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Corn+Soybean Digest

Study Highlights Success of Agriculture Market Development Programs

From the facilitation of a buyer's conference in Southeast Asia to spearheading feeding trials in Jordan, the U.S. Grains Council aligns its strategies with goals outlined by the USDA’s Foreign Agricultural Service (FAS) as part of a shared effort to increase export opportunities for U.S. producers. Through FAS-administered programs, such as the Market Access Program and the Foreign Market Development program, the council is able to increase U.S. market opportunities for U.S. grains and coproducts.

But just how effective are such programs and do they contribute to the U.S. farmer's bottom line? A recent independent study led by IHS Global Insight Inc. reveals that USDA's international market development programs have a positive and significant impact on U.S. agricultural trade and the work done by agricultural cooperatives like the U.S. Grains Council.

According to the study:

  • For every additional $1 expended by government and industry on market development, U.S. food and agricultural exports increased by $35.

  • Without the increased investment in market development since 2002, U.S. agricultural exports would have been $6.1 billion lower in 2009.

  • Export gains associated with the programs increased the average annual level of U.S. farm cash receipts by $4.4 billion and net cash farm income by $1.5 billion. At the same time, U.S. domestic support payments were reduced by roughly $54 million annually due to higher prices from increased demand abroad, thus reducing the net cost of the programs.

"This study says that market development works, it pushes exports to a higher level and benefits producers whether they export or not," says Mike Dwyer, director of the Trade and Biofuels Analysis Division at the Foreign Agricultural Service. "The price effect associated with the export gain benefits each bushel of grain marketed in any given year – foreign or domestic – so net cash income for the farm sector increases."

Criticism has been projected toward the inclusion of MAP in the U.S. farm bill with opponents claiming its exclusion would save taxpayers significant costs. However, Dwyer says scrapping MAP from the farm bill would be less beneficial to farmers and the savings would not be as great as people expect.

"If MAP was removed from the farm bill, tax payers would save $200 million in program costs. However, the study indicates that exports would decline, reducing farm prices and farm income. This would increase government domestic support payments, which could significantly reduce the net savings associated with reducing or eliminating the program," he says. "You can give a man a fish or you can teach him to fish. Market development programs boost U.S. producers' international competitiveness, which allows them to earn more of their income from the international marketplace, where the greatest sales growth will be. The market development partnership is an investment in the future of American agriculture and the study shows that it is more efficient than just sending a farmer a check."

For a shining example of just how agriculture cooperatives are using MAP successfully, Dwyer points to the U.S. Grains Council's work in developing the market for U.S. distiller's dried grains with solubles (DDGS) worldwide.

"The U.S. Grains Council is a poster child of how a well-crafted market development effort can help create a market out of thin air," he says. "Before the Council began its marketing efforts, foreign buyers did not know what DDGS was, how to use it or what results they could expect from using it in feed rations. But now we're seeing these incredible export gains for DDGS in a growing number of markets where activities were carried out, which wouldn't have been possible without a market development strategy."

The full Global Insight study, "A Cost-Benefit Analysis of USDA's International Market Development Programs," may be downloaded as a pdf.

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