Food for Thought Series:

The Economic Impact of the Food System

The food system impacts the economy. Economic development activities targeting the food system can help grow this impact equitably.

How Do Food System Strategies Lead to Economic Impact?

This resource contextualizes several economic impact metrics with examples of economic development strategies relevant to the food system to spark conversations around potential food system actions at the local and/or regional level to grow economic impact in an equitable and sustainable way.

Economic impact typically measures changes in variables like gross domestic product (GDP), employment, sales, and tax revenue as the short-term or immediate effects of programs and policies implemented. Long-term strategies that involve structural changes, increased productivity, and improved quality of life—such as infrastructure improvements, education, and job creation—can spur economic development within a region, which, in turn, may have a stronger and more sustained impact than strategies that focus on short-term gains. Figure 2 below illustrates this relationship in a simplified way.

The sales of goods across the food supply chain provide one way to directly measure economic impact. An increase in sales typically indicates a growing economy, while a decrease suggests economic slowdown. Higher sales may enable businesses to expand, invest in new equipment, and hire more employees.

It is important to note, however, that sales alone do not tell the whole story!

Factors like inflation, consumer debt, and other economic indicators should also be considered when analyzing economic impact.

Figure 2. Simplified model of the relationship between economic development strategies and economic impact

Net Cash Income per Farmⁱ

Net cash income considers both revenue and expenses, enabling the assessment of the profitability of agricultural operations and the identification of areas where producers may need additional support to maintain viable businesses.

Food for Thought

What are the farm income trends for your region?

What might be some reasons producers are netting losses in Central Texas?

Key Messages for Central Texas

Due to production uncertainties and market fluctuations, farming is not always profitable.

At the regional level, net cash income per farm has been negative in each of the last three USDA Census of Agriculture years.

Only one-third of counties in Central Texas had positive net cash income in 2022, mostly in rural northern counties.

Community Voices

Stakeholders in the agriculture sector interviewed for CNAs highlighted rising costs associated with severe weather, processing, and transportation as major profitability issues, tempting even large farms to exit the farming business.

“I think it’s the weather, your soil is not the best, they’re new to farming, and they’re getting taken over by corporations. They give up…like, ‘Oh, I can sell my farm for this and let the Fortune 500 or a developer have it.’”
— Williamson County stakeholder

ⁱ Data Source: USDA National Agricultural Statistics Service, 2012, 2017, and 2022 Census of Agriculture. Counties with positive net cash income in 2022 (8): Coryell, Falls, Freestone, Limestone, McLennan, Milam, Mills, and San Saba.

Key Food System Metrics for Economic Impact

Below is a snapshot of data on the Central Texas Food System Dashboard related to economic impacts.

Agricultural Sales by Product Categoryⁱⁱ

The types of agricultural products grown can vary greatly in their profitability. Sales data do not encompass profit, nor do they account for production costs, market fluctuations, and other factors that directly impact a farm's bottom line. Nonetheless, sales of agricultural product types can help identify which types of producers may require additional support to maintain business viability and ensure a consistent supply of nutritious foods.

Food for Thought

Which product types account for the most sales in your region?

Other than inflation, what are some drivers that could cause sales to fluctuate, and how can these trends impact which crops producers are willing to grow?

Key Messages for Central Texas

Looking at agricultural product sales, every category increased between 2017 and 2022.

Average grain sales were at least four times higher per farm than any other type of agricultural product. Most of these grains, however, are not grown for human consumption but for livestock feed or fuel (ethanol).

Fruits/vegetables was the only category in which average sales were lower in 2022 than in 2012.

Community Voices

Stakeholders interviewed for CNAs emphasized that population growth and associated development have driven up land costs, which can strongly influence what farmers decide to grow in order to make a profit.

“If decision makers care about the quality of the food that the people living here are eating, they must come up with a way to conserve farmland, to set aside farmlands because, at $80,000 an acre, there is nothing you can grow on that and ever make a profit.”
— Bastrop County stakeholder

ⁱⁱ Data Source: USDA National Agricultural Statistics Service, 2012, 2017, and 2022 Census of Agriculture. Count of farms by type in 2022, 2017, and 2012, respectively: Total: 29,448; 33,729; 35,536. Grains: 1,002; 1,195; 1,455. Cattle: 15,782; 17,431; 18,037. Other Livestock: 6,476; 7,455; 6,294. Fruits and Vegetables: 1,445; 1,287; 1,168. Cotton and Other Field Crops: 4,743; 6,361; 8,582.

Processing and Distribution Salesⁱⁱᵛⁱ

Higher processing and distribution sales across a variety of categories may help keep more agricultural products within the region, create jobs, and help producers get their products to local markets.

Food for Thought

Which types of processing and distribution facilities exist in your region?

What additional data might help determine the capacity of regional processors and distributors?

