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The Farm and Food System

The Farm and Food System. Chapter 2. Agriculture’s Role in US Economy. What do you consider Agriculture? Agriculture includes: Family Farms Corporate Farms Credit Organizations Input Suppliers Marketing Firms and Processors Retailers. Agriculture’s Contribution to US Economy.

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The Farm and Food System

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  1. The Farm and Food System Chapter 2

  2. Agriculture’s Role in US Economy • What do you consider Agriculture? • Agriculture includes: • Family Farms • Corporate Farms • Credit Organizations • Input Suppliers • Marketing Firms and Processors • Retailers

  3. Agriculture’s Contribution to US Economy • 15.8 % of US Labor Force • 14% of US Gross Domestic Product • What is GDP? • GDP - the total value of goods and services produced within the US by either foreign or domestic resources. • Farming’s Contribution • 3 % of Labor Force • 2 % of GNP

  4. Agriculture’s Role in the US Economy

  5. Agriculture’s Role in the US Economy • In total however, agriculture indirectly accounts for much of the employment in other sectors. • Agriculture is thus responsible for providing about 21.6 million jobs, constituting 15.8 percent of the total employment in the US. • In addition the farm and food system contributes 14 percent of the nation’s GDP.

  6. Types of Farms in US • Family Farms 86% • Partnerships 10% • Corporations 4% • 30% of Farmland • 27% of Product Sales • All others <1%

  7. Farming Facts • Average size of farm in US is 447 acres • This number is increasing • Number of farms in US is 2 million • This number is decreasing • Number of people living on farms is decreasing and now around 4 million • Why is this the case. (In 1920 there used to be 32 million people living on farms)

  8. Family Farms • Because many of the partnerships and corporations are family organizations, about 96 percent of our farms are really family farms.

  9. Why Incorporate? • Lower cost of transferring wealth • Employee benefits tax deductible • Management can be separated from ownership • Reduce Liability

  10. Revised Tax Rates (as of 1995) Corporate

  11. Revised Tax Rates (as of 1996) Individual

  12. Economic Size Classes of Farms • Expanding Sector of Agriculture • Farms with sales greater than $100,000 annually • Make up 16.7 % of the number of farms with 343,000 of them • Make up 81.9 % of the cash receipts of all farms • Off farm income in this category has grown from $10,635 in 1980 to $37,392 in 1997

  13. Economic Size Classes of Farms (Expanding Sector) • Total of all income is $191,426 • Net Income is $52,896 • Direct Government Payments $13,628

  14. Economic Size Classes of Farms • Declining Sector of Agriculture • Farms with sales between $20,000 and $99,999 annually • Make up 22.2 % of the number of farms with 458,000 of them • Make up 14.2 % of the cash receipts of all farms • Off farm income in this category has grown from $9,285 in 1980 to $43,115 in 1997

  15. Economic Size Classes of Farms (Declining Sector) • Total of all income is $63,396 • Net Income is $9,285 • Direct Government Payments $4,229

  16. Economic Size Classes of Farms • Non Commercial Sector of Agriculture • Farms with sales less than $20,000 annually • Make up 61.1 % of the number of farms with 1,257,000 of them • Make up 3.9 % of the cash receipts of all farms • Off farm income in this category has grown from $16,677 in 1980 to $49,678 in 1997 • Average net income per farm is -$1,397

  17. Economic Size Classes of Farms (Non Commercial Sector) • Total of all income is $48,567 • Net Income is -$1397 • Direct Government Payments $700

  18. Vertical Integration • Vertical integration, vertical coordination, and contract production are terms that are often used interchangeably • An example of this type of integration might be a wheat farmer buying a flour mill or vice versa.

  19. Farmer Cooperatives Cooperatives are an organizational structure that is an alternative to an individual proprietorship, partnership or corporation. A cooperative is a business that is organized, capitalized, and managed by its member-patrons, furnishing and/or marketing goods and services to the patrons at cost.

  20. Number, Population and Size of Farms in the US

  21. The Agribusiness Complex 1997 • Farm supplies industry $167 billion • Total consumer purchases in US was $751 billion • The farm value of these purchases was $148 billion • This means the total value added was $603 billion

  22. International Trade • Value of exports in 1998 was $51.8 billion • US trade balance was about $14.7 in the same year. (exports – imports)

  23. Overview of our Economic System Households Resource Markets Product Markets Finished Goods And Services Land, Labor Capital and Management Money Flow (Consumer Expenditures) Money Flow (Wages, Salaries, Interest, Profits, Dividends) Business Firms

  24. Measuring Output • Gross National Product Is the total value of all finished goods and services produced in the economy within a given time period, such as a year whether these goods and services were produced in the US or overseas. • Gross Domestic Product Is the total value of goods and services produced within the United States by either foreign or domestic resources.

  25. Calculating GDP and GNP

  26. Government Policy • Monetary Policy • Interest Rates • Money Supply • Fiscal Policy • Taxes • Spending

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