Agricultural export market development programs funded through the farm bill have contributed an average of $8.2 billion per year to farm export revenue between 1977 and 2014, for a total of more than $309 billion, according to a new study conducted by noted land-grant university economists.
“In other words, these programs have accounted for 15% of all the revenue generated by exports for U.S. agriculture over that time. To me, such a positive result is just stunning,” said study lead Dr. Gary Williams, professor of agricultural economics and co-director of the Agribusiness, Food & Consumer Economics Research Center at Texas A&M University.
The study examined the effectiveness of the U.S. Department of Agriculture’s Market Access Program (MAP) and the Foreign Market Development (FMD) program. They are part of a public/private partnership that provides competitive grants for export development and promotion activities to nonprofit farm and ranch organizations that contribute funds from checkoff programs and industry support.
The study measured the general effectiveness of total MAP and FMD funding and found that average annual farm cash income was $2.1 billion higher and annual average farm asset value was $1.1 billion higher from 2002 through 2014. The programs increased total average annual U.S. economic output by $39.3 billion, gross domestic product (GDP) by $16.9 billion and labor income by $9.8 billion over the same time period.
The study results also showed that the economic lift linked to these programs directly created 239,000 new jobs, including 90,000 farm sector jobs.
By testing what would happen if federal MAP and FMD funding were eliminated, the study found that average annual agricultural export revenue would be $14.7 billion lower, with corresponding annual average declines in farm cash income of $2.5 billion and significant drops in GDP and jobs.
“I would say these are very successful economic development programs based on their impact to the farm and general U.S. economy,” Williams concluded.
The nonprofit agricultural organizations that participated in MAP and FMD contributed about $470 million per year to the programs in 2014. That was more than 70% of total funding. The federal budget for MAP has been fixed at $200 million per year since 2006, and the $34.5 million annual budget for FMD has not changed since 2002. The Commodity Credit Corp. programs are administered by USDA’s Foreign Agricultural Service (FAS), which is required to report to Congress periodically on program effectiveness.
This is the third study of FAS export promotion programs since 2007 but the first to use an export demand analysis to measure their effectiveness. The U.S. Wheat Associates, USA Poultry & Egg Export Council and Pear Bureau Northwest, organizations that participate in MAP and FMD, sponsored the new study, which was funded by FAS. Informa IEG assembled data to support the study, recruited a team of five agricultural economists from Texas A&M, Oregon State University and Cornell University, interviewed dozens of MAP and FMD participants and reported on results.
The new study identified a return on investment from these programs between 1977 and 2014 of 28 to one, which Dr. Williams considers quite strong and is consistent with results from the two previous MAP and FMD cost/benefit studies.
“The average return on investment, or benefit-to-cost ratio, for 27 previous industry-specific export promotion studies is just under 11 to one,” Dr. Williams said. “So, I was, frankly, quite surprised that the return was this high. The previous MAP and FMD studies showed returns of 25 to one in 2007 and 35 to one in 2010.”
Informa’s report concluded that no matter what type of analysis is used or what time period is considered, “the results of this study and previous studies all demonstrate the importance and effectiveness of market promotion funding on exports, the farm economy and the overall macro economy.”