Executive Summary:
Impact of Agriculture on Georgia's Economy

Georgia's 43,000 farmers generated approximately $7.4 billion in annual farm gate sales in both 1996 and 1997. Agriculture has a significant economic impact, especially in the more rural areas of the state. The largest source of farm income in the northern half of the state is commercial broilers. The southern half of the state is predominately row crop agriculture. The tax digest in predominately farming areas is near 20 percent of the total tax digest. One county in Southwest Georgia has agricultural properties constituting 70% of the total tax digest.

Crops: Crop acreage trended downward for much of the 1980's and early '90's reaching a low of just over 4 million acres in 1992 but has since improved and stabilized at 4.3 to 4.4 million acres. As a result of the 1996 "Freedom To Farm" Act acreage trends experienced in the past (as somewhat determined by government acreage/supply controls) may not apply to the future.

Profit margins in peanut production have been reduced by lower prices, declining yields, and increasing input costs. In general, Georgia farmers are at a competitive disadvantage to the Midwest in the production of corn and soybeans. Wheat acreage has declined over the past 10 years but Freedom to Farm should create greater opportunities for wheat double-cropping particularly where there is irrigation.

Georgia is now the second largest state in cotton acreage in the US and third in cotton production. Acreage expansion has also resulted in investments in cotton infrastructure. During the period 1992-95, approximately 20 new cotton gins were built in the state at an estimated investment of over $90 million. Weak and uncertain economic conditions in southeast Asia are a major concern as these are important markets for US cotton.

Tobacco is grown on less than 45,000 acres in 45 counties but ranks among the most valuable in terms of farm income and total economic impact. Tobacco constitutes more than 10% of all farm receipts in 12 of those 45 counties.

Vegetable income is growing and accounts for the majority of Georgia's horticultural income. Vegetable income at $378 million in 1996 ranked slightly behind peanuts $389 million. Georgia is third in the US in fresh vegetable acreage. Continued, but slower, growth is expected. Fruit crops, with the possible exception of blueberries, are not expected to change much in the next five years. Pecans are the number one horticulture crop in income, but have to make adjustment to stay competitive with western states and Mexico.

The Conservation Reserve Program (CRP) and increased timber prices in recent years has offered landowners an economic alternative on marginal cropland. However, land taken out of row-crop production and placed back into pines will not generate the cash-flow and economic impact to the local community as annual crop production would.

Livestock and poultry: Agricultural income from livestock and poultry represents more than 60% of all Georgia agricultural income and are "value added" in nature, converting forages or grains into meat and milk. Livestock production effects on rural economies are larger in magnitude than from most agricultural enterprises. Animals and animal products represented about 35% of the 1996 value of Georgia Agricultural export products.

The 26,000 beef cattle producers comprise the single largest group of commodity producers within the state. Production is spread relatively evenly throughout the state with production in every county of the state. Georgia hog production has declined by 50% from its high point in the 1980's in response to a highly unstable local hog market. The future of the state's pork production industry will be dependent on the development of processing facilities. Poultry production is Georgia's largest source of farm level income. Income from broiler production has increased by an annual average rate of about 10% over the past five years. While the majority of production is still located in north Georgia, most expansion has occurred in south Georgia. The Georgia dairy industry was in a growth phase from the mid 1980's through the mid 1990's reaching a peak of 1.56 billion pounds in 1994. However, in 1995 a combination of high feed prices and low milk prices resulted in a down turn in herd numbers, cow numbers and milk production. Future expansion in all sectors of livestock will occur in south Georgia.

Alternatives: Georgia farmers constantly look for profitable opportunities to replace less profitable enterprises. The "Green" industry of nursery, greenhouse and turf is growing. Forestry is more profitable, especially on marginal lands. Some growers are looking at specialty enterprise such as: alfalfa, aquaculture enterprises, canola, goats (milk and meat), kenaf, mushrooms, rabbits, and ratities.

Farmers and local community leaders have been working to allow farmers and their local communities to capture some of the profit potential that has not been available to them in the past though further processing or value-added enterprises.

Agribusiness: Changes in the agricultural production system, as well as changes in the food processing and marketing system, are changing the business environment for agricultural input supply firms. As commercial producers increase in size and sophistication, they are becoming more demanding in service and prices. Total output of the food and fiber sector in Georgia exceeds $51 billion, although the food and fiber component only represents sixteen percent of state's total output.

Exports: Georgia's exports of farm products contributed substantially to income and employment in the agribusiness sector. Georgia ranks 16th in total U.S. agricultural exports. In 1996 Georgia exported over $1.270 billion in food and agricultural products, up 10.5 percent from 1995 and 65 percent from 1994.


The Economic Impact of Agriculture in Georgia
Bill Givan

Georgia's 43,000 farmers generated approximately $7.4 billion in annual farm gate sales in both 1996 and 1997. This is a significant amount of the state's $216 billion gross product, and it's contribution differs in various sections of the state. But farm receipts are more than income to producers. They contribute income to farm input suppliers as well as the processors of raw commodities which supports many industries, and in turn, many households.

Data from the Extension Service are available for county farm income, but total county economic activity data are not available. The only comparison is personal income provided by the Bureau of Economic Analysis, which shows the state's net farm income (about 1/3 of gross farm income) to be 1.2% of the $168.9 billion total Georgia personal income in 1996. The four districts of the state's 12 economic development districts with farm income being the highest percentage of total personal income are: 1) Northeast, 2) Southwest, 3) South Central and 4) Central -East. Agriculture has a significant economic impact, especially in the more rural areas of the state.

Farm Income by Development Region

The largest source of farm income in (the six development regions of) the northern half of the state is commercial broilers (Table 1). Much of this area is poorly suited for row crop production, hence broilers contributes to both full-time and part-time operators. While future broiler consumption appears optimistic, broiler producers near larger towns will likely face environmental restrictions for continuing production - and most likely restrictions for expanding production. Other principle contributors of farm income in this part of the state are forestry, dairy cattle and beef cattle.

The southern half of the state (the other six development regions) is predominately a row crop area. Cotton, peanuts, vegetables, and tobacco are the principle crops. Forestry is a major player in two of these districts, and broilers are significant in one region.

The area from Atlanta, south to Macon, west to Alabama and back north to Polk county reports the least amount of agricultural income of all districts. And urban pressures in this area will likely restrict expanding farming activities. These pressures are economic as well as environmental. This does not imply that farm income will not be important in this area, but it is low when compared to more intensive farming areas.

Effects on Local Governments

The value of farmland and attachments are a significant source of county tax revenues. The districts previously mentioned as having the highest percentage of personal farm income in relation to total personal income also have relatively high farm tax digests.

Bureau of Economic Analysis data show the tax digest in predominately farming areas to be near 20% of the total tax digest (Table 2). These are regional weighted averages. Many counties have agricultural property constituting well over one-half the total tax digest. One county in Southwest Georgia has agricultural properties constituting 70% of the total tax digest.

At the other extreme, the primarily metropolitan regions have at least one county where farm properties are practically non-existent for tax purposes.

Future Economic Effects

Farming in and near the metropolitan areas of Georgia will likely increase more slowly than non-farm activity. While future income and tax values will likely be less significant than current contributions, farming will continue to be a viable activity to many individuals in specific localities. As previously mentioned, the economic demand for land for non-farm uses and environmental restrictions will be a deterrent to farm growth in these areas. Most farm operations in these localities are part-time, and will continue to be this type.

In commercial agriculture-South Georgia, row crops will continue to be a dominant economic force. But given the narrowing profit margins for many of the major row crops, plus the increasing costs for most farm capital items, these farmers are having to enlarge operations in order to generate sufficient volume to maintain total income levels. The total land farmed may be nearly unchanged, but the size of operations are getting larger. This creates a lower margin for error from unfavorable weather, insects or disease. These pressures are causing growers to move toward other enterprises -- notably broilers and vegetables, and to consider non-conventional enterprises. Many are installing irrigation systems as a deterrent to drought.

