High-value agricultural products such as processed foods are becoming increasingly important for both the production and trade of the United States. Efficiency gains in primary agriculture may be transferred to the processed food sector in the form of cheaper inputs because price declines and productivity growth have been coincidental in agriculture. In turn, efficiency gains in the processed food sector are transferred, in part, back to primary agriculture by increasing the derived demand and, thus, mitigating the decline in the latter's price. Efficiency gains are relatively more important in primary agriculture than in food processing. Policies which encourage productivity growth that lowers the production costs can increase the competitiveness of both sectors. The ultimate beneficiaries of the price declines in primary agriculture and food processing are consumers.
Bibliographical noteFunding Information:
Funding was provided, in part, by a NRI grant to TAB/ERS/ USDA and University of Minnesota. The authors acknowledge suggestions on an earlier draft by Ron Trostle, Danny Pick, and Xinshen Diao. They also thank an anonymous referee for providing useful suggestions.
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- Processed food
- Technological externalities
- U.S. agricultural competitiveness