Small grains, in particular wheat and barley, are an important part of Arizona’s agricultural economy. Durum wheat, the most common type of wheat produced in Arizona, is grown for a wide variety of domestic and foreign customers. Small grains, especially barley, have long served as a source of feed for the state’s large cattle feedlot and dairy industries as well as its hog, sheep, and poultry industries. Small grains play a critical role in maintaining soil and crop health for Arizona farms because other key agricultural crop sectors, such as those growing fresh produce and cotton, use small grains as import- ant components of their crop rotations. Finally, Arizona mills, bakeries, food manufacturers, breweries, and distilleries also use small grains in a small, but growing local foods movement.
The contribution of small grains production to Arizona’s economy goes beyond the direct effect of the dollar value of grain harvested from the fields. Grain production requires inputs of goods and services, many of which are supplied by local businesses. These local businesses in turn require their own production inputs. These rounds of business-to-business transactions providing inputs are known as indirect effects. Incomes generated in small grains production (farm profits, wages, and salaries) are also spent by house- holds for expenses such as rent or mortgages, doctor visits, and groceries, which produce more rounds of household-to-business transactions, known as induced effects. Because of these indirect and induced multiplier effects, the economic contribution of small grains in Arizona is considerably greater than indicated by farm gate sales figures.
Findings
- In 2014, Arizona’s small grains industry had direct sales (output) of $103 million. Including indirect and induced multiplier effects, the small grains industry had a total economic contribution of $206 million in sales to the state economy.
- The industry supported a total of 1,485 jobs in 2014. This included 814 jobs directly related to small grains production and an additional 671 jobs supported in other industries.
- Because agricultural production and prices are highly variable, estimates of direct effects and total agribusiness economic contributions can fluctuate significantly from year to year. In 2015, both total small grains production and prices increased to above 2014 levels. Direct sales rose from $103 million in 2014 to more than $150 million in 2015. The model used in this study (calibrated to represent Arizona’s economy as of 2014) was also used to estimate the multiplier effects of the 2015 small grains crop. Accounting for multiplier effects (based on 2014 relationships), the total contribution of small grains production to Arizona’s economy in 2015 was $300 million in sales (see report Addendum).
- The predominant forms of organization of Arizona small grains farms are family-based operations and partnerships. Family/individual operations and partnerships account for 71% of wheat-producing farms, while 22% of wheat-producing farms are organized as family-held corporations. Among barley-producing farms, 80% are family/individual operations or partnerships, with 13% organized as family-held corporations. Only 6 of 225 wheat-producing farms are organized as non-family held corporations, while only one out of a total of 177 barley-producing farms is organized as a non-family held corporation.
- Arizona small grains, particularly barley, are a source of feed for Arizona’s animal products industries, which had more than $2.3 billion in direct sales in 2014. Maricopa and Pinal Counties rank within or near the top 1% of all U.S. counties in measures of milk and feedlot-based production. The state’s feed requirements exceed state production, so producers rely heavily on feed grains shipped from the Midwest. Nevertheless, Arizona barley production fulfills several desirable features as a rotational crop and provides the state’s animal products industries with an additional, local source of feed.
- Arizona small grains are used by in-state mills, food manufacturers, restaurants, breweries, and distilleries for the production of local food products. If these grains were not produced locally, some businesses producing for “local foods” niche markets would be required to significantly change their business model and product lines.
- The study also considered the economic value of changes in small grains yields or prices. Assuming acreage and prices held at 2014 levels, a 5% increase in barley yields would produce a total annual sales contribution of about $1.8 million, while a 5% increase in wheat yields would produce an annual sales gain of $7.6 million. Assuming acreage and yields held at 2014 levels, a 10% barley price increase would contribute an additional $3.4 million in sales per year to the state, while a 10% wheat price increase would contribute $14.7 million in sales per year.
Methods
- The economic contribution analysis was conducted using input-output analysis and the premiere modeling software for this type of analysis, IMPLAN Version 3.1. IMPLAN is a modeling system for regional econ- omies based on national average production conditions. The model was refined based on best available recent data to more accurately reflect economic conditions and agricultural production practices in Arizona.
- The contribution of the small grains industry to the Arizona economy was modeled in IMPLAN and measured through the following metrics: sales (output), value added (GDP), labor income, jobs, and state and local taxes.
- A number of Arizona-based businesses directly source Arizona small grains for their production. These include flour mills, food manufac- turers, restaurants, breweries, and distilleries. These businesses were interviewed to determine the role of locally-produced grain products in their production, branding, and marketing decisions.