AN ANALYSIS OF THE IMPORTANCE OF AGRICULTURE AND THE FOOD SECTOR TO THE MICHIGAN ECONOMY

The number of workers on farms and in food processing represents about 16 percent of total employment in basic industries in Michigan. Converting farm labor to full time equivalents, however, reduces the proportion to about 11 percent. The industries dependent upon agriculture and food processing enhance the importance of this sector. Adding backward linked industries increases the total employment from about 100 thousand to 200 thousand and output from $15 billion to $27 billion. If Michigan agriculture's share of the forward linked industries of wholesaling and retailing is added, total employment related directly or indirectly to farming and food processing is estimated to be 500 thousand and output to be $37 billion. In terms of employment, this represents a ratio of nearly 10 jobs for every full time equivalent in farming or about 5 jobs for every employee in the combination of agriculture and food processing. The total direct and related employment in agriculture and the food system is about 1 million, about a fourth of total employment in the state. Not only does agriculture and food processing have a major presence in the state, this sector contributes to the stability of an economy heavily dependent on the manufacture of durable goods which are vulnerable to business cycles. Food processing tends to be located near metropolitan areas, facilitating employment shifts. Similarly, the proximity of alternative employment opportunities provides stability for households involved in agriculture and food processing. While gross farm income and expenditures have increased in nominal terms, trends in the 1980s and 1990s have been stable or negative in real terms. Real net farm income declined in the 1990s. However, both nominal and real farmland prices increased in the same period, a paradox reflecting a robust non-farm economy and the close rural-urban interface. Value added by Michigan food processors increased over time in both nominal and real terms until a reversal in the 1990s. Employment in food processing continued a secular decline at the close of the decade.