As more people are one, two or three generations off the farm, fewer people can share fond memories of visiting or working on their grandparent’s farm. This migration away from farming unfortunately leads to a loss of recognition of how important agriculture is to society and its economic importance to the U.S.
The U.S. Department of Agriculture's Economic Research Service reports that agriculture and its related industries provide about 10% of U.S. employment. In 2014, 17.3 million full- and part-time jobs were related to agriculture, which is 9.3% of total U.S. employment. Direct on-farm employment provided over 2.6 million of these jobs.
More specific to the equipment manufacturer sector, anyone who has spent even more than an hour on a modern farm understands the central role farm equipment plays in facilitating our 21st century agricultural system. We at AEM understand the inextricable linkage between farming and farm equipment, and we work to advance our industry as a whole.
A new report, released earlier this year by AEM, goes a long way toward capturing the contributions of farm equipment manufacturers to our national economy, along with the many factors facing both farmers and manufacturers that shape our shared prosperity.
Farm equipment manufacturers are proud to support over 320,000 jobs across the U.S. as of the end of 2016. Those manufacturers comprise about 27 percent of the jobs across the equipment manufacturing industry, including construction and energy extraction equipment. Between the jobs directly created by manufacturers, the indirect jobs created through industry services and supply chains, and then the overall induced impact of manufacturers in their communities, the equipment manufacturing industry supported 1.3 million jobs across the U.S. last year, and another 149,000 jobs in Canada.
According to the new report, which was prepared by the independent global research firm IHS Markit, farm equipment manufacturers generated almost $102 billion in sales activity across the U.S. last year. After subtracting out costs of production, that means farm equipment manufacturers contributed almost $40 billion to the gross domestic product (GDP) of the United States last year as well. To put that number in context, the contributions of manufacturers of agricultural equipment last year was about the same as the entire state of Montana in 2015.
Even still, it comes as no secret that these past few years have been difficult for farmers, and by extension, manufacturers of farm equipment. Declining commodity prices and farm incomes have in turn diminished investment in new equipment, which has meant that the manufacturing side of the industry has retreated somewhat from recent highs in 2012.
The good news is that this report offers considerable information about the steps our industry must take to return to a cycle of stable growth. The report makes clear that resurgent commodity prices and improving farm incomes will be the most important factor in restoring demand for equipment, and the report has an optimistic forecast for farm incomes to finally begin improving again in the 2017-18 marketing year.
The report also makes clear how several other factors are additionally important for improving demand for farm equipment. Ethanol production continues to serve as a driver for demand in corn, which in turn supports investment in farm equipment. And as IHS Markit reports, some 30 percent of farm equipment manufactured in the U.S. is eventually intended for export. In other words: Trade matters not only for farmers who help to feed the world by shipping produce to every corner of the globe, but also for manufacturers of farm equipment who wish to support jobs here in the U.S. by selling their equipment overseas.
Remarkable change has transformed both farming and manufacturing in recent years, and further technological innovation is also poised to revolutionize agricultural production. Modern farm equipment – from planters to sprayers to harvesters and beyond – both ingest and produce remarkable amounts of information that have made agricultural production more efficient and sustainable than ever. As modern farms continue to connect with and communicate seamlessly with machinery, the rate of change on the modern farm will only accelerate.
Both farmers and manufacturers alike have spent generations learning to adapt to emerging technology and put those tools into use. And yet, farming and agriculture is almost as old as human history itself. And one thing that no report can fully capture is the pride that manufacturers of farm equipment take in supporting our farmers and ranchers in their important work of helping to feed the world. I know at AEM we are as excited as ever about continuing to work to advance that goal in the years and decades to come.
We encourage you to read the whole report yourself to learn about the impact of the industry. Click here to download and accessthe AEM Economic Research Report 2017
Reprinted with permission from the Association of Equipment Manufacturers (AEM). Appeared in the May 22, 2017 AEM Industry Advisor.