STR ENGTHENING RUR A L 

COM MU NITIES: LESSONS 

FROM A GROW ING 

FARM ECONOMY

JUNE 2012

This report was prepared by the Council of Economic Advisers,

the White House Rural Council, and the U.S. Department of Agriculture.

Table of Contents

Executive Summary 1

U.S. Agriculture and Rural America 5

Promoting Agricultural Research and Technological Innovation 10

America’s Agricultural Export Boom Powers an Agricultural Revival 12

New Markets at Home as well as Abroad 16

Toward a Greater Harvest: the Future of American Agriculture . . . . . . . . . . . . . 22

Citations 25

★ 1 ★

Executive Summary

Our rural communities are home to some of the most hard working and fiercely self-reliant Americans 

in the United States. Strong and secure rural communities are essential to creating an economy built to 

last that rewards hard work and responsibility—not outsourcing, loopholes, and risky financial deals.

While the security of the middle class has been threatened by the irresponsible financial collapse and 

the worst economic downturn since the Great Depression, rural Americans continue to come together 

to work hard and make ends meet. The values that have helped hard-working, responsible families 

weather the storm continue to move our economy forward.

A agricultural economy built to last is integral to the affordability of our food, the independence of our 

energy supply, and the security of America’s middle class. While there is still work to do, over the last 

few years, the U.S. agricultural economy has yielded encouraging results:

• Farm sector income experienced a rapid rebound since 2009, growing 27% in 2010 and 20% in 

2011, according to preliminary estimates.

• Farm sector income reached a preliminary estimate of a nominal record of $98.1 billion in 2011.

Adjusting for general inflation, real farm income in 2011 recorded its 3rd highest level in the 

last 50 years.

• Farm exports are at record levels: in FY 2011, total food and agriculture exports reached the 

highest level ever at $137.4 billion.

• In FY 2011, agricultural exports supported more than 1.15 million American jobs.

• The direct and indirect economic activity brought by farm exports supported 907,000 jobs in 

2010, including 298,000 in the farm sector, 174,000 in manufacturing, and 437,000 in transportation and other service sectors.

• America’s agricultural trade surplus is at a record level: in FY 2011, the surplus exceeded $42 

billion.

The Administration has developed and implemented a comprehensive rural strategy to spur innovation, 

increase export levels, invest in clean energy, and expand opportunities for rural enterprises on and off 

the farm that create jobs.

These are part of broader efforts by the Administration to advance the economic security of Americans 

living in rural areas by, for example, improving educational opportunities, providing access to affordable healthcare, and investing in infrastructure. Last year, the President established the first-ever White 

House Rural Council which has been coordinating these efforts, working to streamline and improve the 

effectiveness of Federal programs serving rural America, and building on the progress detailed in last 

year’s White House report Jobs and Economic Security for Rural America.

This report focuses specifically on the current state of the agricultural economy and the Administration’s 

strategy to ensure an agricultural economy built to last. While the U.S. economy continues to recover 

from its worst recession since the 1930’s and there is still more work to be done, America’s agricultural 
STRENGTHENING RURAL COMMUNITIES: LESSONS FROM A Growing FARM ECONOMY

★ 2 ★

economy—farms and other related businesses—has recovered more quickly than many other sectors.

The total value added to the U.S. economy from the farm sector rose about 35% between the second 

quarter of 2009 and the fourth quarter of 2011. Rising global demand and increasing American productivity have made this turnaround possible. This report highlights the positive trends occurring in the 

agricultural economy and the efforts of the Administration to support those trends.

A strong agricultural economy is critical to a strong rural economy.

Strength in agricultural production supports other parts of the economy, particularly in rural communities. Farms and ranches buy fertilizer and seed, invest in farm machinery, contract out with custom 

operators, and support the many local businesses that come together to serve farms and farming 

families, including restaurants and health care service providers. High levels of production also benefit 

other businesses like grain elevators, biofuel refineries, and processed food manufacturers. According 

to the industry input-output accounts for 2010, every additional dollar of final output in the agriculture, 

forestry, fishing, and hunting industry raises gross output across all industries by approximately $2.20.

Under the Obama Administration, shipments of sectors upstream and downstream from agriculture, 

such as farm machinery and finished food products, have increased substantially. The following widereaching impacts of a strong agricultural economy underscore its fundamental importance to the U.S.

economy:

• Farm machinery shipments reached nearly $3 billion in 2011, a record high; and

• Manufactured food product shipments exceeded $710 billion in 2011, a record high.

There are several factors driving progress in the American farm economy.

Innovation

In 1950, the average dairy cow produced about 5,300 pounds of milk—today the average cow produces 

about 22,000 pounds of milk due to improvements in cow genetics, feed formula, and management 

practices. Over that time period, the number of dairy cows in America has fallen by more than half, yet 

U.S. production has nearly doubled.

Studies find that every dollar invested in public agricultural research generates ten to twenty times that 

amount in benefits to society. Innovation in U.S. agriculture has kept America’s farms among the most 

productive in the world.  U.S. farm sector income reached a preliminary estimate of a nominal record 

of $98.1 billion in 2011. Adjusting for general inflation, real farm income in 2011 was recorded at its 3rd 

highest level in the last 50 years. Yet, there is still more work to do. The Administration plans to capitalize 

on the diverse opportunities and invest in future innovations, such as more productive crops, healthier 

livestock, and adaptive farming practices for weather extremes by requesting $2.3 billion in our 2013 

Budget for agricultural research and development (R&D).  
Executive Summary

★ 3 ★

Increasing Agricultural Exports

While much work remains, successful efforts by the Federal government to open foreign markets have 

contributed to an agricultural export boom. During FY 2011, the Obama Administration resolved numerous unwarranted barriers to U.S. food and agricultural exports expanding and preserving agricultural 

trade valued at $4.1 billion. In FY 2011, American agricultural exports reached an all-time high of $137.4 

billion, or roughly 11% of total exports for the fiscal year. Additionally, America runs a trade surplus in 

agricultural goods—a surplus that reached a record level of over $42 billion in FY 2011. The direct and 

indirect economic activity brought by farm exports supported 907,000 American jobs in 2010, including 

298,000 in the farm sector, 174,000 in manufacturing, and 437,000 in transportation and other service 

sectors.

Fifty-seven countries have lifted import bans related to avian influenza on U.S. poultry products.

Negotiations with eight other countries under the Trans-Pacific Partnership offer significant new export 

opportunities for U.S. farmers and ranchers and provide a foundation for expanding open markets to 

other Pacific Rim countries. Negotiating a new Memorandum of Understanding on beef has provided 

new access to American ranchers with an additional $140 million annually in beef exports to the 

European Union in 2011. The Obama Administration has negotiated two organic food equivalency 

arrangements with Canada and the European Union, which are expected to enhance trade in organic 

certified food products.

Once fully implemented, free trade agreements passed under this Administration with Korea, Panama, 

and Colombia are projected to boost U.S. agricultural exports by $2.3 billion per year. Opening South 

Korea’s market to U.S. beef during negotiations for the Korea-U.S. free trade agreement more than 

doubled the value of U.S. beef exports to Korea from $294 million to $686 million between the years 

2008 and 2011. The Administration is now negotiating a new trade agreement—the Trans Pacific 

Partnership—which will provide new market opportunities for America’s farmers and ranchers. The 

Administration also continues to fight for America’s farmers and ranchers to open export markets where 

they face unwarranted barriers.

