“Here’s the bottom line, Mr. and Mrs. Congressman, unless there is more money appropriated for agricultural research, there will have to be more land, labor, capital, and inputs brought into production.” USDA’s Economic Research Service laid it out very clear, and said ag research spending has to keep up with or exceed the rate of inflation to supply enough food to meet the demand. (You can’t get much clearer than that.)
USDA’s economists looked at public funding for agricultural research and compared it to the growing food needs of the next 40 years. What they found confirms what most farmers already knew, but what the Congress needs to hear, and that message is a clear signal that greater financial resources need to be allocated to public agricultural research. Their report forecasts a 70% to 100% growth in demand by 2050 because of population growth, energy demands, and the higher incomes in many developing countries which have recently pressured the markets. Their analysis says global productivity will have to grow by a similar amount, as well as an increase in US domestic food production.
The USDA economists used a yardstick to measure agricultural output called “total factor productivity.” TFP is the output compared to the total amount of land, labor, capital, and inputs used to produce that output, and so if TFP grows then it means technology has had a positive change. They point to the period of 1948 to 2008, in which that 60 year period had an average annual growth rate of 1.58%, while the growth rate in TFP was 1.52%. This was a period of time in which the use of commercial fertilizer, biotechnology, computerization of equipment, and other advancements were introduced. The economists attributed the growth to public investment in agricultural research and development, along with extension, education, and infrastructure improvements, as well as private dollars going into R&D.
In the 82 years prior to 2009, federal and state ag spending on production type research increased an average of 7.5% per year, but when adjusted by the Consumer Price Index and adjusted for inflation, the actual spending was only 3% per year. Spending slowed in the 1980’s, peaked in 1994, and has declined 20% since that time. The economists propose three scenarios that could happen in the next 40 years.
1) Public research spending is held constant at $2.5 billion per year, and inflation reduces it over time.
2) Public research spending is held constant with the recent average of $2.5 billion, but increased at the rate of inflation.
3) Public research spending increases by 1% per year in real terms, which is the rate of inflation, plus 1%, and that would be roughly equal to the rate of population growth in the US. This would be an increase in spending, but not as must as prior to 1980.
Bringing the TFP factor back in, the economists say TFP would decline under scenarios 1 & 2, but would increase under scenario #3 through 2040. That means agricultural output would be 83% higher under scenario #3 by 2050 compared to current levels, barely enough to keep up with the 70% to 100% increase in expected demand by 2050. Scenario #2, in which ag research keeps up with the rate of inflation, would only see a 70% increase in output by 2050, and scenario #1 which has steady funding would only finance a 43% increase in output.
The economists say slower growth will cause prices to rise, reduce global welfare, and increase poverty in urban areas. Rising prices would expand cropland needs domestically and globally, and input use would intensify. They said such activity would come at a high environmental cost, including impairment of soil and water, loss of biodiversity, and increased greenhouse gas emissions. They also expect ag exports to decrease and US farmers to lose competitiveness in international markets.
The forecast is gloomy without higher priorities placed on publicly funded agricultural research. The result will be an erosion of productivity, which means commodity output will not be able to keep up with demand, unless more land is brought into production, along with more labor, capital, and other inputs. That result has environmental negatives, along with the decline in the US agricultural economy.
Source: the FarmGate blog