“In other words, these programs have accounted for 15% of all the revenue generated by exports for U.S. agriculture over that time,” said Gary Williams, professor of agricultural economics and co-director of the Agribusiness, Food, and Consumer Economics Research Center at Texas A & M University, who led the study. “To me, such a positive result is just stunning.”
The study examined the effectiveness of U.S. Department of Agriculture’s (USDA
U.S. Wheat Associates (USW) represents U.S. wheat farmers in overseas markets and is a participant in the MAP and FMD programs. Private funding for USW’s export market development activities comes from 19 state wheat commissions and qualifies USW to compete for program funds. For every $1 wheat farmers contribute, they earn an additional $2 in MAP and FMD funding. A recent, separate study showed that between 2010-14, every $1 wheat farmers invested in the program generated an additional $149 in U.S. wheat exports and returned $45 in net revenue back to farmers from the increased export demand.
The 2016 study measuring the general effectiveness of total MAP and FMD funding showed that average annual farm cash income was $2.1 billion higher, and annual average farm asset value was $1.1 billion higher over 2002 through 2014. The programs increased total average annual U.S. economic output by $39.3 billion, GDP by $16.9 billion and labor income by $9.8 billion over the same time. The study results also showed that the economic lift created by 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 showed that average annual agricultural export revenue would be lower by $14.7 billion, 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 said.
The non-profit agricultural organizations that participate 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 FMD’s $34.5 million annual budget 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 U.S. 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. MAP and FMD participating organizations USW, USA Poultry & Egg Export Council and Pear Bureau Northwest sponsored the new study, which was funded by USDA FAS. Informa Economics IEG assembled data to support the study, recruited the 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 1, which 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 1,” 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 1 in 2007 and 35 to 1 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.”