Friday, February 6, 2009

President Priestley's Editorial

UI Economists Tabulate Agriculture’s Economic Contribution

By Frank Priestley, Idaho Farm Bureau President

An economic analysis recently released by the University of Idaho shows agriculture is the single biggest contributor to the economic base of this state.

UI economists Philip Watson, Garth Taylor and Stephen Cooke conducted an “economic base analysis” and tabulated the economic activity generated by all of the sectors that depend on agriculture. This analysis includes sales of fertilizer, farm equipment, irrigation supplies, the revenue generated by food processing, and all of the jobs created in all of the economic sectors that depend on agriculture for their existence.

The Idaho Farm Bureau Federation has long argued that this type of analysis provides a much better picture of agriculture’s contribution to the state’s economy and we applaud the University of Idaho for conducting this important work.

The typical “gross contribution analysis” which includes total sales, direct employment and direct wages in calculating a sector’s economic contribution, shows Idaho farms and ranches were responsible for 6 percent of gross state product in 2006. Further, this analysis shows Idaho agriculture generating $12 billion in total sales, (11% of state total) 56,000 jobs (6% total workforce) and $1.2 billion in wages paid (4% of state total).

These are the numbers that agriculture’s detractors like to use when they make arguments about how important the high-tech and service (tourism) sectors are, or how Idaho’s economy is evolving into something new and no longer depends on agriculture.

However, under an “economic base analysis” we see that in 2006 agriculture generated $21 billion in total sales (20% of state total), 156,599 jobs (17% of total workforce) $4.2 billion in wages (15% of state total) and $8.4 billion overall which pencils out to 17% of Idaho’s gross state product – “the single biggest contributor to the economic base of Idaho,” according to the study.

Another interesting point noted in the UI analysis shows the value of exports. “An economy without exports is less able to generate new money and will slowly leak out existing money due to purchases from outside the region.”
Idaho agriculture exports 73 percent of its output, while Idaho’s high-tech sector exports 55 percent of its production. On the other hand, Idaho’s service sector, including retail and wholesale trade, construction, utilities and “other manufacturing” are indirect sectors that export little. Their output primarily supports the exporting sectors. The UI analysis points out that healthy economies need industries that export and industries that support exporting sectors, which is what keeps the dollars flowing. “In summary, base contributions are propelled by exports and the output of other sectors indirectly generated in support of agriculture’s export production,” the analysis states.

With the rapid advance of the dairy industry over the past ten years, the makeup of Idaho agriculture has changed. Since 2003, milk sales have generated more revenue than any other commodity except timber in Idaho and overall livestock revenue has outpaced overall crop revenue. Idaho now ranks third in the nation in milk production behind California and Wisconsin. But at the present time, the dairy industry is struggling with overproduction and farm gate returns are running far below production costs.

However, Idaho agriculture is exceptionally diverse in comparison to many other states and because of that fact, agriculture will continue to generate strong revenue, provide thousands of jobs and be a stabilizing force in our state’s economy.

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