Assessing Opportunities in Food and Fiber Processing and Distribution

In public discussions of the economy, particularly at the state level, it is often noted that more attention must be given to economic development and to the creation of jobs and new income sources. The agricultural sector is not immune to such concerns and opportunities. The focus frequently is on the concept of "adding value" to raw agricultural commodities. A statement in the 1985 farm bill identifies research on new or improved food processing or value-added food technologies as a high priority in U.S. Department of Agriculturesupported research programs. Many states have become increasingly interested in developing value-added industries in the agricultural arena as a means of fostering economic development. The industries of primary concern are those engaged in the processing and distribution of food and fiber products. Value added represents the creation of wealth distributed to continuing factors of production including capital, management, and labor. This perspective of value added allows the measurement of relative contributions of each of the parts of the food and fiber system to providing final products to consumers. In particular, the contribution of labor as a component of value added provides the link to the generation of employment opportunities and, consequently, either in direct or indirect fashion, taxable income. The contribution of capital provides the link to the development and adoption of technology in production, processing, and marketing. Attention was directed to the issue of value added at a 1987 symposium sponsored by the American Agricultural Economics Association and at a 1987 conference sponsored by the Food Distribution Research Society. State governments have also held conferences on the issue of value added for agribusiness. Furthermore, several states have made sizable investments in research to boost the production and marketing of value-added agricultural products (Otto and Williams). To set the stage for this paper, consider the following illustration. Texas is a major agricultural state in terms of value of output. The major commodities produced are primary inredients in numerous food, feed, and fiber processing and distribution systems both domestically and internationally. However, a sizable portion of this value-adding activity takes place beyond state borders. This pattern is not in step with other major agricultural states, notably California and Illinois. Given this situation, suggestions to explore feasible opportunities to ameliorate the competitive position of the food and fiber processing and distribution sectors in the state abound. Examples include improving milling and processing qualities of cotton and the quality of food corn handling and processing. In this light, the purpose of this paper is to present a pragmatic yet coherent view of assessing the myriad of opportunities in food and fiber processing and distribution. Agricultural economists have the obligation to point out possible white elephants as well as to single out potential successful industries (Ferris). To quote Polopolus (p. 808), "Part of the challenge of a broader role beyond the farmgate is the need to develop a theoretical framework for empirical analysis at firm, industry, and sector levels."