Last, we must not forget the likelihood that income from tobacco will be declining. Regardless of any tobacco legislation, there appears to be a punitive attitude toward the tobacco industry. Tobacco will continue to be used, but in lower quantities. And it is still a legal commodity. Further, peanut income may decline should farm programs be terminated after 2002. Total replacement of these two income sources is not likely. Any substantial growth in the agriculture sector will come from new enterprises and/or further processing of farm commodities.
Table 1. Total Estimated Farm Gate Income, Georgia, by Development Region
Development Region
Farm Gate Income ($000) Major Contributor(s) and percentages
One- (N'west)
643,462
Broilers(69%); Forestry(4%)
Two- (N'East)
1,137,958
Broilers(70%); Layers(4%)
Three- (Atl)
157,555
Broilers(35%); Nursery - G'house(22%)
Four- (W'Cent)
217,244
Broilers(44%); Forestry(18%); Beef(9%)
Five- (Athens)
773,493
Broilers(60%); Forestry(6%); Dairy(5%)
Six- (Macon)
240,474
Dairy(15%); Cotton(14%)
Seven- (Augusta)
357,296
Forestry(27%); Cotton(15%); Nursery(8%)
Eight- (Columbus)
550,031
Cotton(23%); Broilers(19%); Peanuts(15%)
Nine- (Dublin)
603,310
Cotton(22%); Forestry (17%); Tobacco(7%)
Ten- (S'West)
1,221,887
Cotton(27%); Peanuts(15%); Vegetables(13%)
Eleven- (S'Cent)
1,033,274
Cotton(16%); Forestry(13%); Vegetables(12%)
Twelve- (S'East)
490,270
Forestry(18%); Vegetables(15%); Cotton(10%)
Total 7,426,254
Source: 1996 Georgia Farm Income Survey, estimates by County Extension Agents.
 
 
 
 
Table 2. Total Agricultural Tax Digest as a Percent of Net Maintenance & Operations Digest, Georgia, by Development Region
Development Region
Tax Digest as Percent of Maintenance & Operation Digest
Range
One- (N'West)
12.4
3.1 - 26.8
Two- (N'East)
11.0
4.2 - 50.1
Three- (Atl)
0.8
.0 - 7.8
Four- (W'Cent)
12.3
6.5 - 35.5
Five- (Athens)
16.4
0.5 - 32.9
Six- (Macon)
6.3
1.2 - 31.2
Seven- (Augusta)
6.8
1.0 - 52.6
Eight- (Columbus)
16.4
4.1 - 60.7
Nine- (Dublin)
19.0
8.9 - 49.6
Ten- (S'West)
21.1
2.8 - 70.5
Eleven- (S'Cent)
19.8
5.9 - 59.3
Twelve- (S' East)
5.2
.0 - 35.7
Source: Bureau of Economic Analysis, U. S. Department of Commerce

Note: Tax digest is 40% of assessment value of property.


Trends and Economic Outlook For Georgia's Crop Production
W. Don Shurley, William O. Mizelle, Bill Givan, Stanley Fletcher, and George Shumaker

In1981, Georgia farmers planted approximately 7.2 million acres of row crops. After being fairly static for much of the 1960's and early '70's, acreage of the state's major cash row crops began to expand. Much of the increase in acres under tillage can be accounted for by the rapid expansion of soybean acreage during this time. High soybean prices coaxed land from timber and pastures into crop production.

Crop acreage has been impacted by crop prices, cost of production, weather, and government policies (supply controls through acreage set-aside and land retired for conservation use including replanting to pine trees). Crop acreage trended downward for much of the 1980's and early '90's reaching a low of just over 4 million acres in 1992 but has since stabilized at 4.3 to 4.4 million acres.

Outlook For Income and Acreage of Major Row Crops

Georgia's "major row crops" are considered to be corn, cotton, peanuts, soybeans, tobacco, and wheat. Although other crops are also important, these six farming enterprises contribute most significantly to farm income. The future of row crop agriculture in Georgia is dependent on several factors. The most influential include:

Table 3 presents a summary of trends in acreage planted to major row crops in the state. Beginning with the 1996 crop year, government program payments were decoupled from acreage decisions under the new farm bill (so-called "Freedom To Farm" legislation). Farmers now have complete flexibility in their planting decisions with no impact on payments or payment eligibility. This is an important distinction because acreage trends experienced in the past (as somewhat determined by government acreage/supply controls) may not apply to the future.

Peanuts

Georgia's peanut acreage is largely determined by the USDA allotted state quota. This quota (pounds) is a function of the estimated demand for edible peanut products and seed. The state's peanut economy rests on (1) the future of peanut consumption and (2) any future changes in the

Table 3. Summary Trend and Outlook For Georgia's Major Row Crop Enterprises
1997
Farm Income a/
Acreage Change
10 yrs (1989-98)
Trend
1989-98
Trend
1996-98
5-Year Outlook
Corn $159.5 -10,000 Stable Slight Increase Stable
Cotton  709.3 b/ +1,085,000 Large Increase Stable Stable
Peanuts c/ 360.8 -150,000 Decrease Slight Increase Increase
Soybeans 58.1 -780,000 Large Decrease Decrease Stable
Tobacco 152.9 +2,000 Stable Decrease Decrease
Wheat 50.7 -510,000 Decrease Stable Stable

  • a/ Million dollars
  • b/ Includes cottonseed
  • c/ Includes both quota and additionals

  • program that would further reduce price and/or allow quota pounds to move out-of-state. Government support price for peanuts was reduced 10% in the last peanut program and limited quantities of quota were allowed to be transferred (sold or leased) to farms in other counties within a state.

    Profit margins in peanut production have been reduced by lower prices, declining yields, and increasing input costs. Current peanut legislation ends after the 2002 crop but is still subject to yearly political attack and possible modification. There continues to be pressure to further lower or eliminate the quota price support level (currently $610 per ton).

    Approximately 40 to 50% of the peanut quota in Georgia is produced by farmers who lease the quota from non-producer owners. Producers could be relieved of some of the profit squeeze if lease rates were adjusted accordingly. Thus far, however, lease rates in the major peanut-producing counties have not declined in proportion to lower prices and profit margins. Growers realize that lease and purchase values are ultimately set by supply and demand forces. The profit squeeze combined with relaxed provisions on quota transfer, has already resulted in movement of quota from marginal counties and to more efficient farms.

    Peanut farmers have enjoyed a 3% increase in quota for each of the last 2 crop years (1997 and 1998). In 1996, US peanut consumption increased for the first time since 1991. Demand declined 10% from 1991-95 due largely to loss of government purchases for nutritional/feeding programs and dietary concerns. A rebound in government purchases and aggressive promotional efforts have spurred an increase in consumption of almost 7% since the 1995/96 crop marketing year.

    Peanut consumption is expected to continue to improve at a moderate rate of 1-3% annually. Assuming no changes in current program provisions, the state's peanut acreage is expected to increase as peanut consumption rebounds. This will be mitigated somewhat, however, by increased imports expected under provisions of the General Agreement on Tariffs and Trade (GATT). The level of imports will be taken into account when the poundage quota is set by USDA.

    The longer-term outlook (beyond 2002) is much more uncertain and is heavily dependent on further modification of the program.

    Corn, Soybeans, and Wheat

    Soybean acreage has declined precipitously as cotton acreage has increased. In general, Georgia farmers are at a competitive disadvantage to the Midwest in the production of corn and soybeans. Soybean acreage is not likely to improve significantly from current levels unless prices improve significantly relative to corn and cotton.

    Corn acreage, however, has been more stable over the past 10 years and has increased slightly since Freedom to Farm was enacted. It appears that corn has an important place on Georgia farms almost regardless of price. Because of it's rotational benefits and use of early season resources, the state probably has a baseline (established minimum) of 400-500,000 acres of corn under a wide range of economic scenarios. A corn-peanut-cotton rotation has become standard on many south Georgia farms.

