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AGEC 105

Introduction to Agricultural and

Resource Economics

Jim Mjelde

Introduction

• Class Web site http://agecon2.tamu.edu/people/faculty/mjelde-james/AGEC%20105/

• Syllabus http://agecon2.tamu.edu/people/faculty/mjelde-james/AGEc%20105/document%20105/agec%20105%20syl.pdf

• What is Agricultural Economics?

What is Agricultural Economics?

• What is Economics?

– George Carlin film Clip

• Stuff

http://www.youtube.com/watch?v=MvgN5gCuLac

http://agecon2.tamu.edu/people/faculty/mjelde-james/AGEC%20105/http://agecon2.tamu.edu/people/faculty/mjelde-james/AGEc%20105/document%20105/agec%20105%20syl.pdfhttp://agecon2.tamu.edu/people/faculty/mjelde-james/AGEc%20105/document%20105/agec%20105%20syl.pdfhttp://www.youtube.com/watch?v=MvgN5gCuLachttp://www.youtube.com/watch?v=MvgN5gCuLac

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Stuff

• Economics is all about your stuff and

my stuff – goods and services

• Economic Concepts Introduced

– Unlimited wants, decisions, constraints,

self interest, property rights, utility,

insatiable wants, conspicuous

consumption, Says Law, supply and

demand, economic linkages, production,

consumption, money, multiple products,

international, etc.

Economics Defined

• “…a social science that deals with how

consumers, producers, and societies

choose among the alternative uses of

scarce resources in the process of

producing, exchanging, and consuming

goods and services”.

Scarcity

• Are cars scarce in Houston and Los

Angeles during rush hour?

Houston Los Angeles

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Scarcity Cont.’

• Physical Scarcity

1. the condition or quality of being scarce; inadequate

supply; deficiency; lack. 2. rare or uncommon

(Webster’s New World Dictionary)

• Economic Scarcity

A resource to be considered scarce must be of limited

availability and be of productive use (The Learning

Economist).

Types of Scarce Resources

• Natural and biological resources

• Human resources – human capitalLabor

Education / entrepreneur

• Manufactured resources – capital

Choices - Decisions

• Allocation of scarce resources

• Limited resources but unlimited wants

• Consequences

– Level of satisfaction in not infinite - utility

– Doing one thing requires society to give up

something else – opportunity costs

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What is Agriculture?

Food Commodities

Food Products

Farm Supply Farms First Handler

Processor Distributor Retailer

Agriculture Commodity Movement?

Figure 5. Maps of food flow

networks within the United

States. Maps depict total

food flows (tons) for the (A)

FAF and (B) county scale.

Links are shown for all FAF

data and for the largest 5%

of county links.

Xiaowen Lin et al 2019 Environ. Res. Lett. 14 084011 doi:10.1088/1748-9326/ab29ae

What is Agricultural Economics?

“…an applied social science that deals

with how producers, consumers, and

societies use scarce resources in the

production, processing, marketing,

and consumption of food and fiber

products and natural resources”

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Other Terms

• Microeconomics versus macroeconomicsMicro - individuals or groups of individuals

Macro - broad aggregates at economy level

• Positive, normative, versus prescriptive economics

Positive - “what is”, or “what would

happen if”

Normative - “what should be”

Prescriptive – how to achieve a goal

Food & Fiber Industry Trends

• Farm level / producer

• Consumer

• Market Producer / Consumer interface

• Positive and Negative Consequences

Decreasing number of farms

Slow down in the early to mid 1990s

Decreasing number of acres in

farms

Increasing average farm size

Slow down in early to mid 1990’s

Trends - Producer

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Trends - Productivity

• Green Revolution – transformation of agriculture in the middle of the 20th century

• Father Dr. Norman Borlaug• https://borlaug.tamu.edu/home/dr-norman-borlaug/

• Changes– WW II infrastructure

– Human Capital

– Technology (crop hybrids,

mechanization, fertilizer,

pesticide use, irrigation, management, etc.)

Labor Capital Materials

Changes in Producer Inputs

Productivity Example

https://borlaug.tamu.edu/home/dr-norman-borlaug/

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Why Not Utopia?

• Productivity Increases – Increases slowing down – population growth not slowing as fast

• Environmental Issues – major sources of non-

point pollution problems

Rank Rivers Lakes Estuaries

1 Agriculture Agriculture Urban Runoff

2 Municipal point

sources

Municipal point

sources

Municipal point

sources

3 Stream and

habitat changes

Urban Runoff Agriculture

Source: USDA / ERS / BEA

Trends - Consumer

Source: USDA / ERS ?

BEA

Trends - Consumer

Percentage of away from home

expenditures surpassed at home in 2014

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Source: Behavioral Risk Factor Surveillance System, CDC.

2000

2010

1990

Trends – Obesity Among U.S. Adults

(*BMI ≥30, or ~ 30 lbs overweight for 5’ 4” person)

No Data

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Source: Behavioral Risk Factor Surveillance System, CDC.

Trends – Obesity Among U.S. Adults

2018

Where a food dollar goes

Only 19 percent of each dollar spent on food products goes

to farmers and ranchers, early 1990’s…

Trends – Interface – Early 1990

Source: https://data.ers.usda.gov/reports.aspx?ID=17885

Approximately14.6 percent of each dollar spent on food products

goes to farmers and ranchers

Trends – 2017

https://data.ers.usda.gov/reports.aspx?ID=17885

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Farm Share Over Time

Average

1993- 2017

16.5%

Source: https://www.ers.usda.gov/data-products/food-dollar-series/download-the-data/

Value added - of or relating to the estimated value that

is added to a product or material at each stage of its

manufacture or distribution.

Value Added Component - 2017

Food Services Over Time

Average

1993- 2017

29.8%

Source: https://www.ers.usda.gov/data-products/food-dollar-series/download-the-data/

https://www.ers.usda.gov/data-products/food-dollar-series/download-the-data/https://www.ers.usda.gov/data-products/food-dollar-series/download-the-data/

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Farm Value

Marketing Bill

Source: USDA / ERS

Trends – Consumer Expenditures

Farm Value

Marketing Bill

Source: USDA / ERS http://www.ers.usda.gov/data-products/food-expenditures.aspx

Share of Food Expenditures

by Source of Funds

Farm Value

Marketing Bill

Source: USDA / ERS http://www.ers.usda.gov/data-products/food-expenditures.aspx

Share of Food Expenditures

by Source of Funds – revised data

Same Story

http://www.ers.usda.gov/data-products/food-expenditures.aspxhttp://www.ers.usda.gov/data-products/food-expenditures.aspx

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Other Trends

• The Natural Food Movement

– Organic production practices

• Niche Farming

– Ag. tourism

• Local Food Movement

– Community supported ag.

• Branching to New Areas– Energy

Societal Impacts

• Obesity

• Low cost food

• Greater wealth to

dedicate to other uses

• Greater convenience

• Greater variety

• Year-round availability

• Certain and reliable food

supply

• Industrialized food

production

• Reliance on fossil fuels

• Increased rate of obesity

• Increased rates of Type II

Diabetes

• Environmental Issues

POSITIVE NEGATIVE

Why Homework?

There are three kinds of men:

The ones that learn by reading.

The few who learn by observation.

The rest of them have to pee on the

electric fence and find out for

themselves.

Will Rogers 1879 - 1935

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Summary

• Know Chapter 1 key terms / questions • Economics is about making choices

concerning scarce resources because of

unlimited wants

• Ag. Econ. – concerned with food / fiber / natural resource sectors

• General Trends in agriculture and implications