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Cover of Amber Waves, December 2011 issue
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December 2011

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Methodology notes for Amber Waves Indicators

Measuring nonmetro-metro difference in poverty rates

The Census Bureau has not released official metro/nonmetro poverty estimates for 2004 due to sample redesign in the Current Population Survey (CPS).  The current metro/nonmetro classification, based on the 2000 Census, was phased in over a period of several months, including the period in which households were asked about their 2004 incomes.  As a result, the metro designation assigned to CPS households during this period is a mix of the old and new classifications, preventing a consistent measure of nonmetro poverty rates.

For more information, see . . .

The ERS Briefing Room on Rural Income, Poverty, and Welfare.

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Measuring agriculture's contribution to Gross Domestic Product

Each issue of Amber Waves includes a set of indicators relevant to the farming, rural, natural resource, and food sectors of the U.S. economy. Among those indicators are two measures designed to capture agriculture’s contribution to Gross Domestic Product (GDP). Recently, a new methodology for calculating those measures was introduced in Amber Waves. Under the new methodology, the scope of the agriculture measure is essentially the same. For the measure that captures agriculture and related industries, however, the scope has narrowed with the new methodology.

Until September 2005, the measures published in Amber Waves—food and fiber sector share and farm sector share—came from ERS’s food and fiber system (FFS) data series, which was discontinued in 2002. The current measures, introduced in September 2005, are derived using value-added industry estimates from the Bureau of Economic Analysis (BEA) National Income and Product Accounts. The value-added or net output of an industry is its gross output less the value of inputs obtained from outside the industry. The new measure defines the share of GDP attributed to agriculture and related industries more narrowly than the previous measure (which was called the food and fiber sector share).

Specifically, agricultural and related industry sector output is defined as the sum of the valued-added outputs of the following industries: farms, forestry, fishing, hunting, processed food, beverage, and tobacco products, textile and leather apparel, restaurants and drinking establishments. Some value-added payments reflect agricultural activities generated by nonagricultural demands. These industries were chosen to be included in the measure because of the key role of agricultural inputs in these industries and the availability of industry value-added data. BEA computes industry value-added estimates by using the actual gross output levels of each sector and the input output relationships within and across sectors.

In 2004, agriculture and related industries had a 4.8 percent value-added share of nominal GDP, consisting of a 1.0-percent share for farms; a 1.4-percent share for processed food, beverage, and tobacco products; a 1.8-percent share for food service and drinking establishments; a 0.4-percent share of textile and leather apparel; and a 0.3-percent share for forestry, fishing, and hunting.

For a detailed discussion of FFS methodology see . . .

Measuring the Economywide Effect of the Farm Sector: Two Methods, by William Edmondson, Mindy Petrulis, and Agapi Somwaru, TB-1843, USDA, Economic Research Service, July 1995.

The Food and Fiber System: Contributing to the U.S. and World Economies, Kathryn L. Lipton, William Edmondson, and Alden Manchester, AIB-742, USDA, Economic Research Service, July 1998.

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Measuring the Importance of Trade to U.S. Agriculture

Starting with the November 2003 edition of Amber Waves, ERS has published a volume-based measure of exports relative to production, which provides an aggregate indicator of the importance of trade to agriculture.  The export share of the volume of U.S. agricultural production is estimated from the sum of export volumes of commodities and processed products divided by their corresponding total volume of farm production.  To be consistent with production volumes and to represent export importance at the farm level, processed export volumes are converted to farm weight or fresh-weight equivalent using industry conversion factors.

U.S. agricultural commodities and their products are generally classified as either produced from livestock or from crops.  Livestock products include red meats, poultry meats, dairy products, eggs, animal fats and oils, and live farm animals.  Except for live animals, exported livestock products undergo some form of processing.  The major groups for crops include food grains, feed grains, oilseeds, fruits and nuts, vegetables, sugar, cotton, and tobacco.

As a rule, all agricultural commodities and products whose export and corresponding production volumes are available or convertible to weight measures were included in calculating the aggregate export share of U.S. agricultural production.  Exports of these categories comprised 78 percent of the total value of U.S. agricultural exports in 2005.

As of February 2007, three major changes were made in the estimate of export volume shares of processed agricultural products:

  1. For oilseeds, oilmeal, and vegetable oils, only total oilseed production volume is used as the denominator. Previously, production volumes of oilmeal and vegetable oils were added to oilseed volume, which overestimated the denominator. In addition, oilseed-equivalent weights of oilmeal and vegetable oil exports are now used in place of their product weights.
  2. Exports of grain products such as pasta are now included, using total U.S. grain production as the denominator. These products were previously excluded.
  3. Processed fruit and vegetable exports are now converted to farm weight. Formerly, their product weights were used.

These changes increased the volume of U.S. agricultural exports relative to their production volume, thus raising the collective export share of production.

For more information. . .

Measuring the Importance of Exports to U.S. Agriculture, by Nora Brooks, in Amber Waves, Volume 4, Issue 5, USDA, Economic Research Service, February 2007.

Estimating Export Shares of U.S. Agricultural Production, by Alberto Jerardo, in Amber Waves, Volume 1, Issue 5, USDA, Economic Research Service, November 2003.

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