Innovation, Agricultural Productivity and Sustainability in the United States

268 Pages·2016·4.463 MB·English

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Chapter 1. Overall assessment and recommendations ric Productivity
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Chapter 2. Overview of the food and agricultural situation in the United States ltu
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Chapter 5. Capacity building and services for the US food and agriculture system w
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Chapter 6. US domestic and trade-related agricultural policy
Chapter 7. The US agricultural innovation system
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51 2016 05 1 P

OECD Food and Agricultural Reviews
Innovation, Agricultural
Productivity
and Sustainability
in the United States
This work is published under the responsibility of the Secretary-General of the OECD. The
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Please cite this publication as:
OECD (2016), Innovation, Agricultural Productivity and Sustainability in the United States, OECD Food and
Agricultural Reviews, OECD Publishing, Paris.
http://dx.doi.org/10.1787/9789264264120-en
ISBN 978-92-64-26121-1 (print)
ISBN 978-92-64-26412-0 (PDF)
Series: OECD Food and Agricultural Reviews
ISSN 2411-426X (print)
ISSN 2411-4278 (online)
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3
FOREWORD –

Foreword
Innovation, Agricultural Productivity and Sustainability in the United States is part of the OECD
Food and Agricultural Reviews series. This review was undertaken at the request of the US Department
of Agriculture. We are particularly grateful for the support for this study from the USDA
UnderSecretary for Research, Education, and Economics Dr. Catherine Woteki.
The review examines the conditions in which farms and businesses in the United States undertake
innovation in the food and agriculture sector to become more productive and environmentally
sustainable. It starts with an overview of the food and agriculture sector and outlines development
challenges and opportunities (Chapter 2). A wide range of policies which influence incentives for
innovation are then examined: economic stability, governance and trust in institutions (Chapter 3); a
favourable and predictable environment for investment (Chapter 4); capacities and public services
enabling business development (Chapter 5); agricultural policy (Chapter 6) and the operation of the
agricultural innovation system (Chapter 7).
US policies are analysed following a framework developed by the OECD as part of its work on
agricultural innovation and in response to a request from the G20 in 2012 under the Presidency of
Mexico to evaluate the extent to which a wide range of policies facilitates productivity growth and
sustainability in food and agriculture. The framework has been applied to Australia, Brazil, Canada, the
Netherlands and Turkey and additional reviews are underway or planned.
This review was prepared by Catherine Moreddu and Julien Hardelin from the OECD Trade and
Agricultural Directorate, with contributions from Paul O'Brien from the OECD Economics Department,
and in close collaboration with The Economic Research Service of the US Department of Agriculture
(USDA) under the leadership of James MacDonald and Keith Fuglie. Lihan Wei provided statistical
support. Martina Abderrahmane provided editorial assistance and Michèle Patterson editorial and
publication support.
In the USDA Economic Research Service, James MacDonald provided the information for
Chapters 2 to 5, with contributions from Roger Claassen, Ron Durst, Thomas Hertz, Lorraine Mitchell,
Doris Newton, John Pender, and Peter Stenberg. Anne Effland provided the information for Chapter 6
with contributions from Lorraine Mitchell, and Keith Fuglie led the preparation of information for
Chapter 7 with assistance from Kelly Day-Rubinstein, Matt Clancy, and Paul Heisey.
The OECD review also draws on OECD analysis in various economic and social policy fields and
includes cross-country comparable indicators developed by the OECD and other international
institutions, such as the World Economic Forum.
This report has benefitted from detailed comments from James MacDonald, Anne Effland and
Keith Fuglie from the USDA Economic Research Service, and discussion with them and their
colleagues. Helpful comments were received from Steve Koenig of the US Farm Credit Administration
and Gary Alex at the US Agency for International Development, and from staff throughout the US
Department of Agriculture, including Neena Anandaranam, Tammy Basker, Harry Baumes, Roger
Claassen, Charles Dodson, Larry Granger, Robert Griesbach, Joy Harwood, Kari Heerman, Rosalyn
Murphy-Jenkins, Mark Peters, Jim Radintz, Valerie Reed, Ibrahim Shaqir, Robin Shoemaker, Stacy
Sneeringer, Curtia Taylor and Kalvin Trice. It has also received valuable comments from Ken Ash,
Carmel Cahill, Frank Van Tongeren, Guillaume Gruère, Jussi Lankoski, Jo Cadilhon and Laura Munro
of the OECD Trade and Agricultural Directorate. Steve Neff of USDA’s Foreign Agricultural Service
provided valuable support in launching the project.
This review was declassified by the Working Party on Agricultural Policies and Markets in
September 2016.
INNOVATION, AGRICULTURAL PRODUCTIVITY AND SUSTAINABILITY IN THE UNITED STATES © OECD 2016

