Agriculture in developed countries: competition for resources

Abstract

Any consideration of the competition for resources facing agriculture in developed countries must be related to the supply and demand for agricultural products; the impact of technological advance on output and prices; the interaction between domestic agriculture and international trade; and farm incomes. Possible future developments will be directly affected by the impact of the common agricultural policy on farm incomes and supplies in the United Kingdom. In turn these will have an impact on the resources used in agriculture: land, capital, labour, both manual and managerial, intellectual investment on behalf of agriculture and public expenditure. Attainment of economically optimum results for agriculture is inhibited by policies designed to take account of social and political considerations, especially in the six founder countries of the E.E.G. Policy objectives can also be in conflict, for instance, between commitments to lesser developed countries and policies for domestic agriculture. The latter can give rise to high-cost production and encourage retention of resources in agriculture even though returns are not necessarily high and restrict market access for exports from developing countries. On the supply side, agriculture is dominated by many small units. This results in the need to pay high prices for products to support incomes. The high prices encourage production, frequently in excess of the need of the market, the demand for food being highly inelastic. Surpluses then have to be sold at salvage prices and real returns to resources will be low. New technology and improved management and organization can both contribute to higher productivity if conditions are suitable. Generally, the process is hindered by poor size structure, and the gains are greatly reduced. Again, returns to resources will be lower than would prevail if farm structure were more favourable. Two important results emerge: if developed countries are to meet their commitments to lesser developed countries, market access in the former will have to be eased to encourage development in the latter. Secondly, solving the low income, social problems of agriculture should be separated from price policies to achieve a more favourable supply/demand balance for agricultural produce. Finally, full benefits from the possible contribution of science to agriculture will not be realized if progress in modernization of the industry is not achieved. In the last resort, if policies lead both to surplus and to sustained high prices for food then consumers will both react against them politically and turn to substitute foods at cheaper prices.