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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