Agricultural economics goes back to the days of the Old Testament. When Joseph tells Pharaoh that seven years of famine will follow seven years of good harvests, they work out a plan to store excess grain so Egypt won't go hungry. That's what agricultural economists do: figure out the best way to manage farmers' resources and price agricultural products.
TL;DR (Too Long; Didn't Read)
The agricultural economics definition is the field studies issues related to farming, from how farmers can manage resources effectively to ways farmers can adapt to changing market demand. It seeks to give farmers practical economic advice and not just theories.
The History of Agricultural Economics
Farmers have always had to worry about economics. At what price can they sell their produce? Will buying new dairy cows pay off in having more milk to sell? What's the going rate for farm labor? However, agricultural economics, meaning establishing general principles and scientific rules to answer such questions, didn't develop until the late 19th or early 20th century.
While some economists focus on theory, the importance of agricultural economics is that it's an applied discipline, not just academic. Farmers need information that helps them stay afloat financially, and the various types of agricultural economics tackle the relevant issues.
- What are the production costs of agriculture? How can farmers manage them successfully?
- How can farmers use their land and their workforce most effectively?
- Do the costs of buying equipment outweigh the profits of greater mechanized efficiency?
- As demands change, such as the growing interest in organic produce, is it necessary or profitable for farmers to change what they grow or how they produce it?
- How can society balance the needs of farmers with those of hikers, dirt bikers and other outdoor-recreation enthusiasts?
- How do we balance the needs of farmers with the needs of the environment?
- What should government farm policy entail?
Time and Change
Farming has always had an element of risk: One bad harvest or a crop blight can ruin a farm. However, the economics have changed over the centuries.
At one time, increasing farm production was done entirely by expanding the amount of agricultural land: double the size of the farm, double the yields. Now, however, land is harder to come by, so farmers rely more on high-yield crops, machinery and the use of fertilizer.
Another change is that governments in the 20th century became much more involved in controlling prices for produce. Agricultural prices fluctuate due to yield, supply and demand, so stabilizing prices and ensuring that farmers stay in business became a government priority.
Types of Agricultural Economics
Like many economic disciplines, the agricultural economics definition stretches to a wide variety of fields and career paths.
- Agribusiness addresses issues in marketing, farm management, agricultural finance and trade.
- Policy analysts look at the effect of government agricultural policy on farms.
- Market researchers study market conditions to gauge the sales potential of different farm products.
- Rural development and regional economics
- Supply chain study and management
- Natural resource economics, which studies how farmers can get the maximum use out of their land and other resources
- Risk analysis
The Importance of Agricultural Economics
Two centuries ago, farming was the heart of the American economy. As the country has grown and prospered, farming has dropped in importance. Fewer people work in farming, and the price of food consumes less of our budget than it did for past generations. Farming is concentrated in relatively few areas, so the agricultural industry directly involves only a small portion of the country.
All the same, agriculture is still a big deal, which explains the importance of agricultural economics.
- Agriculture is the source of the world's food. Without the farm industry, we go hungry.
- Although agriculture only makes up 1% of the gross domestic product, it indirectly contributes much more than 1% to the GDP. Agriculture is the foundation for many industries: food, beverage, tobacco, textile, leather, restaurant and bar, for example.
- Agriculture provides 11% of U.S. domestic employment. Food manufacturing provides another 1%, including poultry and meat plants and bakeries.
Fraser Sherman has written about every aspect of business: how to start one, how to keep one in the black, the best business structure, the details of financial statements. He's also run a couple of small businesses of his own. He lives in Durham NC with his awesome wife and two wonderful dogs. His website is frasersherman.com