Agriculture’s economic contribution huge to US

John Kooti

John Kooti

The agricultural sector makes an important contribution to the U.S. economy in many aspects, including supply of safe and reliable food; reducing energy dependence; and supporting job growth and economic development, especially in rural communities.

According to the Bureau of Economic Analysis, agricultural products and agricultural related industries contributed around $2.5 trillion dollars to the gross domestic products in 2016. From that total, farms contributed $368 billion; forestry, fishing and related activities contributed $53 billion; food, beverage, and tobacco manufacturing contributed $950 billion; food and drinking services contributed $765 billion; food and beverages stores contributed $237 billion; and textile, apparel and leather allied products contributed $32 billion to the GDP, or more than 7 percent share of GDP.

According to the U.S. Department of Agriculture, agricultural production occurs in all states, but California leads the country as the largest producer of agricultural products (crops and livestock), with almost 11 percent of the national total, based on the 2012 Census of Agriculture. Iowa, Texas, Nebraska and Minnesota round out the top five agricultural-producing states, with those five representing more than a third of U.S. agricultural-output value.

In terms of employment, agriculture and agricultural-related industries employ more than 21 million full- and part-time people, or 11 percent of total U.S. employment. Direct on-farm employment accounted for about 2.6 million of these jobs, or 1.4 percent of U.S. employment. Employment in agriculture and food-related industries supported another 18.4 million jobs. Of this, food service, eating and drinking places accounted for the largest share, with 11.9 million jobs, and food/beverage stores supported 3.2 million jobs.

In 2015, the U.S. food and beverage manufacturing sector employed more than 1.5 million people, or just over 1 percent of all U.S. nonfarm employment in more than 34,000 plants throughout the country. These employees are engaged in transforming raw agricultural materials into products for intermediate or final consumption. Meat and poultry plants employed the largest percentage of food and beverage manufacturing workers, followed by bakeries, and fruit and vegetable processing plants.

In 2016, the average American household spent 12.6 percent of its budget on food, which ranked third behind housing (33 percent) and transportation (15.8 percent).

According to the U.S. Department of Agriculture Economic Research Service, international trade plays a significant role in U.S. farm and rural economies. ERS estimated that in 2015, the $133 billion of the U.S. agricultural exports, produced an additional $169 billion in economic activities requiring more than 1 million full-time jobs, of which 75 percent are in nonfarm employment.

According to ERS, in 2015, approximately 8,000 workers were needed to deliver $1 billion of agricultural exports. As the world’s economies become more integrated, global trade and the links between countries grow ever deeper. Economic growth in emerging economies such as Latin America, Asia, the Middle East, Mexico and Canada spurred foreign demand for U.S. exports. Agricultural trade was strong even in the face of a strengthening dollar.

Agriculture production is a major use of property, with more than 50 percent of the U.S. land base. Currently, there are around 2 million farms with an average size of roughly 500 acres.

John Kooti is a professor of finance and dean of the John L. Grove College of Business at Shippensburg University. His email is JGKooti@ship.edu.