    Wheat and other small grains (such as rye and oats) are grown as a winter crop to be harvested and followed with June-planted soybeans or cotton (known as double-cropping). Weather permitting a normal planting season, wheat acreage tends to follow farmers intentions for soybeans and cotton. Wheat acreage has declined over the past 10 years but Freedom to Farm should create greater opportunities for wheat double-cropping particularly where there is irrigation.

    Cotton

    Georgia is now the second largest state in cotton acreage in the US and third in total production. Acreage expansion is most attributable to successful eradication of the boll weevil. It is estimated that eradication has cut cotton production cost by 10-12 cents per pound. After declining to 120,000 acres planted in 1983, acreage peaked at 1.5 million acres in 1995. Expansion was also economically feasible due to higher yielding varieties, increased use of irrigation, and provisions of the 1990 farm bill that allowed new farmers to build base (production history) and eligibility for program benefits and to "flex" other crop bases to cotton. These program provisions were particularly vital to farmers in east Georgia where farms traditionally had a long production history and large bases of wheat and corn compared to other parts of the state.

    Acreage expansion has also resulted in investments in cotton infrastructure. During the period 1992-95, approximately 20 new cotton gins were built in the state at an estimated investment of over $90 million. Many previously existing gins invested in additional and faster ginning equipment. Three cottonseed oil mills have been built which has improved markets and prices for cottonseed and farmers have invested over $300 million in cotton harvesting and production equipment.

    Acreage has declined slightly from the 1.5 million acre high of 1995 due to improved prospects for corn and soybeans. Also, some growers have trimmed acreage after experiencing difficulties during the growing and/or harvesting season or because of the relatively high management and technical nature of cotton production and the need to bring acreage within management and time constraints of the farm business.

    Georgia's cotton acreage and future appear solid but there are concerns. Typically, approximately 40% of US cotton is exported. Reduction in income subsidies brought about by the 1996 farm bill increases price risk exposure and US cotton prices are more sensitive to world supply and demand conditions. Weak and uncertain economic conditions in southeast Asia are a major concern as these are important markets for US cotton.

    Georgia farmers planted 1.44 million acres of cotton in 1997 and 1.35 million in 1998. Acreage may vary by plus or minus 20% over the next 5 years depending on US and world supply/demand factors and prices to farmers, prices of other crops, and costs on production.

    Tobacco

    Tobacco is grown on less than 45,000 acres statewide but ranks among the most valuable in terms of farm income and total economic impact. Tobacco annually generates from $150 million to $200 million in farmer income in Georgia per year and ranks fourth in importance behind cotton, peanuts and vegetables. Tobacco is produced in 45 of the state's 159 counties and constitutes more than 10% of all farm receipts in 12 of those 45 counties.

    Tobacco, like peanuts, also contributes to the value of farmland and the tax base of many rural communities due to the rental value of the allotment which is tied to the land. Tobacco also contributes sales tax (through cigarette sales) and excise tax to the state's economy. It is estimated that tobacco contributes over $140 million in state sales tax and state excise taxes annually.

    Georgia's tobacco acreage is determined by the USDA set allotment. The allotment is based on estimated US and export consumption. The state's acreage has trended downward during the 1980's but has stabilized generally in the 40-45,000 acreage range since 1990. The outlook for tobacco acreage is uncertain. Recent efforts to dramatically increase taxes and the cost of cigarettes was defeated but is probably not dead. The long-tern outlook is likely to be stable to declining acreage and value.

    Vegetable, Fruit and Pecan Sectors

    Vegetables

    (Vegetables are important in regions 2, 8, 9, 10, 11, and 12.)

    Demand for vegetables has slowed some from the 1980's, but it is still relatively strong. Total U.S. per capita consumption of vegetables (including potatoes) reached 441 pounds (farm weight) in 1996, compared with 354 pounds in 1973. Excluding potatoes, fresh vegetables account for slightly over half the total vegetable consumption. Per capita utilization of fresh vegetables and melons was estimated to be 161 pounds in 1997 - up 4 percent above 1996. In 1986, fresh use was 126 pounds as compared to 110 pounds per person in 1976.

    The growth areas in the next few years will most likely be in the food service sector and exports. This includes such items as precut fresh vegetables which have been experiencing substantial gains. Also, ready-to-cook, especially microwavable vegetables, may be in a position to take off.

    As a share of the value of US production, exports will grow to 28% in 1998, up a little over 1997 but up significantly over the 20% recorded in 1990. During the near term, the U.S. will stay a net importer because of off-season and tropical products. However, growth in the global economy should drive U.S. fruit and vegetable exports to a level above what we bring in from other countries. In Georgia, vegetables account for the majority of the horticultural crops' income. Vegetable income ($378 million in 1996) ranks slightly behind peanuts ($389 million in 1996). Georgia is primarily a fresh market producing state. USDA data have Georgia third in acreage of fresh vegetables and fifth in income from fresh vegetables. But, about two-thirds of the crops and about half of our acres are not included in the USDA estimates. Extension agents estimated 1996 Georgia vegetable acreage at around 180,000 acres. Fresh market acreage(1) accounted for 93 percent of the acreage. Georgia is primarily a spring producing state. However, some product is produced every month. Production is shipped primarily to the eastern third of the U.S. and eastern Canada.

    All of agriculture, but especially, the fruit and vegetable sectors will be faced with political and consumer concerns regarding food safety and the environment. If current trends continue, fewer and less effective chemicals will be available for production and post-harvest use. Growers will have to adapt new cultural practices that will hold costs in line with competition while still producing products that meet market requirements as to quality and "safety." The most difficult area for many growers may be in the marketing or post-harvest requirements. With fewer and less effective chemicals, new technologies may be needed to maintain the shelf-life quality that buyers demand. Consumer and political education may be necessary to assure that post-harvest treatments (such as irradiation) are not harmful.

    Labor availability and costs may become more of an issue. Immigration, legal and illegal, is coming to the forefront of political discussion. From this will probably come more laws or at least rules and regulations affecting the availability and costs of farm labor. The Georgia Vegetable Growers Association is actively working with labor officials and politicians trying to develop rules and regulations that work for all concerned.

    With more international trade - both import and exports are increasing - competition will intensify. We must be in a position to reap some of the benefits from the increases in international trade. Product specifications for international trade are often different and in many cases more stringent than for the domestic market.

    The outlook for the next few years is for (1) slower, but continued, growth in production; (2) more adoptions of technologies that reduce costs per marketed unit; (3) coping with changes in rules and regulations relative to chemical and labor use; (4) and, increased competition from domestic and foreign sources.

    Georgia's vegetable expansion has occurred over the past few years because of Georgia's grower efforts to provide high quality, competitively produced vegetables. Georgia's cost of production, compared to other nearby states is competitive. Expanding output of the nationally marketed crops will be easier than for regional crops. We are now successfully growing the nationally marketed crops of beans, corn, cucumbers, eggplant, onions, and bell peppers.

    Our continued growth will depend on maintaining and improving our reputation for quality. We also have to continue to strive to reduce our production and marketing costs. Expansion will occur but it must be orderly and gradual. Data show that fresh vegetable consumption is increasing 2 1/2 - 3 percent annually. Georgia growers probably can profitably expand at about twice the national growth rate if we can take some markets from the less efficient competitors.

    Further gains in vegetable use into the next decade are likely, due to:

    Fruit

    Georgia's peach industry (Regions 6 and 11) is in a stage of consolidation. Acreage is remaining constant at about 21,000 acres. Market conditions are such that there is little room for expansion of production for the commercial market. Per capita consumption is declining as consumers substitute other soft fruit and melons. Recent per capita fresh consumption peaked in 1980-81 at seven pounds. Consumption in 1995-96 had dropped to five pounds. Georgia peach industry's value is around $30 million. The value of the US crop is $375-400 million.

