Agriculture/Agribusiness: An American
Bulwark
Within the past 3 years there has been a reawakening of the
importance of agriculture to America. Agriculture is no longer "yesterday's news," it is today's front page story. Grain sales to Russia, food policy and effects of weather on crops are issues· of·discussion'oy· city dwellers as well as rural residents.
Many factors have contributed to the recent general awareness that agriculture is America's bulwark. But perhaps none is more important than the vivid realization that the United States has an abundant food production capability that is not matched by any other country in the world.
This enormous productive capacity of American agriculture has had a tremendous impact worldwide -- both economically and politically. It was to a great extent an untapped resource until the 1970's. Then a major shift in the world's food economy opened new and larger markets for agricultural
products. New farm programs enabled U.S. farmers to produce for those markets.
Through farm legislation in 1970 and 1973, American farmers were given greater freedom to make their own decisions in the challenge of the open market. They have met that challenge and have been rewarded. At the same time, their increased production assures this country that agriculture will remain a bulwark against inflation and other threatening forces.
Remarks by Richard E. Bell, Assistant Secretary of Agriculture for International Affairs and Commodity Programs before a National Seminar on Agriculture and
Agribusiness, sponsored by the U.S. Office of Education, Kansas City, Missouri, March 24, 1976 at 8:00 p.m.
Productivity
One of the greatest threats to our colilltry from within in recent years has been inflation. One 0f the greatest counterforces to inflation is productivity -- increasing output per unit of input. We owe our farmers a tremendous debt of gratitude for increasing productivity and forming a strong line of defense against inflation.
Agricultural productivity has always been the backbone of this nation, but in the 1970's America's farm productivity has become the marvel of the world. There are a number of contributing factors. One of the most signifi-cant is current farm policy. Influence of programs releasing agricultural resources has shown up sharply in farm productivity.
After leveling off in the mid to late sixties, growth in farm
productivity bounced back in the seventies. Last year the farm productivity index -- a major indicator -- scored a record high. A prime reason for this was the increased world demand for grain and soybeans. Millions of acres,
formerly "set aside" by Government programs, were released for production. Also important, the change in farm policy gave farmers greater leeway to pro-duce what they can propro-duce best.
There are still restrictive quotas in sane crops -- peanuts, tobacco and extra long staple cotton -- that need changing, but farmers are now free to produce the major grain, soybean and cotton crops as they choose. If conditions look better for com than for soybeans, farmers can adjust their planting intentions to devote more acreage to corn than previously allowed. And that is exactly what is happening this year, according to planting
Farmers are now free to innovate. They are free to change farming practices or cropping patterns to the most efficient form. They have the management freedom to grow the crops that will return them the most profit
and those in tum will be the crops in greatest demand, the crops that people want and need.
Another major determinant of increased productivity is more general adoption of technological advances. Farmers have changed input mix -- land, machinery and other farm resources have been put to fuller and more efficient use. Other factors have been structural changes spurred by new agricultural ' technology.
One such change involves economies of size and enterprise specializa-tion. Years ago, farm operations were highly diversified, but today, farmers are concentrating on fewer and much larger crop or livestock enterprises. Now many one or two-enterprise farms exist where there were formerly three to five enterprises.
And with the spread of sophisticated machinery, farm sizes have
expanded as their numbers have.declined -- stretching from an average 195 acres in the 1940's to about 390 in the 1970's.
Specialization and growth are aided, of course, by the ready availa-bility of purchased inputs and custom services. Just 40 years ago, farmers were still providing most of their production needs horsepower, clover rotations for soil fertility, livestock feeds, crop seeds and workers.
Now farmers are buying many more of these goods and services front·
technologies, which help keep the production cost of each unit of food as low as possible. These agribusiness services are to the benefit of both the American fanner and the American consIBner.
But the adoption of new production techniques in individual fanning operations is costly. The average capital investment in agriculture has now reached more than $98,000 per worker -- the highest in the world. On commer-cial family fanns, the investment per worker often exceeds $150,000. By way of comparison, capital investment in manufacturing in our country is $55,000 per worker.
