Ag has ripple effect on Oregon economy

February 26, 2008

Special Report 1080

CORVALLIS, Ore. – Oregon's agriculture industry is directly and indirectly linked to $25.8 billion in sales of goods and services, accounting for 10.6 percent of the statewide total, according to a report just released from Oregon State University.

The report, the first since 2000 to assess agriculture's economic ripple effect on the state, also found that Oregon's agriculture industry directly or indirectly supported 214,511 full- or part-time jobs, making up 10.1 percent of total positions.

"Agriculture makes a significant economic contribution to the state,” said OSU Extension economist Bruce Weber. “This impact reaches across the state and into sectors that are not directly connected to agriculture. What happens in agriculture has ripple effects throughout the economy."

Weber and Extension community economist Bruce Sorte wrote the February 2008 report, "Oregon Agriculture and the Economy."

The report followed the economic footprint of agricultural products as they traveled from producers to processors, wholesalers and retailers. It calculated how much money was made by those four sectors – plus the agricultural support services and transportation and warehousing sectors – by producing, processing, transporting, storing or selling the commodities.

Weber and Sorte said the report also took into account what those sectors and their employees did with that money. For example, if employees at a vineyard used their salaries to buy clothes at a department store, that was included as part of the overall $25.8 billion sales figure. That figure also included agriculture-related supplies that those sectors purchased, also known as indirect expenditures. So if a farmer bought a tractor, that purchase was included.

Excluding the multiplier effect caused by the purchases of supplies and the spending of income, total sales in the agriculture industry were $17.9 billion, the report said. Of that, $7.3 billion was income, such as employees' salaries. The estimates in the report were based on the most current data available at the time, which were most often 2005. The numbers are conservative, Sorte said, given recent increases in commodity prices.

"This study strongly validates that agriculture remains a significant economic engine in Oregon," said Katy Coba, director of the Oregon Department of Agriculture. "While other sectors of the economy may be struggling, agriculture is adding to our job base, our trade balance and our quality of life. This report supports the need for policies and resources to match the importance of the industry. We need to keep ag lands viable for producers and our state."

The report also looked at the number, size and types of farms and ranches. It found that in 2005 they occupied 17.1 million acres – or 28 percent of the land in Oregon. About half of that was used solely as pasture, and the average operation spanned 435 acres.

"While Oregon has seen a decline in the number of farms, like the rest of the nation, Oregon agricultural producers have been very creative, which has allowed them to slow, and in many cases, reverse that trend," Sorte said.

Producers from all parts of the industry, for example, are working to meet the needs of consumers who want to know more about how their foods are produced and also want to buy them closer to home, Sorte said. The producers are also using cooperatives to compete more effectively and are diversifying into energy production, like wind and biofuels. Also, adaptive farms – smaller operations that are not initially intended to provide a household's main income – are producing a variety of goods that are often sold locally. In some cases, these small farms eventually become the owner's primary source of income, he said.

Sorte said that market trends suggest that Oregon's agriculture industry will continue to be important to the state's economy, but he added that governments at all levels in Oregon can still help. They can do this, he said, by creating public policies that encourage cooperation among natural resource users, the purchasing of inputs locally, and the differentiation of products so they achieve a premium in the marketplace.

"Implementing this course of action in Oregon could further increase agriculture's economic impacts and provide critical job opportunities for people who are being left out of the new economy," Sorte said.

The report was funded by the Oregon Department of Agriculture and the OSU Extension Service. to view it, see: http://extension.oregonstate.edu/catalog/pdf/sr/sr1080.pdf

Author: Tiffany Woods
Source: Bruce Sorte