Building a Clean Energy Economy

The President’s all-of-the-above approach to harnessing every domestic energy source, including alternatives like biofuels, bioenergy, and wind power provide increasing opportunities for farmers, ranchers, 

and forest managers to contribute to U.S. energy security and greenhouse gas mitigation goals. The U.S.

became a net exporter of ethanol in 2011 is on pace to produce more than 14 billion gallons of corn 

ethanol in 2012, accounting for about 40% of total U.S. corn use. Researchers have linked the increasing 

supply of ethanol between 2000 and 2010 to a drop in gasoline prices of approximately $0.25 per gallon 

on average. In addition, the U.S. produced 861 million gallons of biodiesel in 2011. Lastly, installed wind 

energy generation capacity has increased over the past three years from about 25,000 MW at the end 

of 2008 to almost 47,000 MW by the end of 2011. The pain at the pump, however, is still all too real. This 

Administration has led the effort to promote the domestic production and use of advanced biofuels 

with the potential to create hundreds of thousands of jobs in rural communities; by investing in research, 
STRENGTHENING RURAL COMMUNITIES: LESSONS FROM A Growing FARM ECONOMY

★ 4 ★

supporting farmers growing bioenergy feedstocks, and helping to support more than 230 bioenergy 

projects, including construction of 5 commercial-scale biorefineries to produce fuels. Approximately 

25,000 rural small businesses, farmers, and ranchers, save energy and improve their bottom line by 

installing renewable energy systems and energy efficiency solutions that will save a projected 6.5 billion 

in kWh—enough energy to power over 590,000 homes for a year.

While significant progress has been made, there is still more we can do. As part of his “To-Do List,” the 

President has called on Congress to pass the production tax credit, which will play an essential role 

in supporting American businesses and American jobs in communities across the county, while also 

investing in American innovation. The Administration’s commitment to an “all-of-the-above” energy 

strategy is starting to yield significant results for hard-working farmers, American energy independence, 

and the environment.

Promoting New Diverse Industries

The rich heritage of the agricultural economy features a range of new, diverse industries and sectors.

Organic certifications, specialty crops, biobased products (products, such as fuels, chemicals, and power, 

that are developed from biological sources), and agri-tourism (agriculture-based tourism) are a few of the 

many domestic industries further diversifying the agricultural economy. The retail value of the organic 

industry grew to $31.4 billion in 2011, up from $21.1 billion in 2008. The number of operations certified 

organic grew by 1,109—or more than 6%—between 2009 and 2011. Specialty crops, such as fruit and 

tree nuts, generate approximately $18 billion in U.S. farm cash receipts, on average each year. Future 

growth of the agricultural economy can be enhanced by those alternative sectors.

Supporting Rural Communities

During the recession, rural communities pulled together to support one another. President Obama 

knows we must continue to support those who work hard and play by the rules. The growth of the agricultural economy has had carryover effects on the rural economy at large and can be directly linked to 

the policies and priorities advanced by President Obama. But there’s still work to be done. The values that 

helped so many push through the worst economic downturn since the Great Depression must continue 

to help families carve a path to the middle class. President Obama understands that the strength of the 

rural economy depends on its hard-working communities. That’s why the Obama Administration has 

invested in over 6,250 new rural community facilities projects, over 12,000 grants and loans to assist 

over 50,000 rural small businesses. These investments reward hard work and responsibility and help 

rural businesses expand, grow and innovate. They also help us look after our own by increasing access 

to telemedicine opportunities for 1,440 schools and 3,925 medical facilities, improving the availability 

of quality health care and education in rural America.

Overall, the U.S. agricultural economy stands on the cusp of a historic opportunity for export-led growth.

It will require continued investments in rural economies, new science and technology, alternative energy 

sources, and effective international trade policies. The Administration’s work to date on these issues 

shows that President Obama is committed, now more than ever, to the values and standards that will 

help hard-working communities realize this potential.
★ 5 ★

U.S. Agriculture and Rural America

The agricultural economy is more resilient today than it was thirty years ago during the farm crisis that 

spilled over into rural America. At that time, interest rates hikes driven by the Federal Reserve and other 

Western central banks led to a sharp slowdown in economic activity domestically and abroad.  As rising 

debt-service burdens and plummeting exports squeezed economies, developing countries’ demand 

for U.S. agricultural products collapsed. American farmers had borrowed large sums in the hopes of 

selling into an ever-growing international market, and then found their own debt payments escalating 

as their revenues declined. Farm foreclosures soared, and farmers sharply reduced their investment 

expenditures on new farm equipment. The value of U.S. agricultural exports fell by a third between 

1980 and 1986. Real farm sector asset values fell by nearly half in that period. A full recovery from that 

crisis took nearly two decades.

During those lean years, the less efficient farms—the ones with higher costs and lower output per unit 

of input—simply could not survive.  The most productive farms became a larger and larger part of the 

total industry, while the least productive farms disappeared.  This made the industry as a whole much 

more productive.  It was a difficult process, but at its end America had a more efficient, more resilient 

agricultural system. Investments in rural America benefited farm families and helped boost production.

Farmers diversified income streams and hedged against risks by renting lands, specializing in management of farming operations, contracting capital-intensive services requiring expensive machinery and 

information services, and making greater use of output contracts and financial risk mitigation strategies.

Moreover, production has shifted to farm corporations and partnerships. Those factors have spread risk 

across a wider set of stakeholders. Farms have become more efficient and productive, increasing output 

without increasing inputs.

The resulting resilience and increased productivity has helped the agricultural economy rebound quickly 

from the recent recession. Since the farm crisis of the mid-1980s, real farm assets (including land and 

buildings) have risen in both nominal and real (inflation-adjusted) 

terms (see Figure 1). In real terms, 

farm assets had not reached their 

1980 level until this year. Similarly, 

agricultural land values are now at 

record highs today.

Today, the real equity of farms is 

expected to establish a new nominal record in 2012, with the real 

value of farm assets at the highest 

level since 1980. In 2007, 31% of 

farms used debt financing, as compared to 60% in 1986 (Henderson 

and Akers, 2010). Current levels of 

0

500

1,000

1,500

2,000

2,500

1960 1970 1980 1990 2000 2010

Billions of Chained 2005 Dollars

2012(e)

Note: Data for 2011 and 2012 are estimates.

Source: USDA Economic Research Service.

Figure 1: Real Farm Assets
STRENGTHENING RURAL COMMUNITIES: LESSONS FROM A Growing FARM ECONOMY

★ 6 ★

debt are well below debt repayment capacity, with larger farms making more use of their debt capacity 

(Sundell and Shane, 2012).

Strong demand creates higher commodity prices and higher output levels. As a result, the total value 

added to the U.S. economy from the farm sector, which represents the sum of income earned by all of the 

factors of agriculture production, 

rose about 32% on net between 

the second quarter of 2009, the 

quarter identified by the National 

Bureau of Economic Research as 

the business cycle trough, and the 

first quarter of 2012 (see red line in 

Figure 2). Nominal income growth 

from the agriculture sector during 

the recovery outpaced growth 

from the nonfarm business sector.

Spillovers from our strong agricultural sector boost domestic 

sales, trade, and GDP. As a result 

of strong agricultural productivity 

growth, the U.S. has been able to 

devote the equivalent of 25 percent of acreage to production for export. Increasing incomes abroad, a 

depreciating dollar, and a continuing comparative advantage in agriculture from productivity growth 

have produced U.S. agricultural trade surpluses. Farm exports, besides being a source of U.S. economic 

growth, are one of the bright spots in the economic recovery. Growing global demand and increasing 

American productivity have helped the U.S. agricultural sector take advantage of new market opportunities. The growing middle class in China, for example, has resulted in U.S. corn and soybean exports 

to China surging to record levels over the past two years. As discussed later in this report the Obama 

Administration has won major gains for U.S. agricultural exporters by removing substantial non-science 

based barriers to our agricultural exports and by passing and implementing three new free trade agreements. With three new free trade agreements with Korea, Colombia and Panama entering into effect in 

2012, U.S. food and agricultural exports are expected to continue to be strong.

Agricultural Economy Benefits Rural America

America’s agricultural revival coupled with smart public investments is providing a vital source of new 

economic opportunity for rural America. The agricultural sector is tightly linked to the larger nonfarm 

economy as the purchaser of production inputs—such as fertilizer and farm machinery—and the provider of agricultural commodities for direct human and animal consumption or for use in downstream 

industries—such as finished food products or biofuels refineries.

Those linkages between rural America and agricultural producers are often national or global in nature.

