The central question concerning these long-term trends is whether productivity growth will continue, or slow in the future? This is especially important since a productivity slowdown could mean higher food prices, less food security and more pressure on the environment as farmers intensify land use and perhaps increase chemical applications to meet needs.
The Economic Research Service gets deep into complicated numbers, and is more than a little hard to follow sometimes. For example, US ag output grew at 1.49% per year while input use grew only very slowly (0.07% per year) during the period. The agency says this implies that productivity grew at an annual rate of 1.42% (as measured by the ratio of total output per unit of total inputs).
Although total annual use of inputs changed little since 1948, the mix shifted significantly and had a major impact on both output and productivity. For example use of intermediate inputs (e.g., fertilizer and pesticides) grew, while use of labor and land fell. A good bit of this shift was due to economics since prices of farm machinery, energy, chemicals, and purchased service inputs (e.g., custom machine work) all fell sharply relative to the price of farm labor. Relative prices of ag chemicals were down by three-quarters and farm machinery, purchased services, and energy fell by about two-thirds.
These trends led to substitution of large amounts of manufactured inputs for labor.
The ag output mix changed sharply as well over the period, with crop production growing faster than livestock. The share of farm production revenue in the United States from crops increased from 52% to 56% between 1948 and 2011, while the share for livestock fell from 47% to 39% and the share for other farm-related output increased from 1% to 5%
Relative prices among agricultural outputs also changed as farm prices of fruits/nuts and vegetables/melons rose relative to other crops and prices of poultry and eggs grew much more slowly than prices of other livestock products. These reflect shifts in consumers’ diet preferences and uneven technical changes in production among commodities appear to drive the relative price changes.
A key question is whether productivity is slowing. ERS suggests that while short-term events such as annual weather can shift productivity sharply, their recent analysis shows an upward shift after 1985. In addition, the agency says it found no statistical evidence of a productivity slowdown over the last six decades. It is not so sure about the future.
That concern reflects changes in key drivers of productivity such as public research and development investments that had grown rapidly in real terms from 1948 to the early 1980s, but which have grown much more slowly and variably since then. In fact, by 2009, real public R&D investment had begun to decline so that by 2012, it was nearly 6% lower than in 1982.
At the same time, private R&D investment has picked up much of the slack and has grown rapidly in recent years. In addition, the ERS analysts have become concerned that extension staffs declined by more than 20% between 1980 and 2010 nationally, along with other public support.
ERS says it is concerned not so much by declining public R&D investment in the shorter run, but that the decline could have severe negative impacts over the longer term. For example, it suggests that freezing the level of annual public R&D could pull productivity growth from the historical average of 1.42% to 0.86% by 2050—a very significant 40% decline that would imply the need for imports to provide for the expected population growth, a very unusual development in U.S. ag history.
ERS also opines that it would be increasingly difficult for productivity to make up that gap even if public R&D investments resume growth because of the typically long lag between research investment and the resulting productivity growth.
So, this report suggests that past productivity growth has been strong, and could continue—but also could be constrained in the future if the turn down on support for public R&D continues, a threat that could become severe if it continues, Washington Insider believes.