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Role of Agriculture on the Economy Essay

I remember it like it was just yesterday. I was sitting on my grandparents’ front porch on hot summer day, looking out in to their field where grandpa had been working since he woke up. I remember asking myself, why does he waste his time out there in their field and why he wastes his time growing food when we could just go to the store and buy all the foods they grow. Then one day I asked my grandpa why he goes out there and works all day and he answered me and said because he can sell his crops for money so other families can eat too. I never really understood why he wanted to sell his crops to other people until he explained it to me. He told me that not only does he sell his crops so other families can eat but, also because it helps our economy. I didn’t know what an economy was at that time either so I decided to ask him and of course he explained to me what an economy was. Then I realized why he spends all day out in the fields and in the heat.

Agriculture is all around us and everywhere we go. Agriculture is a major part in our lives. Without agriculture there wouldn’t be any crop production or livestock management. Without crop production and livestock management we wouldn’t have meat, fruits, vegetables, milk, etc. Agriculture also plays an important role in our economy. Economics is the study of how we allocate a finite supply of resources. Agricultural economics, or agronomics, is the study of the distribution of resources and production of commodities in farming. Agricultural economics includes a number of specialty areas including agribusiness, agricultural policy, farm and ranch management, rural development, international development, natural resources and environmental economics, and agricultural marketing. It seeks to optimize the choices made by agricultural producers using economic principles, based on the recognition that land and resources are limited. Agriculture is a vital element of every economy because it is concerned with the production of food, which enables life to exist and grow.Since the 1700s, economists have examined issues of farm production, given the significance of agriculture as a source of national wealth.

By the 1800s, agricultural economics had developed as a specialty within the larger field of economics. Although the agricultural sector has declined in many nations, agricultural economics remains a widely studied subject, exploring not only farm and ranch production, but also environmental issues, trade, economic development and more. Agriculture economics originally applied principles of economics to the production of crops and livestock. Since the 1970s, agricultural economics has primarily focused on seven main topics: agricultural environment and resources; risk and uncertainty; prices and income; market structures; trade and development; and technical change and human capital. The field of agricultural economics can be traced out to works on land economics. Henry Charles Taylor was the greatest contributor with the establishment of the Department of Agricultural Economics at Wisconsin in 1909. Taylor established the first university department dedicated to agricultural economics in the United States during his time at the University of Wisconsin-Madison.

Another contributor, Theodore Schultz was among the first to examine development economics as a problem related directly to agriculture. The United States is one of the world’s largest producers, consumers, exporters and importers of agricultural commodities. Fifty years ago, the United States was the largest agricultural exporter, doing about $3 billion in sales per year. Six of its top ten customers were in Western Europe; two more – Japan and Canada – also were developed countries; India, a food aid recipient, and pre-Castro Cuba were the only developing countries that were major markets. Today, the U.S. agricultural exports top $50 billion a year. Six of its top ten customers are developing countries, and three-fourths of the U.S. agricultural exports go to Asia and the Americans. For the U.S. economy, agricultural trade is an important source of generating output, employment and income. In the 1960s agricultural economics expanded beyond issues of farm and ranch management production to issues of international rural development and natural resource use.

The relationship between land, population, and farm production is a complex one. In traditional agriculture, where methods of production have changed little over a long period of time, production is largely determined by the quality and quantity of land available and the number of people working on the land. Until the early years of the 20th century, most of the world’s increase in crop production came either from an increase in land under cultivation or from an increase in the amount of labour used per unit of land. As agriculture becomes modernized, its dependence upon land as well as upon human labour decreases. Animal power and machinery are substituted for human labour; mechanical power then replaces animal power. The substitution of mechanical power for animal power also reduces the need for land.

The increased use of fertilizer as modernization occurs also acts as a substitute for both land and labour; the same is true of herbicides and insecticides. By making it possible to produce more per unit of land and per hour of work, less land and labour are required for a given amount of output. Crop yields have increased dramatically since 1950, with a faster rate of growth in the developing than in the developed countries. Between 1930 and 2000 U.S. agricultural output approximately quadrupled, while the United States Department of Agriculture’s (USDA) index of aggregate inputs (land, labor, capital and other material inputs) remained essentially unchanged.

Thus, multifactor productivity (output divided by all inputs) rose by an average of about 2 percent annually over this period. This rate substantially exceeds the rate of multifactor productivity growth in manufacturing, and the agricultural rate did not experience the slowdown that occurred in the rest of the U.S. economy during the last quarter of the century. Economic liabilities for industrial agriculture include the dependence on finite non-renewable fossil fuel energy resources, as an input in farm mechanization (equipment, machinery), for food processing and transportation, and as an input in agricultural chemicals.

Farmers as an interest group in the political arena have done well in achieving legislation providing support for commodity prices and returns, public investment in rural infrastructure, and exemption from some regulatory and tax burdens that have fallen on other business sectors. Agriculture is the majority of what makes our economy. Every day you hear about our economy and how fuel prices increase or how the climate is affecting our environment. All of that has to do with agriculture. New inventions and capital investment led to the creation of new industries and economic growth. Agriculture is not only a part of our economy but also our culture. It has been around since before we became a country. Agriculture is something we cannot live without.


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