Growth and Competitiveness of Food Processing: Linkages from Primary Agriculture

High-value agricultural products such as processed foods are becoming increasingly important in U.S. production and trade. Efficiency gains in primary agriculture are transferred to the processed-food sector in the form of cheaper inputs. In turn, efficiency gains in processed-food sectors are transferred, in part, back to primary agriculture by increasing the derived demand and, thus, mitigating commodity price declines. Efficiency gains are relatively more important in primary agriculture than in food processing. Policies that encourage productivity growth and lower production costs will tend to increase the competitiveness of both sectors. Since almost all of the productivity growth in primary agriculture and food processing are passed along in lower prices, consumers are the ultimate beneficiaries.