Value-added industries and activities are fundamental to agriculture’s viability, stability and contribution to economic development of the state. In general, value-added means any activity or process that increases the market value or utility of a product to consumers. In 2001, the value-added activities in Louisiana associated with selected agricultural products for which data are maintained was $3.9 billion and the level of farm income for these products that year was also $3.9 billion. That is, for every dollar of farm income last year, an additional dollar of value-added activity occurred in the state. Over the last five years, the value-added activities have averaged about $4.8 billion, while farm income averaged $4 billion. Agricultural production is what gives rise to the value-added component of the agricultural sector, and this component contributes significantly to the state’s economy.
Vision 2020, a document developed by Gov. Mike Foster’s administration outlines a plan for economic development in Louisiana focusing on the use of industry clusters. These clusters include groups of businesses that complement, compete and have similar needs for technology, human resources and infrastructure. Two sets of clusters have been identified, traditional and seed. Traditional clusters are based on existing industries and represent the state’s industrial core. They include shipbuilding; oil and gas; petrochemical; tourism; transportation; health care; agriculture and food products; wood, lumber and paper; and entertainment. Seed clusters have a strong foundation in university-based research and are expected to serve as engines of growth to transform the traditional clusters. The identified seed clusters include environmental technologies, food technologies, advanced materials technologies, medical and biomedical technologies, microsystems technologies and information technologies. Three clusters are directly related to value-added research and extension programs of the LSU AgCenter. They are 1) agriculture and food products, 2) wood, lumber and paper and 3) food technologies. Particularly critical to the success of the latter cluster is university-developed technology expected to serve as the engine for innovation.
Value-added also represents a major component of the delivery system for newly developed products emerging from research. Given the investment involved in bringing new technologies to the consumer, most companies are looking for exclusive licenses before committing to the production of new and improved products. Therefore, a role for value-added industries in the state is to ensure that new technologies and products are accessible to the end user.
A more subtle value-added activity that the LSU AgCenter is involved in is the maintenance of a coastal wetland area through the management of a watershed which results in the maintenance of an estuary. The value-added as a result of this activity is not as easily defined in terms of monetary or market value but is more appropriate when viewed from the foregone loss that might have occurred. The point is that while value-added takes on specific meaning in the market, there are numerous research and extension programs that would fall into the category of value-added activities where value is something other than market determined.
The most recognized use of the value-added term relates to the enhancement of the value of products. Why these activities are important to producers and consumers alike is at least partially due to the incidence of economic activity. For any given product, the more of the processing, packaging and distribution functions occurring within a state, the greater the level of economic activity and job creation. Economic activity and job creation lead to the ripple effects of new or additional sales leading to enhanced incomes, increased tax base, community services and standard of living.
Leo J. Guidry, Executive Vice Chancellor, LSU AgCenter, Baton Rouge, La.
(This article was published in the fall 2002 issue of Louisiana Agriculture.)