ECONOMIC RESEARCH SERVICE Purpose Statement The Economic Research Service was established by Secretary's Memorandum No. 1446, Supplement No. 1, of April 3, 1961, under Reorganization Plan No. 2 of 1953 and other authorities. The Service develops and carries out a program of economic research designed to provide economic intelligence for the Department of Agriculture and other Federal decisionmakers, farmers and related industries and the general public. The findings of this research are made available to these users through research reports and through economic outlook and situation reports on major commodities, the national economy, and the international economy. The Service carries out the following major activities: 1. Fara economics research consists of a nationwide program of research dealing with the economic problems of agricultural production and resource use, Farm production economies research includes analyses of farm production costs and efficiency, use of capital, labor and other resources in agriculture, profitable adjustments in farming, and financial problems of farmers. Natural resources economies include studies of the use and management of land and water resources, including the quality of these resources, resource institutions, and watershed and river basin development problems. Economic development research includes a broad program of economic studies on development of rural areas, employment opportunities for farm and other rural people, and availability and factors affecting the availability of public and private facilities and services necessary to improve the quality of rural life, including local governments and their organization. 2. Marketing economics research includes economic analyses and research relating to the marketing of agricultural commodities, the organizational structure, practices, and performance of commodity markets from the farm to the consumer, costs and margins involved in the marketing of agricultural products, farmer's bargaining power, the economics of product quality and grade, market potentials, distribution and merchandising of agricultural products, and the economics of transportation. 3. Domestic and foreign economic analysis. Domestic economic analysis consists of economic and statistical research on agricultural prices, farm income, commodity outlook and situation, supply and consumption of farm products, and agricultural history. Foreign economic analysis includes: Studies of supply and demand and trade in farm products in foreign countries and their effect on prospects for U.S. exports; analysis of farm export programs, progress in economic development and its relationship to sales of farm products, assembly and analysis of agricultural trade statistics; and analysis of international financial monetary programs and policies as they affect the competitive position of U.S. farm products. 4. Work performed for others. The Economic Research Service performs research services for other governmental and private agencies on a reimbursable or advance payment basis. These include special studies of agricultural economios of foreign countries, special economic studies on water and land conservation programs and practices, appraisals of price-support and production control programs, studies of development in rural areas, and various types of marketing studies. The Service functions through a central office in Washington, D.C. and a small field staff at each of 56 locations, principally the Land Grant Colleges and Universities throughout the United States. Much of the research is carried on in cooperation with State Agricultural Experiment Stations. 8 8 Item Economic Research Service: : Budget Estimate 1974 Man Years Appropriation................................... :$16,467,000: 826 :$17,826,000: 768 :$17,766,000: 788 Obligations under other USDA: appropriations: 8 8 Estimated Soil Conservation Service:: 172,000; 10 227,000: 11 146,000: 9 136,000: 6 : and investigations.....: 1,855,624: 89: 2,058,000: 89 : 19.760.123: 982: 21.061,000: 912: 20,785,000: 920 144,000: 7 28,000: 3.235.000: 144 3,019,000: 132 : Development: Training of foreign : participants.... : 1,080,412: 52: 964,000: 53 964,000: 53 Technical consultation and : support..... ......... : 705,670 29 666,000: 33: 666,000: 33 (1) A decrease in farm economics due to a reduction of $275,000 for cost/benefit analysis of predator controls. A program reduction of $275,000 is proposed for FY 1974. These funds were appropriated in 1973 but withheld from use. Need for Increase: The objectives are to (1) measure the cost and profit Food is one of the most important consumer expenditures and the price of food billion for U.S. farm foods. in 1971, of which $75.3 billion went to pay the mrketing bill and $35.8 billion went to farmers. Palicy is directed at encouraging a food production and marketing system that offers consumers their choice of food at lowest prices consistent with a reasonable return to farmers and marketers. Assessing the role of the food marketing system in obtaining these goals requires continuous monitoring of costs, margins, prices, and productivity in farm food marketing. Current farm retail price spreads are computed monthly for each of 65 food items. However, these data are not sufficiently detailed to identify the component parts in total or for the individual food items. Attempting to monitor food prices under the economic stabilization program has demonstrated the inadequacies of existing marketing margin data. Thus, the focus of this research proposal is the development of data on margins, costs, and profits for individual products at each level in the marketing system. Initial efforts will be directed at the major products including red meats, broilers, milk, eggs, bread, food oils, and selected fruits and vegetables. Other products will be studied as resources permit. Availability of these data will allow analysis of the component parts of the market basket and marketing bill statistics. In addition to identifying departures from reasonable prices at the retail level, the research will show when prices of wholesalers and processors do not adequately reflect supply conditions at the farm level. Moreover, measurement and monitoring of profits as well as labor and other costs incurred by marketing agencies at various levels of the food system will help to ascertain whether their pricing policies are reflecting something other than actual changes in costs. The proposed research will also enable improved measures of productivity at each stage of marketing and will pinpoint where inefficiencies are occurring. Thus, a major purpose of this research is to encourage efficient performance in all aspects of marketing and maintenance of fair and equitable returns to farmers. Improved pricing policies to accurately reflect supply-demand conditions and increased productivity in marketing will benefit both the producer and consumer participants in the system. Plan of work: As a first step, many data gaps must be filled. One of the more critical gaps is data on margins, costs, and profits for individual products at each level in the marketing system. These data will allow disaggregation and analysis of the Department's market basket and marketing bill statistics. Obtaining data on cost of labor, transportation, packaging, etc. for processors, wholesalers and retailers for the selected commodities will require extensive surveys of marketing firms. Additional resources are needed to finance these surveys and to analyze the data collected from them. Some secondary data will be purchased from the Census of Business and other data collection agencies of Government. The new and existing data will provide a basis for cost analysis of the marketing system which will be more comprehensive then heretofore, which will be predictive, and which will provide a framework for further examination of equity and efficiency issues in marketing. This cost analysis will go further than the current marketing bill to allow evaluation of the interrelationships between channels of distribution and between the cost components for the various commodities which go to make up total marketing costs and expendi aures for foods. (3) An increase of $115,000 in domestic and foreian economic malreis to improve stimates of farm income and related statistical series ($631,000 available in FY 1973). Need for Increase: The objective is to develop new and improved measures of the sources, level and distribution of income of farmers and of returns to resources used in farm production. |