    Georgia's apple industry (Region 1) has made the transition from shipping to local sales. Acreage dropped from 3,500 in 1989 to 2,400 in 1996. The north Georgia area is best for the traditional Delicious varieties. The newer varieties may have some potential for local sales outside north Georgia. Per capita consumption for fresh apples is showing a slight increase - rising from around 17 pounds in the mid seventies to around 19 pounds now. The value of the Georgia crop is $3.5 to 4 million.

    Blueberries (3,500 bearing acres in Region 9 and 11) still have growth potential for the shipping market as well as local market. Southern highbush adds potential for increased fresh market sales and higher prices due to earliness. Potential for further processing exists through the puffing(raisin) process. Rabbit-eye, the predominant type produced in Georgia, is preferred for puffing. Muscadines (Region 10) were planted for the potential 'pop' wine market that failed to materialize. Fresh sales are limited to southern markets. Potential for additional acreage for sales outside of Georgia is weak. All grapes acreage is 1,600 acres. Value is around $3.5 million. Strawberries have shown some potential for shipping. However, the competition from cheaper production areas and the cost of harvesting labor will limit the Georgia growth potential.

    Pecans

    Pecans (Regions 6-12) are number one in value of horticulture crops with an average annual value of $70 million (a high of $100 million in 1991). The industry is in a difficult adjustment process. Pressure from pesticide loss, aging trees, poorly accepted varieties, and highly variable yields contrasted to constantly increasing production costs presents a profitability problem. Pecans in the old peach area of middle Georgia show promise because of younger trees of more acceptable varieties. Growth of the industry in western states presents competition as do imports which are 1.5 time exports.

    Economic and Policy Forces In Row-Crop Outlook

    Much of Georgia's agricultural economy is subject to many exogenous political and economic forces. The tobacco and peanut programs continue to be political targets. Trade agreements and the increasing globalization of agriculture continue to press the need for fair trading rules and importance of cost efficiency and managing price volatility.

    Peanuts

    The future of the peanut program is highly uncertain but the over-riding realities of GATT and NAFTA signal that prices may have to move lower and producers, therefore, must become more efficient. US peanuts will have to compete in a global economy. Elimination of the peanut program could reduce farm income by $60 million assuming no change in quota production within the state. Should changes in the program result in a net export of quota out of the state, losses would be even greater. In addition, farmland values could decline by over $350 million effecting the tax base in many rural communities.

    Peanut producers are operating under a cost-price squeeze and reduced overall farm income due to flat price supports through 2002 and lower quota (a 3% increase the past 2 years but initially an 18% reduction in 1996). Assuming a 3% annual increase in costs and a modest 2% annual increase in quota, Table 4 summarizes how a 100-ton peanut quota enterprise compares in 1998-2002 versus 1995 (before the new peanut program).

    Under this scenario, peanut income and returns in 2002 would still be 34% below pre-1996 farm bill levels. The net return per pound of quota would continue to decline suggesting that quota lease rates, unless adjusted accordingly, will place additional pressure on income of tenant producers.

    Table 4. Comparison of 100-Ton Peanut Quota Enterprise *
     
    1995
    1998
    1999
    2000
    2001
    2002
    Quota (Tons) 
    100.0
    93.8
    95.7
    97.6
    99.6
    101.6
    Acres Planted
    66.7
    62.6
    63.8
    65.1
    66.4
    67.7
    Peanut Income
    $67,800
    $57,250
    $58,395
    $59,563
    $60,754
    $61,969
    Variable Costs
    30,253
    28,064
    28,905
    29,773
    30,666
    31,586
    Net Return
    37,548
    29,186
    29,489
    29,790
    30,088
    30,383
    Fixed Costs
    10,966
    11,382
    11,724
    12,076
    12,438
    12,811
    Net Return
    $26,581
    $17,804
    $17,765
    $17,714
    $17,650
    $17,572
    Net Return Per Lb
    13.3
    9.5
    9.3
    9.1
    8.9
    8.6
    * Simple average of irrigated and non-irrigated production and an average yield of 3,000 lbs per acre. Assumes no planting or production of additional peanuts. Fixed costs exclude land and quota.

    Bimodal Nature of Crop Production

    Peanuts and cotton comprised almost 1/5 of the state's total agriculture income in 1996. On many farms, these two crops account for over 3/4 of all farm receipts. With the expansion of cotton acreage, the state's agriculture has become increasingly dependent on fewer crops. In 1996, cotton and peanuts accounted for 16% of all farmland in the state and 43% of all cropland. The nature of supply and demand for these two crops suggests that the state's agriculture and economic base is very much at the whims of political forces and world markets-- particularly southeast Asia.

    Table 5 illustrates comparative income, costs, and returns of various crops. Additional peanuts (peanuts produced in excess of the farm's quota allotment) are produced for the export market and as an alternative to other crops such as corn, cotton, and soybeans. Production of additionals depends on yields and contract price opportunities. At the 1998 quota, Georgia peanut farmers would plant about 450,000 acres to meet their poundage quota with some allowance for yield uncertainty. Farmers planted 540,000 acres of peanuts in 1998.

    Table 5. Comparative Expected Income and Net Returns Per Acre From Alternative Crop Enterprises In South Georgia, 1998. *
    Non-Irrigated
    Irrigated
    Corn Cotton Soybean Peanuts Corn Cotton Soybean Peanuts
    Total Crop Income  195 474 180 437 390 730 300 612
    Direct Expenses 166 291 126 412 295 369 152 465
    Net Return 29 183 54 25 95 361 148 147
    Annual Overhead 80 105 65 0 157 190 140 70
    Net Return -51 78 -11 25 -62 171 8 77
    * Assuming typical or average yields and based on '98 crop price opportunities as of 6/22/98. Overhead excludes land and management. No overhead charged to additional peanuts except irrigation where applicable.

    The southeast US is the low-cost producer of cotton nationwide. Yet, many producers seem to be experiencing high costs and declining profit margins. Producers evaluate crop decisions on the basis of risk-returns given the management and other resources required and available. Peanut quota, for farms with quota, will be planted or leased out. A minimum acreage of corn is often planned based on the farms rotation patterns. Cotton plantings are often determined by the growers attitude (cotton requires high labor and management), price, and availability of credit. Because cotton production costs are relatively high, growers sometimes cannot obtain the credit needed to plant all the acreage desired. Remaining land will go to soybeans, extra corn, and additional peanuts depending on planting season weather and prices. Although the low-cost producers, Georgia cotton farmers must continue to strive to lower their cost per pound of lint.

    Corn and soybeans have been and can continue to be profitable crops for many farmers. Some growers will routinely achieve yields substantially better than those assumed in the above table. These crops also have the advantage of being relatively inexpensive to grow and are less management intensive than cotton and peanuts.

    Pine Trees

    Some cropland has been returned to pine trees in recent years. Land has been re-entered into the Conservation Reserve Program (CRP). Also, some landowners have taken land out of crop production has a result of the 1996 farm bill. Owners can receive government payments (Market Transition Payments) even if land is not cropped. This has taken cropland way from some tenants.

    Also, increased timber prices in recent years has offered landowners an economic alternative on marginal cropland. Landowners have opportunity to enter into long-term contracts with timber companies who are paying high rent to the landowner under the agreement.

    While this trend may be profitable for the landowner and beneficial to the environment, it should be some cause for concern in rural communities who have become dependent on crop agriculture. Land taken out of row-crop production and placed back into pines will not generate the cash-flow and economic impact to the local community as annual crop production would.

    Row Crop Income By Region

    Table 6 summarizes 1997 farm receipts for the 6 major row crops by Economic Development Region with the state.
     

