Michigan's Second Largest Industry: A Myth

We've all heard that agriculture is Michigan's second largest industry, and most of us interpret that to mean that the crops, livestock, and other food products grown here contribute enough to our economy to rank second on the scale of industries in Michigan.  But that is just not true.

And to be fair, that isn't exactly what the most recent report on the subject claims; instead, that report is entitled The Economic Impact of Michigan's Food and Agriculture System.  And as soon as you realize that "Food" in that title includes every food product sold in Michigan, whether or not it was grown, processed, or packaged here, you will understand what the problem is.  Yes, the number used to argue that "food and agriculture" is Michigan's second largest industry, includes the value of all the food shipped across our state borders and into food stores and bought by one of us.  Indeed, you could remove "agriculture" from the findings - the part where Michigan farmers actually grow food - and the overall results would be similar, because the value of food that we grow is so small compared to the value of food that we eat.  

Well, that might be a bit of an overstatement, but not by much.  What I see in the report is that Michigan farmers who grow livestock, dairy, field crops, vegetables, fruits, floriculture, nursery, turf grass and other items have about a 7 billion dollar impact on our economy - unless you want to remove known sources of double-counting, in which case the number is closer to $6 billion.  So I look at this report and see that our agricultural system produced $6 billion in economic value, on average, in each year between 2008 and 2010.

If you then look at food processing and manufacturing in Michigan, which includes the manufacturing of dry and condensed and evaporated milk, soft drinks, bread and bakery products, breakfast cereals, and poultry slaughtering, among others, you get a direct economic benefit of $14.7 billion.

And if you look at the value of food wholesale and retail - which is calculated by taking the USDA number for total food spending in the United States in 2010, and then adjusting for the number of people who live in Michigan (I am not making this up!) - you get an estimate in that category of $29.1 billion.  

So our farms produce $6 billion in value, our food processing and manufacturing another $14.7 billion, and we consume about $29.1 billion in food products.  The MSU report adds these and a couple of smaller items to come up with a $52.4 billion number in direct economic value, and then adds multipliers to include the indirect economic benefits of the direct economic benefits, and concludes that the whole thing is worth $91.4 billion - a number which other folks use to argue that food and agriculture is Michigan's second most important industry in Michigan.  Sheesh.

So one important piece of information is that every time you hear that agriculture is Michigan second largest industry at almost $92 billion, you should remember that only $6 billion of that number represents the work of farmers to grow food products in Michigan.  I am hardly the first person to make this point, and you can read more about what the Mackinac Center for Public Policy has said about this in 2009 and in 2012.

But the other important point, of course, is to understand what is gained by this myth that agriculture is Michigan's second largest industry.   The best explanation I've seen goes back to 1999, when Phil Ginotti, assistant to then Senator Bill Schuette said:

…because agriculture is Michigan's second largest industry it's important to protect the right to farm from township ordinances that impede the health of the industry.

So the argument is that because agriculture is so important to our state economy, it deserves extraordinary protections.  In 1999 the argument was that RTF should be amended to exclude local units of government from oversight over farm operations - even the very large industrialized operations - within their borders.  

I agree that agriculture is important in Michigan.  Important to the economy, important to people who grow food, and important to people who eat food.  But at $6 billion per year in actual farm output, I don't think we jeopardize our entire state economy by addressing our farm and food system honestly.  If Right to Farm protection of farms in urban residential areas really is a problem, for example, I think the legislature can safely address the issue.  I think the DNR and DEQ can be led by experts in Natural Resources and Environmental Quality, rather than experts in Agriculture, and the state will benefit.  I think that MDARD can support not only the kind of agriculture that is industrial-scale, but also the kind of agriculture that is family-scale and even backyard-scale, without tragic outcomes of any kind.  

In fact, I think the outcomes of that kind of policy would be pretty good for our state, and even that a state policy that supports small farm operations is something worth fighting for.