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TABLE OF CONTENTS –

Table of contents
Acronyms and conversion rates .................................................................................................................... 11
Executive summary........................................................................................................................................ 17
Chapter 1. Overall assessment and recommendations ................................................................................ 21
A framework to analyse policies for innovation, productivity and sustainability in the food
and agricultural sector .................................................................................................................................. 22
Improving food and agriculture performance to face new challenges requires further innovation .............. 23
Framework conditions are generally supportive of investment and entrepreneurship ................................. 24
Capacity and services for sustainable productivity growth could be improved ........................................... 28
Agricultural policy is generally conducive to innovation ............................................................................ 31
The government role in the food and agricultural innovation system is changing ....................................... 33
References .................................................................................................................................................... 38
Chapter 2. Overview of the food and agricultural situation in the United States ..................................... 39
Challenges and opportunities: The need for innovation in food and agriculture ......................................... 40
The place of food and agriculture in the US economy ................................................................................. 40
Farm structure .............................................................................................................................................. 45
Agribusiness structure .................................................................................................................................. 49
Farm sector and farm household financial performance .............................................................................. 52
Agricultural trade ......................................................................................................................................... 55
Agricultural productivity .............................................................................................................................. 58
Sustainability performance........................................................................................................................... 64
Summary ...................................................................................................................................................... 72
Note .............................................................................................................................................................. 74
References .................................................................................................................................................... 75
Chapter 3. Economic stability and trust in institutions in the United States ............................................. 79
Macroeconomic policy environment ............................................................................................................ 80
Governance and the quality of public institutions ........................................................................................ 87
Summary ...................................................................................................................................................... 90
Note .............................................................................................................................................................. 90
References .................................................................................................................................................... 91
Chapter 4. Investment in the US food and agriculture system ................................................................... 93
Regulatory environment ............................................................................................................................... 94
Trade and investment policy ...................................................................................................................... 109
Finance policy ............................................................................................................................................ 114
Tax policy .................................................................................................................................................. 117
Summary .................................................................................................................................................... 121
Notes .......................................................................................................................................................... 123
References .................................................................................................................................................. 124

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Chapter 5. Capacity building and services for the US food and agriculture system ............................. 129
Infrastructure and rural development policy .............................................................................................. 130
Labour market policy ................................................................................................................................. 144
Education and skills policy ........................................................................................................................ 152
Summary .................................................................................................................................................... 160
Notes .......................................................................................................................................................... 162
References .................................................................................................................................................. 163
Chapter 6. United States domestic and trade-related agricultural policy ............................................... 167
Agricultural policy framework ................................................................................................................... 168
Broad-based domestic measures ................................................................................................................ 170
Domestic measures targeting specific issues ............................................................................................. 179
Trade-related measures .............................................................................................................................. 188
Agricultural support level and composition ............................................................................................... 190
Discussion of likely impact ........................................................................................................................ 196
Summary .................................................................................................................................................... 199
Notes .......................................................................................................................................................... 201
References .................................................................................................................................................. 203
Chapter 7. The US agricultural innovation system .................................................................................... 207
Foundations of the US agricultural innovation system .............................................................................. 208
Agriculture in the US research system ....................................................................................................... 209
The US food and agricultural R&D system: Actors and funding .............................................................. 214
Governance of the R&D System ................................................................................................................ 219
Fostering innovation .................................................................................................................................. 225
R&D outputs and impacts .......................................................................................................................... 236
Adoption of innovations ............................................................................................................................. 243
International cooperation ........................................................................................................................... 251
Summary .................................................................................................................................................... 257
Notes .......................................................................................................................................................... 258
References .................................................................................................................................................. 259

