SDSU study: South Dakota agriculture has $21 billion impact
Contact: Gary Taylor
Phone: (605) 688-4851
Thursday, April 23, 2009
An SDSU analysis of 2006 data shows that production agriculture and agribusiness combined had a total impact of $21.3 billion on South Dakota’s economy, or 36.3 percent of state economic activity.
South Dakota State University economist Gary Taylor said that includes direct, indirect and induced effects. The study showed the two sectors employ 173,101 people and generate $645 million in taxes.
Taylor, an associate professor in SDSU’s Department of Economics, analyzed the data with the help of an input-output modeling software called IMPLAN Pro.
“Each dollar of revenue generated in the state from production agriculture creates another $1.374 in economic activity. This makes agriculture a potent engine for economic development within the state,” Taylor said. “Agriculture represents approximately 40 percent of employment opportunities in the state, out of 423,657 jobs in the state in December of 2006. Agriculture was also responsible for approximately 50 percent of the state’s total tax collections in 2006.”
The direct effect of production agriculture in the 2006 data, or the value of the products of production agriculture, was $5.3 billion, or 9 percent of the total economic activity generated in the state. The indirect effect, or the economic activity from industries supplying inputs, was an additional $4.5 billion. The induced effect, or the increase in household spending from the increased economic activity, was $2.8 billion. That adds up to $12.6 billion in total economic impact from production agriculture.
Agribusiness had a direct impact of $3.7 billion, indirect impacts of $3 billion, and induced impacts of $2 billion, for a total impact of $8.7 billion.
To get a complete picture of the total impact of agriculture in the state, Taylor combined those production agriculture and agribusiness sectors and estimated their total impact. Their combined direct impact was $9 billion, they had indirect impacts of $7.5 billion, and induced impacts were $4.8 billion, for a total of $21.3 billion.
Taylor said the expansion of the ethanol industry and the increase in commodity prices in recent years likely served to increase the importance of agriculture in the state.
Compared to other industries, production agriculture was third-largest sector of the state’s economy in 2006 in terms of its direct effect, or output. Manufacturing had the largest output of any sector, at $13.1 billion, followed by government, at $5.8 billion, and agriculture at $5.3 billion. Other leading sectors of the state economy were health and human services, at $4.7 billion, and finance and insurance, with output of $4.6 billion.
However, agriculture had the largest multiplier of any sector, closely followed by construction and manufacturing. Taylor said the implication is that investment in sectors with larger multipliers has larger positive impacts on the economy compared to investments in sectors with lower multipliers.
Taylor’s earlier study of 2004 data showed that agriculture’s overall impact on the South Dakota economy at that time was $19.2 billion.
More details from the latest study are available in Taylor’s article for Economics Commentator, a publication of the SDSU Department of Economics. Taylor’s article, “Economic Impact of Agriculture on South Dakota,” is available at this link: http://econ.sdstate.edu/Research/Commentator/No507.pdf.
AgBio Communications Unit
South Dakota State University
ACC, Box 2231, Rm 200
Brookings, SD 57007
Telephone: (605) 688-4653
Lance.Nixon@sdstate.edu