My office is always quick to brag about the success of CAFNR researchers and their ability to leverage the federal and state base funding that we receive through extramural grants, gifts and contracts. Our faculty attracted $33.6M in extramural funding in FY06, and they have consistently led all campus divisions in that regard. While we are rightly proud of this success, we are under increasing pressure to justify the investment made in public research institutions. A recent publication from the USDA-Economic Research Service* (ERS) presents an interesting analysis of the economic returns to public agricultural research.    

According to the authors, investment in public and private agricultural research combined grew from just over 3 percent to about 7 percent of agricultural GDP from 1971 through the late 1990s. In constant 2001 dollars, the investment grew from $4.8B to $8.8B with the private sector accounting for most of the growth. Spending (after adjusting for inflation) on public agricultural research was flat through 1998 but increased through 2004. Agricultural research in this context includes work on crop and animal productivity, food nutrition and safety, natural resources, rural development and economics.   

Two studies are cited that document the return on investment in public agricultural research:

• Huffman (Iowa State University) and Evenson (Yale University) reviewed 35 studies published from 1965-2005 that evaluated the return of investment in agricultural research. Their conclusions implied that each dollar spent on agricultural research returned $10 worth of benefits to the economy. While the individual studies varied in their estimates of the rate of return, all documented that the return to public agricultural research was significantly greater than the benchmark return from government securities (~3 to 4 percent per year).
• In a separate analysis, the ERS analyzed data from 27 studies over the 20th century and found the majority showed rates of return on public agricultural research ranged from 20 percent to 60 percent.

Other interesting conclusions in the ERS report include:

• Commodity-specific studies have shown that rates of return were high for both crops and livestock with little evidence that some commodities have benefitted more than others.
• Current research suggests that it takes longer for basic research to produce tangible economic impacts than for applied research. On average, current public agricultural research will begin to noticeably impact agricultural productivity in as little as two years and that the impact could last as long as 30 years.
• Much agricultural research is targeted to specific ecological conditions within a state or region; however, the results affect productivity beyond the targeted region. This spillover is greater for livestock research than for crop research because the former is less constrained by ecological factors such as soils and climate.

It is encouraging to know that the investment made in public agricultural research institutions, such as the Missouri Agricultural Experiment Station, results in a significant increase in agricultural productivity at a rate that far exceeds the benchmark return on government securities. 

The knowledge that we advance enhances the quality of life of our citizens and forms the foundation upon which agriculture, the number one industry in the Missouri, is built. The AES is grateful for the support it receives from state, federal and non-public sources.  We can be proud of our effective use of those funds and the strong record of economic return that our stakeholders, public and private, receive from their investment.

Regards,
Marc

*Fuglie, Keith O., and Paul W. Heisey.  Economic Returns To Public Agricultural Research.  EB-10, U.S. Dept. of Agriculture, Economic Research Service.  September 2007.