Economic Tidbits

Productivity Key to Agricultural Growth

The USDA Economic Research Service (ERS) says increased productivity is the main contributor to agriculture’s economic growth over the last 75 years. According to the ERS, U.S. farm output in 2021 was 190 percent greater than 1948, growing at an average annual rate of 1.46 percent (Figure 3). At the same time, aggregate input use declined 2 percent or -0.03 percent annually. U.S. farms and ranches used fewer inputs in 2021 compared to 1948 but produced significantly more output. How? Growth in productivity. Growth in total factor productivity, the difference between the growth in output and growth in inputs used, increased at an average of 1.39 percent per year. 

All types of inputs—labor, materials, and capital—are used less in today’s agriculture. Labor used in agriculture has been shrinking as producers adopt labor-saving technologies. Since 1948, labor’s contribution to output shrunk every subperiod except 2007-19 and declined at an average annual rate of -1.93 percent. Material inputs (i.e. seed, chemicals, fertilizers) declined -.46 percent on average between 2007-19 and -1.60 percent between 2019-21. And capital use in agriculture has declined as well. The ERS says capital inputs contributed an annual -0.07 percent to output growth, largely due to a decline in land use. Land use declined 28 percent between 1948-2021.

Agriculture is more productive today compared to 75 years ago. More output is produced with less labor, capital, and materials. And given the economic and societal pressures to produce more with less, agriculture’s productivity must continue to improve. To do so, research and development into new technologies and farming practices by private and public institutions is a must.

FIGURE 3. U.S. AGRICULTURE PRODUCTIVITY, 1948-2021

Source: USDA, Economic Research Service, Agricultural Productivity in the U.S. data product. Data as of January 2024.

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