Titus O. Awokuse

omas W. Ilvento

Zachary Johnston

December 2010

College of Agriculture& Natural ResourcesDEPARTMENT OF FOOD & RESOURCE ECONOMICS

The ImpacT of

agrIculTure

on Delaware’seconomy

acknowleDgemenTs

we especially thank Dean robin morgan of the college of

agriculture and natural resources at the university of

Delaware and mr. ed kee, Delaware state secretary of

agriculture, for their invaluable moral and financial support

for the project. we also appreciate the inputs from various

stakeholders across Delaware agriculture and support from

our colleagues in the Department of food and resource

economics at the university of Delaware.

abouT The auThors

Dr. Titus Awokuse is an associate professor and Director

of graduate studies in the Department of food and

resource economics at the university of Delaware. he

teaches undergraduate and graduate level courses in

international trade, agricultural and natural resource policy,

and applied statistics. Dr. awokuse conducts empirical

economic research on policy issues related to international

trade, agricultural and energy markets, economic growth

and development economics. he holds a ph.D. degree

in agricultural and applied economics from Texas a&m

university in 1998.

Dr. omas Ilvento is professor and chair of the food

and resource economics Department at the university of

Delaware. his primary appointment is as an extension

specialist in community and economic Development.

he has worked in such areas as public policy issues

(including land use and water quality); business retention

programs; community needs assessment; and collaborative

problem solving. Dr. Ilvento received his graduate degree

from the pennsylvania state university in 1985.

Zachary Johnston is m.s. student in the food and

resource economics Department at the university of

Delaware. he obtained his bachelors degree in food

and agribusiness management at the university of

Delaware in 2009.

eXeCUTIVe sUMMaRY viii

InTRoDUCTIon 1

Role of aGRICUlTURe In DelaWaRe 3

2.1 Implications of a More efficient agriculture 3

2.2 e Changing nature of agriculture in Delaware n 5

DaTa anD MeTHoDoloGY 9

3.1 Data sources and Issues 9

3.2 Methodology: overview of Input-output Modeling 12

eMPIRICal ResUlTs anD fInDInGs 14

4.1 overview 14

4.2 Direct Impact of Delaware agriculture 15

4.3 aggregate Impact of Delaware agriculture 16

4.4 economic Impact of agriculture by Categories 17

ConClUDInG ReMaRKs 19

RefeRenCes 21

Table

of

ConTenTs

execuTIve summary

agriculture is a very important economic sector nationally and itmakes a notable contribution to the overall economy ofDelaware. In recent decades, the agricultural industry hasexperienced dynamic changes in response to new develop-ments of innovative production technologies that have af-fected agricultural productivity and yield. furthermore,agriculture as a business has faced new challenges from per-sistent changes in consumers’ perception and demand forvarious attributes of agricultural and food products. In thechanging landscape of agriculture it is important to take acloser look at recent trends in the industry and develop an accurate accounting of the economic value and contribution of agriculture to the rest of the state economy.

e purpose of this project is two-folds. first, this studyprovides an overview of the business of agricultural produc-tion and provides a historical perspective of some of themajor trends in production, land use, and the structure ofagriculture. second, an economic impact analysis ofDelaware’s agricultural industry was conducted to better ac-count for inter-industry linkages and to determine howmuch value the agricultural industry adds tothe rest of Delaware’s economy. In addition toconventional production agriculture’s contribu-tion, we also examined the impact of otheragriculture-based subsectors such as food pro-cessing/manufacturing, forestry activities andagricultural related services. is analysis usedstate and national level economic data fromvarious industries. In order to analyze all theeconomic transactions generated by the im-pacted industries in Delaware, a quantitative

economic model (i.e., input-output model) was used. eanalysis generated a set of multipliers that represent a quan-titative measure of agriculture’s impact through employmentand expenditures throughout the economy. multipliers areoften called estimators of the “ripple” effect of an industry.

key fInDIngs:

In 2008, the total economic contribution of all cate-gories of agriculture in Delaware is $7.95 billion in in-dustry output. a portion of this amount goes toDelaware workers and agricultural producers in theform of wages, salaries, and profits. In addition toagricultural business expenditures, income by opera-tors and workers in the sector are also spent in pur-chasing product and services from other Delawarebusinesses. e agricultural industry contributes $2.5billion in value added activity, and $1.6 billion inlabor income. e total value is the sum of direct, in-direct, and induced effects. e estimated total num-ber of jobs supported by the agricultural industry isabout 30,000 jobs in 2008. e employment figuresinclude full-time, part-time, and seasonal employ-

e Impact of Agriculture on Delaware’s Economy

VIII

1

ment. e agricultural industry as a whole generates ajob multiplier of 1.8 and an output multiplier of 1.4.

