Pinal County ranks in the top 2% of all U.S. counties in the total value of agricultural sales and the top 1% in cotton and cottonseed sales, milk sales, and inventories of cattle and calves. Supporting large dairy and beef industries, Pinal County ranks in the top 4% of all counties in barley acreage, corn acreage, and forage crop acreage.
The contribution of agriculture to the Pinal County economy goes beyond the direct sales value of crops and livestock produced in the region. In addition to the direct contribution of farm gate sales, or agricultural cash receipts, a “ripple” of economic activity is stimulated in other industries outside of agriculture to meet the demands of farmers and ranchers and households that derive their income from agriculture. Economists call these indirect and induced multiplier effects.
- Indirect effects measure economic activity generated by farmers and ranchers’ demand for inputs or supplies. These effects are the business-to-business transactions that occur in other agricultural and non-agricultural industries that provide goods and services as inputs to Pinal County farmers and ranchers, such as the insurance, utility, or banking industries.
- Induced effects measure the economic activity generated when households employed by Pinal County farms spend their earnings on local goods and services. These effects are the household-to-business transactions that occur in industries that provide consumer goods and services to households, such as the retail, healthcare, and restaurant industries.
This study conducts an economic contribution analysis for the 2016 calendar year, estimating the total (direct, indirect, and induced multiplier effects) contribution of on-farm agriculture to the Pinal County economy.
On-farm production is just one part of an entire system of industries connected with agriculture. In Pinal County, a large and important industry intimately connected with on-farm production is the dairy processing and dairy product manufacturing industry. With this in mind, the study also conducts an economic contribution analysis of on-farm agriculture plus related agribusiness industries involved in input man- ufacturing and food and fiber processing, estimating the total (direct, indirect, and induced multiplier effects) contribution of agriculture and agribusiness to the Pinal County economy in 2016.
Finally, as the availability of irrigation water is of utmost importance to crop production in the region, this study considers the economic con- sequences of a hypothetical water cutback and estimates the reduction in acreage, on-farm sales, and the resulting economic multiplier effects from reduced purchases of local inputs, reduced farm income, and re- duced farm employment and wages.
Findings
Profile of Pinal County agriculture
Pinal County ranks high among U.S. counties in the production of many agricultural commodities.
- Pinal County ranks in the top 2% of U.S. counties for total value of agricultural sales.
- The county ranks in the top 1% of all U.S. counties for total animal product sales, also ranking in the top 1% for milk sales and in the top 2% for cattle and calf sales.
- The county ranks in the top 3% of all U.S. counties for total crop sales, also ranking in the top 1% for cotton and cottonseed and in the top 1% for “other crops and hay” sales, where alfalfa sales dominate in Pinal County.
- Despite its specialization in feed, forage, and cotton crops, Pinal County also ranks in the top 7% of all counties for vegetable produc- tion and fruit and nut production.
Pinal County is predominately a livestock-producing county.
- Between 2012 and 2016, approximately two-thirds (2/3) to three-quarters (3/4) of the county’s total annual agricultural sales were derived from livestock and their products.
- The top livestock commodities produced are beef and milk, with roughly a 50/50 split between cattle and calf sales and milk sales.
Pinal County is an important contributor to Arizona milk supplies.
- In 2012, Pinal County accounted for just 6% of the state’s total population but accounted for 39% of the state’s milk sales, supplying milk to the large urban centers of Phoenix (Maricopa County) and Tucson (Pima County). These two urban counties accounted for 75% of Arizona’s population but generated only 52% of Arizona’s milk sales.
Most farms in Pinal County are family- or individually-owned and are considered small scale, both in terms of acreage and sales.
- Of the 938 farms in Pinal County in 2012, most farms (602 or 64%) were family- or individually-owned.
- Most Pinal County farms are small scale in terms of acreage, with more than 50% (530 farms) having less than 50 acres, and 37% (348 farms) having less than 10 acres.
- About half of Pinal County farms had sales less than $10,000 in 2012. The highest proportion of Pinal County farms (256 or 27%) had annual sales of less than $1,000. That said, the second highest proportion (145 or 15%) had annual sales of $500,000 or more. Operations with $250,000 or more in sales made up 21% of farms but 98% of sales.
Contribution analyses of Pinal County agriculture and agribusiness
Including direct, indirect, and induced multiplier effects, the total contribution of on-farm agriculture to Pinal County sales was an estimated $1.1 billion in 2016.
- Of this $1.1 billion in total sales,
- $908.1 million in sales was directly contributed by on-farm agriculture, with approximately $599.3 million in sales from livestock production, $275.8 million in sales from crop production, and $33 million in sales from agricultural support service industries, such as cotton ginning and farm labor contracting; and
- $213.7 million in sales was generated in the Pinal County economy through indirect and induced multiplier effects.
Agriculture and agribusiness are part of Pinal County’s economic base and Pinal County has a high concentration of employment in several agricultural industries.
- Of the top 20 industries in Pinal County ranked by concentration of employment (location quotient), nine are agricultural or agriculture-related industries.
- The employment location quotient for cotton farming in 2017 was 47.8, meaning that the share of employment in cotton production in Pinal County is 47.8 times the national average.
