1. United States Agriculture and
Operations Management
Andrew T. Pulvermacher, CMA, CPIM

2. YIELD RISK Approved Yield x Coverage Level x Base
Premium Rate x Base Price
REV RISK: Approved Yield x Coverage Level x CRC Base Rate
x CRC Low Price Factor
PRICE RISK Approved Yield x Coverage Level x Base Premium
Rate x CRC High Price Factor
RISK PREM

3. Objective 1: US ECONOMY and AG

4. US Economy and Agriculture
1947 2006
US GDP $244B $13.1T
AG GDP $19.9B $129.7B
Sources:

5. GDP ($trillions)
Sources:
$-
($trillions)
US GDP
$10.0
$12.0
$14.0
$6.0
$2.0
$4.0
$8.0
1947
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
US Economy and Agriculture
1995
1998
2001
2004

6. US Economy and Agriculture
Top US Industries as a Percent of US GDP
Agriculture Manufacturing Finance Professional services
30.0
25.0
20.0
% of US GDP
15.0
10.0
5.0
-
1947
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
Sources:

7. US Economy and Agriculture
Agriculture GDP Performance
10.0 % of GDP $160.0
$GDP
9.0
$140.0
8.0
$120.0
7.0
$100.0
$GDP ($billions)
6.0
% of GDP
5.0 $80.0
4.0
$60.0
3.0
$40.0
2.0
$20.0
1.0
- $-
1947
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
Sources:

8. AG Productivity Improvements
U.S. Agricultural Output, Input, and Total Factor Productivity
2.80
2.60
2.40
2.20
2.00
1.80 Input
Output
1.60 Total Factor Productivity
1.40
1.20
1.00
0.80
1948
1950
1956
1958
1964
1966
1968
1974
1976
1982
1984
1990
1992
1998
2000
1952
1954
1960
1962
1970
1972
1978
1980
1986
1988
1994
1996
2002
2004
Sources:

9. US Economy and Agriculture
Sources:

10. Objective 2: AG PRODUCTIVITY

11. AG Productivity Improvements
Productivity
Innovation Efficiency Management Research
Sources:

12. AG Productivity Improvements
Production History and Stats
1900s Today
Fertilizer 3.7m tons 50m tons
Hrs to Prod. 100 bushels 100hrs 2hrs
One farmer supplies… 5 people 110 people
Exports ($b) $0.92b $77.5b
Sources:

13. AG Productivity Improvements
Sources of AG Inputs
Capital
Labor
Material
Sources:

14. AG Productivity Improvements
Agriculture: Sources of Production
3.00
Material Labor Capital
2.50
2.00
Input Index
1.50
1.00
0.50
0.00
1948
1951
1954
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
Sources:

15. AG Productivity Improvements
Sources of Material Input
Farm origin Energy Chemicals Purchased services
6.000
5.000
4.000
Input Index
3.000
2.000
1.000
0.000
1948
1951
1954
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
Sources:

16. AG Productivity Improvements
U.S. Agricultural Output, Input, and Total Factor Productivity
2.80
2.60
2.40
2.20
2.00
1.80 Input
Output
1.60 Total Factor Productivity
1.40
1.20
1.00
0.80
1948
1950
1956
1958
1964
1966
1968
1974
1976
1982
1984
1990
1992
1998
2000
1952
1954
1960
1962
1970
1972
1978
1980
1986
1988
1994
1996
2002
2004
Sources:

17. AG Productivity Improvements
GDP without Technology Impact
$160.0
GDP
Adj. GDP
$140.0
$120.0
$GDP ($billions)
$100.0
$80.0
$60.0
$40.0
$20.0
$-
1953
1956
1959
1971
1974
1977
1989
1992
1995
1947
1950
1962
1965
1968
1980
1983
1986
1998
2001
2004
Sources:

18. AG Productivity Improvements
Sources of Productivity
Sources:

19. AG Productivity Improvements
Sources of Productivity
Sources:

20. AG Productivity Improvements
Sources of Productivity
Sources:

21. Factors Affecting Agricultural Productivity
R&D
Extension
Education
Infrastructure
Gov’t programs

22. AG Productivity Improvements
Advances in Technology
Sources:

23. AG Productivity Improvements
Today’s Advancements
Herbicide-tolerant (HT) soybeans
Conservation Tillage
Bt Crops
Precision Agriculture
Sources:

24. Objective 3: GLOBAL MARKET

25. Global Marketplace
World Population (in Billions)
10.0 9.2
World Pop. (billions)
9.0
8.0
6.5
7.0
6.0
5.0
4.0 3.3
3.0
1965 2006 2050

26. Impact of Global Demand
CBOT
Corn 40% 70%
Example, Georgia chickens
Wheat 75%
Soybeans

27. Global Marketplace - DEMAND
•US Biofuel Tax Incentives
•Economies of Asia and Latin America
– Growing Middle Class
•Global Grain Stockpiles Decreasing

28. Global Marketplace – FOOD CONSUMPTION
• US: 10% of Income = Food Purchases
– Bread up 24%
– Milk up 26%
•Italy / Mexico / Pakistan / Russia

29. 30
18
20
15
13
12
2
Home Debt Energy Food Goods Savings Taxes

30. Global Marketplace – Food Companies

31. Global Marketplace – The American Farmer
•Income up 48% to a record est. $87B
•Exports up 15% to $79B
•Reinvestment:
– John Deere up 76%
– Monsanto up 79%
– Mosaic up 200%

32. Global Marketplace – Developing Nations
•Long-Term Prices
•Increased Demand
• Part of the reason for the drawdown can be seen in China, where soaring demand for milk has increased the number
of dairy cattle threefold so far this decade. Half of the world's hogs now live in China, which is importing about 13%
of all the soybeans grown in the U.S. to help fatten its livestock.
•Price burdens
• The prospect for a long boom is riveting economists because the declining real price of grain has long been one of
the unsung forces behind the development of the global economy. Thanks to steadily improving seeds, synthetic
fertilizer and more powerful farm equipment, the productivity of farmers in the West and Asia has stayed so far
ahead of population growth that prices of corn and wheat, adjusted for inflation, had dropped 75% and
69%, respectively, since 1974. Among other things, falling grain prices made food more affordable for the world's
poor, helping shrink the percentage of the world's population that is malnourished.

33. Global Marketplace
Outlook
Increased resource use and improvements in technology and efficiency have increased
global food production more rapidly than population in recent decades, but 800 million
people remain food insecure
Given economic and environmental constraints on cropland expansion, the bulk of
increased crop production will need to come from increased yields on existing cropland