In addition to the total industry impact results, sepa-rate results are also provided for various categories bysub-sectors, by counties and for seven key agriculturalindustry categories (poultry, dairy, fruits and vegeta-bles, corn, soybeans, wheat, greenhouse, nursery andhorticultural products). e majority of the economicvalue of the agricultural sector comes from the pro-duction and processing of poultry products. is sub-sector produces an industry output of $3.2 billion anda total of 13,437 jobs. ese output figures translateto a total effect of $646 million in labor income. issub-sector generates a job multiplier of 2 and an out-put multiplier of 1.34.

In summary, the impact of agriculture on Delaware’s

economy is much larger than the market sales of agri-cultural products for any given year. agricultural con-tributes to the manufacturing and service sectors ofthe economy and a more complete accounting of itsimpact is warranted.

1. InTroDucTIon

agriculture is an important business in Delaware. Itgenerates farm products that have a market value atthe farm level of over one billion dollars in 2007(2007 census of agriculture). It shapes the presentand future land use in the state, covering over 40 per-cent of the land area. figure 1 shows the land use inDelaware in 2007 based on the usDa’s natural re-source Inventory. e 510,023 acres in farms in 2007included cropland, pasture, and forested lands. farm-ing provides a living for over 2,500 farm families and it

employs many others as full-timeand part-time workers. overtime, the size of this industry issmaller when compared to othersectors of the economy, but it stillprovides a strong foundation thatis often undercounted and under-valued in Delaware’s economy.

e purpose of this report is toprovide a better accounting of thevalue of the agricultural sector inDelaware’s economy. we will ac-complish this objective by using

Figure 1. Land Use by Type in Delaware, 2007Source: 2007 Natural Resources Inventory, USDA, NRCS

Delaware Land Use, 2007

2

activity by perdue agribusiness would not be fullycounted as part of the economic contribution of agri-culture to Delaware’s economy. such an omissionwould be inappropriate because it underestimates thetotal contribution of agriculture to the state’s economy.

e second strategy employs the idea that contribu-tions of agricultural production and food processingresults in value-added to the economy, which includesmultipliers in the labor force and the rest of the econ-omy. specifically, we conducted a quantitative eco-nomic analysis of the contributions of the agriculturalindustry to Delaware’s overall economy. is eco-nomic analysis focused on both the direct and indirectcontributions of agriculture. is component is esti-mated from an economic modeling technique calledInput-output analysis.

a major contention of this report is that we need toconsider three main components of agriculture whenwe think of the contributions of agriculture to theeconomy of Delaware. e first is the market value ofproducts sold from the production on the farm. isis what has been traditionally reported from the cen-sus of agriculture over the years. e second compo-nent is the revenue from the processing and

two strategies that are accepted and commonly usedwithin the economic development field. e firststrategy is to expand the pie of how we define agricul-ture to include related industries of forestry (often as-sociated with farm land owners), agricultural suppliesand services, and the processing and manufacturing ofagricultural products which takes places withinDelaware. is approach simply recognizes that farm-ers are involved with and contribute to the economyin a wider range of activities in the production andmarketing of food products.

for example, perdue agribusiness recently announcedthey will move their corporate headquarters to seaford,Delaware along with an $8 million investment and110 to 120 new jobs. e Delaware office of eco-nomic Development is supplying a $1.74 milliongrant to help in the transition. e news Journal usedthe following headline to describe the event, Delawarejobs: perdue subsidiary hQ going to seaford: Del.welcomes 'great' agribusiness jobs (e news Journal,november 17, 2010). is significant activity contributes to the economy in real ways and is relatedto agriculture. however, if we follow the conventionalpractice and only focus on agricultural production andfarm gate market sales, this agriculture-based economic

