December 15, 2008

Ag productivity gains key to past, present, future

This ERS report contains some pretty interesting facts about the growing efficiency of U.S. agriculture. It takes into account more than just measures of productivity growth (improved yields) or output per worker (labor productivity). Instead, it uses ERS's productivity indexes to identify the separate roles of changes in input use and productivity-improving developments in technology that drive growth in ag output.

It calls this "total factor productivity" (TFP) - or the difference between the growth in ag output and growth in inputs. A chart from the report is below. It shows a dramatic rise in output while inputs have remained flat.

The opening paragraph of the ERS report notes (emphasis added):

U.S. agriculture relies almost entirely on productivity growth, primarily from innovation and changes in technology, to raise output. Total production nearly tripled between 1948 and 2004, while land in agriculture fell by one-quarter and labor declined by three-quarters. Because of high productivity growth, agricultural commodity prices rose at less than half the rate of economy-wide prices over those 56 years.

That says a lot, doesn’t it? After all, there is no more land now than in the ‘40s, and it is a safe bet there won’t be more land in the future, either.

The ERS report also led to a very good piece by Morton Sosland over at Food Business News (they also publish Milling and Baking News and Meat and Poultry). You can find that article here.

Sosland concludes his article with this (emphasis added):

On balance, the ERS declares, "There can be little doubt that productivity growth has been the engine of economic growth in post-World War II agriculture." The same may be said about the food industry whose growth obviously has been fueled by the ability of agriculture to keep pace with expanding demand. All too often the food industry neglects this long-term perspective where its outlook is tied so closely to the ability of American agriculture to innovate and to embrace promising technology. This depends on uninterrupted investing in research aimed quite specifically at finding the technology and the innovations that will promise continued amazing growth in the output of American agriculture.

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