Every press release from the South Dakota Department of Agriculture notes that agriculture is “a major contributor to South Dakota’s economy” and generates $25.6 billion in annual economic activity. I’ve always said that $25.6 billion figure is bogus since South Dakota’s total GDP is in the $40-billion range, and there’s no way ag generates over half of our economy.
The Bureau of Economic Analysis offers the actual GDP figures by sector in this chart, which shows that, yes, ag is a major contributor to our economy, but farming and ranching have slipped from the third-largest component of South Dakota’s economy in 1997 to the eighth-largest in 2017:
South Dakota’s biggest private industry sectors are finance and insurance, real estate and rental and leasing, manufacturing, and health care and social assistance. Include the public sector, and government is the second-biggest contributor to GDP in our supposedly low-tax, low-government state. There’s even more wealth being generated in wholesale and retail trade than in agriculture.
Or look at the percentage gains: Ag GDP over 20 years increased 86%; the total state GDP grew 160%. GDP in finance grew 532%.
None of this says agriculture isn’t important to South Dakota. But it does say that other economic sectors have become even more important.
thanks for continuing to shine a light
What happened to state tourism? I didn’t see it on the list?
Or is it included in other areas such as accommodations and food service, retail trade, and arts and entertainment, and recreation?
Depressed farm prices account for the move to eighth place, I would say. Also in an agricultural state like ours the vast majority of the other sectors depend upon agriculture for their livelihood, and that is not reflected in gdp alone. If there was some way to measure that impact on the total of the state economy I would bet agriculture would be number one.
Cory, there you go again. :-) You are comparing apples and oranges and calling the oranges bogus. The $25.6 billion in annual economic activity in the agriculture sector is different than the $3.3 billion in GDP attributed to agriculture. Economic activity is a gross number and GDP is a net number after deducting the cost of inputs.
To make this clear, let’s look at the 2017 corn and soybean crops in South Dakota. Roughly 700 million bushels of corn were grown in SD in 2017 at let’s say an average farm price of $3 a bushel. That’s $2.1 billion. SD also grew roughly 250 million bushels of soybeans at an average price of $9 a bushel equals $2.25 billion. Thus, the corn and soybean crops alone in SD in 2017 were worth over $4 billion. This does not include the value of all the wheat, sunflowers, rye, flax, cattle, hogs, poultry and lumber produced, nor all of the dollars generated by hunting, fishing that are also supposed to be included in your cited GDP numbers.
The GDP number you cite of approximately $3.3 billion obviously can’t be all of the ag, fishing, forestry, and hunting economic activity when the corn and soybean crops alone top this number.
The economic activity related to agriculture that the state cites is a broad view that almost certainly includes all of the value added activities like ethanol production, milk processing, and all the dollars that recirculate in the economy because of ag production related activities.
Alan, certainly, the depressed farm prices have something to do with it. I took five slices, at five-year intervals. On average, over each of those five-year intervals, the total GDP grew steadily, about 40 percentage points. Ag’s percentages over 1997 at each five-year interval were –36%, +45%, +148%, and +86%. Ag bounces all over, but it hasn’t kept up with the overall growth rate.
Another way to look at the data: calculate each sector as a percentage of total GDP. In 1997, ag was 9.30% of the state GDP. At the subsequent intervals, it was 4.25%, 7.36%, 10.24% (2012, high crop prices, right?), and 6.62%.
Interestingly, government was the largest sector in 1997 at 14.41%, bigger than agriculture and manufacturing. Government has slipped steadily to 11.69% of GDP, still the second-largest sector but surpassed by finance/insurance.
Darin, it’s not like I’m citing fake news. Tell me how the Bureau of Economic Analysis manages not to count corn and bean crop values in the ag category. Which category above would they be in?
Roger, tourism is split between arts/entertainment and accommodations/food service.
Just a guess – leased agricultural land income shows up under the real estate category, and as though those rents are paid from ag production, they would reduce the GDP attributed to ag.
GDP doesn’t measure economic impact, just final sales. Raw commodity sales don’t reflect how much of a component those commodities are during the value added production and distribution processes. A thousand dollars worth of corn headed for an ethanol plant that turns it into, say, two thousand dollars worth of ethanol, shows up in GDP as a thousand bucks for ag and two thousand bucks for manufacturing. Not sure how economists quantify the economic impact of that raw corn, but it’s definitely a factor in determining the value of corn production to the overall economy. Same goes, of course, for all ag commodities. I wouldn’t argue with the $25 billion figure of ag’s economic impact.