Capital Expenditures
Investments in buildings, machinery and other capital expenditures by farmers form an important part of the U.S. economy. Economic effects are not concentrated. They are felt widely within the economy. For every dollar of expenditure by farmers, $2.10 of business activity is stimulated.
Using input-output analysis, Department of Agriculture economists studied the impact of farmers' expenditures for farm capital items on business or economic activity. From 1971 data, the latest year for which detailed expenditures were available, they found farmers spent $7 billion for all capital items.
The firms which supplied the $7 billion of materials and services in turn had to purchase goods and services from other firms. Consequently, the original expenditures for capital items generated additional economic
activity within the U.S. economy. Thus, the total business activity stimulated in 1971 by the $7 billion in capital expenditures was $15.1 billion.
Of the total outlays for capital items in 1971, farmers spent around $4.9 billion for farm machinery. This expenditure generated some $10.4 billion in total business activity that year. At the same time, farmers
spent $2.1 billion for buildings and other capital improvements which generated $4.7 billion of total business activity.
Traditionally, cash receipts from farm marketings have been a good indicator of farmers' capital expenditures. In 1971, farm cash receipts
totaled $56 billion. During the past 3 years, farm cash receipts have averaged $92 billion annually. With higher cash receipts, farmers have been buying larger and more expensive models of farm machinery. We expect 1976 to be another good year for farmers. If so, the value of farm marketings may again be at a record level.
If this occurs, and the demand for nonrnachinery farm capital items follows the same trend as the demand for farm machinery, expenditures for farm capital items will be strong. This would be good news for the U.S. economy. Larger farm expenditures will create jobs, both inside and outside agriculture, and have a direct and favorable impact on total employment.
Employment
Agriculture itself is the Nation's largest employer. Approximately one out of four jobs in private employment is related to some phase of
agriculture -- from growing food and fiber to selling it at the supermarket. Farming alone provides employment for 4.3 million operators and workers -- as many as the combined payrolls of transportation, the steel industry and auto-mobile industry.
Between the fann and the dinner table, agriculture requires the services of several million people who either store, transport, process and merchandise the output of the Nation's fanns, or provide fanners with supplies.
The meat and poultry industry, including meatpacking, prepared meats, and poultry dressing plants, is one of agriculture's largest employers. It employs 315,000 workers and has a payroll of over $2.7 billion.
Another large employer is the baking industry, which includes plants for making bread, biscuits and crackers. It employs 254,000 workers and has a payroll of $2.3 billion.
The dairy industry includes manufacturers of such products as fluid milk, concentrated and dried milk, cheese, butter and ice cream. It employs 187,000 workers and has a payroll of $1.6 billion.
Canned, cured, and frozen food plants employ 227,000 workers and have payrolls totaling $1.6 billion.
These and other food processing industries employ about 1.7 million people; textiles and apparel manufacturing, 1.9 million; other manufacturing related to agriculture, 1.7 million; agriculturally related trade and trans-portation, 7.7 million; and resource based industries and services, 1.8 million.
A further indication of agriculture's viability as a jcb market is mushrooming enrollment of students in agricultural curriculums at
universities. Over 92,000 undergraduate students enrolled in the colleges of agriculture of the land-grant universities in the fall of 1975. And
that's almost 40,000 more than in 1970. Seventeen percent of all college of agriculture graduates currently are returning to the farm. Twice as many as 10 years ago.
In addition, enrollment of high school students in vocational agri-cultural courses is increasing. Enrollment in 1974 reached an all time high of 659,316 students, almost 200,000 more students than in 1960.
Perhaps one of the least recognized sources of employment is foreign agricultural trade. It is estimated that each $1 billion of farm exports creates 56,000 additional jobs. Thus, nearly 900,000 jobs have been created by burgeoning farm exports in the 1970's.
Foreign Trade
Farm exports have grown from less than $6 billion in 1969 to nearly $22 billion in 1975. In addition to creating employment, these farm exports have helped strengthen the dollar and paid for many of this country's
essential imports. For example, on an annual average for the past 3 years the value of agricultural exports have exceeded the cost of petroleum imports by $1.5 billion.