Manufacturing farm production inputs (such as machinery and fertilizers) benefit from strong farm 

incomes and increasing demand for expanded production. Also, farm services and food processing, 

80

90

100

110

120

130

140

2006:Q3 2007:Q3 2008:Q3 2009:Q3 2010:Q3 2011:Q3

Farm Business

Sector

Nonfarm 

Business Sector

Index (2009:Q2 = 100)

2012:Q1

2009:Q2

Figure 2: Value Added in the Farm and Nonfarm

Business Sectors

Source: Bureau of Economic Analysis.
U.S. Agriculture and Rural America

★ 7 ★

which are disproportionately located in non-metropolitan counties, have also rebounded quickly (up 

17%) since 2009 and are near historic levels.

The family farmer has always been a cornerstone of America. The Obama Administration is committed 

to supporting and incentivizing beginning family farmers in order to support their efforts in providing 

healthy, American-grown food for our country. In addition, the Administration is dedicated to helping 

Box 1: Farm machinery sales have been expanding.

Buoyed by higher incomes for farmers and expanding demand for U.S. agricultural products, U.S. shipments from farm machinery companies rebounded quickly from the recent economic downturn (see 

Figure 3), reaching a record high of more than $29 billion in 2011.  2012 looks to be another bumper year.  

The Federal Reserve Bank of Kansas City reports that “loans for farm machinery and equipment held at 

high levels with a sharp jump in the volume of intermediate-term loans” (Henderson and Akers, 2012).

Prospects are good, even for dealers who specialize in sending second-hand tractors abroad (National 

Public Radio, March 13, 2012, “Record-High Food Prices Boost Farmers’ Bottom Lines”). Several large farm 

machinery companies in the U.S. are gearing up for expanded opportunities at home and abroad. Deere 

& Co. (headquartered in Moline, IL), for example, project a 10% increase in farm machinery sales in the U.S.

and Canada this year (see Financial Times May 16, 2012) and point to rising global populations coupled 

with rapid per capita GDP growth, especially in large emerging markets like India and China, as sources of 

continued growth in product demand.  Those domestic and international prospects translate into domestic manufacturing jobs. In December 2011, Deere & Co. announced plans to invest $85 million in its Ankeny, 

Iowa plant, to upgrade and expand production capacity for self-propelled sprayers. The investments are 

expected to preserve or create 400 jobs at that plant.  More recently, Deere & Co. reported investing $70 

million to expand production of large farm tractors at the Waterloo, Iowa plant.  The plant currently ships 

tractors to more than 130 countries each year and employs roughly 6,000 workers.  Another prominent 

farm machinery manufacturer AGCO (headquartered in Duluth, Georgia) recently renovated and expanded 

its Massey Ferguson tractor production facility in Jackson, Minnesota (population 3,300), at a cost of $6.2 

million.

0

1

2

3

4

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Billions of Dollars, Monthly, Seasonally Adjusted

Figure 3: Manufacturers' Shipments of Farm Machinery

Mar-12

Source: Bureau of Economic Analysis
STRENGTHENING RURAL COMMUNITIES: LESSONS FROM A Growing FARM ECONOMY

★ 8 ★

already existing family famers stay prosperous and stay on their land.  In 1945 the average age of the 

American farmer was 39; today it is 60. That means now more than ever the policies that the President 

is putting in place to support new and existing family farmers are essential to sustaining our nation’s 

food supply. In order to accomplish this, the Obama Administration has provided more than $5 billion 

in farm operating and ownership loans to help over 35,000 small and medium sized businesses. There 

are policies being created to ensure new farmers are given the tools and competitive edge to succeed 

in a competitive market.

However, despite a strong agricultural economy, rural America faces a number of unique challenges.

First, incomes are lower and poverty rates are higher in rural areas than they are in urban areas. Second, 

a lower proportion of the rural population is of working age (20-64), and the share of the U.S. population 

living in rural counties has steadily declined over time. Third, a higher portion of rural residents are on 

disability and therefore unable to participate in the rural workforce. Fourth, educational attainment lags 

behind that of urban areas for the working-age population.

Recognizing these challenges, this Administration reaffirmed its commitment to investing in rural 

America. On June 9, 2011, President Obama issued Executive Order 13575, which established the White 

House Rural Council. At its core, the Rural Council has taken steps to: (1) increase capital flow to rural 

areas and improve job creation and workforce development; (2) enhance telecommunications in rural 

areas, support renewable energy efforts, and open new markets for rural communities; (3) expand 

access to health care services, improve education, and housing; and (4) promote outdoor recreational 

opportunities to generate economic growth.

Some key examples of the Rural Council’s successes include:1

• The Administration established a rural component within the Small Business Investment 

Company (SBIC) Impact Investment Program that doubles the rate of investment in distressed 

rural areas and emerging sectors such as clean energy.

• USDA and the Department of Labor (DOL) partnered to offer job training information and better utilize the rural footprint of the USDA field offices across the country to provide them with 

greater access to job search resources by reducing the driving times and distances for rural 

customers seeking program information.

• USDA and the Department of Health and Human Services (HHS) signed an agreement to 

improve access to capital for rural hospitals and other providers seeking to implement health 

information technology and expand the health IT workforce in rural communities.

• The Navy, the Department of Energy, and USDA have joined forces to spur the creation of an 

advanced biofuels industry that will support commercial aviation, with a pledge of $510 million, 

over three years, under the Defense Production Act of 1950.

• Through the White House Rural Council’s efforts, the Administration has directed Federal 

agencies to take additional steps to double the purchase of biobased products over the next 

two years, creating new rural jobs and driving innovation where biobased products are grown 

1.  For more Rural Council initiative details, see: www.WhiteHouse.gov/administration/eop/rural-council
U.S. Agriculture and Rural America

★ 9 ★

and manufactured. Additionally, the Administration will increase by 50% the number of new 

products that are designated as biobased by February 2013.

• In January 2012, President Obama signed an Executive Order creating a Task Force charged 

with developing a National Travel and Tourism Strategy with recommendations for new policies and initiatives to promote travel opportunities throughout the United States, including 

tourism opportunities in rural communities. The Task Force has completed the National Travel 

and Tourism Strategy, and agencies have already begun undertaking actions (alone and in 

partnership with the private sector) to drive additional tourism this summer and fall.

• USDA and the Department of the Interior (DOI) established the Working Lands for Wildlife partnership to work with farmers, ranchers, and forest landowners and use innovative approaches 

to restore and enhance the habitats focusing of seven at-risk wildlife species. In return for 

voluntarily making habitat improvements on their lands, the Federal government will provide 

landowners with regulatory certainty that they will not be asked to take additional conservation actions.

• USDA’s Forest Service, in conjunction with the White House Rural Council, released a strategy to 

increase the scale of restoration treatments like forest thinning, reforestation, and other activities 

to restore and sustain the health of our forests.

• The Administration announced an initiative to assist rural homeowners refinance their mortgages at lower interest rates through USDA’s Rural Development agency. By reallocating existing 

funding, at no additional cost to taxpayers, USDA will have almost doubled the amount of funds 

available to homeowners seeking to lower their mortgage payments or avoid foreclosure.

• About 65% of all interstate highway miles—and 70% of all Federal-aid highway miles—run 

through rural areas.2 These highways allow rural Americans to sell their products in key markets 

throughout the country and the world. Beyond highways, Federal programs also support the 

rail, barge, and ocean-going transportation infrastructures. Without this key infrastructure, the 

crops grown in rural America could not as easily reach the domestic and international markets 

that sustain farm income.

• Through efforts such as the USDA’s Farm to School Program and its Know Your Farmer, Know 

Your Food initiative, the Administration is working to better connect consumers and farmers 

and to encourage consumers to learn more about the people behind the products and the 

role of agriculture in our economy and communities. These efforts are yielding results. As of 

mid-2011, there were over 7,175 farmers markets operating throughout the United States. This 

is a 17 percent increase from 2010. Nearly 110,000 farms across the nation are linked to farmers 

markets. On average, those farms reported that local food sales accounted for 61 percent of 

their total sales. Almost two-thirds of these producers, regardless of size, reported that local 

food sales were at least seventy-five percent of their total sales.

