Publicly Funded Agricultural Research and the Changing Structure of U.S. Agriculture (2002) / Chapter Skim
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5. Drivers of Structural Change, Changes in Knowledge and Information, Implications for Policy
5. Drivers of Structural Change, Changes in Knowledge and Information, Implications for Policy
Pages 86-104
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From page 86... ...
DRIVERS OF STRUCTURAL CHANGE The U.S. food production and distribution industry is in the midst of major structural changes changes in product characteristics, in worldwide production 86
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From page 87... ...
families, changing attitudes about food safety and quality, increasing competition from global market participants, economies of size and scope in production and distribution, the inelastic characteristic of the demand for foods, risk mitigation and management strategies of buyers and suppliers, strategic positioning, market power, and control strategies of individual businesses, and private sector R&D and technology transfer policies. Finally, the availability and cost of resources, including capital and finance, personnel and human resources, and information and industry infrastructure in general will significantly affect the future structure of the farming sector.
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From page 88... ...
The essence of the argument is that resource prices and market forces encourage or induce R&D investments that result in changes in relative resource productivity, and when these changes result in substituting the less expensive resource for the more expensive resource, structural change occurs. Hayami and Ruttan (1985)
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From page 89... ...
Knowledge and Information: A Changing Role Farmers have long recognized the importance of education as a source of competitive advantage and continuous improvement in business and financial performance. Knowledge and information have always been important, but their relative importance has increased in recent years (Drucker, 1992; Peters, 19924.
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From page 90... ...
programs; antitrust rules and the regulation of competition in the food system markets; international trade policy and agreements; public incentives and investments in technology transfer and the creation of knowledge; intellectual property rules and regulations; interest rate and tax policy; and regulation of food safety, the environment, worker safety, the transportation system, resource use, and conservation. Studies of the direct influence of government policies on size and type of farms are limited and out of date.
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From page 91... ...
Data from ERS show that small farms (less than $250,000 in annual sales) receive 83 percent of the payments from conservation programs (Conservation Reserve Program, Wetlands Reserve Program, and the Environmental Quality Incentive Program; USDA, 1998a)
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From page 92... ...
Industrialized Agriculture "Industrialized production" is large-scale production using standardized technology and management linked to the processor by formal or informal arrangements. Size and standardization are important characteristics in lowering production costs and in producing more uniform crop products and animals that fit processor specifications and meet consumers' food safety concerns and desires for specific product attributes.
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From page 93... ...
Differentiated Products The transformation of crop and livestock production from commodity to differentiated product industries will be driven by consumer demand for highly differentiated food products, food safety, and trace-back ability for quality assurance; continued advances in technology, and the need to minimize total costs of production, processing, and distribution. Food systems will attempt to differentiate themselves and their products by science or through marketing.
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From page 94... ...
This supply chain approach will improve efficiency through better flow scheduling and use of resources; increase producers' ability to manage and control quality throughout the chain; reduce the food safety risk associated with contamination; and increase the ability of the crop and livestock industries to respond quickly to changes in consumer demand. Food safety is a major driver in the formation of chains.
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From page 95... ...
Some food distribution channels could require particular quality characteristics that are not available in predictable quantities in open, spot markets. The risk of changing consumer preferences or a food safety scare could be much more difficult and important to manage than price or availability of raw materials.
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From page 96... ...
In food product markets, lack of food safety can destroy brand value quickly. Increasing Diversity Production agriculture in the future could be characterized by increasing diversity, which can overlap, but is different from, increasing diversification.
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From page 97... ...
Thus there is increasing diversity in production technology, management and business practice and financing en cl organization ares ,~ ~~ ~~ ^ INFORMATION, INNOVATION, AND THE STRUCTURE OF AGRICULTURE We have briefly reviewed the forces shaping the structure of the agricultural industry, including market forces, government policy, and innovation. We now turn more specifically to the structural implications of the changing role and sources of knowledge, information, and R&D.
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From page 98... ...
In the past, production agriculture focused primarily on commodity products with coordination through open-access markets. The increased specificity in raw-material requirements, combined with the potential for producing specific attributes in agricultural products, is transforming part of the agricultural market from a commodity-product market to a differentiated product market.
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From page 99... ...
Control over proprietary knowledge confers strategic competitive advantage. R&D in contract- or ownership-coordinated systems is more focused on total system efficiency and effectiveness than it is on individual components of the system.
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From page 100... ...
Since the 1980s, however, suppliers, consultants, and service firms increasingly gather data for production agriculture; the private sector plays a larger role in providing data, knowledge, and information; and private property rights have replaced common property concepts. Private property rights enable individuals who have those rights to capture value to extract profits or payment from those who use property.
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From page 101... ...
A logical and yet largely unresolved public policy challenge involves distribution of international intellectual property rights. Access to Technology and Disenfranchisement The privatization of agriculture R&D and information markets, the profound structural changes occurring in the food production and distribution industry, and the narrowly defined criteria for allocating public-sector R&D funding all have the potential to restrict the access of some producers to the latest technology and innovation.
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From page 102... ...
Increased diversity poses a significant challenge to those who want to provide knowledge, information, and technology to the production sector, and to those who want to represent the production sector in the shaping of public policy, including farm programs and public-sector R&D policy. In essence, the increased diversity in production agriculture results in increasingly diverse demands with respect to public-sector assistance or support for the industry.
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From page 103... ...
, and on vertical coordination between various stages of the food production and distribution value chain. Research is needed on government policies that drive structural change and their specific consequences for consolidation (the number and size of farms, processors, input suppliers, and retailers)
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From page 104... ...
, or other structural characteristics. Consequently, a public-policy response to increase access to technology, target disenfranchised groups, serve a broader constituency, and evaluate (as well as include as part of funding criteria)
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