Concern about the loss of farmland is tied — often explicitly — to concerns about agricultural production. A recent Michigan State University study, for example, warned that "[Farmland acreage trends] should assure that Michigan citizens will have sufficient land for food production to the year 2010, but future generations may not be able to produce enough food if the population continues to grow." An impending food shortage was implied when the authors added, "Farm products will continue to be exported from and imported into Michigan, but other states will also experience decreases in farmland and cropland acreages and face similar challenges to provide an adequate food supply."
The need to cultivate additional land for food is unlikely, given recent trends of decreasing farmland loss, and Michigan’s agricultural output remains remarkably strong despite the loss of farmland (see Chart 8). Agricultural production has hovered steadily around 24 million tons since 1992. While production dipped in 1996, this slump is likely to be temporary. In addition, only about two-thirds of Michigan’s farmland is harvested. The rest is laid fallow or left as open land. Thus, more land could be brought "on-line" to boost production, if needed. Even if agricultural production could not keep pace, Michigan could still trade products from its other major industries — such as automobiles — for food from other states who specialize in agricultural production (see box on page 21).
Despite the declining number of farms and lower employment, the industry has generated output worth about $2 billion each year since 1990. In one year, 1995, the value of Michigan’s agricultural products generated revenues more than one-third higher than 1990 levels. Even though the value of agricultural production declined in 1996, total value still exceeded 1992 levels.
The Agricultural Industry in Michigan
At first glance, stable revenues seem to describe a declining agricultural industry in Michigan. Total output and production numbers mask important changes in employment, income, and industry in the national and state economy. Farming and agricultural production, while important, are becoming relatively less significant economically.
First, agricultural prices have fallen steadily over the years as new technology and changes in farming methods have dramatically boosted the supply of food. From 1990 to 1995, producer prices for all farm products fell 4.3%—7.7% for fruits, melons, vegetables, and nuts; 27.3% for fresh fruits and melons; and 19.7% for livestock.
Changes in prices are important signals to farmers about what to produce and what not to produce. Not surprisingly, cash receipts in each of these food categories where prices fell declined during this period. Cash receipts in corn, soybeans and vegetables increased, reflecting rising prices for these categories, but also incentives to produce food to meet demand.
Agricultural production, like output in other sectors of the economy, adjusts according to the demand for products and expectations about profitability. Michigan’s agricultural industry is not unique in this respect.