2.  CEA report (2010)
STRENGTHENING RURAL COMMUNITIES: LESSONS FROM A Growing FARM ECONOMY

★ 10 ★

Promoting Agricultural Research and Technological Innovation

Persistent gains in efficiency have defined American agriculture. Over time, aided and abetted by public 

and private investments in agricultural R&D, U.S. farmers have consistently found ways to grow more with 

less. Whereas growth in U.S. industrial output over the past 50 years has mostly been due to increases 

in non-labor and labor inputs; agricultural output growth has mainly been due to substantial increases 

in total factor productivity (TFP) (see Figure 4).

American farmers have continually 

found a way to grow more with 

less: new seeds are less susceptible 

to disease and yield more crops; 

new tractors are guided by satellites and spread fertilizer optimally 

across the field; and animals’ diets 

are optimally calibrated to grow 

larger animals with less feed. For 

example, corn yields remained relatively constant from the Civil War 

through WWII; but yield jumped 

from 33 bushels per acre in 1945 

to 100 bushels per acre in 1979 to 

an estimated 166 bushels per acre 

today. The same is true for animals.

There were less than half as many dairy cows in the U.S. in 2010 as in 1950, but milk production per cow 

was about four times as high, due to improvements in cow genetics, feed formulations, and management practices. In poultry, broiler chickens today consume about 1.8 pounds of feed to generate one 

pound of weight gain, as compared to 2.1 pounds in 1980 and 2.9 pounds in 1955. Improvements in 

feed conversion reduce feed costs for livestock producers, and they also reduce the amount of manure 

generated per pound of meat produced or feed used.

Innovations from Investments in Research and Development (R&D)

Increasing productivity on U.S. farms stems largely from the rapid and widespread adoption of an ongoing series of biological, chemical, mechanical, and organizational advances. Formal research programs 

are carried out in universities, government labs, and private firms. Similarly, most agricultural innovations 

building off that research are developed by input suppliers in the private sector or by public institutions.

Agricultural research and development generates high payoffs for farmers and the public. Heisey et al.

(2010) notes that the substantial body of literature on investing in agricultural R&D shows that the social 

benefits from public research in agriculture have been large, with social rates of return usually falling 

within the range of 20 to 60 percent annually (see also Fuglie and Heisey, 2007, for a recent overview, 

and Alston et al. (2010) or Evenson (2001) for extensive surveys).

50

100

150

200

250

300

1948 1958 1968 1978 1988 1998 2008

Sources: USDA Economic Research Service; Bureau of Labor Statistics.

Productivity Index (1948 = 100)

Figure 4: Farm and Non-Farm Productivity

Farm 

Productivity

Non-Farm 

Productivity

2009

Total Farm Output

Total Farm Input
U.S. Agriculture and Rural America

★ 11 ★

Expenditures on public and private R&D programs provide much of the impetus for new technological 

innovations (see Figure 5). Total public and private R&D spending in agriculture reached $11 billion 

dollars in 2007, or nearly 8% of the value-added in the sector.  Annual public R&D spending, through 

universities as well as government laboratories, rose by 77% between 1970 and 2002 (after accounting 

for inflation), and played an important role in driving productivity.  Private R&D expenditures doubled 

(after accounting for inflation) between 1970 and 2007 (see Figure 5).

Innovation leads to Increasingly Efficient Farms

Efficiency-increasing agricultural innovations have enabled farmers to manage more cropland or 

raise more livestock. In addition, innovations have led farms to contract out for specialized services.

Farmers now rely extensively on 

private consultants, government 

extension agents, lenders, and 

supplier representatives for technical advice.

Some of these managerial innovations rely on further developments 

in the design of organizations 

and of contractual relationships 

in order to effectively organize a 

series of complicated commercial 

relationships. The share of production under marketing or production contracts increased from 28% 

in 1993 to over 38% by 2010. Corn, 

soybean, and wheat producers, for 

example, place about half of their production under forward contracts; many of them also invest in 

storage facilities to store products when anticipating future price increases, and nearly 30% of them use 

futures markets to hedge the risks from their cash sales (MacDonald and Korb, 2011). Similarly, farmers 

have realized more intensive use of capital by leasing equipment from specialized suppliers, and they 

often engage further specialized expertise, and capital equipment, by contracting for certain farm tasks 

(such as spraying, field preparation, or harvesting) with custom service providers.

Farmers now use information technology to automatically vary feed mixes and climate controls to the 

precise needs of the animals in confined feeding operations. Dairy farmers can monitor feed intake, milk 

production, and milk attributes on a near-continuous basis to identify animal health threats and the 

effectiveness of feed formulations. Integrated hog operations, for example, sharply reduced the amount 

of feed, capital and labor needed to produce hogs as new technologies and organizational forms swept 

the industry. As a result, live hog prices were nearly a third lower than they would have been without 

the productivity growth that occurred between 1992 and 2004, and retail pork prices were 9% lower 

(Key and McBride, 2007).

0

2

4

6

8

10

12

1970 1975 1980 1985 1990 1995 2000 2005 2010

Billions of 2005 Dollars

Figure 5: Public and Private U.S. Agricultural R&D 

Spending, 1971-2009

Public & Private 

Agricultural R&D

Note: All R&D spending in 2005 dollars using ERS R&D deflator. 

Source: USDA Economic Research Service.

2007

Private 

Agricultural R&D

Public 

Agricultural R&D 2009
STRENGTHENING RURAL COMMUNITIES: LESSONS FROM A Growing FARM ECONOMY

★ 12 ★

The market, scientific, and technological opportunities beckoning American farmers are as great as they 

have ever been. Our focus therefore is on practical application of science, research and development 

on America’s farms and ranches. Even America’s larger firms are too small to support sophisticated 

basic research, and many of the most significant applications of farm improvement research are not 

patentable. Public science institutions and the private farm partnerships must continue to realize the 

possibilities within the Agricultural economy. The Obama Administration believes America’s agricultural 

future is worth investing in, and has committed to increases in scientific research that could benefit our 

agricultural sector for decades to come.

America’s Agricultural Export Boom Powers an Agricultural Revival

The collapse of farm export markets in the 1980s triggered a crisis in America’s agricultural economy 

whose effects were felt in rural communities for nearly two decades. In the 2000s, though, unexpectedly strong growth in a set 

of economies largely outside the 

set of traditional U.S. farm export 

destinations began to fundamentally reshape the contours of supply and demand for agricultural 

goods. Those countries included 

emerging markets whose economic progress had been uneven 

and halting since the 1970s. With 

strong growth throughout the 

developing world in the 2000s, 

those countries collectively represented an increasingly important 

source of demand for agricultural 

goods and other commodities.

Reflecting rising export demand, commodity prices began rising in the 2000s. Those price increases 

continued through the decade, reaching historically unprecedented levels by the eve of the global 

financial crisis.

Due to the world economic slowdown, between 2008 and 2009, U.S. agricultural exports fell from $115 

billion to $98.5 billion. Total economic activity generated through farm exports fell from $273 billion in 

2008 to $228 billion in 2009. Fortunately, this collapse was short-lived. As the world economy recovered, 

agricultural commodity prices rose (see Figure 6) and U.S. economic activity supported by farm exports 

soared to new heights.

The economic benefits brought by America’s rapid farm export recovery are far greater than is generally 

understood. The nearly $116 billion of U.S. farm exports in 2010 generated an additional $155 billion 

in related domestic economic activity. The direct and indirect effects together accounted for a total 

$271 billion of U.S. national income. That larger number reflects the additional economic activity and 

0

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200

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Jan-1921 Jan-1951 Jan-1981 Jan-2011

Index (1982 = 100)

Figure 6: Farm Products Producer Price Index

Mar-2012

Source: Bureau of Labor Statistics.
U.S. Agriculture and Rural America

★ 13 ★

employment opportunities that exist in concert with the agriculture sector. For example, products such 

as bulk grains require a large transportation system as they are moved from the farm to an elevator, to 

train cars or barges, and then to the port. In addition to the transportation system, high-value agricultural products create jobs in the processing and/or manufacturing sectors. All this direct and indirect 

economic activity generated by farm exports supported 907,000 jobs in 2010.3 In FY 2011, total food 

and agricultural exports reached a record level of $137.4 billion.