3

manufacturing of agricultural and forestry products.is component essentially increases the size of the pieby recognizing that the business of agriculture also in-cludes the processing of the agricultural products intothe market, such as processed foods or timber. andthe third component is the inter-industry linkages ofthe value-added to the economy from the first twocomponents. e third component uses an economicmodeling analysis to estimate the economy-wide mul-tiplier effects of all agricultural-related expendituresand employment.

e remainder of this report is organized as follows.section 2 contains an overview of the role of agricul-ture in Delaware’s economy with emphasis on a dis-cussion of historical economic statistics and trends inagriculture. section 3 provides a brief discussion ofthe methodology and data used in the analysis of theinter-linkages between the agricultural industry and

other economic sectors within Delaware. section 4 pro-vides a discussion of results and implications forDelaware agriculture and section 5 concludes the report.

2. The role ofagrIculTure InDelaware’s economy

In recent decades, the structure of agriculture haschanged and is still changing. a major area of changeis the significantly higher level of production effi-ciency and increased diversity in the list of activitiesthat could be classified as agriculture. Due to the lim-ited scope of this study, we will only focus on the im-plications of the changes in agricultural productivityon farm structure and economics.

2.1 ImplIcaTIons of a moreeffIcIenT agrIculTure

e increased production efficiency in u.s. agricul-ture has far-reaching implications for farm size, pro-ductivity, income and employment in this sector. byitself, agricultural production will never be a large partof employment, income or gDp of Delaware’s econ-omy. e farm sector is very competitive and as a re-sult production efficiency is very high. as notedearlier, the number of producers has steadily declinedover the last century, as has the number of acres inproduction. yet, farmers are producing and market-ing more products than ever before. e tremendousgains in efficiency have resulted in fewer producersand farm laborers, working on larger farms, producingmore goods and services. ese gains in productionefficiency came through innovations, better technol-ogy and application of biological scientific discoveries,and increased productivity. as a result, in 2007 agri-

Delaware Employment By Key Industries, 1978 to2007

Components of Delaware’s GDP, 2007

Figure 2. Delaware Employment in Key Industries from 1978 to 2007 (Percent of Total)

Source: BEA, Regional Economic Accounts, BEA, Table CA25 Total Employment by Industry

4

culture as defined by what is produced on the farm,accounted for 0.8 percent of employment, 0.7 percentof income, and 0.8 percent of gDp (source: bea,regional and economic accounts).

figures 2 and 3 show the relative contributions of theagricultural sectors to employment and gDp forDelaware. over the 1978 to 2007 time period, em-

ployment in agricultural production showed a slightdecline as a percent of total employment, but overallremained relatively flat. e biggest changes over thistime period is that percent employed in manufactur-ing declined rapidly while services and fIre (finance,Insurance and real estate) showed large gains in thepercent of total employment. In terms of gDp, the market sales of agricultural

Figure 3. e Relative Components of Delaware’s GDP by Sector, 2007

Source: BEA, Regional Economic Accounts, BEA, Gross Domestic Product by State

5

must make a profit over most years or the producerwill be forced to liquidate. farmers deal with a con-siderable amount of risk, just like any other business.however, beyond interest rates, business cycles, traderestrictions, regulations, taxes, and the state of theeconomy, farmers also endure weather-related risk.agriculture is a unique sector within the u.s. econ-omy because of yield and total output uncertaintiesassociated with variations in temperature and recipita-tion levels. us, various government agriculturalsupport policies are designed to serve as income safetynets for agricultural producers.

e business of agriculture has been an importantcomponent of the history of the united states andserved as the foundation of the birth of the nation.e u.s. began as a predominantly agrarian nation,providing one of the few accesses to affordable land inthe world in the 17th and 18th centuries. In the dis-tant past, most rural people in america were farmers.It was not until somewhere between the 1910 and the1920 censuses that the u.s. first became predomi-nantly urban. and it was not until sometime in the1930s that the rural population mostly lived off or

products, accounts for less than one percent ofDelaware’s gDp in 2007 (see figure 3). finance andinsurance make up the largest contributions (34.5%)followed by services (23.6%), real estate (11.8%), andgovernment (8.6%). over time we would notice shiftsin the relative contributions – a decline in manufactur-ing, a gain in finance and insurance and the service sec-tors – but agriculture, as represented by market salesfrom the farm, would only be a relatively small amountof the state’s gDp. however, as we argued earlier andwill show later in this report, a fuller accounting ofagriculture’s contributions to the state will yield a largerand more justified contribution to the economy.