    Table 6. 1997 Farmer Income From Row Crops, By Region *
    Corn Cotton Peanuts Soybeans Tobacco Wheat Total
    Region 1 $7,262 $3,674 $5,876 $14 $1,488 $18,314
    Region 2 1,782 330 892 57 795 3,856
    Region 3 142 375 312 195 1,024
    Region 4 1,486 1,142 673 1,766 5,067
    Region 5 1,104 2,153 1,807 2,337 7,401
    Region 6 1,571 22,513 $10,475 1,277 3,607 39,442
    Region 7 9,769 42,826 10,906 5,469 315 8,140 77,424
    Region 8 13,100 69,745 60,492 4,269 59 8,671 156,356
    Region 9 13,770 91,971 25,894 5,756 33,852 6,073 177,315
    Region 10 58,041 207,998 182,247 7,706 28,570 11,969 496,531
    Region 11 28,608 141,193 62,692 7,019 84,660 2,589 326,761
    Region 12 12,393 43,085 24,196 10,496 19,110 1,899 111,179
    State $149,028 $627,003 $376,901 $51,572 $166,637 $49,529 $1,420,670
    * All numbers are in thousands of dollars.


    Georgia's Livestock and Poultry Sector
    John McKissick and Bill Thomas

    Agricultural income from livestock and poultry represents more than 60% of all Georgia agricultural income according to the last census of agriculture. Livestock and poultry enterprises are "value added" in nature, converting forages or grains into meat and milk. Due to the value-added aspect of livestock production along with the nature of animal care, the effects of livestock production on rural economies is larger in magnitude than from most agricultural enterprises. In addition, meats have been one of the fastest growing sectors of all agricultural export commodities, increasing at an average annual rate of more than 10% during the past five years. Due to increasing world wide income levels and thus improved diets along with reductions in trade barriers, meat exports are expected to meet or exceed their past five years' growth over the next five years. This is important to Georgia since animal and animal products represented about 35% of the 1996 value of Georgia Agricultural export products.

    Environmental concerns stemming from concentrated animal feeding and animal/human conflicts are likely to be limiting factors on production both in the U.S. and Georgia over the next five years. The very low animal and human concentrations in the rural areas of districts 7-11 combined with the crop nutrient demands (some of which could be supplied by animal manures) in these areas make them among the best situated areas in the South and perhaps the U.S. to sustain increases in animal agriculture. Reasonable, scientific based environmental regulations based on Georgia's animal concentration will be critical if Georgia is to capitalize on its potential to increase rural income through growth in the animal agriculture sector.
     

    Beef

    The 26,000 beef cattle producers comprise the single largest group of commodity producers within the state. Production is spread relatively evenly throughout the state with production in every county of the state. However, the Northeast Georgia area (Districts 2 & 5) has the greatest concentration of production. Beef production is typically not the major source of income on individual Georgia farms, but as a commodity it represented the 5th largest single source of farm income within the state in 1997 ($352 million).

    Georgia beef cattle numbers declined from 1996 to 1998 by 5% in response to unprofitable prices. Beef cattle numbers will likely decline another 1-2% in 1999-2000 before expanding by 3% to 5% from 2000-2003. Beef cattle prices will continue to improve over the next five years as U.S. beef supplies are reduced although not by as much as the 60% price gain registered in 1997. As a result of more cattle in Georgia and higher prices, income may be up as much as 20% by 2003 over current levels. Production and income gains should be spread throughout the state in relation to current production.

    Pork

    Georgia hog production has declined by 50% from its high point in the 1980's in response to a highly unstable local hog market. As in the U.S. industry as a whole, producers have become larger in size and fewer in number. The lack of a major deep south packer/processor market is chiefly responsible for Georgia hog producers receiving about 7% lower prices than in other major U.S. markets. As a result of the packer/processing deficit in the southern U.S., a cooperative of producers from a 5-state area has formed to develop an integrated large scale pork processing operation in Georgia. The future of the state's pork production industry will be dependent on the development of the processing area. Given a stable local market environment and competitive national market prices, pork production in the state could at least double by the year 2003, returning to the levels of the early 1980's. Farm income would be 200 to 300% higher by the year 2003 than in 1997. If the market situation remains unstable and market hog prices uncompetitive, Georgia hog numbers as well as the number of producers will drift further as the state moves to an industry producing pigs to be shipped to Midwestern states for finishing closer to the slaughter/ processing markets and in areas with lower feed cost. In the latter case, even if swine breeding herd numbers stabilize or expand, farm income from production will likely fall 10 to 50% by the year 2003. The effects of either case will be confined to state service delivery regions 5,7,9,10,11,12.

    Poultry

    Poultry production is Georgia's largest source of farm level income. Income from broiler production has increased by an annual average rate of about 10% over the past five years. While the majority of production is still located in north Georgia, most expansion has occurred in south Georgia. The rate of increase in broiler income is not likely to keep pace over the next five years with that experienced in the past five. However, annual increases of 5 percent or more are expected with the greatest expansion occurring in regions 5,7,8,9,10,11 and 12.

    Dairy

    The Georgia dairy industry was in a growth phase from the mid 1980's through the mid 1990's reaching a peak of 1.56 billion pounds in 1994. However, in 1995 a combination of high feed prices and low milk prices resulted in a down turn in herd numbers, cow numbers and milk production.

    Many factors have led to continuing declines in milk production in the Southeast region. These factors include 1)the average age of dairy farmers, 2) other farming options, 3) low and variable milk prices, 4) high feed prices, 5) cost of renovation and expansion, 6) availability of farm labor, 7) high land prices and 8) uncertainty about future dairy policy.

    Recently, construction of new fluid milk processing plants has greatly expanded the processing capacity in Georgia. The three new plants in the Atlanta area owned by Kroger, Publix and Dean Foods require milk from about 75,000 cows to meet their daily fluid milk needs. These plants along with a projected growth of 100,000 people each year in Georgia guarantees an increasing future demand for Georgia produced milk.

    The population growth in the state is centered around Atlanta and is affecting the traditional dairy production areas. The current and future expansion of milk production is in south Georgia. Currently 43 percent of the production in the state is south of Macon. Production in south Georgia should increase significantly in both absolute and relative terms over the next few years.


    ALTERNATIVE FARM ENTERPRISES
    Bill Thomas, Forrest Stegelin and Bill Mizelle


    The Federal Agriculture Improvement and Reform Act of 1996 (FAIR Act) was a milestone in U.S. agricultureal policy. The FAIR Act, in effect through 2002, fundamentally redesigns income support and supply management programs for producers of wheat, corn, grain sorghum, barley, oats, rice, and upland cotton. The Act also alters the dairy, sugar, and peanut programs, reauthorizes the Conservation Reserve Program (CRP); reduces Export Enhancement Program (EEP) funding; and targets trade programs to markets with greatest potential for U.S. export gains. The current and future profitability of all of these crops, as well as tobacco which is currently under attack, is being impacted and many Georgia farmers are considering alternatives.

    Georgia farmers constantly look for profitable opportunities to replace less profitable enterprises. Over the past several years cotton prices were at the highest levels in several decades and Georgia farmers considered cotton as an alternative to soybeans, and other crops. In the past seven years cotton acreage increased from 265,000 to 1.3 million acres. This was over a 500 percent increase and currently ranks Georgia second in the nation in cotton acreage. Today farmers are looking for alternatives to cotton as the price has declined compared to prices in the early 1990's.

    As new enterprises are tried, all must go through the same steps. A potential enterprise is identified and production issues such as varieties, production standards, disease control and production costs are investigated. The next step is to develop a market. For many of the enterprises discussed below, the maximum market is only a niche market. That is the largest market to farmers is only very small. This may be a local market, a specialized market with only a small demand, or a narrow time window between lower cost suppliers.

    Many enterprises face a "Catch 22" situation. They can not develop a profitable market until they have a reliable supply. But producers can not afford to produce and process large volumes without an assured market. Many Georgia farmers have worked through this situation successfully and others are still working on solving significant problems.