These record-breaking achievements are a testament to the skill, hard work, and productivity of 

America’s farmers and ranchers. They also point to the skill with which America’s agricultural exporters 

have tapped into the growing demand generated by fast-growing emerging markets. Box 2 explains how 

rapid growth in these economies is creating the potential for even more dynamic growth and prosperity 

for our agricultural exporters in the years ahead. To fully benefit from this historic opportunity, though, 

America’s farmers and ranchers need access to these growing markets, and a level playing field on which 

to compete. America’s agricultural industry cannot negotiate these terms on its own—it needs the full 

support and engagement of the federal government’s trade agencies.

Opening Global Markets to U.S. Agricultural Exports under the National Export Initiative

Even today, after a half century of multilateral trade negotiations, international trade in agricultural 

products remains distorted by high tariffs and unwarranted nontariff barriers. All too often, American 

exporters, seeking to feed a growing world, find restrictive trade policies standing between them and 

the foreign customers who could benefit from their products. These restrictive policies can be especially 

damaging to our agricultural exporters when they block access to the world’s fastest growing markets.

That is why emerging markets have been a particular focus of Obama Administration efforts to negotiate better agricultural market access. This Administration has signed historic free trade agreements to 

improve America’s access to emerging markets, it has launched a new effort to negotiate free trade 

agreements in a region of the world economy that contains some of world’s most dynamic emerging 

markets, and has fought unfair and unwarranted barriers to U.S. exports in emerging markets around 

the world.

Under the President’s National Export Initiative (NEI), the Obama Administration has made reducing 

trade barriers to improve market access overseas for U.S. farmers and ranchers a top priority, alongside 

efforts to ensure that America’s trading partners fully honor all the commitments they have made 

under existing trade agreements. Often trade barriers hide behind concerns for public safety and public 

health. For example, global concerns about avian influenza and H1N1 were invoked as an excuse for 

U.S. trading partners to implement widespread bans on U.S. exports of poultry and pork products. Use 

of phytosanitary standards that lack a clear basis in science continue to block U.S. agricultural exports 

to developing countries as well as some advanced industries economies. The European Union (EU), for 

example, is the fifth largest export market for U.S. agricultural products, but a range of U.S. products are 

kept out of the EU market because of EU or member state food safety rules and other barriers that are not 

scientifically justified. Currently, the United States and the EU are exploring possibilities for expanding 

transatlantic trade and investment. A priority for the Obama Administration in any new trade initiative 

with the EU will be to address unwarranted barriers to U.S. agricultural exports.

3. www.ers.usda.gov/Data/TradeMultiplier/econeffects/2010overview.aspx
STRENGTHENING RURAL COMMUNITIES: LESSONS FROM A Growing FARM ECONOMY

★ 14 ★

To achieve the goals of the NEI, the President has signed several historic trade agreements that significantly expand market access for our agricultural exporters. The recently implemented U.S.-Korea Free 

Trade Agreement (KORUS) is set to deliver substantial gains for U.S. agricultural exports in coming years.  

In a separate beef import protocol concluded in 2008, Korea agreed to adjust its import restrictions 

on U.S. beef. As a result, U.S. beef exports to Korea more than doubled in value, 2008-2011, to about 

$686 million.  Under KORUS, Korea will gradually bring its tariffs on imports of U.S. beef and pork down 

to zero and the U.S. meat industry will benefit from even greater gains in trade.  The improved access 

provided by the agreement for a wide range of other products, beginning in 2012 and continuing over 

the agreement’s phase-in period, will yield new market opportunities for U.S. exporters.  USDA estimates 

that, when fully implemented, KORUS will expand U.S. agricultural exports to Korea by an estimated 

$1.9 billion per year—gains that will benefit agricultural producers and processors across the United 

States.  Together with the free trade agreements with Panama and Colombia, passed at the same time, 

the three agreements, once implemented, are expected to boost U.S. agricultural exports by $2.3 billion 

per year (Wainio, Gehlhar, and Dyck, 2011).

The Obama Administration has worked with a number of other developing and developed countries 

to reopen their markets to U.S. beef products. Partly as a consequence of these steps, U.S. beef exports 

exceeded 2003 levels for the first time in 2011, reaching $5.4 billion. Similarly, 57 countries, including 

many important emerging markets, have now lifted bans on U.S. poultry products. Between 2007 and 

2011, the value of U.S. poultry exports increased from $4.1 billion to $5.6 billion. U.S. pork exports to the 

rapidly growing Chinese market soared, once H1N1-related bans were lifted. Immediately prior to the 

ban, the U.S. exported on average about $11 million in pork and pork products per month to China. In 

2010, pork exports to China totaled only $79.3 million. In 2011, pork exports to China grew by a factor of 

six, exceeding $477 million and quickly demonstrating the value of better access to this key emerging 

market. In the first quarter of 2012, roughly two years after the ban was lifted, the U.S. exported about 

$122 million in pork and pork products to China.

The Obama Administration is also pursuing a broader regional free trade agreement—the Trans-Pacific 

Partnership (TPP) to further expand export opportunities for American farmers, ranchers and food processors. Current negotiating parties include Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, 

Peru, Singapore, and Vietnam. Canada, Japan, Mexico, and other countries have signaled interest in 

joining. Through this agreement, the Administration is seeking to boost U.S. economic growth and 

support the creation and retention of high-quality jobs at home by increasing American exports to a 

region that includes some of the world’s most dynamic emerging economies and represents more than 

40 percent of global trade.

In addition, Russia’s accession to the World Trade Organization (WTO) is a top priority for the Obama 

Administration. The Administration worked closely with Russia to secure commitments that will enhance 

the transparency and predictability of Russia’s trade regime once it joins the WTO, thus creating more 

certainty and opportunities for U.S. agricultural exporters. For our farmers and ranchers to benefit from 

Russia’s WTO commitments, Congress will need to terminate the application of Jackson Vanik amendment so that the President can grant Russia Permanent Normal Trade Relations (PNTR).
U.S. Agriculture and Rural America

★ 15 ★

Box 2: Focus on Emerging Markets under the National Export Initiative

Growing demand from emerging markets has played an important role in driving the U.S. agricultural 

export recovery. During 2000-10, world population rose on average 77 million people per year. This 

population growth was concentrated in developing countries, where per capita incomes have also been 

rising. As countries move from low-income to middle-income status and as populations in these countries 

move from the countryside into cities, diets tend to diversify toward meats and dairy products (and other 

high-value products such as processed foods). As demand for high value products rises, imports tend to 

rise. U.S. agriculture benefits from this growth in two ways. As demand shifts from staples to high-value 

products, the demand for grains and oilseeds as feed often rises to support growing livestock sectors. The 

United States is very competitive in grains and oilseeds as well as other high-value agricultural products, 

and stands to benefit as emerging markets become steadily more important consumers of U.S. agricultural 

exports. These shifts, and the benefits they are bringing to American agriculture, are already highly visible 

in some commodity markets. China, for example, is now the largest importer of U.S. soybeans, consuming 

more than half of all U.S. soybean exports.

For the foreseeable future, the growth of demand from developing countries for the output of America’s 

farms and ranches appears to rest on the strong economic foundation, rooted in the rapidly growing 

private sectors of key emerging markets. China and India, especially, have the potential to grow rapidly for 

decades. As these giant economies grow wealthier, their demand for agricultural products will continue 

to increase. Of course, many other smaller emerging markets are also growing at a robust pace. For many, 

their growth prospects rest on similarly secure foundations.

Thus, although prices for major crops are projected to decline in the near term as global production 

responds to recent high prices, long-term growth in global demand for agricultural products, in combination with the continued presence of U.S. ethanol demand for corn and EU biodiesel demand for vegetable 

oils, is likely to keep prices for corn, oilseeds, and other crops historically high. Similarly, the value of U.S.

agricultural exports is expected to rise steadily over the next decade (see Figure 7). So long as U.S. exporters can obtain adequate access to these growing markets, strong foreign demand could support continued 

growth and prosperity in the American farm economy for years to come.

