Why Domestic Capacity Matters for U.S. Agriculture

By Faith Parum

Key Takeaways

• Domestic processing capacity supports farm demand and rural economies. When commodities are processed in the United States, more of the food dollar stays in the domestic economy — supporting rural jobs, strengthening local markets for farmers and anchoring economic activity in agricultural communities.
• Loss of capacity increases export reliance and vulnerability. As processing and manufacturing shift overseas, farmers become more dependent on global markets to absorb production, exposing both farm income and rural economies to trade disruptions, geopolitical risks and supply chain shocks.
• Once capacity leaves, it is difficult to rebuild. Processing facilities require large capital investments, skilled labor and established supply chains. When plants close, rural communities lose major employers and rebuilding that infrastructure can take decades.

American agriculture is among the most productive sectors in the world. Advances in plant and animal genetics, mechanization and precision agriculture have driven remarkable yield gains. Corn yields have risen from 38 bushels per acre in 1950 to about 187 today, nearly a fivefold increase, while soybean yields have more than doubled. Yet, productivity alone does not determine farm profitability.

Agricultural commodities must move through processors, manufacturers and retailers before they generate income for farmers. Where that processing occurs determines where the economic value accumulates. Oilseeds become cooking oils and renewable fuels. Grains become ethanol and animal feed. Cotton becomes textiles and apparel. When these activities occur domestically, the value created supports American businesses, workers and rural communities. When processing moves overseas, that value moves with it.

On March 10, American Farm Bureau Federation President Zippy Duvall testified before the Senate Committee on Agriculture, Nutrition and Forestry on the importance of rebuilding domestic demand and maintaining a resilient agricultural supply chain. This Market Intel highlights several sectors where the erosion of domestic processing capacity has reshaped how farmers market their crops and where they absorb risk.