Attracting more value-added agriculture industries to Iowa is a major focus of the state's economic development activities. Yet a new study from the Iowa State University economics department shows that from a job creation perspective, diversity in the state's economic development portfolio might be a good idea.
The study looked at employment changes in agricultural commodity processing industries in the state from 1992 to 1998. Authors Liesl Eathington, Dave Swenson and Daniel Otto traced the use of beef, pork, poultry, dairy, food and feed grains, soybeans and other commodities through several stages of processing to create a list of industries related to Iowa agriculture.
The industries fell into three major manufacturing categories--food and kindred products, chemicals and allied products and leather and leather products.
Food and kindred products represent 95% of the agricultural commodity processing jobs in Iowa. This category includes 35 individual industries manufacturing food or animal feed. Jobs in meat processing and grain processing make up 70% of all food processing jobs in the state, with the remaining 30% in various industries, including dairy products, frozen foods, soft drinks and bread products.
The study showed that in 1998, agricultural commodity processing industries accounted for 20% of all manufacturing jobs and less than 4% of all nonfarm jobs in the state.
The distribution and concentration of agricultural commodity processing employment varies across the state.
The study shows Iowa's 10 metropolitan counties account for most of the commodity processing jobs with 22,700. The state's 60 small urban counties have 17,500 commodity processing jobs, the 11 large urban counties have 11,100 of the jobs and the rural counties have just under 2,400 agricultural commodity processing jobs.
A regional look at agricultural commodity processing shows these industries are most prevalent in the east central and central regions of the state, and least prevalent in the southwest, south central and north central portions.
The study also looked at employment change in agricultural commodity processing industries. "The manufacturing sector contains some of Iowa's most rapidly growing industries, but the agricultural commodity processing industries are not among them," the report states.
"These industries grew only slightly more than a third of the manufacturing sector's average rate between 1992 and 1998. Total manufacturing employment in Iowa grew 14.5%. Employment in Iowa's commodity processing industries grew only 5.5%."
Job levels in many of the traditional commodity processing industries are subject to many of the structural changes occurring in production agriculture. While almost 4,900 new agricultural commodity processing jobs were added to Iowa's economy during the six years studied, those gains were offset substantially by losses of 2,100 jobs in declining commodity processing industries, making the net employment growth 2,800 new jobs.
The net state employment change in meat processing industries was 350 new jobs during the time period studied. There was a net loss of more than 800 jobs in grain and soybean processing industries, with most of those losses occurring in the animal feed industry.
The study concludes that Iowa's agricultural commodity processing industries have an undeniably important role in the state's economy and help increase commodity prices received by farmers, but cautions against raising expectations of their impact to unreachable heights.
"Iowa's dependence on agricultural commodity processing employment has decreased in the last six years. With growth rates lagging other manufacturing industries, agricultural commodity processing industries dropped from 22 to 20% of total manufacturing employment between 1992 and 1998," the report states.
The authors note that newer, high-technology firms might represent greater opportunities for employment growth than the traditional food processing industries, although they acknowledge this potential is difficult to assess.
The report's final paragraph says Iowa's future growth will depend on capitalizing on its strengths, such as production agriculture, agricultural services and value-added agricultural industries.
However, it cautions that slow employment growth rates experienced by agricultural commodity processing industries limit their potential as job generators for rural places. And that an overemphasis on value-added agriculture may keep the state from seeing new opportunities in other industries.
The full report is on the Web at: www.econ.iastate.edu/research/webpapers/NDN0081.doc. This is the third in a series of reports focusing on recent patterns of employment change in Iowa. The first report described broad changes in Iowa employment. The second dealt with employment increases in targeted industries.