classes of Farms (Expanding Sector)

Declining Sector of Agriculture Farms with sales between $20,000 and $99,999 annually Make up 22.2 % of the number of farms with 458,000 of them Make up 14.2 % of the cash receipts of all farms Off farm income in this category has grown from $9,285 in 1980 to $43,115 in 1997 Economic Size Classes of Farms

Total of all income is $63,396 Net Income is $9,285 Direct Government Payments $4,229 Economic Size Classes of Farms (Declining Sector)

Non Commercial Sector of Agriculture Farms with sales less than $20,000 annually Make up 61.1 % of the number of farms with 1,257,000 of them Make up 3.9 % of the cash receipts of all farms Off farm income in this category has grown from $16,677 in 1980 to $49,678 in 1997 Average net income per farm is -$1,397 Economic Size Classes of Farms

Total of all income is $48,567 Net Income is -$1397 Direct Government Payments $700 Economic Size Classes of Farms (Non Commercial Sector)

Vertical Integration Vertical integration, vertical coordination, and contract production are terms that are often used interchangeably An example of this type of integration might be a wheat farmer buying a flour mill or vice versa.

Farmer Cooperatives Cooperatives are an organizational structure that is an alternative to an individual proprietorship, partnership or corporation. A cooperative is a business that is organized, capitalized, and managed by its member-patrons, furnishing and/or marketing goods and services to the patrons at cost.

Number, Population and Size of Farms in the US YearNumber of Farms Farm Population (000) Average Farm Size (Acres) US Population on Farms (%) 19206,518,00031, ,648,00023, ,439,5106, ,191,5104,

The Agribusiness Complex 1997 Farm supplies industry $167 billion Total consumer purchases in US was $751 billion The farm value of these purchases was $148 billion This means the total value added was $603 billion

International Trade Value of exports in 1998 was $51.8 billion US trade balance was about $14.7 in the same year. (exports – imports)

Overview of our Economic System Households Business Firms Resource MarketsProduct Markets Land, Labor Capital and Management Money Flow (Wages, Salaries, Interest, Profits, Dividends) Finished Goods And Services Money Flow (Consumer Expenditures)

Measuring Output Gross National Product Is the total value of all finished goods and services produced in the economy within a given time period, such as a year whether these goods and services were produced in the US or overseas. Gross Domestic Product Is the total value of goods and services produced within the United States by either foreign or domestic resources.

Calculating GDP and GNP Stages of ProductionProduct Value at Point of Sale Value Added Cotton Farmer$2 Cotton Mill42 Textile Mill95 Shirt Manufacturer145 Wholesaler162 Retail Outlet204 Totals6520

Government Policy Monetary Policy Interest Rates Money Supply Fiscal Policy Taxes Spending