U.S. animal agriculture has economic importance

Diversified grain and livestock farms were once the model of U.S. agriculture. Farms often had crop and animal enterprises to help capture their complementary nature such as spreading the use of family labor throughout the year and recycling animal waste as nutrients to the crop enterprise. 

Currently farms are much more specialized in crops or animals; far fewer have both. That may have changed the relative economic importance of crop and animal agriculture in the United States.

There are some drivers of greater enterprise specialization. Of course modern technology is complex. Complexity tends to economically favor specialization. Specialization helps focus limited capital resources in one enterprise rather than allocating to multiple enterprises.

Larger capital investments help employ the best technology and the best managers. Specialization helps gain economies of size that would not be achievable if limited capital and management were being allocated to multiple enterprises. Specialization also tends to give businesses better knowledge in risk management, marketing and financial management.

In the long run the movement to industrialization in animal agriculture has also favored specialization. Egg and chicken production tended to leave the family farm in the 1950s and was largely replaced by specialized industrial-scale integrated production units. Cattle feedlots moved from primarily small-scale family farms to large commercial feedlots in the 1960s and early 1970s.

The 1970s saw hog production move out of pasture systems and into more capital-intensive indoor-confinement facilities. The grain export boom of the 1970s encouraged many farm families to specialize in crop production and drop animal enterprises. In more recent decades pork production and milk production have also moved sharply toward the more-specialized industrial model.

Is the crop sector or the animal sector economically bigger today? Data from the U.S. Department of Agriculture Farm Income and Wealth Statistics at the Economic Research Service estimates the farm-level value of crop and animal production by state and for the United States as a whole.

The data show that the value of production for the crop and animal sectors have made about the same economic contributions dating back to 1990.

Overall the value of crop production has been modestly larger than animal production. It has tended to move upward more quickly when agricultural demand is strong. There were two of those strong demand periods. The first was the growth of Asian demand in the mid-1990s. The second was the biofuels and Chinese demand surges from 2007 to 2012. In each of those periods the value of crop production increased more rapidly than the value of animal production.

Those events increased the demand for grains and oilseeds, thus increasing grain and oilseed prices and immediately increasing revenues from crops. But there is a lagged impact on the value of animal production.

Increasing feed prices cannot be immediately passed to consumers. Instead there is a multiple-year process of adjusting animal production down to a level where the prices in the animal sector increase sufficiently to cover the greater feed costs. That period of adjustment can be seen by the increasing value of animal production from 2009 to 2013.

Since 2016 the long-term relationship of the value of crop and animal production being of about the same size has returned. The bottom line is that the economic size of the animal sector is about the same size as the crops sector for the country as a whole.

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The movement to large-scale industrial animal production has also meant more geographic concentration of production. Large-scale animal production can concentrate in certain areas with little production in other regions. Cattle feeding is geographically concentrated in the Great Plains. One state may have several large-scale egg production and processing facilities, yet a neighboring state with similar land resources may have none of those egg facilities.

The natural resource base of an individual state will be the primary factor in determining the mix of crops and animals for that state. Animal production can move to locations that minimize costs of production and distribution. On the other hand crop production is tied to the land and is not mobile. One of the implications is that the importance of crop production compared to animal production could change throughout time for individual states.

Examples from select states in 2017 show large differences in the value of production from crops versus animals.

  • In 2017 the total U.S. value of production was 52 percent crops and 48 percent animals.
  • Iowa was close to that equal mix with 48 percent crops and 52 percent animals.
  • Illinois, in major contrast, was 85 percent crops and only 15 percent animals.
  • Wisconsin is specialized in milk production; animals represented 72 percent of the value of all farm production.
  • Kansas and Nebraska are major beef producers, especially feedlots, and the value of animal agriculture is about 60 percent and dominating crops.
  • North Carolina is a leader in industrialization of poultry and especially pork production; the animal sector contribution was 68 percent in 2017.

On a national basis the economic size of the crop sector and the animal sectors are about equal as measured by the farm-level value of production by USDA. The animal sector continues to add value, jobs and rural economic activity as it has always done.


U.S. animal agriculture has economic importance

U.S. animal agriculture has economic importance

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