Technology and Agriculture

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Technology and Agriculture

• Economic Impacts of Advancing Technology

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How does technological innovation impact
agriculture?

• Major Technological Advancements in Agriculture
• Mechanization
• Chemical Fertilizers
• Hybridization
• Biotechnology

3
How does technological innovation impact
agriculture?

• Technology Impacts the Supply of Agricultural
  Products
• Supply Shifters
• Prices of Related Goods
• Corn Soybeans
• Cattle -- Leather
• Price of Inputs
• Technology Allows a farmer to produce more with
  a given level of inputs

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How does technological innovation impact
agriculture?

• What Does that Supply Shift Look Like?

Price
Supply
Supply1
Original Price
Quantity
Q
Q1
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Supply and Demand Elasticities

• Demand Elasticity for Agricultural Products
• Inelastic Demand, Why?
• What does that mean for the producer?

Demand for Food (Necessity) Inelastic
Price
Demand for Luxury Automobiles Elastic
Quantity
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Supply and Demand Elasticities

• Supply Elasticity for Agricultural Products
• Short Run
• Intermediate Run
• Long Run

Price
Supply - Short Run
Supply - Intermediate Run
Supply - Long Run
Quantity
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New Technologies in the Livestock Industry

• Artificial Insemination
• Sexed Semen
• The ability to choose the sex of the offspring
• Why Beef Cattle?
• Why Dairy Cattle?

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New Technologies in the Livestock Industry

• Cloning
• The ability to make an exact duplicate animal
  with the same genetic makeup

Dolly?
Dolly
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The Case for Beef Cattle
Price of Beef
Supply of Beef
Supply1 of Beef
Original Price
New Price
Demand for Beef
Quantity of Beef
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What about the market for Steers?
Price Steers
Supply of Steers
New Supply of Steers
Demand for Steers
Quantity Steers
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And the market for Heifers?
Price of Heifers
New Supply of Heifers
Supply of Heifers
Demand for Heifers
Quantity
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The Technological Treadmill Theory
How does technology affect the total revenue of
the farmer over time?
Price
Supply
Demand
Quantity
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The Technological Treadmill Theory
Price
Total Revenue Price Quantity
Supply
When supply increases from the technological
change, what happens to Total Revenue?
P
TR
Demand
Q
Quantity
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The Technological Treadmill Theory
Price
New Total Revenue Price1 Quantity1
Supply
S 1
Supply has increased and Total Revenue changes
from the tan box to the blue box.
P
P1
TR1
Demand
Q
Quantity
Q1
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The Technological Treadmill Theory
Price
Supply
S 1
The red shaded region is a loss in total revenue
and the green shaded region is the gain. Since
the loss is larger than the gain Total Revenue
has gone down.
P
Loss
P1
G A I N
Demand
Q
Quantity
Q1
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The Technological Treadmill Theory
Price
Supply
S 1
Why does this happen? Inelastic demand of
agricultural commodities.
P
Loss
P1
G A I N
Demand
Q
Quantity
Q1
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Emerging Technologies in Production Agriculture
Over the Last Decade

• First Generation Technologies
• Biotechnologies that have made it to market
• Flavr SavrTM Tomatoes in 1994
• Bt Cotton
• Roundup Ready Soybeans
• Second Generation Technologies

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Biotechnology and the Agricultural Marketing
System

• How is the marketing system going to handle new
  products that used to be just commodities?

Commodity
Value Added Product
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Other Potential Impacts From Biotechnology in
Agriculture

• This impact on the marketing system could create
  opportunities for other products as well.
• Non-Traditional Crops
• Organic Crops
• Heritage Crops and Livestock