Last calendar year, a $12.6 billion surplus in agricultural trade more than offset a $2.3 billion deficit in non-agricultural trade. The $10.3 billion surplus in our balance of trade was a significant factor in beginning
this country's economic recovery.
During fiscal 1976, we expect U.S. agricultural exports to reach a record high of $22.1 billion. This would mean that the annual value of agricultural exports during the past 3 fiscal years would average $21.7
billion, compared to $9.6 billion for the previous 3-year period -- an increase of 126 percent.
Const.nners benefit from agricultural exports in terms of their food supply. Exports have given farmers the freedom to farm the way they can farm best, with full production at the lowest possible unit cost. Expanded markets, made possible through competitive unit costs of production and freer trade, permit farmers to produce at optimum efficiency. Everyone benefits.
The tremendous growth in our agricultural exports has been vital to American agriculture. Farmers are now exporting the produce of nearly 1 out of 3 cropland acres. All farm exports, crops and livestock, account for $1 out of every $5 of cash receipts from farming and ranching.
U.S. farmers are now exporting about 60 percent of their wheat, 50 percent of their rice and soybeans, 35 of their sorghum and 25 percent of
their corn. In addition, they annually export about 40 percent of their cotton,
40 percent of their tallow and more than 30 percent of their tobacco.
This fiscal year we expect the United States to account for 50 percent of the wheat and wheat flour moving in international trade. U.S. dominance of the world feed grains market is even more striking. In 1975/76, the United States will supply 63 percent of the world's total trade in corn, barley, oats and sorghum.
World Politics
America's agricultural abundance and this country's importance in the world grain market has created a new concept of U.S. agriculture in world politics. This concept has been referred to as agripower, or food power.
Some people even refer to it as a political weapon.
The capacity of .America's farmers to feed 215 million people in this country and millions more in foreign countries is an important world force.
It is a force that has not been fully tested. But it is a very real force; and it has the capacity to develop further strength.
We know that U.S. dominance of the world grain market is greater than that of any one nation among the petroleum exporting countries. We also know that U.S. farmers have the resources and technical knowledge to increase food production substantially if the incentives exist.
We know that U.S. agriculture can be used in a positive manner to promote peace and prosperity throughout the world. We also know that under a future leadership that does not fully understand American agriculture and the world's food needs, agriculture's productive capacity could be used as a political weapon. It is the manner in which our abundance could be used that concerns me.
President Ford has stated very clearly his position on the use of our agricultural abundance in world politics. In a speech on March 5, 1976, in Springfield, Illinois, the President emphasized that "farm exports will not be a pawn of international politics. We want our agricultural production to promote trade and help keep the peace."
Greater detail on current policy was outlined in President Ford's remarks to the American Farm Bureau Federation at its annual meeting in St. Louis on January 5, 1976. In essence, the President said that short-term denial of U.S. food supplies to obtain political concessions is not
likely to be effective against any major power which can buy from other sources as well as tighten its belt.
Using food as a political weapon also would imply arbitrary
interferences with the flow of agricultural products that could only mean disruption and hardship for the American farmer. Furthermore, because food is a basic necessity, unlike oil or other commodities, its arbitrary denial would raise serious ethical questions.
However, as the world's foremost producer and exporter of agricultural products, food is an important thread in the fabric of our relationships with nearly all other countries -- just as is our industrial strength and the
overwhelming size of the United States as a market for the products of others. It is obvious that access to food supplies is a fundamental long-term
consideration in our foreign relations, but it is not a valve to be turned on or off at will. I concur with this policy.
Conclusion
Agriculture and agribusiness do form a bulwark for America. It is a strong support capable of growing stronger. Let us not weaken it by impos-ing policies that restrict decision-makimpos-ing and programs that kill incentives. Let us give American agriculture the freedom to contirue operating under a policy of full production and market orientation. Let us use our agricultural productivity as an instn.unent of peace.
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