Saturday, November 8, 2014

U.S. agricultural productivity out paces all other industries

Where does all this food come from?

The abundance of safe, nutritious food in the U.S. is efficiently produced.
We understand that every American farmer feeds roughly 155 people. Since these people do not have to farm to feed themselves they are free to pursue other careers. This phenomenon is often referred to as the “industrialization of agriculture.”  By increasing the productive capacity of our farmers we were able to devote massive amounts of creativity and innovation to manufacturing, technology, communications and trade. What is this thing we call “productivity?”

Productivity is the ratio of output to inputs in production; it is a measure of the efficiency of production.

Productivity has many benefits. At the national level, productivity growth raises living standards as more real income improves people's ability to purchase goods and services, enjoy leisure, upgrade their housing and education, and contribute to social and environmental programs. Productivity growth is important to a business because more real income means the business can meet its commitments to customers, suppliers, workers, shareholders, and governments (taxes and regulation), and still remain competitive or even improve its competitiveness in the market place

It is widely agreed that increased productivity is the main contributor to economic growth in U.S. agriculture.  The level of U.S. farm output in 2011 was 170% above its level in 1952, growing at an average annual rate of 1.63%. This occurred as total input use increased a mere 0.11% annually, so the positive growth in farm sector output was very substantially due to productivity growth. But what exactly is farm productivity? 

Single-factor measures of productivity, such as corn production per acre or per hour of labor, have been used for many years because the underlying data are often easily available. While useful, such simple measures can also mislead. For example, yields could increase simply because farmers are adding more of other inputs, such as chemicals, labor, or machinery, to their land base. To account for a wider range of inputs our USDA produces measures of total factor productivity, taking account of the use of all inputs to the production process.

Specifically, annual productivity growth is the difference between growth of agricultural output and the growth of all inputs taken together. Productivity therefore measures changes in the efficiency with which inputs are transformed into outputs. Input measures are adjusted for changes in their quality, such as improvements in the efficacy of chemicals and seeds, changes in the demographics of the farm workforce, or innovations in machinery design. As a result, agricultural productivity is driven by innovations in on-farm tasks, changes in the organization and structure of the farm sector, research aimed at improvements in farm production, and/or random events like weather. There are many facts and figures  on U.S. farm productivity to support this conclusion.

As we have benefited as a society from the creativity and innovation of all those people freed from the tasks of food production, we have also benefited greatly from the creativity and innovation of those few people that did chose to pursue farming as a career. In other words, farmers were getting better and better at their jobs, using more and better technology, and progressing at a faster pace than urban workers. Many see this as a huge advantage for both farmers and consumers. Productivity growth provides the potential for higher farm incomes and lower consumer food costs (Bill Ganzel. ) The U.S. leads the world in food production efficiency. We get the most food from resources consumed which allows us to put additional resources towards other uses.

SOURCE: USDA, ERS research report: Agricultural Productivity in the U.S.

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