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Investment in Market Development Programmes

by 5m Editor
19 September 2011, at 10:10am

US - US beef, pork, corn and soybean producers are receiving a solid return on their checkoff investments in the US Meat Export Federation’s (USMEF) export market development programmes, according to a study completed recently by Dr Harry Kaiser, the Gellert Family Professor of Applied Economics and Management at Cornell University and director of the Cornell Commodity Promotion Research Programme.

In fact, every industry dollar invested in these programmes over the past 10 years returned an average of $15 in net revenue for the pork industry and $8 to the beef industry.

"An Economic Analysis of the US Meat Export Federation’s Export Market Development Programmes" was commissioned by USMEF to quantify the returns that the US Department of Agriculture’s Foreign Agricultural Service (FAS) and the beef, pork, corn and soybean checkoff programmes receive from their investments in USMEF’s export market development programmes. The independent study was funded by the USDA and Dr Kaiser was chosen from several researchers who proposed to do the research.

"It is clear that US beef and pork export market development and promotion programmes have had a significant and positive impact on meat export net revenue," said Dr Kaiser.

The economic model showed that combined producer and USDA marketing expenditures increased US red meat exports by more than 30 per cent per year. According to Dr Kaiser, "This increase in exports due to export market development translated to between $46.3 million (for beef) and $85.7 million (for pork) in average annual extra net revenue to the industry, which is far higher than the average annual $27.5 million cost invested by producers and the USDA."

The study determined that reducing export promotion and development programme funding by 75 per cent between 1995 and 2010 would have reduced US beef exports by 36.1 per cent and US pork exports by 30.1 per cent, a total export loss equal to almost 537 million pounds per year for the eight top foreign markets analyzed in the model. The value of that loss was determined, then compared to total beef and pork export promotion cost to calculate a series of benefit-to-cost ratios (BCR).

The overall BCR for USMEF market development programmes had median values of 3.87 for beef and 7.42 for pork. This means that the average return to meat producers on each $1 invested by them and the government in market development activities in international markets was $3.87 for beef and $7.42 for pork.

"Because producers contributed approximately half of the total dollars spent on export marketing, the median BCRs for their half of the spending averaged between 7.74 (for beef) and 14.84 (for pork) times their investment, which are very high returns," noted Dr Kaiser.

These results suggest that US export promotion have a very important impact on import demand for US beef and pork. In comparing the results of this study to those of 16 studies of similar programmes for other commodities, Dr Kaiser notes: "The results of this study suggest that US beef and pork export promotion has had a larger impact on imports of US meat than most other export promotion programmes.“

Dr Kaiser also looked at the regional impacts of these programs and found two of the most important markets for US meat exports, Mexico and Japan, had the highest gains in imports due to export market development. Collectively, USMEF programs in these two countries accounted for 373 million pounds per year in increased exports of US beef and pork.

"Dr Kaiser’s study is beneficial because it provides an independent analysis of the returns that US producers’ investments as well as USDA funds generate through USMEF’s international market development programmes,“ said Philip Seng, USMEF president and CEO. "When the process is transparent and measurable, our funding sources can make informed decisions on how to invest their funds and feel confident that the benefits to producers and taxpayers are solid."