In 2010, U.S. agriculture produced nearly 38% of the entire world’s corn crop, 34% of world soybean production, and almost 20% of global pork and poultry production. The global prominence of U.S. production agriculture today was neither obvious nor a forgone conclusion a century ago. Several factors contributed. First and foremost, the United States has been blessed with comparatively good agricultural soils and climate, skilled, increasingly educated, and hard-working farmers, and a vibrant agribusiness sector. These advantages have been augmented and exploited over the decades through very substantial private investments in innovation and physical capital.
But this is only the beginning of the story. Much of the growth in U.S. farm output is attributable to the know-how, scientific and technological impacts resulting from sustained and significant investments in public agricultural R&D and the public institutions that carried out that research. These processes are slow and subtle and often underappreciated, but the productivity consequences of public investments in R&D have been large and the economic payoff has been remarkable.
The value of U.S. agricultural output grew almost tenfold to $281.5 billion in 2007 from $29.9 billion in 1949. This growth was achieved with little increase in aggregate input, meaning that almost 80% of production in 2007 was attributable to research-induced improvements in agricultural productivity since the middle of the 20th century. Research carried out by the state agricultural experiment stations returned benefits worth more than $20 per dollar invested. These benefits came primarily in lower cost of production, giving rise to consumer benefits from cheaper, safer, and more abundant food. Additional societal gains came from holding steady on the amount of land used in agriculture, preserving landscapes for more environmentally benign uses.
Will the next century witness a repeat of this remarkable agricultural productivity performance? The present signs point to pessimism. Congress has cut back on (inflation adjusted) funding for public agricultural R&D in the past eight years, a continuation of a much longer slowdown in the rate of growth in spending on public agricultural R&D over the previous several decades. Agricultural R&D is slow magic. The productivity payoffs, as large as they have been, take decades to realize. American agriculture is already beginning to see a substantial slowdown in productivity growth as the nation has nibbled away at its accumulated stock of research capital. This rundown will have largely predictable and negative productivity consequences that will be compounded by changes in climate that will require additional R&D just to prevent productivity from falling. Meanwhile, rapid increases in public R&D spending by large agricultural economies—such as Brazil, India and China—will erode the competitive advantage of U.S farmers and make it harder to compete in global markets.
What should the government do to revitalize agricultural R&D? One option would be to redirect farm subsidies. While a political consensus appears to finally be emerging to do away with “direct payments” to U.S. farmers—which could save around $5 billion per year—there is no apparent consensus or meaningful pressure from farm organizations and others to divert even a small portion of these savings to revitalize the U.S. public food and agricultural R&D sector. Instead, significant increases are proposed in subsidized crop insurance, among the most wasteful ways of supporting farm incomes.
Other policy options that could be deployed to turn things around include new initiatives for sharing the cost among taxpayers, farmers, agri-businesses and others who share in the benefits from R&D. Not all public-performed research need, or indeed should be paid from the public purse. But none of these options appears to have strong support in either state or federal policy discussions, which seem to be focused on more currently pressing concerns.
Looking back from the middle of this century, in all likelihood 2013 will be seen as a critical time in U.S. agricultural history when the economically obvious choice was not made, and governments opted instead in favor of political expedience for more immediate payoffs. The consequences will be seen over the coming half century in several unwelcome trends:
- A declining U.S. presence in the world food economy and in agricultural science and technology;
- An increased U.S. reliance on food imports;
- A faster rate of depletion of natural resource stocks in the United States and globally; and
- More serious problems of food security and poverty both in the United States and in the world as a whole.
But we never witness what might have been and will not know how much harm could have been avoided by a comparatively small effort today.
This post was coauthored by Julian Alston, (Julian@primal.ucdavis.edu), Professor of Agricultural and Resource Economics at the University of California-Davis, and Phil Pardey (firstname.lastname@example.org), Professor in the Department of Applied Economics at the University of Minnesota. Both authors have written extensively on agricultural productivity and the economics of R&D. Recent article, which can be accessed in full at www.instepp.umn.edu/publications, include:
Pardey, P.G., J.M. Alston and C. Chan-Kang. Public Food and Agricultural Research in the United States: The Rise and Decline of Public Investments, and Policies for Renewal. AGree Report. Washington D.C.: AGree, 2013.
Pardey, P.G. and J.M. Beddow. Agricultural Innovation: The United States in a Changing Global Reality. CCGA Report. Chicago: Chicago Council on Global Affairs, 2013.
Pardey, P.G. and J.M. Alston. For Want of a Nail: The Case for Increased Agricultural R&D Spending. Report in the American Boondoggle: Fixing the 2012 Farm Bill series. Washington, D.C.: American Enterprise Institute, 2011.