2.2 The changIng naTureof agrIculTure InDelaware

without question, agriculture is a major business.e family farm is often seen as a way of life and anhistorical marker of american past. nevertheless, it isa business that uses various inputs (e.g., land, capital,labor, etc.) to produce outputs for domestic and inter-national markets. To be economically sustainable, it

6

was not connected to the farm. over time agriculturebecame more productive and capital inputs were sub-stituted for labor, thereby freeing up large pools of sur-plus rural labor. ese labor pools moved into thecities and provided the workforce for an industrial ex-pansion. and while less labor was used on the farmand while other sectors of the economy grew in im-portance for both employment and income, the agri-cultural sector still remains a strong foundation of theeconomy.

what has been true for the nation is also true forDelaware. ere is a rich history of agriculture in thefirst state that has shaped the economy and land usethat continues today. e number of farms, the num-ber of families engaged in the business of agriculture,and the amount of land in agriculture have all de-creased. however, in its place is a more productive

Number of Farms and Acreage in DE

Figure 4. Number of Farms and Acres in Farms in Delaware, 1900 to 2007

Source: Statistical Abstract of the U.S. and the Census of Agriculture

and efficient agricultural system. us while over timethat story has changed, agriculture still remains an im-portant pillar of the state economy.

figure 4 shows the trend over the last 100 years in thenumber of Delaware farms and the acres in farms. atthe turn of the 19th century, Delaware had 9,687farms with 1,066,228 acres in farmland. at that timeover 85% of the land area in the state was consideredagricultural. e number of farms declined more rap-idly than the acres in farms over the last century. by1950, the number of farms declined to 7,448 (a loss of2239 farms or a 23% decline). at that point in time,about two-thirds of Delaware was in farmland. by theturn of the 21st century, Delaware had 2,546 farmscovering 510,023 acres (2007 census of agriculturefor Delaware). compared to the numbers in 1900,this represent a decline of 73.7% of farms and 52.1%

7

ticides, and agronomic production techniques all con-tributed to increased efficiency and productivity. partof the steeper decline in the number of farms relativeto the decline in acreage reflected the consolidation offarming in the state. as some producers left farming,others bought their land and increased their acreage.e average farm size in Delaware is nearly half of theu.s. average of 418 acres in 2007. e trend in aver-age farm size in Delaware is consistent with the pat-tern for the u.s.

If we look at a size breakdown of Delaware farms bythe amount of land it is evident that most of the landand production lies with a small number of very largefarm operations. figure 6 shows the breakdown of thenumber of farms by six size categories. e figureshows the distribution by the percent number of farmsand the percentage of acres and the contrast betweenthe two indicates an important point of modern agri-culture. while there were 2,546 farms counted in2007, the majority of them are less than 50 acres insize. only 5.7 percent of all farms are over 1,000 acres

in farmland. by 2007, agriculture accounted for40.8% of all land in Delaware, still a considerable per-centage and the dominant form of land use in thestate. e national pattern for the u.s. as a wholewas very similar.

while the number of farms and the number of acresin Delaware agriculture were declining, the averagefarm size increased steadily since the 1940s (see figure5). In 1900 the average farm size in Delaware was110 acres and it remained relatively flat until the1940s. however, following wwII, farm size began toincrease rapidly. by 1960, the average farm size wasnearly 153 acres, and in 1982 it was 196 acres. farmsize in Delaware peaked at 226 acres and has since de-clined slightly (possibly due to changes in the defini-tion of a farm which allowed horse farms to becounted in 2007). e increase in farm size reflectedboth technological and biological innovations withinagriculture that allowed a single operator to be moreproductive and maintain a larger operation. Innova-tions in farm equipment, the use of fertilizers and pes-

Figure 5. Average Farm Size in Delaware, 1900 to 2007

Source: Statistical Abstract of the U.S. and the Census of Agriculture

Average Farm Size in DE

8

Figure 6. Percent Farms and Acres by Farm Size Category, 2007 Source: 2007 Census of Agriculture

Percent Number of Farms and Acres By Farm Size, 2007

9

products (2.0%).

