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White House report: Lauding agriculture as economic plus
By RICK A. RICHARDS
Indiana Correspondent

WASHINGTON, D.C. — The White House last week released a 32-page report holding up the nation’s agriculture sector as a bright spot in economic recovery. But in order to maintain agriculture’s 20 percent economic growth of last year, it will need support from Congress, especially in research and development (R&D).

The report, which comes just as the 2012 election season is heating up, presents a rosy picture of growth in traditional crops, organic farming, livestock production, farm implement production and across-the-board exports of farm products.

“The (Obama) administration has developed and implemented a comprehensive rural strategy to spur innovation, increase export levels, invest in clean energy and expand opportunities for rural enterprises on and off the farm that create jobs,” read a paragraph in the report’s Executive Summary.

An underlying theme of the report is that “a strong agricultural economy is critical to a strong rural economy.” That, in turn, is vital to a strong national economy. “Strength in agricultural production supports other parts of the economy, particularly in rural communities,” reads the report.

“Farms and ranches buy fertilizer and seed, invest in farm machinery, contract out with custom operators and support the many local businesses that come together to serve firms and farming families, including restaurants and health care service providers.”

The report goes on to include the ripple effect the farm economy has on grain elevators, biofuel refiners and food processors.
Although the report doesn’t say so directly, it implies there is a concern that growth in the agricultural economy could begin to plateau. For that reason, it urges an increase in funding for R&D across the board in agriculture.

“Studies find that every dollar invested in public agricultural research generates 10 to 20 times that amount in benefits to society,” read the report. President Obama has requested $2.3 billion be set aside in the 2013 budget for agricultural R&D.
This figure is considerable, but is down from about $4 billion just two years ago. While the Obama White House sees R&D as crucial, like many programs across the budget, cuts are being made to ease the burden on taxpayers. Coupled with private investment in R&D, and contributions from the nation’s universities, agricultural R&D is expected to be in the neighborhood of $11 billion in 2013.
The report said through research and development over the decades, for example, corn production has jumped from 33 bushels an acre in 1945 to 166 bushels today. Increasing exports is another focus of the White House report, which said total farm exports were $116 billion in 2010, and generated an additional $155 billion in related domestic economic activity. “The Obama administration has worked with a number of other developing and developed countries to reopen their markets to U.S. beef products,” read the report.
As a result, the report credits increasing beef exports to $5.4 billion (the highest since 2003) and in poultry products to $5.6 billion (up from $4.1 billion in 2007). The report also looked at increases in organic farm production ($31.4 billion in 2011) and increased production in ethanol and other biofuel, which is credited with reducing the price of gasoline by 25 cents a gallon.

Additionally, the White House report praised states for jumping on the wind power bandwagon. Fourteen states are now generating more than 1,000 megawatts of electricity from wind, including Indiana, Illinois and Iowa.

“The agricultural economy is more resilient today than it was 30 years ago during the farm crisis that spilled over into rural America,” read the report. “At that time, interest rate hikes driven by the Federal Reserve and other western central banks led to a share slowdown in economic activity domestically and abroad.
“As rising debt service burdens and plummeting exports squeezed economies, developing countries’ demand for U.S. agricultural products collapsed. American farmers had borrowed large sums in the hopes of selling into an ever-growing international market, and then found their own debt payments escalating as their revenues declined.”

The report described it as “a painful time” because less efficient farms that had high cost and low output didn’t survive. “At its end, America had a more efficient, more resilient agricultural system,” read the report. “Investments in rural America benefited farm families and helped boost production.

“Farmers diversified income streams and hedged against risks by renting lands, specializing in management of farming operations, contracting capital-intensive services requiring expensive machinery and information services and making greater use of output contracts and financial risk mitigation strategies.”

Changes made since then, said the report, have created a more stable farm economy where just 30 percent of farms use debt financing, compared to 60 percent in 1986.

“An agricultural economy built to last is integral to the affordability of our food, the independence of our energy supply and the security of America’s middle class,” read the report. “The administration has developed and implemented a comprehensive rural strategy to spur innovation, increase export levels, invest in clean energy and expand opportunities for rural enterprises on and off the farm that create jobs.”

6/22/2012