Tables
Table 2.1. Contextual indicators, 2014 ................................................................................................ 41
Table 2.2. Cash receipts in the US farm sector, by commodity class, 1955, 1985 and 2014 ............... 43
Table 2.3. Changes in midpoint enterprise size, selected commodities, 1987 and 2012 ..................... 47
Table 2.4. Selected four-firm concentration ratios in US agribusiness ................................................ 51
Table 2.5. US farm cooperatives by activity, 2000-14 ........................................................................ 52
Table 2.6. Farm operator household income, by farm type, 2014 ....................................................... 54
Table 4.1. US income tax rates by organisation structure .................................................................. 119
Table 5.1. Agricultural transportation: Selected commodities and modes, 2012 ............................... 134
Table 5.2. USDA rural development: Enacted programme levels and budget authority, 2015 ......... 143
Table 5.3. Occupational injuries and fatalities, by industry, 2014 ..................................................... 151
Table 6.1. Producers' choice of programme, 2014-18 ....................................................................... 174
Table 7.1. Federal R&D expenditures by function, 1960-2014 ......................................................... 212
Table 7.2. Federal Government R&D obligations by selected agency, character of work and field
of science, 2013 ................................................................................................................ 213
Table 7.3. Intellectual Property Rights for agricultural innovations in the United States .................. 228
Table 7.4. Major US legislation encouraging public-private collaboration in research and
technology transfer............................................................................................................ 232
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Table 7.5. Estimates of the internal rate of return to public investments in agricultural research ..... 242
Table 7.6. Structural change and efficiency in pig production, 1992-2009 ....................................... 247
Table 7.7. Scale economies and adjustment in feeder to finish operations, 1992-2009 ..................... 247
Table 7.8. Agri-food R&D co-operation, 2006-11 ............................................................................ 252

