Study Measures Value of Pork Checkoff to Producers

by 5m Editor
23 July 2007, at 9:26am

US - A recently completed study of the economic value of Pork Checkoff programs has concluded that the returns to producers, on average, substantially outweigh the costs.

The peer-reviewed study, conducted by economists at RTI International of Research Triangle, NC, and North Carolina State University, also concludes that the Pork Checkoff has “a significant positive effect on the demand for hogs and pork.”

The compulsory five-year review is required by the US Department of Agriculture as part of its oversight of the National Pork Board and Pork Checkoff programs. The results for the latest study , An Economic Analysis of the Effectiveness of the Pork Checkoff Program, have just been released and presented to members of the National Pork Board. It will now go to USDA for review.

Steve Meyer, president of Paragon Economics and a consultant to the National Pork Board said that the results were reasonable when compared to similar analyses of a broad array of producer-funded Checkoff programs.

The study concludes that based on data from the five years of the study, marginal increases in Checkoff program expenditures would increase producer profitability, on average.

Specifically, the study’s results indicate an overall marginal benefit-cost ratio – the net return to producers divided by the program cost – of 13.8, “indicating that producers would gain an additional $13.80 for each additional $1 of program expenditures.” That ratio is the combined ratio of an analysis of four specific Checkoff expenditure categories: Production research; post-farm research (marketing-chain research); domestic promotion; foreign market development.

Among the four expenditure categories, the study found the highest average benefit-cost ratios for marketing-chain research, followed by foreign-market development.

Overall, the authors note, “The results of the study indicate that the average hog producer experiences net benefits as a result of the [Checkoff] program. It is also important to note that there have been several years of low prices and high production costs for the average hog producer during 1999 through 2005. However, the econometric models presented in this study suggest market conditions for hog farmers would have been significantly worse without the program.”

“Studies such as these are best used to describe the impacts past Checkoff programs and expenditures have had on the economic situation facing producers,” said MR Meyer said. “It is historical, and while activities are measured in dollar terms, the results are heavily impacted by how a given number of dollars is used. For instance, one of the reasons that pork promotion expenditures have been effective is that the Pork. The Other White Meat® campaign was a good idea that resonated with consumers and effectively repositioned pork in the marketplace. The same number of dollars spent on a different idea may well have not had the same impact.”

Meyer said the USDA’s requirement that this study be done every five years also serves producers by giving the National Pork Board an incentive to focus on the potential return on investment of the programs and activities it supports.

The authors of the study said that the results for the four expenditure categories are consistent with other studies of generic promotion and research programs, including a previous study of the Pork Checkoff program conducted by Texas A&M economists in 2001. That study, employing slightly different methodology, found an average benefit-cost ratio of 16 for the years 1986 to 1998.

Click here for an executive summary of the study

5m Editor