November 25, 2015

25/11/2015: Study shows US farmers get US$45-to-US$1 return from wheat export promotion funds

US wheat producers invested an average of US$4.9 million in checkoff funds per year to promote their milling wheat overseas between 2010 and 2014, and for every one of those dollars they received up to US$45 back in increased net revenue. That is a principal conclusion of a new economic analysis of wheat export promotion released today by US Wheat Associates (USW).

USW commissioned the study with funding from the USDA/Foreign Agricultural Service (FAS) Market Access Program. Dr Harry M Kaiser, the Gellert Family Professor of Applied Economics and Management at Cornell and director of the Cornell Commodity Promotion Research Program (CCPRP), designed and conducted the research using established methods from his 30 years of research experience.

“The study showed that investing in US wheat export promotion had a large and beneficial impact for producers and the economy that far exceeded its cost,” Dr Kaiser said.

“The econometric models we used showed that between 2010 and 2014 the total investment in wheat export promotion by farmers and the government increased total annual gross revenue by US$2.0 billion to US$3.0 billion. So for every US$1 farmers and the government invested, the estimated return in gross revenue to the US economy was between US$112 and US$179.”
Image: Antonin
Dr Kaiser added that the most likely annual gross revenue return is about US$149 for each dollar spent based on USDA supply elasticity studies.
Dr Kaiser quantified the impact of wheat export promotion through models that account for several factors affecting commodity export demand such as prices and exchange rates. The study determined that cutting promotion by 50 percent between 2010 and 2014 would have significantly reduced wheat exports by about 15 percent. That represents a total potential export loss equal to nearly 161.5 million bushels per year. The value of that loss was determined, then compared to total wheat export promotion cost to calculate a series of benefit-to-cost ratios (BCR).

The BCR from the total promotion cost averaged 14.9 to 1. Because producers contributed about one-third of the total producer and FAS investment through state checkoff program, the BCR for their investment averaged about three times the total, or about 45 to 1. Assuming farmers get ten percent of the total revenue, Dr Kaiser said the study shows wheat export promotion increased net revenue for farmers by more than US$247 million per year. The impact of in-kind contributions from state commissions was not considered in this study.

“Our organisation is accountable to wheat farmers and other taxpayers who fund the market development work we do,” USW President Alan Tracy said.

“Dr Kaiser’s research methods are well respected and the conclusions echo previous studies in 2004 and 2009, so we can very confidently say that the money farmers provide for export promotion is well worth the investment. In fact, the study predicts that increasing the promotion investment has the potential for even greater returns to wheat farmers, the wheat supply chain and the US economy.” 

USW will use additional results from the study to help plan and manage its future activities. The organisation has posted full study results on its website HERE.  

US Wheat Associates is the industry’s market development organisation working in more than 100 countries on behalf of America's wheat producers. The activities of USW are made possible by producer checkoff dollars managed by 18 state wheat commissions, in-kind support, and cost-share funding provided by USDA’s Foreign Agricultural Service.

To qualify for federal funds, USW is required to prepare and submit an annual, comprehensive Unified Export Strategy that details specific market development plans for every country and region. 

Read the economic analysis HERE.

Visit the USW site HERE.

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