• It is important to note that while $837 million of market value is poultry products, the bulk of this revenue went to the integrator company because of the contract nature of poultry production.

• e majority of the farms (54.0%), acreage 52.8%), and market value (78.4%) are located in sussex county in the southern part of Delaware.

• nearly 60 percent of Delaware farmers indicatedtheir principle occupation is farming.

• e average age of farmers in Delaware is 55.4 years, a continuing trend of aging of agricultural producers in the state.

3. DaTa anDmeThoDology

3.1 DaTa sources anD Is-sues

Data for this report comes from three main sources.e first is from the regional economic accounts(formally known as the regional economic Informa-tion system -reIs) of the bureau of economic analy-

in size, and only 1.8 percent are above 2000 acres. yetmost of the acreage in farmland in Delaware belongsto farm operations that are over 1,000 acres in size.ese large farms are responsible for most of the pro-duction and market value of products in the state.

e following is a summary of statistics on agricultural production in Delaware from the 2007census of agriculture.

• e number of farms in Delaware in 2007 was 2,546 which covers 510,253 acres, or 41 percentof all state land.

• e average farm size in Delaware is 200 acres. e median size is considerably lower at 31 acres. e median is the middle value, so this means that the majority of farms are small farms.

• only 9.6 percent of farms are 500 acres or more.

• e total market value of agricultural products sold at the farm in Delaware was $1,083,035,000 in 2007 (rounded to $1.1 billion).

• e overwhelming majority of the market sales was poultry (77.3%) followed by corn (6.3%), soybeans (2.9%) and milk and other dairy

10

sis (bea). is data are estimates of income and em-ployment based on models using data from adminis-trative records from the bureau of census, the usDa,Department of labor, the social security administra-tion, the Irs, and many other federal agencies. a sec-ond source of data is from the census of agricultureadministrated first by the bureau of census and laterby the Department of agriculture. finally, a thirdmajor source of data is from records and accounts de-veloped specifically by the minnesota Implan eco-nomic modeling system.

whenever we deal with economic data we have to recog-nize that definitions for key variables may change overtime. is is especially true for agricultural data. accord-ing to the usDa census of agriculture, the definition of afarm is the following.

The census definition of a farm is any place from which

$1,000 or more of agricultural products were produced and

sold, or normally would have been sold, during the census

year. e definition has changed nine times since it was es-

tablished in 1850. e current definition was first used for

the 1974 Census of Agriculture and has been used in each

subsequent agriculture census. is definition is consistent

with the definition used for current USDA surveys. Source: United States Summary and State Data, Volume 1,

Geographic Area Series, Part 51 AC-07-A-51.

most of the data presented here were from the 1978to 2007 censuses of agriculture where the definitionof a farm has remained fairly consistent, althoughthere have been a few changes in the 2002 census ofagriculture. we used the same dates for data as thebureau of economic analysis (bea). an importantchange took place in the bea regional economic ac-counts in 2001 when the standard Industrial classifi-cation system (sIc) changed to the north americanIndustry classification system (naIcs).

Two key points about market receipts and incomefrom agriculture are important to note. e first isthat the nature of agricultural production is that thereis tremendous volatility from year to year due toweather and price fluctuations. farmers have sometools (e.g., futures and options market) to managevolatility, but it is never fully tamed. figure 7 showsthe volatility of farm marketing receipts from 1969 to2007. e jagged up and down pattern reflects thevolatility of the market.

e second point about agriculture is that as an indus-

Figure 7. e Volatility of AnnualDelaware Farm Marketing Receipts,1985 to 2007

Source: BEA, Regional and Economic Accounts,CA45 - Farm income and expenses

Volatility of Delaware Farm Marketing Receipts, 1985 to 2007

11

try, farmers incur a large amount of expenses for laborand other inputs to generate the market value of salesin a given year. figure 8 shows a rough “balancesheet” for agricultural sales and expenses in Delawarefor the years 1978 to 2007. is figures show thatthe net income to farmers and farm labor cost is rela-tively small compared to the volume of sales and ex-penses. In fact, without other income sources in someyears the income for proprietors and farm labor wouldbe considerably lower.

another important source of income for farmers is

government payments, although this amount is lessthan some might think for Delaware farmers. overthe time period from 1978 to 2007 the percentagefrom government payments was as low as 1.1% in1982 to a high of 13.7% in 2002. some of the variationin payments reflects special programs enacted within a spe-cific time period. e average percentage across the timeperiod was 7.1%.

