Midwest Economy Blog

Oppedahl on the agriculture R&D conference

October 26, 2007

Have you ever wondered how the U.S. can produce so much food with relatively few farmers? On September 24, 2007, at the Federal Reserve Bank of Chicago you could have learned some of the reasons behind the cornucopia of output from U.S. agriculture at our conference The Role of R&D in Agriculture and Related Industries: Today and Tomorrow. The conference explored the role of research and development (R&D) in agriculture, biotechnology, and the food industry, focusing on policies that promote industry growth and rural development. This conference brought together those interested in the R&D issues facing agriculture and related sectors of industry, particularly biofuels and food manufacturing.

The goals of the conference were to examine agricultural R&D from a midwestern perspective, explore the implications of R&D for industry growth, and discuss the influence of government R&D policies on industries and rural development. The sessions of the conference covered the following topics: 1) agriculture R&D and funding, 2) biotechnology and food R&D, 3) biofuels R&D, and 4) a policy discussion about the best ways to promote agriculture-related R&D. Next I’ll highlight a few of the presentations.

William Testa, vice president and director of regional programs at the Chicago Fed, kicked off the day with opening remarks that emphasized the role Chicago has played in the development of agriculture in the Midwest. “Almost from its inception, Chicago has been the nexus and commercial center for a broader region whose wealth emanates from production agriculture,” Testa said. Yet, shifts in agricultural labor due to increased productivity have affected the region’s economy. Testa noted that fewer production jobs in agriculture and related industries have led to struggles in rural development, though agriculture remains a key sector. “At heart, production agriculture must remain in the Midwest where land, climate, and transportation infrastructure are superior,” Testa stated. Moreover, R&D activities have played a key role in shoring up the District economy and offer hope for a bright future. The web of R&D efforts in the Midwest is likely to grow, creating more opportunities for the region through better products and new technologies. Testa concluded, “I am optimistic here today that the dissolution between research lab and factory and farm that has taken place in other regions and in other industries is not our Midwest region’s destiny.”

My presentation opened the first session and emphasized the link between the amazing productivity in agriculture during the last 60 years and agricultural research. Recent data from the U.S. Department of Agriculture demonstrated that, while using fewer inputs than in 1948, the agricultural sector in the U.S. produced more than 2.5 times as much output in 2004 as it did over a half century ago. Of course, the use of some inputs, like fertilizers, has increased. However, the contraction in farm labor more than offset these increases. Yet, there was a shift in the source of agricultural productivity during this period. In the 1948–1980 period, almost three-quarters derived from an increase in inputs per worker, whereas in the 1981–2004 period, two-thirds derived from growth in total factor productivity (TFP), which reflects changes in technology and other factors rather than labor-saving productivity alone. Government policies fostering agricultural research have promoted the long-term health of agriculture via TFP. According to Fuglie and Heisey, “There is a consensus that the payoff from the government’s investment in agricultural research has been high.” There are even greater benefits to the public from agricultural research when one considers the social returns from private research as well as public funding.

Orion Samuelson, agribusiness director at WGN Radio Chicago since 1960, presented the keynote luncheon speech, expanding on this theme of the changes in agriculture due to government policies. He passed along a few of his many experiences related to the changes in agriculture during his association with the industry. Orion touted rural electrification as the single factor that changed agriculture the most in the twentieth century; farm life was transformed by a reliable supply of electricity. He also said that research played a vital role in agriculture’s growth and that research funding should be expanded to sustain the industry’s growth. An example of the key role of research is the ongoing development of drought-resistant crop genetics via biotechnology, which will contribute to the record corn crop this year. Samuelson contended that we’re just seeing the beginning of biotechnology’s impact across the industry. Moreover, he predicted that U.S. agriculture would rise to the challenge of helping feed the world through agricultural R&D, just as it has over past decades.

The final session explored policies that would strengthen agricultural R&D in the U.S. Jeffrey D. Armstrong, dean of the College of Agriculture and Natural Resources at Michigan State University, discussed CREATE-21, a set of proposals to integrate the U.S. Department of Agriculture’s research, extension, and teaching functions and double U.S. funding of agricultural research to about $5.4 billion per year over a seven-year period. Moreover, the funding would become more competitive under CREATE-21, making research better suited to the changing needs of agriculture.

Lastly, Robert L. Thompson, Gardner Chair in Agricultural Policy at the University of Illinois at Urbana–Champaign, looked at the resource constraints facing world agriculture, even as world food demand could double by 2050. In this scenario, research investment is particularly essential for the future as well as it has been in the past. Also, the Midwest may play an even larger role in feeding the world with exports because of the water and land constraints that many regions across the globe face. But increased funding of R&D is needed to meet the rising global demand for food products. Indeed, R&D plays a key role in achieving greater output and in enhancing productivity, which will allow for more exports. Moreover, a better mix of funding with enhanced government participation would benefit agriculture and the world because private sector investment alone will not reach the socially optimal level in all areas of research.

The other presentations at the conference were excellent as well. Most of the presentations from the conference are now available online, so be sure to check them out to learn more about R&D in the agricultural, food, and biofuel sectors. (A special Chicago Fed Letter summarizing the conference presentations will come out in the near future.)

The views expressed in this post are our own and do not reflect those of the Federal Reserve Bank of Chicago or the Federal Reserve System.

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