    THE GREEN INDUSTRY

    Floriculture and Greenhouse Crops

    The 1990 per capita wholesale value of non-edible horticulture purchased in the U.S. was $150. Greenhouse enterprises that grow flowers and vegetables are found throughout Georgia, but concentrated in or near metropolitan centers where large markets exist. The size of firms range from 1,000 to nearly a million square feet. The greenhouse business is seasonal for some producers who use a greenhouse only as a seasonal profit center, but a significant number are in the greenhouse business full-time. Economies of scale have separated the industry into large, mainly wholesale producers and small, mainly retail producers. Over a hundred acres of greenhouses are operated as full-time businesses, with a return on equity of 5% to 20%. Greenhouse production offers high returns but is highly capital and labor intensive.

    The $54 million wholesale value of Georgia's floriculture crops in 1997 includes, in order of economic importance, bedding and garden plants ($36 million), potted flowering plants ($11 million), and foliage plants ($2 million). Also in the distribution chain are nearly 1,500 professional florists having gross sales exceeding $180 million. These florists purchase flowers (and hard goods) and add value through the design of flower arrangements and the extra services required for weddings, parties, funerals, and special occasions. Data to estimate the sales of flowers at farm stores, garden centers and traditional direct marketing outlets are not available, including the value of Georgia floriculture purchased from mass merchandisers.

    The market for floricultural crops is expanding rapidly. Per capita consumption doubled during the latter 1980s, but domestic consumption is still only about half of the consumption common in Europe and Asia. The Georgia greenhouse industry has existing capacity to expand floriculture production at rates approaching 10% annually for the next five years, which is significantly better than most traditional agricultural enterprises.

    The floriculture and greenhouse industries are capital intensive, and few Georgia farmers feel they can invest the dollars necessary for success. The lack of knowledge of the greenhouse and floricultural industries limits the expansion of this segment of the industry. Most farmers lack production knowledge and lack an understanding (and appreciation) of the consumer-oriented marketing systems for floricultural crops.

    The greenhouse industry is management intensive and risk laden. It faces a shortage of affordable trained labor, and must increase automation of production and distribution technologies and practices, becoming even more capital and management intensive.
     

    Nursery and Landscape

    Georgia's nursery and landscape industries contribute nearly a billion dollars to the state's economy annually. These industries include nursery crop production, landscape design, construction and installation, and landscape maintenance. The primary landscape production systems include propagation, container production, and field grown production.

    Georgia has the advantage of a longer growing season and lower labor rates than states to the north, so growers can be competitive in those markets. The demand for native plants and specimen landscape plant materials is strong, and is expected to remain so.

    The economic impact of this, the fastest gaining segment of the green industry, should continue to increase. However, the rate of increase will depend on housing starts and the rate of commercial construction plus the overall economic climate. Homeowner tastes and preferences for landscape materials will influence which plant materials are in demand.
     

    Turfgrass

    The 1996 Georgia Nursery, Greenhouse and Turf Survey reported there were over 12,000 acres used for producing sod/stolons. The farm gate value was $30.9 million ($34 million estimated, 1997), a 49% increase over 1991. After its sale, one acre of sod contributes at least an additional $660.00 per year for an indefinite period (average turf maintenance expense). A 1987 survey found that 75% of this industry was less than 11 years old and 49% was less than six years old.

    A related industry which is supported by the turf industry is the golf course industry. Annual expenditures of maintenance and the addition of an average of 11 new courses each year means that there is an opportunity for continues growth in the turfgrass industry.

    FORESTRY

    Due to the projected increase in the demand for forest products, there are several state and federal programs which make forestry investments economically attractive. As with any investment where taxes are involved, the degree of "profit" is influenced heavily by the owner's other incomes and tax bracket. Several observers predict that if there is a buy out of tobacco quotes, there will be a "CRP" style movement into timber production. Private timber companies are offering more than $80 per acre per year on a 20 year contract. This is better than most Georgia farmers can consistently make on most other enterprises. Predictions are that many dryland crop areas will switch to trees if producers have another poor year in 1998 due to low prices or poor weather.

    There are no minimum or maximum acreage requirements associated with a profitable forestry investment. Small acreages may be as profitable as large tracts if located within a reasonable distance from a mill; located in close proximity to other large tracts and harvested at the same time as the large tract; readily accessible during wet weather; supports high-quality products; and finally, the owner realizes the significance in treating it like a business which means marketing the products rather than just selling them.

    Most Georgians purchase a live Christmas tree from either retail lots specializing in imported trees or, with increasing frequency, purchase locally-grown trees from cut-your-own operations. The Georgia Christmas Tree Association has organized growers and stimulated the market for greater acceptance of locally-grown trees. Locally-grown trees are expanding into this lucrative market based upon their superior freshness, lower transportation costs and the development of a family tradition of selecting trees from local suppliers.

    A number of Georgia producers are developing value-added and niche markets. Some of the forestry products which have significant profit potential are: 1) aromatics, 2) charcoal, 3)chips, shavings and excelsior, sawdust, bark, and pine straw, 4) cones and seeds, 5) cooking wood, smoke wood, and flavorwood, 6) forest botanicals as flavorings, medicinals, and pharmaceuticals, 7) greenery, transplants, and floral products, 8) honey, 9)mushrooms, 10) nuts, 11) recreation and wildlife recreational enterprises, 12) syrup, 13) weaving and dyeing materials, 12) hobby wood, 13) turning wood, and 14) carving wood.

    SPECIALTY, EXOTIC OR NICHE ENTERPRISES

    Specialty, exotic or niche enterprises (will be referred to as specialty) are those that are considered different or unusual for the area. Marketing is often difficult because the marketing channels are not well organized. Also, producers have to be above average production managers as well as being exceptional businessmen and marketers, since these enterprises are often new, even to professional advisors. The producer thus has to be his own expert on production and marketing. One of the advantages of specialties is that the profit potential is often very high, but the market can become easily saturated. Some examples of specialty enterprise in Georgia include: alfalfa, aquaculture enterprises, canola, goats (milk and meat) kenaf, mushrooms, rabbits, and ratities.

    Some service enterprises that farmers or rural residents are trying include: agricultural tourism, lawn maintenance, hunting leases, and recycling.

    Value Added Products or Enterprises

    The value of raw materials in agricultural and wood-based products represents only a fraction of each dollar paid by the consumer for these products. In 1998 only 24 percent of the food dollar want to the farmer. Farmers and local communities leaders have been working to allow farmers and their local communities to capture some of the profit potential that has not been available to them in the past.

    One of the oldest ways of adding value is grower retailing as is done with some fruits and vegetables. Pick-Your-Own (PYO) small fruit operations have potential in most areas of the state. There needs to be a population base (3,000-10,000 per acre) within 15 miles (20 minutes) of the proposed operation. In most cases, PYO vegetables should be considered only as part of a multi-product operation. In selected instances, PYO vegetables only may be considered. A special type of producer is required to make this type of operation work. A person must like dealing with people and be willing to spend considerable resources promoting their products.

    Roadside marketing or produce stands have potential in high traffic, highly visible locations or when part of a fairly well known growing area, such as north Georgia apples, middle Georgia peaches and Vidalia onions. Highly populated areas can support produce markets as an alternative to the traditional grocery chains.

    The Vidalia onion is a model of what can happen when producers work together. Georgia sweet onion producers have been successful in differentiating their onion from other sweet onions. This has allowed them to develop value-added products ranging from the raw onion, to processed products such as onion rings and Vidalia onion dressing, to related products such as receipt books and onion peelers. One South Georgia group trying to follow the same model is Georgia Sweet Carrot growers. They are trying to develop a superior product and differentiate their product in order to receive a premium price.

    The pork processing plant that the pork producers are attempting to build is another example of growers trying to add value to their product. Beef producers are retaining ownership of animals sent to out-of-state feedlots. A number of producers have successfully increased their profit potential through such activities.

    See Appendix for Examples by county


    Critical Components of Georgia's Agribusinesses
    Forrest Stegelin

    The Agricultural Input Industries

    Changes in the agricultural production system, as well as changes occurring up the food system, shape a new business environment for agricultural input supply firms. It is the characteristics of this environment that input supply firms will need to monitor over time in deciding the strategies they will pursue long term.

