Agricultural production has become progressively more mechanised, efficient and costeffective
over the last 80 years (Hennessy, 2004). One of the key economic drivers is the
relative impact of cost seasonality of production – regions with strong seasonal cost
advantages will tend to produce lower value products. An increase in demand for more
processed food products induces a shift towards non-seasonal production.
The impact of increased agricultural efficiency is the lowering of food raw material
costs. The impact of this on the USA food manufacturing sector (comparing 1975 to 1997)
has been reviewed by Huang (2003). Over that period,
• gross output from the food sector increased by 1.88% per annum;
• net output increased by 3.58% per annum;
• on average around 60% of the cost of food was the raw material cost;
• multi-factor productivity index increased by 0.45% per annum (compared to the
manufacturing sector productivity of 1.25%);
• capital investments increased by 2.25% per annum;
• the decline in processed food price was almost totally accounted for by the cost of
raw materials;
• food manufacturing private R&D expenditure increased 2.22% per annum,
compared to agricultural inputs R&D (4.04%) and all U.S.A. industries (5.78%);
• R&D expenditure represents 0.23% of sales.