3.2 meThoDology:

Figure 8. A Rough Balance Sheet for Delaware Agriculture, 1978 to 2007Source: BEA, Regional and Economic Accounts, CA45 - Farm income and expenses

Balance Sheet For Delaware Agriculture, 1978 to 2007

12

overvIew ofInpuT-ouTpuT moDelIng

e quantitative analyses were accomplished throughthe use of the Input-output analysis modelingframework, which is a method of quantifying the re-lationships between sectors of an economy. e eco-nomic impact analysis component of the study showsthe complex interconnections between agricultureand other industries in the state of Delaware and pro-vides quantitative estimates of direct, indirect and in-duced effects.

economic impact analysis involves the developmentof a detailed accounting of inter-industry activitiesand linkages. is economic analytical framework iscommonly described as input-output analysis. wass-ily leontief, a nobel prize winner in economics, de-veloped this method of analysis. Input-outputanalysis uses a mathematical modeling approach tomodel the transactions between various industries inthe economy. e input-output model requires thecollection of economic data for a specific geographicregion (county, state, or nation). e main emphasisis on the economic activity of a group of industriesthat both produce goods (output) and consumegoods from other industries (input) in the process ofproducing the specific industry’s output.

e economic impact analysis of Delaware’s agricul-tural sector was done to account for inter-industryactivities and determine how much value agricultureadds to the rest of the state economy. is analysisuses state level data and national data for various in-dustries within the economy. e model estimates an

input-output table, which shows all the economictransactions generated by impacted industries in thestate of Delaware. e analysis builds a set of out-puts, which identifies the purchase and sale transac-tions between industries within a state system andwith neighboring regions (imports and exports).e analysis generates a set of multipliers which rep-resent a quantitative measure of the extent that achange in employment or expenditures is expected togenerate in additional effects throughout the econ-omy. multipliers translate the consequences ofchange taking into account the complicated linkagesin the economy. for example, a state employmentmultiplier can be estimated which relates a change inagricultural sector employment to the resulting totalemployment change in the state. In input-outputanalysis, there are many different multipliers that canbe estimated and reported. e most appropriatemultipliers are those that do not double-count oroverestimate the impacts of changes in employmentor expenditures in one industry relative to others.most studies report the direct, indirect, and induced

multiplier effects of a particular industry on the over-all economy’s output, income, and employment lev-els. e direct effect measures the direct contributionof agricultural industry expenditures to Delaware’seconomy. e indirect effect measures the effect ofagricultural industry expenditures on non-agriculturalindustries that supply inputs and services used by theagricultural industry. finally, the induced effectmeasures the impact of expenditures by householdsthat receive income from the agricultural industry –in other words, the effect of household spending as aresult of income from agriculture.

e input-output analysis and corresponding multi-pliers were derived using the nationally accepted soft-ware called Implan (Impact analysis planning).e Implan model was originally developed at theuniversity of minnesota for the u.s. forest service.Tables 1-7 provide detailed information on the eco-nomic impact analysis results and estimates of variousmultipliers.

3.3 DefInIng economIcmulTIplIers

e multipliers are often described as estimators ofthe “ripple” effect of an industry’s economic activitieson the other impacted industries in the economy.e Implan manual recommends the use of theType sam multiplier and it is obtained as follows:

Type SAM multiplier = (direct effect + indirect effect+ induced effect) / direct effect.

additional definitions of the terms used in the resulttables are given below:

Industry Output Multipliers represent the total dol-lar value of output generated in the economy by a $1change in final demand for the products of a particu-lar sector.

Value Added Multipliers represent the total effect ofa $1 change in output on employee compensation,plus proprietary income plus other property incomeplus indirect business tax. is is an alternative in-come multiplier that accounts for other incomes be-yond agricultural labor income.

