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Published January 21, 2013, 10:02 AM

Study: Investing more in ag research would increase efficiency, productivity

Investing more money in agricultural research would improve both total factor productivity and U.S. ag production, according to a report from the U.S. Department of Agriculture.

By: Jonathan Knutson, Agweek

"Total factor productivity" isn't a term that rolls easily off the tongue.

But investing more money in agricultural research would improve both total factor productivity and U.S. ag production, according to a report from the U.S. Department of Agriculture.

The report looks at TFP, or the efficiency with which inputs such as land, labor, capital and materials are combined to produce crops and livestock.

From 1948 to 2008, U.S. ag inputs barely increase, while output (production) rose 250 percent. The increase in TFP during those 60 years nearly matched the increase in output.

On an annual basis, TFP rose an average of 1.52 percent from 1948 to 2008. In the same period, average annual production rose by an average of 1.58 percent, the report found.

Public spending on ag research wasn't the only reason TFP rose, but "the force of these (other) factors is compounded by public agricultural research," according to the report.

Put simply, spending more on ag research raised TFP, helping farmers become more efficient and productive.

Spending more on ag research in the future would continue to increase TFP and productivity, the report found.

It examined three scenarios for public spending on U.S. ag research from 2010 to 2050:

•In the first scenario, spending holds steady in nominal dollars, but isn't adjusted for inflation.

Average annual growth in TFP would fall to less than 0.75 percent. U.S. ag production would increase 40 percent by 2050, barely enough to outpace projected growth in the country's population.

•In the second scenario, spending is increased by 3.73 percent annually, enough to offset inflation in the cost of ag research.

Annual TFP growth would average 1.4 percent. That would raise U.S. ag production 73 percent by 2050, most likely enough to keep up with rising global demand.

•In the third scenario, spending is raised by 4.73 percent annually, 1 percentage point above inflation.

Annual TFP growth would average 1.6 percent. That would raise U.S. ag production 83 percent by 2050, most likely enough to keep up with rising global demand.

Here's the final takeaway from the report:

The long-term growth rate of U.S. ag production will decline if spending on ag research doesn't increase.

That, in turn, likely would lead to higher food prices, serious environmental consequences and a potential drop in ag exports as U.S. farmers lose competitiveness in world markets.

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