0

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1990 1995 2000 2005 2010 2015 2020

Billions of Dollars

Figure 7: U.S. Agricultural Trade Value

2021

Exports

Imports

Sources: USDA Agricultural Projections to 2021 (February 2012); USDA Economic 

Research Service.
STRENGTHENING RURAL COMMUNITIES: LESSONS FROM A Growing FARM ECONOMY

★ 16 ★

The President will continue to work with trading partners around the world to increase market access 

for our productive farmers and ranchers. The potential benefits of further effort are high. Research by 

World Bank-affiliated agricultural trade economists shows that the complete elimination of agricultural 

trade barriers could raise the level of U.S. exports by nearly $20 billion per year above and beyond 

what we would expect in the absence of such liberalization (Anderson and Martin, 2006). This kind 

of far-reaching liberalization would add $168 billion per year to the welfare of global consumers and 

producers (Anderson 2010).

New Markets at Home as well as Abroad

The agricultural sector has been challenged to provide not just food, feed, and fiber to U.S. and world 

consumers, but also to meet a larger share of our nation’s transportation fuel needs. Farmers, ranchers, 

and forest managers have responded and the production of renewable and clean bioenergy dramatically 

increased over the past five years, contributing to an all-of-the-above energy strategy. In addition, as 

farms have restructured and re-organized to take advantage of technical progress they have specialized 

as well. More farms are producing organic and specialty products and income earned from agritourism 

and biobased products is increasing.

Energy for today’s transportation

Currently, the predominant biofuel in the United States is corn-based ethanol and, to a lesser extent, 

biomass-based biodiesel. In 2012, the United States is on pace to produce more than 14 billion gallons 

of corn ethanol, accounting for nearly 40% of total U.S. corn use. Increasing the volumes of gasoline 

substitutes helps drive down prices when biofuel feedstocks are cheap relative to crude oil. Researchers 

have linked the increasing supply of ethanol between 2000 and 2010 to a drop in gasoline prices of 

approximately $0.29 per gallon on average (see Du and Hayes, 2011). In addition, the U.S. produced 

967 million gallons of biodiesel in 2011— drawn from soybean oil (about 20% of current use) and other 

feedstocks. Cellulosic ethanol made from non-food feedstocks such as corn stover, grasses, or forestry 

products are scheduled to become a much more substantial share (16 out of 36 billion gallons) of our 

renewable fuel supply by 2022, but this alternative fuel has not yet become commercially widespread.

Rising gasoline and diesel prices globally have boosted the competitiveness of biofuel production in the 

United States and subsequently created a new and growing source of demand for conventional commodity feedstocks (particularly corn and soybean oil in the U.S.). Since 2007, corn prices have generally 

risen in tandem with ethanol production, resulting in higher incomes from corn production, and causing 

adjustments in the allocation of land between crops. Initially, the growth of corn production came at 

the expense of soybeans, cotton, and other crops that compete with corn, but price signals have since 

induced farmers to bring more land into crop production.

Higher commodity prices, caused by a variety of factors, have contributed to rising farm incomes and 

U.S. agricultural exports, but have presented challenges for downstream users of commodities, such 

as livestock producers, the food industry, and foreign buyers. For example, higher prices for corn have 

raised costs for livestock producers, bringing output levels below what they otherwise would have 

been. This is offset partially by the availability of distillers’ grains (a co-product of ethanol production) 
U.S. Agriculture and Rural America

★ 17 ★

as a substitute source for feed. The shift to “next generation” biofuels—those produced from non-food 

feedstocks and wastes—will change the resources used for biofuel production, when they become 

commercially viable. The use of feedstocks that do not compete directly with conventional commodity 

crops will have a smaller effect on land use as well as food and feed markets.

Raising agricultural productivity growth and diversifying the source of feedstocks for bioenergy production will mitigate many of the concerns associated with corn-based ethanol and soy-based biodiesel 

production. In addition, as yields increase for conventional feedstocks such as corn and soybeans the 

price impacts of biofuel demand will fall, lowering prices for food and livestock feed. Further, the shift 

to “next generation” biofuels and bioenergy produced from non-food feedstocks and wastes, such as 

biodiesel from algae and bioelectricity from manure, will change the resources used for bioenergy 

production. Feedstocks could increasingly come from crop residues, energy crops such as switchgrass 

and fast growing woody biomass. The use of these feedstocks will have a smaller direct impact on food 

and feed markets.

Investing in Tomorrow’s Renewable Energy

The Administration is supporting advances in bioenergy through such programs as the Biomass Crop 

Assistance Program, the Biorefinery Assistance Program, the Repowering Assistance Program and the 

Bioenergy Program for Advanced Biofuels, and Rural Energy for America Program. Implementation of 

the 2008 Farm Bill has contributed to USDA’s efforts to revitalize the rural economy and meet the Nation’s 

energy challenges. Those renewable energy programs provided new sources of farm income, increased 

domestic energy production and developed a domestic renewable energy industry which helped create jobs and reduce America’s dependence on imported oil. For example, since 2003, through the Rural 

Energy for America Program (REAP), the USDA has invested more than $350 million in grants and loans 

in more than 5000 renewable energy and energy efficiency projects that have helped generate or save 

6.5 million megawatts hours of power, enough to fuel 600,000 households.

The Recovery Act made substantial investments in America’s renewable energy future. In the short 

term, those investments have helped keep the U.S. on track to achieve the President’s goal of doubling 

renewable energy production by 2012. Over the long term, those investments will help ensure that 

renewable energy sources become a major part of our energy supply. Increasing geothermal, wind, 

solar, and biomass renewable energy production will increase incomes, particularly for residents of 

rural communities.

States with largely rural populations have some of the highest technical potential for renewable development and therefore will likely be the principal recipients of renewable energy projects spurred by 

these Federal incentives. Installed wind capacity has increased from about 25,000 MW at the end of 

2008 to almost 47,000 MW by the end of 2011. States with installed capacity greater than 1,000 MW 

include Colorado, Indiana, Kansas New York, Wyoming, North Dakota, Oklahoma, Oregon, Washington, 

Minnesota, Illinois, California, Iowa, and Texas. Since 2009, capacity has increased by 35%. In just the 

past three years, capacity in Ohio, Arizona, Nebraska, Maine, South Dakota, Michigan, Massachusetts, 

Idaho, and Vermont has increased by more than 100%.4 Low-density rural counties have the greatest 

4.  See www.windpoweringamerica.gov/wind_installed_capacity.asp.
STRENGTHENING RURAL COMMUNITIES: LESSONS FROM A Growing FARM ECONOMY

★ 18 ★

technical potential for solar and 

wind-based energy, while highdensity rural counties have the 

greatest technical potential for 

crop and forestry biomass as well 

as renewable energy from animal 

waste residues. In particular, North 

Dakota, Montana, and other Great 

Plains states rank highest in terms 

of wind intensity (see Figure 8).

The Administration has also provided support to increasing the 

availability of renewable fuels (see 

the recently released National 

Bioeconomy Blueprint for more 

details). For example, in September 2011, USDA’s Agricultural and Food Research Initiative committed 

more than $136 million to develop regional Coordinated Agricultural Projects for bioenergy systems 

through partnerships between academia, government, and industry. Plants Engineered to Replace Oil 

(PETRO) is a $30 million program launched recently by the Advanced Research Projects Agency-Energy 

(ARPA-E) aims to create plants that capture more energy from sunlight and convert that energy directly 

into fuels by optimizing processes of energy capture and conversion to develop robust, farm-ready crops 

that deliver more energy per acre with less processing prior to delivery to retailers. In August, 2011, under 

the USDA-DOE Plant Feedstock Genomics for Bioenergy Program, $12.2 million was awarded for research 

to improve special crops for biofuels by increasing their yield, quality, and ability to adapt to extreme 

environments. Relying on modern genomics to develop novel breeding strategies, researchers focused 

on switchgrass, poplar trees, sorghum, miscanthus, and energy cane, among other promising plants 

with potential for growth, on marginal lands that are poorly suited for food crops. Potential benefits of 

this research range from decreasing oil consumption to increasing options for American farmers, while 

adding new jobs and driving wealth creation in rural America.

