Financial Flux Forcing Extra Groundwork For U.S. Growers

Financial Flux Forcing Extra Groundwork For U.S. Growers

The produce industry in Florida is facing an array of issues that threaten its position as a state leader in food production. It has been noted previously that Florida and California have consistently ranked first and second in total factor productivity in agriculture since 1960. In stark contrast, the last decade brought on challenges that resulted in negative growth in total factor productivity for Florida agriculture, challenging the industry to change the way it operates. The industry has partnered with federal agencies in addressing the issues challenging Florida agriculture, none more so than USDA.

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The USDA National Institute of Food and Agriculture (NIFA) was established in the 2014 Farm Bill to provide critical funding for research, education, and Extension to deal with the emerging issues in agriculture. Their budget for the 2017 fiscal year shows increased interest in food safety, sustainable agricultural research and development, water for food production systems, childhood obesity prevention, climate variability and change, and sustainable bioenergy.

The 2014 Farm Bill is scheduled to expire in 2018 and negotiations are beginning for the next Farm Bill. In the face of current challenges confronting this industry, negotiation for our next Farm Bill is a priority for Florida agriculture. The Farm Bill prescribes the funding for agricultural R&D in the public sector.

Private sector funding of R&D has grown more than public sector growth. Private sector growth is driven by the returns on investment to the firm’s bottom line. Factors influencing returns to investment in R&D by private, for-profit firms include market size, technological opportunity, the ability of firms to appropriate economic benefits of research, and costs of R&D inputs. Across agricultural input industries, market size does not appear to be a good predictor of the amount of R&D invested. Research intensity (spending as a percentage of net sales) varies widely from 10.5% in seeds to 0.25% in fertilizers. Research intensity within each industry, however, has remained fairly constant over time. Thus, for some industries in which sales have grown rapidly (e.g., the seed industry), R&D also has grown rapidly with it.

Extending A Hand

Funding for R&D cannot overlook the contribution of cooperative Extension. Through Extension, land-grant colleges and universities bring vital, practical information to agricultural producers, small business owners, consumers, families, and young people. Land-grant institutions use Extension to reach out and offer their resources to address public needs. By educating farmers on business operations and on modern agricultural science and technologies, Extension contributes to the success of farms, ranches, and rural business. Further, these services improve the lives of consumers and families through nutrition education, food safety training, and youth leadership development.

Placing Priorities

The challenges are great for the produce industry, particularly in food safety, labor, the environment, and water. Produce ranks fourth as the food category contributing most to the burden of foodborne diseases in the U.S., with 14 pathogens causing 1.2 million illnesses, 7,300 hospitalizations, 140 deaths, at a cost of $1.4 billion and a loss of 1,400 Quality Adjusted Life Years. The economic impact of food safety outbreaks and recalls can be devastating to individual businesses and can have impacts across the produce industry. Recalls can cost companies hundreds of millions of dollars due to removing food from shelves, notifying consumers, loss of markets and consumer confidence, damage to reputation, litigations, and company closure. Food safety will continue to strain total factor productivity in agriculture.

The grain belt of the U.S. is struggling with lower farm incomes than seen for many years. Their struggles and the struggles of a general U.S. economy with a record debt burden will challenge the new Administration in setting priorities for the next Farm Bill. R&D funded from the Farm Bill has never been more important than it is today. The threat exists to cut Farm Bill expenditures when the grain belt is demanding more assistance. Policy will be the leading challenge to Florida agriculture in the coming year given the need to develop the next version of the Farm Bill. It will set the agenda for the next four to six years.