Duration: 10/01/2001 to 09/30/2006

Administrative Advisor(s):

NIFA Reps:

Non-Technical Summary

Statement of Issues and Justification

Farm groups in the United States now spend some $1 billion annually on programs designed to enhance the demand for their products in domestic and foreign markets. The dairy industry, with levies at both farm and processor level, account for a significant share of these expenditures (about $300 million). However, citrus, beef, pork, and cotton spend significant funds as well, amounting to some $250 million in 2000. Altogether about 80 farm commodities conduct some form of promotion through state or federally-sponsored check-off programs. In addition, another $120 million in federal funds are made available through the Market Access Program (MAP) and the Foreign Market Development Program (FMDP) administered through USDAs Foreign Agricultural Service. These funds are matched by U.S. producer funds, and funds made available through foreign third-party cooperators. Thus, when federal and foreign funds are considered, the total annual investment in market development activities for U.S. agricultural commodities comes to about $1.2 billion. As such, there is considerable interest in the economic impacts of these expenditures, and in determining how the programs that they fund can be made more efficient.

The proposed activity addresses national priorities in several ways. First, Congress requires that federally-mandated commodity promotion programs be evaluated not less frequently than once every five years. Thus, there is a need to develop methods and data to address the Congressional mandate, especially if these evaluations are to be rigorous. A coordinated approach facilitates this by bringing together researchers who have a common interest in the problem to share ideas and research results. Since most of the federally-mandated programs are national in scope, the evaluation requires a national perspective, which lends itself to the multi-state approach. Second, export market expansion plays a central role in the new market-oriented farm policy. Research is needed to determine the extent to which non-price promotion can be effective in building export markets for U.S. agricultural commodities, and the costs and benefits of this approach vis-a-vis other policy instruments. Since federal subsidies are involved in export promotion, there is a general interest in knowing whether these subsidies are effective, and whether the expenditures are efficient.

Stakeholders in this research include the farmers who nominally fund the programs; consumers who share in the cost through tax shifting; promotion board managers who want to know whether benefits exceed costs and how funds can be allocated more efficiently; USDA personnel who have oversight responsibility; and policy makers who are concerned with social welfare and equity issues. For example, is commodity promotion a zero-sum game, as some contend, or is it possible to expand the total market such that all producers benefit? Does commodity promotion conflict with other public policy goals such as improved human health through better diets? (Most generic advertising is for diary products, beef, and pork -- items that are generally taken to be high in saturated fats and cholesterol and thus implicated in heart disease.) Given the ongoing consolidation in food processing and distribution, are farmers benefitting from their promotion efforts, or are most of the gains being retained by middlemen who possess growing oligopoly/oligopsony power? What are the distributional impacts of commodity promotion? For example, do large producers receive disproportionate benefits? How are consumers affected by these programs, and how should the impacts be measured? Answers to these and related questions will improve understanding of the economics of commodity promotion, which, in turn, should lead to better program management and public policy.

Objectives

Procedures and Activities

Expected Outcomes and Impacts

Projected Participation

View Appendix E: Participation

Educational Plan

Information generated by the committee is made available through published proceedings, minutes that are circulated after each meeting, and a web site.

Organization/Governance

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Literature Cited

Attachments

Land Grant Participating States/Institutions

AL, AZ, CA, FL, GA, IA, IN, MN, MS, ND, NY, OH, OK, PA, TX, WA, WI

Non Land Grant Participating States/Institutions

Arizona State University, California Department of Agriculture, California Tree Fruit Association, Cattleman's Beef Board, Dairy Farmers of Canada, Farm Foundation, National Pork Producers Council, Des Moines, Iowa, Ontario Milk Marketing Board, University of Alberta, University of Manitoba, USDA AMS, USDA, FAS