Figures
Figure 1.1. Policy drivers of innovation, productivity and sustainability in the food and agriculture
sector ................................................................................................................................... 22
Figure 2.1. Agriculture's share of US GDP, 1930-2014 ........................................................................ 41
Figure 2.2. US surface area by land cover and use, 2012...................................................................... 42
Figure 2.3. US food expenditures as a share of personal disposable income, 1950-2013 ..................... 44
Figure 2.4. The size distribution of US farms, 2014 ............................................................................. 46
Figure 2.5. Agricultural production is shifting to larger farms, 1996 and 2014 .................................... 46
Figure 2.6. Farm size in selected OECD countries, 1995 and 2010 ...................................................... 48
Figure 2.7. Net farm income, 1990-2015 .............................................................................................. 53
Figure 2.8. Price trends for farm products, 1990-2014 ......................................................................... 53
Figure 2.9. Exposure to trade, 2014 ...................................................................................................... 56
Figure 2.10. US agricultural trade, 1980-2014 ........................................................................................ 56
Figure 2.11. Changes in the composition of US agricultural exports, 1995 and 2014 ............................ 57
Figure 2.12. The ten primary destinations for US agricultural exports, 1990 and 2014 ......................... 57
Figure 2.13. Annual agricultural TFP growth rates for selected OECD countries,
1961-2012 and 2003-12 ...................................................................................................... 58
Figure 2.14. US agricultural productivity growth, 1948-2013 ................................................................ 59
Figure 2.15. US farm and food prices, relative to prices for all consumer goods, 1950-2015 ................ 59
Figure 2.16. Trends in selected agricultural inputs, 1948-2013 .............................................................. 60
Figure 2.17. US crop land, crop production, and chemical use, 1960-2011 ........................................... 61
Figure 2.18. Adoption of genetically engineered seeds in the United States, 1996-2015 ....................... 63
Figure 2.19. Herbicide application rates for soybeans, 1996-2012 ......................................................... 63
Figure 2.20. Herbicide application rates for maize, 1996-2014 .............................................................. 64
Figure 2.21. Development of environmental indicators for agriculture, United States, OECD
and European Union, 1998-2000 to 2008-10 ...................................................................... 65
Figure 2.22. Soil erosion on cropland, 1982-2012 .................................................................................. 66
Figure 2.23. Crop nitrogen recovery rates, 1996-2010 ........................................................................... 67
Figure 2.24. Crop phosphorous recovery rates, 1996-2010 .................................................................... 68
Figure 2.25. Planted areas receiving excess nitrogen, 1996-2010 ........................................................... 68
Figure 2.26. Planted areas receiving excess phosphorous, 1996-2010.................................................... 69
Figure 2.27. Irrigated acres and water use, 1984-2013 ........................................................................... 70
Figure 2.28. Agriculture and forestry greenhouse gas emissions and sequestration, 2012 ..................... 72
Figure 3.1. US GDP growth, unemployment and inflation, 1998-2014 ................................................ 81
Figure 3.2. The TED spread, monthly averages, 1998-2015 ................................................................. 82
Figure 3.3. World trade during the financial crisis, 1998-2015 ............................................................ 82
Figure 3.4. US interest rates, 1998-2015 ............................................................................................... 83
Figure 3.5. US Federal deficits and debt as a percentage of GDP, 1970-2015 ..................................... 84
Figure 3.6. The US exchange rate for agriculture, 1998-2015 .............................................................. 86
Figure 3.7. Global Competitiveness Index: Quality of public institutions, 2015-16 ............................. 89
Figure 3.8. Americans report declining trust in most institutions, 1975 and 2015 ................................ 89
Figure 4.1. OECD Integrated Product Market Regulation Indicator, 2008 and 2013 ........................... 95
Figure 4.2. Barriers to entrepreneurship indicator, by regulatory area, 2013 ........................................ 96
Figure 4.3. Stringency of environmental policy, 1990-95 and 2012 ................................................... 101
Figure 4.4. Manure application intensity in pig production, 1998, 2004 and 2009 ............................. 103
Figure 4.5. Index of regulatory restrictions to trade and investment, 2008 and 2013 ......................... 111
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Figure 4.6. OECD FDI Regulatory Restrictiveness index, by sector, 2014 ........................................ 111
Figure 4.7. FDI inflows into the United States, 2008-14 .................................................................... 112
Figure 4.8. Cumulative FDI into the United States, 2008-14 .............................................................. 113
