Economic Development

by Francis Thicke

[The following is an excerpt taken from my book, 'A New Vision for Iowa Food and Agriculture'.]

Chapter 31. Economic Development

Iowans eat $8 billion worth of food annually, but about 90 percent of that food is imported from out of state – another ironic statistic from the “Food Capital of the World.” Growing more of our food right here in Iowa represents a potential multi-billion dollar economic development opportunity. This potential economic activity could create thousands of new jobs and help revitalize rural communities in Iowa, as well as provide Iowans with fresh, nutritious food. It would also increase the biodiversity on Iowa’s landscape.

Iowa State University researcher Dave Swenson has estimated that if Iowans ate the recommended five servings of fruits and vegetables per day, and Iowa farmers produced that food for just three months of the year, the production and marketing of those additional crops would add $302.4 million and 4, 095 jobs to Iowa’s economy. And it would not displace very much commodity corn and soybean production.

How much land would have to come out of corn and soybean production to produce the fruits and vegetables eaten in the Midwest? Relatively little. In another study, Swenson estimated that it would take the land equivalent of only about one Iowa county to produce 25 to 50 percent of 28 fruits and vegetables eaten in six Midwestern states. The farm-level income generated from that fruit and vegetable production would be $882 million, with a retail value of $3.31 billion.

Swenson’s study concluded that for every job displaced from corn and soybean production in Iowa, an estimated five jobs would be created for fruit and vegetable production on the same amount of land. That means that growing more of our food locally equals more jobs and increased rural economic development.

How large does a “farm” need to be to be profitable? An advantage of growing food for local consumers is that it can take a lot less up-front capital to get started than for large-scale commodity production. One system for getting started in intensive vegetable production, called SPIN (Small Plot INtensive) Farming, provides guidelines on how it is possible to gross more than $50,000 on half an acre of land. This scale of farming can be done on vacant lots in urban areas. Of course, intensive vegetable production requires a lot of physical work – and certainly won’t pay the salary of a Wall Street broker. However, commodity agriculture has not been so lucrative in recent times either.

Studies by Ken Meter of the Crossroads Resource Center have indicated that commodity agriculture production has generally been unprofitable or only marginally profitable in recent years. Using data from USDA and the U.S. Bureau of Economic Analysis, Meter compared the income from agricultural commodities with the costs of producing those commodities. Meter did the analysis for various regions around the country and found that in many cases the net income was negative.

For example, in an eight-county region of northeast Iowa, farmers sold an average of $1.08 billion worth of crop and livestock commodities per year during 1999–2003. Yet they spent $1.14 billion to raise those commodities. The result was an average loss of $62 million in production costs for the region each year. That loss was offset by an average of $173 million of federal subsidies, and $72 million of other farm-related income (primarily custom work and rental income) each year. During the same timeframe, consumers in the eight-county region spent $400 million per year buying food imported from outside the region.

The net result of commodity agriculture production and consumer food purchases in that eight-county region was a large drain of wealth from the region. Of the $1.14 billion spent to raise agricultural commodities each year, $500 million was spent buying supplies from outside of the eight-county region. That $500 million, combined with the $62 million loss from commodity production (calculated above) and the $400 million sent out of the region to buy food, equals a $962 million loss of potential wealth from the region’s food and agricultural system each year.

Meter has found similar results in other regions of the United States, indicating not only that commodity agricultural production can be a net drain on a region’s economy, but that importing food from outside the region further exacerbates the drain of the region’s financial resources. Meter’s analysis provides a sobering look at the value of our commodity food and agriculture system to local economies. It also points to the conclusion that producing food locally is a way to retain food dollars locally, making real contributions to local economies.

[Stay tuned to this blog: I will be posting all the chapters from my book, 'A New Vision For Iowa Food And Agriculture' to this blog during the final weeks before the election on November 2nd. I look forward to any comments or questions you have.]

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1 Comment

  1. Nancy Thompson says:

    I realize this website is that of a candidate for office, but I can’t resist commenting on how wise this column really is. It’s ludicrous for those of us in farm states to be importing such high percentages of our food. Even if we had to subsidize fruits and veggies, that certainly would be better than subsidizing all kinds of sugar and refined flour products found in the kids’ well-subsidized school lunches. And if farmers are losing money on livestock and crops….it doesn’t take rocket science to see we could do something more socially beneficial. Let’s start.