    A more liberal trade environment and more flexibility in government programs will contribute to the risk and volatility of the business environment. The future promises rapid technological innovation, and firms investing in the technology will require more funds invested in the technology. Anticipating competitors' response will be challenging, as will predicting producer decisions. Adapting to the more frequent changes in the producers' plans will be more difficult. Input suppliers will face pressure for better market assessment and market development skills to respond to the emergence of specialty markets.

    Standards for acceptable levels of product and service performance will continue to rise, and competition will continue to ratchet up these standards. Quality and value will still be the watchwords of these agribusinesses, who must now focus on "total value" as the features and services perceived as not adding value will be dismissed by the customer.

    Production agriculture is becoming increasingly more fragmented. Commercial producers have increased in size and sophistication, and now focus on profitability and risk management. A "purchasing agent" attitude is exhibited where more information is demanded from suppliers and a willingness to out-source occurs. Part-time and small-scale farmers will demand services of all types: management, marketing, and custom production services. Suppliers will be sought who will help maximize the value of the farmer's limited time and financial resources, as producers work to maximize economic and financial profit.

    There will be the continued evolution of specialty or niche markets. Technological advancements will allow for more specialized products so producers can earn additional margins and processors attempt to drive down costs and boost profitability. A non-traditional role for input supply firms should occur, such as deal maker, facilitator and coordinator in organizing business linkages between producers and first-handlers and processors.

    Growth in specialty products is driving a more coordinated agriculture. While input firms may initiate these linkages, food firms may control more of the coordination because of their position to capture value from either reductions in production cost, or increases in output quality.

    More consolidation will occur among input supply firms. Manufacturers, distributors, and dealers will examine their own distribution systems to maximize efficiencies and serve producers better. Larger firms have an advantage of size while smaller firms will be more intimate with their customers (consumer friendly and service oriented) at the local level.

    The distribution channel will see changes as well, as manufacturers seek to secure distributors and retail outlets to reach customers directly. A "bundling" of inputs will encourage tighter linkages, providing "systems of solutions" for animal or crop agriculture alike.

    Social responsibility will become increasingly important, especially, environmental concerns. Industry responsiveness may be driven by regulatory requirements, or the fear of litigation, and respond to the demands of first handlers, food processors, and the consumers. In the long term, input firms will be forced to balance short-term profit objectives with longer-term societal goals.

    The Food and Fiber Processing, Distribution and Marketing Industries

    From a study by the Center for Agribusiness and Economic Development, total output of the food and fiber sector in Georgia exceeds $51 billion, although the food and fiber component only represents sixteen percent of state's total output. The food and fiber sector's output is comprised of food service (16%), food and fiber production (5%), food and fiber processing (64%), wholesale and retail (11%), and farm inputs and machinery (4%).

    The food and fiber employment surpasses 607,000 of the state's total employment of four million-plus workers, or fifteen percent of the total labor force. Within the food and fiber sector, food service accounts for 37%, food and fiber production 17%, food and fiber processing 29%, wholesale and retail 14%, and farm inputs and machinery 3%.

    Location and structure of an agribusiness industry or a food and fiber business is influenced by: cost of production and processing and distribution; potential for producer-processor alliances; business climate and incentives; environmental regulation; plant capacity (unused or expected growth); infrastructure (finance, raw materials, transportation, utilities); social and legal acceptance; and population and consumer density.

    Attraction-retention-expansion factors (what brought you to Georgia?, what is keeping you in Georgia?, and what encourages you to broaden operations in Georgia?) from a Center for Agribusiness and Economic Development study highlight the following issues:

    + availability and quality of water
    + cost of property and real estate
    + availability and cost of electricity
    + availability and cost of waste treatment and waste disposal facilities
    (availability and cost of air freight transportation services and accessibility to ports and ocean freight are of least concern)
    + annual costs to comply with environmental regulations
    + fairness of enforcement of environmental regulations
    + ease and speed of compliance with environmental regulations
    + existence of municipal sewers to handle waste water
    + water waste disposal costs
    (air pollution regulations are of minimal importance)
    + overall tax burden on business
    + community attitude toward business development
    + workers' compensation insurance
    + local property taxes
    + sales tax exemptions on manufacturing and processing equipment
    (of least importance are the availability of enterprise zones and incentives for venture capital formation)
    + quality, availability and cost of labor
    + quality and availability (cost and accessibility) of ground transportation
    + proximity to markets
    + environmental regulations and concerns
    + business climate in Georgia
    (state marketing assistance programs are not important)
    + availability of labor
    + labor productivity
    + non-unionization of labor
    + work ethics and attitude
    + prevailing wage rates
    (the presence of unions scores the lowest of labor concerns)
    + problems with government regulations (food safety, labeling, OSHA, EPA, ADA, FDA, IRS, new product introductions)
    + labor problems
    + marketing problems (forecasting, increasing sales, pricing, merchandising, advertising and promotion)
    + problems created by competitors
    + problems associated with economic climate (local, state, or regional economy)
    + attractive place to live
    + quality and cost of housing
    + cost of living
    + quality of medical care and facilities
    + quality of schools.
    To increase the likelihood of attracting and retaining agribusinesses and food and fiber businesses, suggestions include:
     

    Community and Rural Development (Champion Communities)

    Of USDA's 180 Champion Communities, seven are in Georgia, located in ARC regions 6, 8, 10, 11, and 12. What is a Champion Community? As a general rule, Champion Communities represent localities that have suffered from years of economic distress and impoverishment. Measurement methodologies include poverty rates, unemployment rates, and unskilled/poorly educated labor force numbers.

    Technical assistance and training needs of Champion Communities include:

    --community planning and development

    -- expanding economic opportunities -- facilitating and expanding citizen involvement Keys to Potential Economic and Human Capital Development

    The keys to potential economic and human capital development are the three E's: empowerment, education, and entrepreneurship. Empowerment is the willingness and ability of people to take charge more fully in the development process. Education is the provision of basic skills and the preparation of better job applicants. Entrepreneurship embodies the other two E's by developing value-added potentials through know-how, not guess-how.

    Fundamental Rural Economic Development Strategies

    Five fundamental rural economic development strategies have been identified: infrastructure development; agribusiness; industrial recruitment; natural resource extraction and processing; and tourism and recreation. Elements of each of the strategy suggest:
     

    Local Employment Growth in a Changing Economy

    New jobs can be generated either when a firm moves into the area from some other location, when an existing local enterprise expands its workforce, or when a new local business opens its doors. The demand for locally produced goods may be primarily driven by conditions beyond the boundaries of the local economy.

    Characteristics of a local economy that might affect employment growth: local educational levels, local industrial structures, local labor costs, population settlement patterns, and location. The rise of a service-driven economy supposedly is increasing skill demand, while skill supply is apparently declining due in part to the so-called education crisis. Today's workers expected to increasingly absorb and manipulate information, rather than physical objects. Specific skills include basic literacy, basic numeracy, problem-solving abilities, abilities to learn and to adapt, and the ability to work cooperatively.

    Summary and Implications

    All of these changes, critical components, and opportunities characterize the production agriculture, the agribusiness farm input sector, the food and fiber processing and marketing industries, and Georgia's rural community environment of the future, especially the next five years. And these concepts and concerns present tremendous challenges for Georgia agriculturalists and agribusiness leaders as agriculture moves beyond the year 2000. Farms and firms that understand these emerging issues, and address them proactively stand to be presented with exciting opportunities and enhanced odds of success in the future.
     


    Importance of International Trade To Georgia's Agriculture:
    Current Export Situation and Growth Potential
    Glenn C.W. Ames

    Georgia farmers historically have grown commodities for export. Traditional farm exports include cotton, tobacco, lumber and naval stores. In recent years peanuts and poultry meat have joined the list of Georgia's agricultural exports as important commodities in international sales. The economic activity associated with the production and marketing of export commodities contributes significantly to Georgia's farm and nonfarm economy. Georgia's exports of farm products contributed substantially to income and employment in the agribusiness sector.

