Duration: 10/01/2006 to 10/01/2011

Administrative Advisor(s):

NIFA Reps:

Non-Technical Summary

Statement of Issues and Justification

The U.S. Congress and successive presidential administrations have long recognized commodity promotion as a key pillar of agricultural policy. Indeed, compared to other ways of increasing the returns to farming, collective promotion by groups of farmers is relatively efficient, budget-neutral and controlled by the farmers themselves. Indeed, as reaffirmed by the U.S. Supreme Court in its recent decision in the case of Veneman versus LMA, commodity promotion represents a valid form of government speech as it is a means by which farmers can achieve the aims of public policy through their own collective action. However, perhaps because commodity promotion represents a regulated private activity that is designed to serve a policy goal, there are a number of economic questions that must be answered in a rigorous way. Answering these questions is particularly important given the magnitude of the investment involved, some $1.0 billion annually.

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 dairy 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.

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.

Objectives

Procedures and Activities

The NECC-63 meets twice yearly to share information on theoretical developments in the economics of commodity promotion, the results of empirical studies on evaluating the effectiveness of commodity promotion, legal decisions and developments, as well as strategies and practices used by both commodity commissions and firms engaged in marketing commodities. These meetings consist of a combination of formal paper presentations, slide shows from industry practitioners and roundtable discussion sessions. Members are encouraged to freely engage in the discussion and to present differing points of view on issues of current controversy. Each meeting is organized around a central theme such as "distributional issues in commodity promotion," "structural change in agricultural marketing channels and commodity promotion," or "nutrition, obesity and marketing agricultural commodities." Approximately once every three years, an entire meeting is dedicated to the practice of commodity promotion evaluation, so academic researchers can interact directly with industry practitioners on methods that are not only theoretically correct, but "state of the art" in demand analysis. Summaries, presentations and papers from each meeting are made available on the NECC-63 website: http://www.nec63.org/.

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

Standard (see attachment for current officers and executive committee)

Literature Cited

Attachments

Land Grant Participating States/Institutions

AL, CA, IN, MN, ND, NY, OH, OR, WA

Non Land Grant Participating States/Institutions

Farm Foundation, National Pork Producers Council, Des Moines, Iowa, University of Alberta, University of Manitoba, USDA AMS, USDA, FAS