To me, what the biggest tragedy is of the $25 Billion is that so little, in comparison, goes to the producer’s bottom line. Some of the producers are once again operating in the red when they go to the bankers for operating funds.
I’ll ask this every time we have this discussion: to what extent can manufacturing, finance, and other sectors claim those bigger economic impact numbers? Does agriculture have a uniquely higher multiplier?
Here’s how USDA assesses economic impact on a national scale. Note that total ag sales are only about 1% of GDP, but overall contribution to GDP makes it responsible for 5.5% of GDP. That’s because so many industries rely on ag inputs for all or part of their existence. Don’t know if that 1 to 5 ratio applies in South Dakota. I’m surmising the net amount of ag’s contribution to GDP would be much higher because of our thin population and relatively low manufacturing base. https://www.ers.usda.gov/data-products/ag-and-food-statistics-charting-the-essentials/ag-and-food-sectors-and-the-economy/
Cory, you are not citing fake news. You are dismissing part of the real news and drawing false conclusions.
Both of the figures are probably reasonably correct. What I am saying and John T. says above is that GDP does not equal economic activity.
The ag GDP figures have to be net contributions despite the use of the word “gross.” It has to be a net number which takes into account the inputs that go into the production of agricultural goods. As I illustrated above, the gross value of corn and soybeans production alone in 2017 far exceeds the $3.3 billion that your citation to the BEA uses for the combined category of “Agriculture, forestry, fishing and hunting.” Thus, the costs of production for corn and soybeans (and all other agricultural products) must be reducing the gross value for GDP purposes of the Ag category.
“Economic activity” is a term that would involve all of the dollars flowing through the ag sector irrespective of profitability. Moreover, the economic activity attributed to ag by the SD Dept. of Ag also includes all of the dollars that flow through the economy down stream of ag, like ethanol and dairy processing, as well as sale barns, lockers, retail grocery stores, etc., etc.
The important point that you are missing is without the gross dollars of agricultural production, other industries that you attribute to other areas of our economy would not even exist or would be vastly smaller. We don’t need manufacturing of livestock gates and fencing if we don’t have livestock, for example. We don’t need as many diesel mechanics if we don’t have farms using diesel tractors. We don’t need as many construction workers if we aren’t building farm buildings, livestock confinement operations, milking parlors, etc., etc.
Maybe you should drive around SD and take an informal survey of what you see. I should think it would not be hard to understand that agriculture is an important part of the economy throughout SD, way above number 8.
Every industry in every state uses the same “I’m the best and I don’t get the rightful respect or exemptions from social critique!” example of how their business drives every other business. GDP figures are a very useful tool to gauge a state’s economy. e.g. In Colorado oil/gas tries to say they’re number one and cites the same criteria as Darin and John. In actuality, oil/gas is three behind tourism and aerospace. If one is to extrapolate the benefits of an industry then the detriments must also be included and weighed. Ag in SoDak is the major polluter which costs the state immensely. Same with oil/gas in CO.
SoDak’s banking, insurance, real estate rental and leasing, health care and social assistance are clean machines and don’t leave a wake of pollution.
Porter, I say Oats, it’s the future for farmers once again. Perfect for South Dakota’s troubled ag industry and espcially, milk production. “In late 2016, the Swedish company Oatly set up production in North America and began shopping its oat-derived “milk” to New York City’s latte cognoscenti. By the next autumn, oat milk had conquered the city’s “most esteemed coffee bars” at a “practically unheard of” rate, according to the coffee trade magazine Sprudge.
Chic cafés peddling a grainy Scandinavian-inspired formula may sound too twee for words. But the market for dairy alternatives is growing quickly in the United States, where negative perceptions of cow’s milk have created a thirst for substitutes made from coconut, peas, and hemp. Oat milk offers another benefit. If consumption approaches levels now enjoyed by industry leader almond milk, those urban hipsters may be the vanguard of a soil revolution.”
Organic oats! Bah zing! Easy to grow in South Dakota as well. Pretty drought resistant and need no chemicals that we like to saturate the ground with. NO CAFO’s to destroy the water. Good all around.
We grew a lot of oats. A little durum wheat, too. I’d not heard of oat milk, so thanks for the info. Dairy alternatives are a growing business, for sure.