    Georgia ranks 16th in total U.S. agricultural exports. In 1996 Georgia exported over $1.270 billion in food and agricultural products, up 10.5 percent from 1995 and 65 percent from 1994 (Figure 1). Georgia's top five agricultural exports include poultry products, cotton and linters, peanuts and products, tobacco, and live animals and meat (Figure 2). Poultry and cotton led all commodities in terms of export growth in the last two years. Poultry exports rose 72.3 percent between 1994 and 1996 while cotton exports jumped 209.6 percent in the same two years. On the average, production from more than one-third of all U.S. acres is bound for the export market but for specific commodities, exports as a share of production, account for more than 50 percent. Nationally, poultry exports account for about 17% of production; Georgia's poultry meat exports reached $367.3 million in 1996, up 28.6 percent over 1995 (Table 7); and poultry exports as a share of production have more than doubled since 1990.

    Georgia's agricultural exports increased at an average annual growth rate of nearly 6.6 percent from 1992 to 1996. Georgia's farm exports have followed national trends in the 1990's with the value of international sales booming since 1994. Georgia led the nation in exports of peanuts and ranked 2nd in poultry products, 3rd in tree nuts and 4th in unmanufactured tobacco in 1996. Georgia's share of peanut exports was valued at $121.9 million in 1996, or over 40 percent of the U.S. total (Table 8). Georgia accounted for $367.3 million or 13.5 percent of national poultry exports. The state also supplied $98.7 million, or 7 percent of total U.S. tobacco exports valued at $1,392.7 million in 1996.

    The factors behind this phenomenal boom in U.S. agricultural exports include strong income growth in world markets, trade liberalization, rapid urbanization in developing countries, and a shift toward ready to eat food products. Other factors include rising consumerism in world markets, comparative advantage in food production and processing, export promotion, and improvements in transportation and port facilities. On a regional basis, the North American market has grown significantly since 1994 with exports to Canada and Mexico up 25.5 and 15.3 percent, respectively. Exports to the Southeast Asian market have grown substantially also but could be threatened by currency devaluations and slower economic growth in the next few years. These changes in export demand also could threaten farm income and employment. As the Russian poultry embargo of 1996 indicated, a disruption in normal export marketing can have a disastrous impact on poultry meat prices and industry profits.

    Japan, European Union (EU), Canada and Mexico continue to be the U.S.'s, as well as Georgia's most important trading partners. Canada ranks 1st as a market for peanuts, peaches and vegetables and the 4th for poultry. Japan is the U.S.'s largest customer for tobacco and poultry, and the 7th largest market for peanuts. The European Union countries buy large quantities of tobacco and peanuts from Georgia's producers. Russia has emerged since 1991 as the largest export market for poultry meat, mainly dark meat, followed by Hong Kong, Mexico and Canada. China, Japan, Indonesia, Korea, and Taiwan are the leading cotton export markets. While these exports are important to the farm sector, they also generate benefits in other sectors of the economy.
     

    Exports, Farm Income and Employment

    International trade in agricultural commodities also affects other sectors of the economy. A 1998 USDA study estimated that each $1.00 received from agricultural exports stimulates another $1.32 of output in the U.S. economy, but intermediate or value-added exports generate $1.70, or 28.8 percent more in additional output. Moreover, over 859,000 full-time civilian jobs are related to U.S. agricultural crop exports. About 292,000 of these are farm related jobs but more than 567,000, or 60%, are employed in nonfarm activities related to the assembling, processing, distribution, and transportation of agricultural products for export. Georgia's $1,270 million in farm exports generated more than 18,000 in jobs statewide in 1996.

    The farm sector is the primary income beneficiary of agricultural exports; however, the income generated is widely dispersed. The year-to-year instability of agricultural exports and their impact on incomes in other sections of the economy is apparent. When, on the average, 10-20 percent or more of a particular commodity is exported, the economic well-being of that commodity group is closely tied to the foreign market.

    The Composition of Farm Exports

    The composition of U.S. agricultural exports indicates a shift toward intermediate and consumer-oriented foods and less emphasis on bulk exports. In 1975 bulk commodities accounted for 76% of U.S. agricultural exports but by 1997 only 42 percent. Intermediate commodities and consumer-oriented foods accounted for 22 and 36 percent, respectively, of total exports. The growth in intermediate and consumer-oriented foods has been steady in the last four years. Intermediate commodities, which contain value-added components from processing packaging and marketing grew 28.8 percent between 1994 and 1997, reaching $12.3 billion. Consumer-oriented food exports valued at $20.79 billion, led by poultry meat exports, increased 24.4 percent in the same period. Bulk exports also increased 34.4 percent in export value but fluctuated widely in year-to-year performance. Bulk exports will continue to be important for U.S. farm exports but for Georgia's agricultural sector, consumer-oriented commodities like poultry meat, eggs, cotton and associated products, edible oils, peanuts and products, and selected fruits and vegetables will provide growth opportunities.

    Georgia's Export Growth Potential

    Georgia has unique resources that will provide support for continued export growth. The state's transportation networks and ports at Atlanta, Savannah and Brunswick provide a very efficient export oriented infrastructure for the movement of goods and services into the international market. Georgia hosts international trade shows which attract thousands of visitors and participants who become potential agribusiness clients and export customers. Commodity groups, the Southern U.S. Trade Association, the Department of Agriculture, The Department of Industry and Trade, and a wide range of private firms promote the state's exports abroad. These resources are combined with promotion efforts at the national level to boost exports of Georgia's bulk, intermediate and consumer-oriented farm products. The income and employment impacts of farm exports on Economic Development Regions depends upon the location of farm production, processing, packaging, shipping and financing. Thus, all sectors of Georgia's economy have a stake in continued growth of its agricultural exports.
     
     
    Table 7. Value of Export Shares of Farm Commodities from Georgia, Fiscal Years, 1992-1996.
    Percent
    Commodity 1992 1993  1994  1995  1996 Change 95/96
    ------------------ Million Dollars ------------------- -- Percent --
    Wheat and Flour 16.5  29.5  18.3  42.5  36.7  -13.6 
    Cotton and Linters 87.8  70  105.1  270.4  325.4  20.3 
    Soybeans 48.4  51.8  24.6  44.3  30.4  -31.4 
    Cottonseed and Products 4.1  4.1  4.8  10.4  10.1  -2.9 
    Tobacco 83.4  101.4  85.7  78.2  98.7  26.2 
    Fruits 6.2  5.9  7.3  9.8  34.2 
    Tree Nuts 17.3  8.8  16.8  15.9  17.1  7.5 
    Vegetables 7.9  13.1  15.8  21.4  26.1  21.9 
    Poultry Products 134.9  147.9  213.2  285.5  367.3  28.7 
    Peanuts 143.4  111.4  89.6  153  121.9  -20.3 
    Other 145  162.4  190.2  220.8  227  2.8 
    Total 694.9  707.4  770  1149.7  1270.5  10.5 
    Source: U.S. Department of Agricultural, Economic Research Service. Foreign Agricultural Trade of the United States, Jan.-Mar., 1997.
     
     
     
     
    Table 8. Georgia's Share of Selected U.S. Agricultural Exports.
    Commodity 1980  1984  1996 
    -------------- Percent ------------
    Peanuts 43.5  47.8  40.1 
    Poultry 10.6  11.9  13.5 
    Tree Nuts 1.2 
    Tobacco 8.1  8.7 
    Cotton and Linters 1.4  10.7 
    Cottonseed and Products 0.6  1.7 
    Source: U.S. Department of Agricultural, Economic Research Service. Foreign Agricultural Trade of the United States, Jan.-Mar., 1997 and earlier issues.



     

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