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Study shows agriculture, food economy growing

By Francie Todd
College of Agriculture and Natural Resources

Though much of Michigan’s economy has foundered for the past three years, there has been a bright spot: the state’s agri-food sector has continued to grow.

An analysis by economists with the MSU Product Center for Agriculture and Natural Resources shows that Michigan’s agri-food and agri-energy system had a total economic impact estimated to be $63.7 billion per year, based upon data primarily from 2006.

This represents an increase of approximately $3.6 billion above the $60.1 billion impact projected in an analysis of 2004 data released two years ago.

Peterson

Christopher Peterson, director of the product center and the paper’s lead author, said the report, “Update on the Economic Impact of Michigan’s Agri-Food and Agri-Energy System,” considers economic contributions from agriculture and related industries, including leather, nursery, turfgrass, ornamental plants and food processing, as well as economic contributions from ethanol production.

The study shows the agricultural economy expanding at a rate more than a full percentage point above the growth rate of the general economy (5.9 percent versus 4.8 percent) between 2004 and 2006.

“The original study, done two years ago, was based on data through 2004. It has had such widespread use by public and private decision-makers that we knew an update would be appreciated,” Peterson said. “Don Koivisto, director of the Michigan Department of Agriculture, asked us to put one together. We were able to update some significant data through 2006 and look at ethanol production numbers for 2007.”

All of the updated numbers are advisory estimates only. A full analysis only can be done every five years, as agricultural and economic census data are collected and released, Peterson said.

The study analyzed both the direct and indirect economic impacts of producing and processing agricultural and food products.
The direct economic impact of the agri-food system is estimated to be $38 billion, and the direct impact of the agri-energy system – primarily the production of ethanol – is estimated to be $378 million.

Ethanol production has become a far more significant economic activity in Michigan since 2004, with a dramatically increased economic impact due to the increase in the number of ethanol plants in the state from only one in 2004 to five today.
“This study underscores the importance of the agri-food business to Michigan’s economy,” Koivisto said. “Though the state’s economy has struggled, Michigan agriculture continues to see growth. I believe it will be a cornerstone to diversifying Michigan’s economy in the future.”

The earlier study showed a potential for considerable economic growth and employment within the agri-food system.
Agri-food is the state’s second largest production sector, behind the automotive industry. It employs nearly one-quarter (24 percent) of all employed Michiganians, with more than 725,000 of these workers directly employed in the industry. Others are employed indirectly in related sectors, such as transportation.

“The agri-food and agri-energy system is critical to the state’s economic health, contributing a total $63.7 billion annually,” Peterson said. “The system is growing at a robust rate of 5.9 percent for the two-year period from 2004 to 2006, led by farming (6.4 percent increase) and ethanol production (692 percent increase). Overall, the state’s economy grew only 4.8 percent for that same period.”

To download a copy of the report, look under the Market Reports tab at: www.productcenter.msu.edu.