Domestic production of renewable energy, including bioenergy, is a national imperative. Reducing 

dependence on foreign energy by expanding domestic renewable fuels has impacts on the overall 

U.S. economy because of energy’s importance in consumption, production, and trade. As production 

technology advances and petroleum prices continue to rise as projected, the benefits to renewable 

bioenergy will also increase. By substituting domestic biofuels for imported petroleum, for example, 

the United States would pay less for imports overall and receive higher prices for exports, providing a 

gain for the economy from favorable terms of trade. U.S. household consumption would rise because 

of higher real wages, increased household income, and lower import prices (ERS, 2010 ERR-102). As 

noted above, USDA has been working to assist in developing competitive bioenergy sources, which will 

increase production opportunities for farmers, help create jobs, combat global warming, replace our 

dependence on foreign oil and strengthen a 21st century economy that is built to last.

Figure 8: U.S. Annual Average Wind Speed at 80 m 
U.S. Agriculture and Rural America

★ 19 ★

Organic Crops

Investments in research and development and progress made to minimize trade barriers also benefits 

specialty markets, such as in organic agriculture. In 2009, for example, the U.S. signed an organic equivalence arrangement with Canada which allows organic products certified in one country to be sold as 

such in the other. This is particularly important for small and mid-sized operations that cannot afford 

the time and money necessary for duplicative certifications, fees, and inspections. In February, 2012, the 

U.S. established a similar equivalence arrangement with the European Union (EU). To ensure that the 

terms of all trade agreements are being met, the National Organic Program conducts periodic audits of 

foreign countries’ organic programs. Between 2009 and 2011, USDA has supported internal science and 

university researchers with more than $117 million focused on improving the productivity and success of 

organic agriculture. For example, USDA research on weed management research for organic vegetable 

production has produced techniques and tools that can help control 70% of weeds at 15% of the cost 

Box 3: More than a quarter million organic cows.

Organic farming has been one of the fastest growing sectors in agriculture. Between 2002 and 2008, acres 

under organic production grew on average by 16.5 percent annually. In 1997, the retail value of organic 

food sales totaled $3.6 billion; in 2008 they totaled $21.1 billion. That growth has been particularly evident 

in the organic dairy sector, accounting for 16 percent of organic sales in 2008. The number of organic milk 

cows on US farms increased by annual average of 26 percent between 2000 and 2008 (see Figure 9), for 

example (USDA, ERS, ERR-82). The CROPP cooperative, for example, was founded in Wisconsin by seven 

small farm families in 1988. Now it is one of the largest organic cooperatives in the U.S. representing 1,687 

farmers. The cooperative sold more than $715 million in organic products under its Organic Valley and 

Organic Prairie labels in 2011 up from $523 million in 2009 (about 85% of sales are liquid milk). The cooperative lists several benefits to being a member: stabilizing prices, providing brand recognition, technical 

assistance, certification, and marketing power. Profits for the cooperative exceeded $13 million in 2011, up 

from $7 million in 2009.
STRENGTHENING RURAL COMMUNITIES: LESSONS FROM A Growing FARM ECONOMY

★ 20 ★

of hiring workers to weed by hand. Extending USDA organic research findings to people in the field is 

critical and the “eOrganic” electronic extension service funded by USDA has become an essential tool 

for compiling and disseminating knowledge about organic production. The retail value of the organic 

industry grew to $31.4 billion, up from $21.1 billion in 2008 and from $3.6 billion in 1997 (Dimitri and 

Oberholtzer 2009; USDA 2011). Organic foods continue to gain market share in the food industry, 

climbing to 4.2% of U.S. retail food sales in 2010. This creates opportunities for farmers and ranchers: 

the number of operations certified organic grew by 1,109—or more than 6%—between 2009 and 2011.

Other Specialty Crops

U.S. producers have also turned to horticulture to take advantage of niche local markets as well as new 

export opportunities. Horticultural crop production is a diverse, complex, management-intensive, and 

little-subsidized business in the United States. It is also among the more financially successful components of U.S. agriculture. Along with fruits and nuts, vegetables and melons have long been recognized 

as vital components in the nutritional health and well-being of the Nation. Fruit and vegetable5 farms, 

for example, are an important component of U.S. agriculture. U.S. production of vegetables and melons 

occurs on about 2% of all harvested cropland. Similarly, production of fruit and tree nuts is harvested 

from less than 2% of total harvested cropland. From that small footprint, however, comes a diverse set 

of high-value products. Vegetable, melons, and tree fruits and nuts generated 22% of all farm crop cash 

receipts between 2008 and 2010. That produce accounts for about $16 billion in export sales annually, 

or 16% of export sales during the 2008 to 2011 period.6

Agritourism and Outdoor Recreation

Committed to enhancing job growth and economic development in rural areas, the President signed 

an Executive Order on January 19, 2012, creating a Task Force charged with developing a National Travel 

and Tourism Strategy to promote visits to the United States public lands, waters, shores, monuments, 

and other iconic American destinations. The benefits of that strategy include not only the potential 

increase in travel exports, but also lower travel imports as it will provide Americans with more and better choices of travel and tourism destinations within the United States. While the government has an 

important role in insuring that national treasures such as Yellowstone National Park are appropriately 

maintained and made accessible to domestic and international tourists, rural areas also provide many 

recreational opportunities.

In 2006, for example, the Outdoor Industry Foundation, estimated that active outdoor recreation participants spent nearly $300 billion on recreational trips and outdoor gear in 2006.7 These figures include 

outdoor activities such as fishing, hunting, hiking, biking, camping, paddling, wildlife viewing, and snow 

sports. Hunting and fishing and other outdoor recreational pursuits also provide an additional source 

5.  Vegetables include all fresh and processed vegetables (potatoes, sweet potatoes, dry beans, dry peas, and 

lentils).

6.  usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1377; 

www.ers.usda.gov/Publications/vgs/#yearbook; www.ers.usda.gov/Publications/fts/#yearbook; 

www.ers.usda.gov/Data/FarmIncome/finfidmu.htm

7.  Southwick Associates and the Outdoor Industry Foundation. 2006.The Active Outdoor Recreation Economy:

A $730 Billion Annual Contribution to the U.S. Economy. http://www.outdoorindustry.org/images/researchfiles/

RecEconomypublic.pdf?26
U.S. Agriculture and Rural America

★ 21 ★

of income to farmers, ranchers, and forest landowners. In 2006, 34 million hunters and anglers alone 

spent over $76 billion, including trip-related expenses ($24.6 billion), equipment costs ($41.0 billion) and 

other expenditures ($11.1 billion) for items like magazines, permits, concession fees, etc.8 The President 

recognizes the important economic benefits of outdoor recreation to rural economies and has directed 

his cabinet to develop the America’s Great Outdoors Initiative. The America’s Great Outdoors Initiative 

aims to reconnect Americans to the great outdoors, invest in a shared conservation legacy, and sustain 

job creation in vibrant rural economies.

Rural areas also provide recreational opportunities on farms, known as agritourism. Farm-based recreation includes outdoor recreation, such as hunting, fishing, and horseback riding. However, agritourism 

also includes entertainment activities, such as hayrides, petting zoos, corn mazes, wine tours, and wildlife 

viewing, plus hospitality services such as on-farm bed and breakfasts, weddings, and other events.

Agritourism generated $567 million in gross cash farm income in 2007, mostly on small to intermediate 

farms (total farm sales less than $250,000, operator reports farming as principal occupation), double the 

amount recorded in 2002. Data indicates that agritourism in the U.S. is particularly concentrated in the 

Southern Plains. The more detailed 

2007 Census of Agriculture data 

show that regional concentrations also occur in parts of the 

West, Southeast, and in some 

high-amenity locations such as in 

New England, the East coast, and 

along the Northern Great Lakes 

(Bagi and Reeder, 2011).

Biobased Economy

More than 3,000 companies in 

the United States are producing 

biobased products (see Figure 10).