Labor Income Multipliers represent the total changein statewide household labor income due to a $1change in the labor expenditure of a given sector inresponse to change in demand for the sector.

Employment Multipliers measure the total employ-ment change in the state resulting from a change inemployment of a given sector as a result of a changein final demand.

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14

Table 1. Direct Effects of Delaware Agriculture by Industry Components, 2008.

4. empIrIcal resulTs

4.1 overvIew

e objective of this section of the study is to esti-mate the direct, indirect, induced and total impact ofthe agricultural sector on the economy of in 2008.In order to accurately capture the economic impor-tance of this industry, it is necessary to first discussthe components and linkages that define an inte-grated economic sector.

In Delaware, the agricultural industry has a far-reach-ing impact on other industries in the state economyin terms of expenditures on various materials and in-

puts used in the production of animals and crops(e.g., labor, energy, etc.). non-agricultural industriesbenefiting from agricultural production and businessexpenditures include real estate, vehicle and equip-ment sales, services, wholesale, retail, manufacturing,and other related industries. Delaware’s agriculturalproducers support their business activities with landpurchases, capital investments, and equipment pur-chases and they utilize a variety of other industry sup-port goods and services, many of which helpstimulate the economic well-being of other businessesin the state of Delaware.

Table 2. Total, Direct, Indirect and Induced Impact of Delaware Agriculture, 2008.

15

4.2 DIrecT ImpacT ofDelaware agrIculTure

Table 1 contains data on direct effects of economicactivities in agriculture in the state. ese data hasnot been subjected to any transformations or model-ing. rather, they are the reported raw data from na-tional data reporting agencies (e.g., bea, usDa)summarizing the base value of agricultural economicactivities in the state. In 2008, Delaware agriculture

accounted for a total of $5.8 billion of output, over17,000 jobs and over $ 1.3 billion in value added.ese aggregate amounts were further disaggregatedby the three main sectors (agriculture, forestry, andagriculture-related services (e.g., crop dusting andditch digging); by agricultural activities (productionand processing), and by sub-sectors within agricul-ture (animal and crops). for example, the total directeffect of agriculture is $4.993 billion of which themajority are derived from agricultural and food pro-

Table 3. Economic Impact of Delaware Agriculture by Counties.

16

cessing activities ($3.796 billion). e most com-monly cited number for the impact of agriculture isthe $1.19 billion derived from production agricultureonly. as noted before, the value for production agri-culture is only a part of the big picture. as shownfrom this table, production agriculture only repre-sents about 20 percent of the total direct effect ofagricultural activities in the state of Delaware. In ad-dition to the direct effect values provided above, wealso need to account for the impact contributed byindirect and induced effects, which are a smaller frac-tion of the aggregate contribution of agriculture.

4.3 aggregaTe ImpacT ofDelaware agrIculTure

the total effect broken down into direct, indirect, andinduced contributions of Delaware’s agricultural in-

dustry to the state economy. as shown in Table 2, theaggregate economic contribution of all categories ofthe agricultural industry is $7.95 billion in total in-dustry output. e total value of $7.95 billion in out-put is the sum of direct, indirect, and induced effects.In addition to agricultural business expenditures,there are also induced effects where income by opera-tors and workers in the sector are also used in pur-chasing products and services from other Delawarebusinesses. e industry contributes $2.5 billion invalue added activity, and $1.6 billion in labor income.e estimated total number of jobs supported by theagricultural industry is almost 30,000 jobs in 2008.e employment figures include full-time, part-time,and seasonal employment. e agricultural industryas a whole generates an employment multiplier of 1.8and an output multiplier of 1.4.

Table 4. Economic Impact of Delaware’s Poultry Industry.