- Not only is the location quotient for cotton farming quite high, but so too are the location quotients (LQs) for hay farming (18.5), cotton ginning (23.0), and milk production (25.7). To put these numbers in perspective, the LQ for automobile manufacturing is 24.8 in Wayne County, Michigan (which includes the city of Detroit). In terms of labor specialization, cotton farming and dairies are to Pinal County what auto manufacturing is to Detroit.
Agribusiness industries involved in agricultural input manufacturing, food and fiber processing, and agricultural product wholesaling make significant contributions to Pinal County’s economy.
- Direct sales of $908.1 million from on-farm agriculture in 2016 were supplemented with $979 million in direct sales from agricultural input manufacturing and agricultural (food and fiber) processing in Pinal County.
- Nearly two-thirds of these additional agribusiness sales came from Pinal County businesses involved in fluid milk manufacturing; dry, condensed, and evaporated dairy product manufacturing; and snack food manufacturing.
- Food manufacturing is the largest manufacturing sector in the county, providing more than 25% of all manufacturing jobs.
- Agriculture-related wholesale trade accounts for 23% of county whole- sale trade jobs.
Including direct, indirect, and induced effects, the total contribution of on-farm agriculture and agribusiness to Pinal County’s output was nearly $2.3 billion in total sales in 2016.
- Nearly $1.9 billion of this total was from direct agricultural and agribusiness sales.
- The remainder was sales in other industries stimulated by agricultural activities
Including direct, indirect, and induced effects, the total contribution of agriculture and agribusiness to Pinal County’s gross regional product (GRP) was an estimated $611.1 million in 2016.
- The contribution to gross regional product, or value added, is the most accurate metric to use when talking about the contribution of an industry to a regional economy. Value added measures the net incremental change in the value of the good from the last stage in production and is synonymous with gross domestic product (GDP) at the national level.
- Value added combines net farm income, profits in other industries, county employee compensation, and tax revenues.
- Of the total $611.1 million supported by on-farm agriculture and agribusiness and the resulting indirect and induced multiplier effects, $433.5 million originated directly from on-farm agriculture and agribusiness industries, with $273.0 million directly from on-farm agriculture.
Agriculture and agribusiness support jobs and incomes in Pinal County.
- Including indirect and induced effects, Pinal County agriculture and agribusiness supported 7,516 full- and part-time jobs in the county and incomes of $356.8 million in 2016.
- Pinal County agriculture and agribusiness directly supported an esti- mated 5,150 full- and part-time jobs, with nearly three-fourths of these jobs occurring on-farm.
Analysis of fallowing impacts
A hypothetical cutback of 300,000 acre-feet of irrigation water, and a corresponding reduction in the wheat, alfalfa, and cotton acreage grown and harvested in Pinal County, would affect farmers and the regional economy, but in different ways.
- With fewer acres in production, farmers would have decreased sales as well as decreased costs of production (because they are no longer purchasing inputs needed for growing and harvesting). Direct effects to farmers, therefore, would be lower net revenues for their individual operations.
- A reduction in agricultural production could have negative effects on the regional economy resulting from lower spending on inputs and labor.
- Given hypothetical, simplified scenarios and reductions in acreage (and resulting changes in economic activity from production), the total value-added (GRP) impacts to the Pinal County economy from large- scale land fallowing range from $31.7 million to $35 million. About half of these losses are directly borne by agricultural producers and their employees in Pinal County. The remaining reductions in value added come from multiplier effects, where non-agricultural industries have reduced employee compensation, taxes, and profits because of fewer inputs purchased and fewer farmworkers spending on household goods and services. Approximately 1% of county value-added reductions would occur through reduced county sales tax revenue.
- Large-scale land fallowing reduces employment in Pinal County by 270 to 480 full- and part-time jobs, depending on economic modeling assumptions.
Methods
- This study conducts two economic contribution analyses: one for on-farm agriculture (crop, livestock, and agricultural support service industries) and one for agriculture and agribusiness combined (on-farm agriculture, agricultural input manufacturing, and food and fiber processing industries).
- The economic contribution analyses were modeled using the IMPLAN 3.1 input-output software and data. The model was customized using the best available, most recent data to more accurately reflect the production practices and economic conditions in Pinal County in 2016. Data and research methods used to estimate the contribution are presented in Appendix A.
- Results of the economic contribution analyses are presented by value of sales, value added (contribution to gross regional product [GRP]), labor income, and number of full- and part-time jobs.
- Using the same input-output model, IMPLAN 3.1, this study estimates the decreases in economic activity associated with hypothetical reductions in agricultural production in Pinal County. Reductions in the value of agricultural production are assumed to occur as a result of fewer acres in production due to fallowing resulting from a hypothetical irrigation water cutback of 300,000 acre-feet (AF). Water application rates, yield, and price data were used to estimate reductions in acreage and the value of production for six hypothetical, simplified fallowing scenarios com- prised of various wheat, alfalfa, and cotton crop-fallowing mixes. Reduc- tions in agricultural sales were then modeled in IMPLAN to estimate the resulting decreases in regional economic activity