Key Messages for Central Texas

In 2023, processors of non-alcoholic beverages and meat had the highest average sales. Among distributors, "Other" (includes general food service) and "Dairy" lead in sales.

The wide range of average of sales reflects the limited number of processing and distribution facilities in Central Texas and the highly variable sales volumes.

Critically, these figures do not identify the types of businesses involved in processing and distribution (as this sector is often dominated by large corporations) or which producers they serve, hindering a comprehensive understanding of the regional food system.

Community Voices

Stakeholders interviewed for CNAs mentioned the lack of local processing and distribution infrastructure as a compounding challenge for farmers, due to increased transportation and storage costs.

“[The farmer] shuts down for summer because it’s just too hot for the birds. And his model is that he…takes them—God, I don’t know how far. But far. Because…the closest processing plant isn’t here anymore. … But then he needs cold storage. … He thought he was going to have profit this year, but because of the amount of money he had to spend on cold storage…I don’t think he broke even.”
— Bastrop County stakeholder

ⁱⁱⁱ Data Sources: Purchased from Data Axle Jan. 2024. USDA Food Safety and Inspection Service Meat, Poultry and Egg Product Inspection Directory (July 2, 2024 edition). Count of Processing and Distribution businesses providing sales data, respectively: Total: 94, 43. Condiments: 7, 4. Dairy: 5, 4. Grain: 9, 1. Meat: 36, 4. Non-Alcoholic Beverages: 12, 11. Other: 9, 5. Produce: 2, 13. Snack Foods: 14, 1.

Value-Added, Direct-to-Consumer, and Locally/Regionally Branded Salesⁱᵛ

Increases in direct-to-consumer and locally/regionally branded products may result from expanded marketing opportunities for producers, keeping more money in the local economy. Increases in sales of value-added products may also result from increased access to markets and/or income diversification among farmers.

Food for Thought

What do value-added producers and sales look like in your region?

Through which channels can local producers sell their products in your region, and which channels are most profitable for producers?

Key Messages for Central Texas

Average sales of direct-to-consumer and value-added products increased between 2017 and 2022, while average sales of locally and regionally branded sales fell. Overall sales increased across all three categories from 2017 to 2022.

Examples of direct-to-consumer markets include farmers markets and community-supported agriculture programs (CSAs). Value-added products include items like jams, salsas, and pickled vegetables.

Community Voices

Stakeholders interviewed for CNAs observed increased engagement with local food outlets during the COVID-19 pandemic. Potential reasons for this shift were a desire to support the local economy and environment by reducing the distance food travels.

“Anecdotal evidence says that the customer base, that the market has grown three times what it was before. … Yeah, I think the pandemic…was really helpful for farmers markets.”
— Hays County stakeholder

ⁱᵛ Data Source: USDA National Agricultural Statistics Service 2017 and 2022 Census of Agriculture. Number of operations with the following types of sales in 2022 and 2017, respectively: Value-Added: 432, 263. Direct-to-Consumer: 1,315; 1,332. Locally/Regionally Branded: 1,482; 113.

Sample Strategies from Food Plans to Support Economic Development

Below are a few sample strategies mentioned in food plans across the U.S. that address the issues outlined above and can be implemented at the local or regional levels. Strategies listed here do not represent an exhaustive list and are not intended to serve as recommendations—they can serve as a starting point to explore further.

Strategies to expand existing and develop new processing and distribution infrastructureᵛ include exploring public-private partnerships and tax incentives to invest in new facilities that are critical to the food supply chain.²⁻¹⁷

Strategies to strengthen food system workforce development at all career levels include integrating farm and food system job training and education into curriculum and career planning in schools, building skill development opportunities like apprenticeship programs, and advocating for high-quality food system jobs.⁴˒⁷⁻¹⁰˒¹⁵˒¹⁷˒¹⁸

Strategies to support business growth and diversification through technical assistance servicesᵛⁱ for farmers and ranchers include exploring ways to increase coordination among service providers; and targeting outreach to young, beginning, and small- and mid-sized farmers and ranchers, as well as food business entrepreneurs.⁴˒⁷˒⁸˒¹¹˒¹³⁻¹⁹

ᵛ Examples of processing facilities include those designed for packing, manufacturing, cold storage, and freezing; distribution facilities include those designed for aggregation, storage, and transportation.

ᵛⁱ Common topics covered by technical assistance help farmers and ranchers sell new products, access new markets, and successfully manage their businesses: production education, business planning, value-added processing, navigating regulations, marketing, financial literacy, risk management, and scaling up to meet requirements for entering larger-volume markets like wholesale.

Learn More

Explore the Central Texas Food System Dashboard for more food system data, including county-level data, insights, and questions.

For a curated list of food system resources, visit our Resources page.

Questions or feedback? Contact research@centraltexasfoodbank.org.

Click here to download a printable PDF of “Food for Thought: The Economic Impact of the Food System” (coming soon!).

References

Last updated January 2025