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1
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
2
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
3
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 capital
Labor
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
4
What is Agriculture?
Food Commodities
Food Products
Farm Supply Farms First Handler
Processor Distributor Retailer
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”
Other Terms
• Microeconomics versus macroeconomics
Micro - 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
5
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
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.)
6
Labor Capital Materials
Changes in Producer Inputs
Productivity Example
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
7
Source: USDA / ERS
Trends - Consumer
Source: USDA / ERS
Trends - Consumer
Percentage of away from home
expenditures surpassed at home in 2014
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 <10% 10%–14% 15%–19% 20%–24% 25%–29% ≥30%
8
Source: Behavioral Risk Factor Surveillance System, CDC.
2013
Trends – Obesity Among U.S. Adults
(*BMI ≥30, or ~ 30 lbs. overweight for 5’ 4” person)
Trends – Obesity Among U.S.
Adults 1985 - 2010
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
9
Source: 2012 values
Approximately17.2 percent of each dollar spent on food products
goes to farmers and ranchers
Trends – 2014 - Interface
Farm Share Over Time
Average
1993- 2015
16.7%
Source: 2012 values http://www.ers.usda.gov/data-products/food-dollar-series/download-the-data.aspx
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 - 2014
10
Food Services Over Time
Average
1993- 2015
29.1%
Source: 2012 values http://www.ers.usda.gov/data-products/food-dollar-series/download-the-data.aspx
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
11
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