Magazine article The Futurist

Food, Farming, and the Future: Three Myths Overshadow Agricultural Policy

Magazine article The Futurist

Food, Farming, and the Future: Three Myths Overshadow Agricultural Policy

Article excerpt

U.S. Agriculture Secretary Mike Johanns is holding forums across America to hear what farmers have to say about their future.

Whatever the outcome of these meetings and the coming debates in Congress over the next farm bill, farm policy must be shaped in a very different context from that which existed when the first farm bills were enacted in the 1930s. Yet the past continues to affect farm policy.

Here are three important myths that continue to influence farm policy and need to be removed from our thinking.

Myth One: U.S. farmers produce food. When the first farm bill was written, farmers produced food for both themselves and others. In 1947, the first year data are available, 47% of the value of food originating on U.S. farms was the value of farm products used in the food. This share represents the wheat in bread, the corn in corn flakes, and the cow's milk in a gallon of milk bought at a supermarket. However, by 2002, the farm share had declined to less than 19% (see Figure 1).

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Today's consumers choose food that embody time savings, whether the food is prepared by someone else at a restaurant or prepared using ingredients that can be conveniently combined at home. In summary, a more accurate portrayal of the current situation is that U.S. farmers produce raw ingredients--i.e., farm commodities--which are transformed into what Americans call food.

Myth Two: Agriculture is the largest U.S. economic sector. Though agriculture is a large and important part of the U.S. economy, I am aware of no study that systematically compares all economic activity generated by the various U.S. economic sectors. One reason for the lack of such studies is that it is difficult to identify all inputs and outputs associated with an economic sector. Without comparable accounting, skepticism should abound regarding what is the largest U.S. economic sector.

Figure 2 underscores the reason for skepticism. I have reorganized the data on expenditures by U.S. consumers into categories associated with housing, medical care, and the food and fiber system. This data is reported by the U.S. Department of Commerce, Bureau of Economic Analysis. Even though all expenditures on clothing, including synthetic fibers, are included in the food and fiber sector, consumers' annual expenditures for housing and medical care exceed expenditures for food and fiber products. So it is more accurate to say that agriculture is among the largest sectors of the U.S. economy.

Myth Three: The U.S. farm sector will disappear. The share of expenditures that U.S. consumers devote to domestically produced farm commodities has declined dramatically over the last half century, from 11.9% of all expenditures by U.S. consumers in 1947 to 1.8% today. The ongoing, long-term decline in farming's role in the U.S. economy has produced the myth that eventually the U.S. farm sector will disappear. This overlooks the important role that relative prices play in directing the evolution of economic activity. For example, as computer chips have become cheaper, they have been used not just in computers, but also in cars, refrigerators, greeting cards, and even tennis shoes.

U.S. farm products have steadily become cheaper relative to both fuel and non-fuel industrial commodities. What makes these price trends so exciting is that they coincide with an explosion in our knowledge of biological processes. This knowledge offers the potential for radical new processing systems in which farm commodities become a source of industrial raw materials. Already, ethanol accounts for over 10% of U.S. corn use, and farther in the future, farm products may be increasingly used in drugs, clothing, building materials, and more, as the biotech revolution proceeds.

While the role that government subsidies play in stimulating the use of ethanol cannot be dismissed, long-run fundamental economic forces are also at work. …

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