Agricultural economics refers to economics as it relates to the “production, distribution and consumption of [agricultural] goods and services”. Combining agricultural production with general theories of marketing and business as a discipline of study began in the late 1800s, and grew significantly through the 20th century. Although the study of agricultural economics is relatively recent, major trends in agriculture have significantly affected national and international economies throughout history, ranging from tenant farmers and sharecropping in the post-American Civil War Southern United States to the European feudal system of manorialism. In the United States, and elsewhere, food costs attributed to food processing, distribution, and agricultural marketing, sometimes referred to as the value chain, have risen while the costs attributed to farming have declined. This is related to the greater efficiency of farming, combined with the increased level of value addition (e.g. more highly processed products) provided by the supply chain. Market concentration has increased in the sector as well, and although the total effect of the increased market concentration is likely increased efficiency, the changes redistribute economic surplus from producers (farmers) and consumers, and may have negative implications for rural communities.
National government policies can significantly change the economic marketplace for agricultural products, in the form of taxation, subsidies, tariffs and other measures. Since at least the 1960s, a combination of import/export restrictions, exchange rate policies and subsidies have affected farmers in both the developing and developed world. In the 1980s, it was clear that non-subsidized farmers in developing countries were experiencing adverse effects from national policies that created artificially low global prices for farm products. Between the mid-1980s and the early 2000s, several international agreements were put into place that limited agricultural tariffs, subsidies and other trade restrictions.
However, as of 2009, there was still a significant amount of policy-driven distortion in global agricultural product prices. The three agricultural products with the greatest amount of trade distortion were sugar, milk and rice, mainly due to taxation. Among the oilseeds, sesame had the greatest amount of taxation, but overall, feed grains and oilseeds had much lower levels of taxation than livestock products. Since the 1980s, policy-driven distortions have seen a greater decrease among livestock products than crops during the worldwide reforms in agricultural policy. Despite this progress, certain crops, such as cotton, still see subsidies in developed countries artificially deflating global prices, causing hardship in developing countries with non-subsidized farmers. Unprocessed commodities (i.e. corn, soybeans, cows) are generally graded to indicate quality. The quality affects the price the producer receives. Commodities are generally reported by production quantities, such as volume, number or weight.