Paper and Textile industries have 

moved toward biobased products 

and away from use of petrochemical products for both manufacturing and clean-up, and now use microorganisms or biologically derived industrial enzymes that are more environmentally friendly and cost 

effective. In the future, biological innovation could lead to developments, such as improved biological 

systems for removing carbon dioxide directly from air and sequestering it in biomass for other uses. From 

traditional plant breeding to synthetic biology, medical treatments to petroleum replacements, future 

bio-manufacturing will be greatly facilitated by the ability to design and use biological systems and 

organisms quickly. Such opportunities offer agricultural producers expanded markets for their products.

8.  U.S. Department of the Interior, Fish and Wildlife Service, and U.S. Department of Commerce, U.S.

Census Bureau. 2006 National Survey of Fishing, Hunting, and Wildlife-Associated Recreation.

Figure 10: Locations of Biobased Firms

Source: USDA BioPreferred Program.
STRENGTHENING RURAL COMMUNITIES: LESSONS FROM A Growing FARM ECONOMY

★ 22 ★

The recently augmented BioPreferred Program at USDA highlights new opportunities to supplement 

farm production, support economic expansion and create jobs from the farm to the finished product.9

Toward a Greater Harvest: the Future of American Agriculture

The U.S. agricultural economy has quickly bounced back from the worst global downturn since the 

Great Depression. That resilience was forged through nearly three decades of difficult adjustment after 

the farm crisis of the early 1980s. Building off sustained public and private investments in R&D, productivity growth, and market diversification, farms and ranches restructured and became more efficient.

Farmers quickly adopted new and promising technologies, developed through public research and 

development. They also specialized in management operations—contracting out for capital-intensive 

services that require expensive machinery and for information services and organizing more effective 

contracting arrangement to limit exposure to risk. Farmers reliance on borrowing went down. In 2007, 

31% of farms used debt financing, compared to 60% in 1986 (Henderson and Akers, 2010). Current 

levels of debt are now well below debt repayment capacity. The Federal government restructured farm 

supports so as to minimize distorting planting decisions and supported eliminating trade barriers, while 

improving the safety net for risk mitigation. The strength of the farm lenders (rural commercial banks 

and the Farm Credit System) also benefits the agricultural economy and helps ensure favorable access 

to credit to farmers (Sundell and Shane, 2012). Markets opened, yields improved, and the agricultural 

economy recovered—but it took time.

America’s agriculture economy faces an historic set of opportunities. Farm sector income reached a 

nominal record of $98.1 billion in 2011, which was the 4th highest real farm income in the last 50 years.

Real equity of farms is expected to establish a new nominal record in 2012, with the value of farm assets 

at the highest level since 1980 (USDA 2012). Farm exports are at record levels, as is America’s agricultural 

trade surplus. Continued emerging market population and income growth presents sustained growth 

opportunities. Government (at all levels), farmers and ranchers, agribusinesses, and local communities 

must work together to ensure that America’s agricultural economy makes the most of this historic opportunity. The Obama Administration has set out a strategy for growth in this vital sector that emphasizes 

the following themes.

Investing in Agricultural Research

Even relatively large farms and ranches in the United States constitute a very small share of total agricultural production. This creates a challenge for any farmer or rancher who would want to invest in new 

crops or new techniques—others would quickly copy these improvements, limiting the profits accruing 

to the innovator. In recognition of the special challenges faced by would-be innovators in agriculture, 

the U.S. has always pioneered agricultural research efforts, leading the world through the 19th century 

and into the 20th century. The benefits from past R&D investments helped producers become more 

efficient following the 1980’s crisis in the agricultural economy However, in recent years, the U.S. has cut 

back on many kinds of agricultural research. As a result, increases in agricultural productivity appear to 

9. See program website for additional details: www.biopreferred.gov
U.S. Agriculture and Rural America

★ 23 ★

be tapering, suggesting that revived investment in agricultural R&D will be needed to maintain America’s 

competitive advantage in producing from the land those products that generate the highest net returns.

The potential returns to increased research investment are particularly high today. New markets are 

opening abroad for new products; scientists are increasingly noting adverse changes to climatic conditions for growing crops and raising livestock; and other countries are increasing their own exports 

of traditional and non-traditional commodities. In addition, meeting the food needs of an expected 

2050 global population of 9 billion will require agricultural production to increase by 70%; demands 

for bioenergy supplies are increasing as petroleum prices rise; and consumers’ preferences for cleaner 

air and water are increasing.

These challenges will require supportive investment policies for basic and applied agricultural research, 

to ensure that U.S. agricultural productivity continues to increase. The Administration plans to capitalize on those diverse opportunities and invest in future innovations, such as more productive crops, 

healthier livestock, and adaptive farming practices for weather extremes by requesting $2.3 billion our 

2013 Budget for agricultural research and development (R&D).  

Doubling Exports Can Start with Agriculture

Thanks to food and agricultural exports, the United States is well on the way to doubling exports 

as envisioned by President Obama. To realize the promise of continued growth, the Administration 

is negotiating for greater access to sell American agricultural products in important Asian markets 

through the TPP, exploring greater economic opportunities with the European Union and eliminating 

unwarranted barriers to American grown products around the world. Central to the Administration’s 

international trade policy, the United States is focused on lowering trade barriers around the world to 

increase opportunities for U.S. farmers and ranchers, capitalizing on America’s large endowment of 

arable land and its high level of agricultural technology.

Opportunities at Home

Rising prices for fossil fuels have increased the opportunity for U.S. agriculture to participate in markets 

for biofuels, wind power, biomass and biogas electricity generation. Maintaining policies that promote 

domestic energy alternatives provides increasing opportunities for U.S. agriculture to contribute to U.S.

energy security and greenhouse gas mitigation goals.

Similarly, domestic investments in small business will be essential to developing the kinds of innovative rural business and manufacturing needed to spur jobs. For example, in August the White House 

Rural Council established a rural “carve-out” in the Small Business Investment Company (SBIC) Impact 

Investment Program that will invest in distressed areas and emerging sectors such as clean energy.  SBA 

will provide up to a 2:1 match to private capital raised by the fund.  SBA and USDA are committed to 

partnering to drive $350 million of investment capital through the fund and existing SBICs into rural 

small businesses over five years, doubling the current rate of investment.

Those efforts are geared toward helping rural businesses become more competitive and expanding 

opportunities for agricultural production at home and abroad in markets for bioenergy and for other 
STRENGTHENING RURAL COMMUNITIES: LESSONS FROM A Growing FARM ECONOMY

★ 24 ★

non-traditional farm products, such as organics and other high-valued crops. The diversification of the 

growing agricultural economy spans new products for exports, to agritourism and outdoor recreation 

opportunities, to new biobased product manufacturing.

America’s Agricultural Revival: Today, Tomorrow, and Beyond

America began as an agricultural economy, and our first President dreamed that we would someday 

become, in his prescient words, “a granary and a storehouse for the world.” Throughout our history, the 

innovation of America’s farmers and ranchers has lit a pathway to progress for the world, creating new 

products and processes that fed our own nation as well as millions beyond our shores. As a new century 

of progress and achievement in American agriculture unfolds, America’s farmers and ranchers continue 

to define the frontiers of agricultural best practice. In recent years, it has become increasingly clear that 

American agriculture has put two decades of difficult transition behind it.

• American agriculture has never been stronger, more innovative, or more competitive than it 

is today.

• The productivity of our farm and ranches remains among the very highest in the world.

• Food and agricultural products are one of the country’s most important exports.

As this report has demonstrated, America’s agricultural economy and its rural communities face an 

unparalleled opportunity for growth and prosperity. This is not just an historic moment of opportunity 

for rural communities—it is one for the nation as a whole.

This report has laid out a strategy for smart, cost-effective government action that could keep America’s 

agriculture economy in high gear for decades to come. If fully implemented, this pro-growth agenda 

could support the broader national goals of increasing domestic energy security and expanding exports.

Our hope is that this report will not only highlight the Administration’s achievements and the potential 

of America’s agricultural economy, but help build the consensus needed to establish and maintain the 

smart public policies that will enable this enormous potential to be realized. Our nation’s farmers and 

ranchers, and the future generations who will inherit their land, their dreams, and their legacy, deserve 

no less.
★ 25 ★

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