Figure 4.9. Total FDI inward stocks by country, 2005 and 2014 ........................................................ 113
Figure 4.10. The US financial system ................................................................................................... 114
Figure 4.11. Global Competitiveness Index: Financial market development, 2015-16 ........................ 115
Figure 4.12. Farm sector debt, by type of lender, 2014 ......................................................................... 116
Figure 4.13. Federal, state and local government receipts, by source, 2013 ......................................... 118
Figure 4.14. Combined corporate income tax rate, 2015 ...................................................................... 120
Figure 5.1. Global Competitiveness Index: Quality of transport infrastructure, 2015-16 ................... 131
Figure 5.2. Global Competitiveness Index: Quality of electricity and telephony infrastructure,
2015-16 ............................................................................................................................. 132
Figure 5.3. Access to urban areas, 2010 .............................................................................................. 132
Figure 5.4. Fixed (wired) broadband access at 1.5 MBPS or greater, 2014 ........................................ 133
Figure 5.5. Wireless broadband access at 1.5 MBPS or greater, 2014 ................................................ 133
Figure 5.6. Ten largest US ports by volume of agricultural trade, 2011 ............................................. 135
Figure 5.7. Spending on highways and transit by levels of government, 2012 ................................... 136
Figure 5.8. US electricity generation, by fuel source, 2005-15 ........................................................... 139
Figure 5.9. OECD indicators of employment protection legislation 2013 .......................................... 145
Figure 5.10. Global Competitiveness Index: Labour market efficiency, 2015-16 ................................ 146
Figure 5.11. Trends in authorisation status of hired US crop workers, 1989-2012 ............................... 147
Figure 5.12. Unauthorised workers account for half of all hired labour on crop farms, 2005-09 ......... 147
Figure 5.13. Number of years since foreign-born agricultural workers have migrated, 1999-2000
to 2009-10 ......................................................................................................................... 148
Figure 5.14. Migration patterns for hired US crop workers, 1991-2009 ............................................... 149
Figure 5.15. H-2A Temporary visas certified for agricultural work, 2005-15 ...................................... 150
Figure 5.16. Global Competitiveness Index: Higher Education and Training, 2015-16 ....................... 154
Figure 5.17. Enrolment in US educational institutions by level and control of institution, 2014 ......... 155
Figure 5.18. Educational attainment in the United States, 1940-2013 .................................................. 156
Figure 5.19. Average public expenditure per student by educational institutions, 2012 ....................... 157
Figure 5.20. Public and private expenditure on educational institutions as a percentage of GDP, 2012157
Figure 5.21. Educational attainment by industry of employment, 2014 ............................................... 158
Figure 6.1. Projected outlays under the 2014 Farm Bill, 2014-18 ...................................................... 169
Figure 6.2. USDA budget outlays, 2003-16 ........................................................................................ 169
Figure 6.3. 2014 Farm Bill offers producers both income support and risk management options ...... 173
Figure 6.4. Crop insurance coverage, by option, 1994-2015 .............................................................. 176
Figure 6.5. Historical dairy margins in relation to MPP bounds, 2000-16 .......................................... 177
Figure 6.6. Annual spending on major USDA conservation programmes, 1996-2018 ....................... 182
Figure 6.7. Evolution of conservation spending, 1980-2016 .............................................................. 182
Figure 6.8. Conservation programmes in the 2014 Farm Bill ............................................................. 183
Figure 6.9. Share of maize used for ethanol, 1980-2014 ..................................................................... 186
Figure 6.10. US tariffs on agricultural commodities, 2015 ................................................................... 188
Figure 6.11. Import tariffs for industrial and agricultural goods, 2012 ................................................. 189
Figure 6.12. US Producer Support Estimate compared to OECD average, 1986-2015 ........................ 191
Figure 6.13. Variations in US Producer Support Estimate (PSE) over 1986-2015 ............................... 191
Figure 6.14. Composition of support to US producers, 1986-2015....................................................... 192
Figure 6.15. Composition of Producer Support Estimate by country, 2013-15 .................................... 192
Figure 6.16. Support conditional on the adoption of environmentally friendly production practices,
1995-97 and 2013-15 ........................................................................................................ 193
Figure 6.17. Composition of US GSSE compared with OECD average, 2013-15 ............................... 194
Figure 6.18. Composition of US Estimate of Support to General Services, 1986-2015 ....................... 194
Figure 6.19. Total support to agriculture (TSE) and general services (GSSE) by country, 2013-15 .... 196
Figure 7.1. Total R&D spending as a share of GPD, 1953-2013 ........................................................ 210
INNOVATION, AGRICULTURAL PRODUCTIVITY AND SUSTAINABILITY IN THE UNITED STATES © OECD 2016