World Food Policy Volume 2, Number 1, Spring 2015 | Page 25

World Food Policy

slaughterhouse to delivery to wholesale),
primary production of animals accounts
for approximately 72% of the total cost.
But fully 10% of these costs arise from
transactions within the same meat sector,
which implies that the primary sectors
within “livestock” in reality account
for 80% the total costs paid to external
sectors. Implementing a policy that has
a significant impact on the primary farm
sector linked to raising livestock would
also have a significant impact on the meat
processing sector. Both stages are closely
interrelated and policies affecting one
affect the other, and in some case this
interrelation can be highly important
in terms of income. For example, in
Argentina, beef export restrictions, while
benefiting urban consumers, have very
large welfare implications in rural areas,
from the slaughterhouse to the ranch.

The case of the wine industry
is also an interesting illustration of the
importance of farm sector linkages
(Table 2b). The raw material (grapes)
represents approximately 22% of the
total cost of intermediate inputs in wine.
But winemaking is declared outside
of agriculture’s VA. Consequently, if
agricultural policy encourages (or
restricts) the expansion of the production
of grapes for wine through support
programs for irrigation, or genetic
development, or via a reduction of tariffs
on imports of agricultural inputs, etc., this
policy decision has implications for the
profitability and employment over a much
larger sector than that indicated by the
agricultural VA in national accounts. These
linkages between the primary agriculture
VA and the VA of other industries extends
to canning, dairy, seed oils, sugar, wood
processing, paper, ce llulose, and others.

A proposed measure of linkages:
adjusting
for
the
relative
importance of the primary sector
in downstream and upstream
activities

O

ne might be tempted, as has been
done in some studies, to attribute
to agriculture the entire VA of
related sectors. A simple sum, however,
of the VA of closely related activities
would overestimate the role of domestic
agriculture, because the VA of any sector
could be attributable to contributions
from multiple sectors. And other
activities could claim the same linkages
to agriculture. Furthermore, the ability
to import agricultural products as inputs
reduces the validity of attributing the VA of
other sectors to domestic agriculture. For
2008, Table 3 presents this exercise, using
32 sectors within and closely related to the
primary sectors making up “renewable
resources.” The sum of shares of the
various values added would reach 9.6%
of total national VA, considerably higher
than the 3.8% officially attributable to
the 12 activities in the broader renewable
resource sector.

To estimate the linkages of
agriculture to the national economy,
unlike a simple sum of the added values of
the other sectors, we propose a weighting
scheme that takes the weight of the
participation of the domestic primary
sector in the VA of other sectors. The
basic idea is to calculate an additional
component which represents a fraction
of the added values of other sectors.
This proportion is determined by the
dependence that each sector has on
agriculture as input or as destination of

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