Ask A Researcher

June 2023

Agriculture a Key Driver in the North Dakota Economy

Dr. Nancy Hodur is the director of the Center for Social Research at NDSU and has over 25 years of professional experience in applied research, public policy, and outreach education. Dean Bangsund is an economist in the NDSU Dept. of Agribusiness and Applied Economics. He specializes in Impact Assessment, and has over 25 years of experience conducting applied economic research. In this article, Nancy Hodur and Dean Bangsund share some of the findings of a research study that brings insight into the economic contribution of the North Dakota agriculture industry.

Agriculture has long been recognized as a key economic driver of the North Dakota economy. However, until recently the economic effects of agriculture have been limited to assessments of individual commodities such as soybeans, wheat, corn, sugar beets, etc. and their respective activities such as grain handling, transportation, and processing. Previous efforts have described the economic effects of pieces of the agriculture industry in North Dakota, not a comprehensive assessment.

Modern agriculture in North Dakota is much broader than farm gate commodity production. North Dakota’s agriculture industry adds value through commodity processing such as ethanol production, oil seed crushing, grain milling, corn milling, and food-grade packaging for various commodities. Agriculture includes all of the factors needed to move commodities from farm to end users, which includes grain handling and transportation networks. Commodity production also includes the entire farm and ranch service and supply sector which provides farm inputs such as seed, fertilizer, chemical, insurance, operating loans, and equipment and machinery. North Dakota also has a number of firms that manufacture machinery and equipment for in-state and out-of-state markets.

A Broader Assessment
Understanding the full breadth of North Dakota’s agriculture industry has been a high priority to industry leaders. In 2022, industry leaders came together to sponsor a comprehensive assessment of the agriculture industry in North Dakota. The recently released study is the first comprehensive assessment of the agriculture industry in North Dakota. In addition to estimating the economic significance of the industry using various metrics, the study helps to tell the story of agriculture and illustrate that agriculture is not just crop and livestock production in rural North Dakota but includes a wide range of services and activities throughout the state — and in North Dakota cities too.

Key Economic Metrics

Total Output. Overall, the agriculture industry contributes $30.8 billion to the state’s economy . Total output from the industry was $18.8 billion with secondary output of $12 billion. Total output is a measure of gross business volume. Direct effects represent the first round of business activity for a number of industry segments, and includes payments for labor, services, and goods used to produce a product or service. Secondary effects represent the economic activity created by businesses and households as a result of the direct or first round effects. The agriculture industry represents 28 percent of North Dakota’s total output for all economic sectors of $108.5 billion.

Value Added. Another metric used to describe economic effects is the industry’s contribution to the gross state product or value-added. Value-added measures gross domestic and gross state product which illustrates the size of an economy or segment of the economy. The agriculture industry contributed $13.4 billion to the state’s gross state product. Crop production accounted for the largest industry segment share, accounting for 56 percent of the industry’s contribution to gross state product with commodity processing accounting for an additional 19 percent. Overall, the agriculture industry accounts for 24 percent of the state’s total gross state product.

Employment. Agriculture also supports substantial levels of employment and labor income. From 2018 to 2020, the agriculture industry, on average, supported direct employment of 43,060 jobs and secondary employment of 67,420 jobs for total employment of 110,480 jobs. The 110,480 jobs supported by the agriculture industry represents approximately 19 percent of statewide employment. Fifty-five percent of agriculture industry employment was supported by crop production.

Production agriculture is somewhat unique in that self-employment represents a sizeable share of overall employment. To illustrate, employment is divided into wage and salary employment and the self-employed. While agriculture supports more wage and salary jobs overall, 69,030 wage and salary jobs compared to 41,450 self-employed jobs, it is the share of total state employment that is noteworthy. Agriculture supports 15 percent of the state’s total wage and salary employment and a third (33 percent) of the state’s total self-employment.

Labor income illustrates the financial compensation for all jobs in the industry. The agriculture industry averaged $3 billion in direct compensation and $4 billion in secondary labor compensation for a total of $7 billion in labor compensation. Average overall labor compensation was 21 percent of the state’s total labor compensation. Again, crop production was the largest contributor to overall industry labor income. Fifty-nine percent of labor income was a result of commodity production and another 17 percent was supported by commodity processing.

Leading Components of the Agriculture Industry
Among all economic metrics, crop production is the single largest component of the agriculture industry representing approximately half of the industry output and 11 to 15 percent of the state’s economy, depending on the metric considered. Commodity processing is the second largest industry segment representing 27 percent of total industry output and 8 percent of total statewide output. Livestock production accounts for about 9 percent of industry output and commodity handling and transportation account for about 7 percent of industry output with each accounting for about 2 percent of total statewide output.

Intuitively, it is widely known and accepted that agriculture is a significant and important part of the state’s economy. This study clearly demonstrates how important agriculture is to the state. Across three key economic metrics — total output, value-added, and employment — the agriculture industry represents about 20 to 25 percent of the North Dakota economy. In addition to demonstrating and quantifying the economic contribution of agriculture to the state’s economy, the study provides a baseline that can be used to measure future change in the industry.

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