17

4.4 economIc ImpacT ofagrIculTure by caTegorIes

In addition to the total industry impact results in Table2, separate results are also provided by industry compo-nents. Table 3 contains a breakdown of the economicimpact of agriculture by the three Delaware counties.sussex county is the largest agricultural region of thestate in terms of economic value and contribution of tothe economy. sussex county generates a total industryoutput of $3.78 billion and a total of 15,378 jobs.ese output figures translate to a total effect of $711million in labor income. agriculture in this countyalso generates output multipliers of 1.3 and an employ-ment multiplier of 1.6. In addition, agriculture inkent accounts for a total industry output in theamount of $2.64 billion and a total of 8,502 jobs. In

contrast to the other counties, new castle agriculturecontribute $1.2 billion in total industry output toDelaware’s economy and 4,448 jobs.

furthermore, Tables 4-7 presents a summary of eco-nomic impact estimates for seven key agricultural in-dustry categories (poultry, dairy, fruits and vegetables,corn, soybeans, wheat, greenhouse, nursery and horti-cultural products). Table 4 contains the economic im-pact estimates for the poultry sector in Delaware. eresults indicate that poultry is the largest agriculturalindustry in Delaware. poultry production and pro-cessing activities accounts for over $3.2 billion dollarsin industry output, 13,437 jobs, and $911.6 millionin value added. e economic impact of the fruitsand vegetables industry is provided in Table 5. eresults show that fruits and vegetables production and

Table 6. Economic Impact of Delaware’s Dairy Industry.

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Table 5. Economic Impact of Delaware's Fruits and Vegetables Industry.

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lion and a total of 492 jobs. ese output figurestranslate to a total effect of $19.8 million and $15.3million in labor income for corn and soybeans, respec-tively. Due to the nature of the sector and data limi-tations on processing activities, only productionestimates are reported.

5. concluDIng remarks

is study provides an overview and analysis of theeconomic impact of agriculture on the Delaware stateeconomy. while some previous studies have exam-ined the impact of specific sectors or commodities(e.g., equine and poultry sectors), this is the first study

Table 7. Economic Impact of Delaware Crops and Horticultural Products.

processing activities accounts for about $179 milliondollars in industry output, 754 jobs, and $67.5 mil-lion in value added activities. furthermore, Table 6shows the economic contribution of the dairy indus-try, which produces $73.3 million in industry outputand provides 260 jobs.

In addition, the breakout of the economic impact re-sults for four other agricultural sectors (corn, soy-beans, wheat, greenhouse, nursery and horticulturalproducts) are provided in Table 7. for example, cornproduction activities generate a total industry outputof $113.6 million and a total of 858 jobs while soy-beans produce a total industry output of $77.3 mil-

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in recent decades that engaged in a comprehensiveand thorough investigation of the role and contribu-tion of agriculture as a whole in Delaware. is proj-ect is particularly timely because of the recentdynamic changes in the structure and performance ofthe agricultural industry in Delaware and nationally.

e empirical results indicate that the agricultural in-dustry makes very important contribution to the over-all economy of Delaware. specifically, the totaleconomic contribution of all categories of agriculturein Delaware is $7.95 billion in industry output in2008. a portion of this amount goes to Delawareworkers and agricultural producers in the form ofwages, salaries, and profits. In addition to agriculturalbusiness expenditures, income by operators and work-ers in the sector are also spent in purchasing productand services from other Delaware businesses. eagricultural industry contributes $2.5 billion in valueadded activity, and $1.6 billion in labor income. etotal value is the sum of direct, indirect, and inducedeffects. e estimated total number of jobs supportedby the agricultural industry is about 30,000 jobs in2008. e employment figures include full-time, part-time, and seasonal employment. e agricultural in-dustry as a whole generates a job multiplier of 1.8 andan output multiplier of 1.4.

In addition to the total industry impact results, sepa-rate results are also provided for various categories bysub-sectors, by counties and for key industry com-modities categories. e majority of the economicvalue of the agricultural sector comes from the pro-duction and processing of poultry products. is sub-sector produces an industry output of $3.2 billion anda total of 13,437 jobs. ese output figures translateto a total effect of $646 million in labor income. epoultry sector generates a job multiplier of 2 and anoutput multiplier of 1.34.

e growing importance of the agricultural industry asan invaluable source of food and jobs would continueto make this a growth industry worthy of greater pub-lic and private investment. e agricultural sector willplay a significant role in the evolution of u.s. agricul-tural policy targeting the growing national concernover health and nutrition and the resulting govern-ment programs addressing these issues. given thefindings of this study, it is important that policy mak-ers in Delaware are proactive in seeking market-basedpolicies to promote the growth of the agricultural in-dustry in the state.

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1

Department of food & resource economics

university of Delaware

newark, De 19717, usa