PUBLIC/PRIVATE PARTNERSHIPS

The Foreign Agricultural Service (FAS), an agency within the U.S. Department of Agriculture (USDA), is a partner with every aspect of the U.S. agricultural community - forest, field and stream - in promoting the growth of overseas markets for U.S. agricultural products. This partnership is vital to the continuing development of new markets and the maintenance of developed markets as recipients of the quality products that the U.S. agricultural community raises.

This public-private partnership has been evolving since its inception during the Eisenhower/Benson era in 1953 when it became apparent that U.S. production was outstripping domestic consumption and external markets were needed to absorb this bounty.  On March 10, 1953, the Foreign Agricultural Service was created as an agency.  It is a historically unique agency in that there is nothing like it anywhere else in the federal government.

 

The Evolution of the Market Development Programs

and the Public/Private Partnerships

 

Following is a very brief history (I) of the creation and evolution of the programs with a more historical description (II) of each, including how the allocation requirements and procedures have been refined and standardized to respond to the changing environment in the global marketplace.  You will also learn the philosophy behind the partnership, what drove its creation and how it works.  For more detail, please see "Why Have Them?" and "What's in the FAS Toolbox?" as subsets to this information.

 

I.  Brief History

Foreign Market Development (FMD) Program

The Ag Trade Development Act of 1954 authorized the use of foreign currencies generated by the sale of PL-480 surplus commodities "…to help develop new markets for U.S. agricultural commodities on a mutually beneficial basis."  The new agency recognized that it had neither the staff nor the necessary expertise to implement commodity promotion activities and began to look for U.S. partners (Cooperators) to work with them in this program. Cotton, wheat and tobacco were the first commodities to respond as they had organizations in place with export and promotion experience, the need to expand their markets overseas, the necessary commitment to long-term involvement and the necessary staff available to implement the programs.

 

FAS provided the statistical data and analysis while survey teams composed of FAS personnel and Cooperator staff met with in-country government officials and local trade under the auspices of the attachés and U.S. Embassy officials.  These teams researched the size of potential markets, the likely U.S. share, the nature and importance of local and not import competition, the tariffs and trade barriers in restraint of trade and the interest of local trade and processors in collaborating.

 

The first cooperative agreement was signed with the National Cotton Council in 1955, followed quickly by one with the Oregon Wheat Council.  FAS' outreach efforts to promote interest in exports and to enlist new groups resulted in a proliferation of agreements including tobacco, soybeans, dairy, millers, poultry and rice in 1956, followed by prunes, raisins, Florida citrus, Sunkist (California/Arizona), canned peaches, red meat, tallow and grease, hides and skins in 1957 and Northwest apples and pears and a small feed grains project in 1958.

 

This was the only program in place until the early 1980's when the U.S. saw a decline in exports after years of record gains, resulting in growing surpluses.  Added to this was the aggressive promotion and subsidization by U.S. competitors, eroding our foreign markets, and the imposition of trade barriers by these foreign markets, hampering further market expansion.  Responding to these threats, Congress passed the Food Security Act of 1985 which included the export initiative called the Targeted Export Assistance Program.

 

The U.S. Agricultural Export Development Council (USAEDC) was created at this time as well.  Its purpose then, as now, is to facilitate communications between FAS and the growing number of cooperators by serving as a liaison between FAS and the cooperators and coordinating two major FAS/cooperator meetings annually.

 

Targeted Export Assistance (TEA) Program

Initial funding for the TEA Program was set at $110 million for the first three years and $200 million for the remaining two.  It became quickly apparent that the amount of funding available permitted only limited expansion of trade servicing and technical information activities, as these are very labor intensive.  It did, however, allow an array of consumer promotions, which while initially costly, could be contracted through public relations firms and once developed be reused in the same and other markets with little additional cost or effort.  Consequently, the Horticultural and Tropical Products (H&TP) groups tended to be the major recipients.

 

The focus on the type of export began to change in the late 80's from bulk to more value-added products.  These value-added product promotions generated the development of branded product promotion programs whereby relationships were created with foreign brands, requiring them to utilize a specific percentage of the U.S. commodity in their products to gain promotional support.  These activities helped to grow the export market from $27.9 billion in 1987 to $40.1 billion in 1990.

 

The trade environment in the 1990's changed, and the U.S. response to those changes prompted Congress to pass the Food, Agriculture, Conservation and Trade Act in 1990.  This eliminated the TEA Program but created the Market Promotion Program (MPP) in its stead.  This Act funded MPP at $200 million per annum, a level that remained in place until 1993 when the Agriculture Appropriations Committee reduced it to $147.7 million.

 

Market Promotion Program (MPP)

High-value products, valued at $136 billion, accounted for 65% of world trade in 1990.  The U.S. share of this category was valued at $20 billion, double its share in 1985 at the inception of TEA.  Even so, it still only accounted for 15%, while the EU share was 24%.  The EU at this time was spending $1.46 billion to subsidize the production and export of justfruits, vegetables, wine and processed products compared to the U.S. expenditures of $200 million for allagricultural exports.  The Farm Bill of 1996 renamed MPP as the Market Access Program (MAP).

 

Market Access Program (MAP)

This revised a number of the criteria from the previous program including eliminating the export incentive program, requiring priority assistance for cooperatives equivalent to that provided to small firms and prohibiting direct funding assistance to foreign firms or for promotion of foreign-manufactured products.

 

The FMD and MAP programs have been refined over the years due to the different nature of the targeted audiences and the activities required to achieve success.  In 1997, FAS instituted a competitive allocation process for the FMD program based on goals projections versus actual export gains.  FMD allocation criteria includes six years of export history, a demand growth factor to reflect the longer term nature of the program and a focus on technical information and trade servicing activities targeting infrastructural impediments in markets that inhibit demand growth.  FMD cooperators tend to represent bulk product promotion through exclusively generic activities in less developed markets and consumer promotions are ineligible.  The MAP allocation formula, on the other hand, considers only three years of export history and goals to reflect the more immediate impact of consumer-targeted strategies.  MAP has become largely focused on value-added and consumer orientated trade promotion strategies.

 

Essentially, FMD allows for market development activities, laying the groundwork for subsequent MAP market expansion activities.  They work in tandem and one without the other would be ineffective.  The U.S. agricultural community cannot build a market (MAP) in a country/region that has not been researched and developed through trade servicing and technical information activities (FMD).  Likewise, it is essential to future market expansion that promotional activities (MAP) follow and build on the relationships established by the trade servicing and technical assistance activities (FMD) or the momentum will be lost and costly to regain.

 

Since the 2002 Farm Bill, these two programs have been funded throughout the Farm Bill cycles.  

 

In 2006, FAS commissioned a cost-benefit study by Global Insight, Inc. - the world's largest economic analysis and forecasting firm - to evaluate the impacts that the Market Access Program (MAP) and the Foreign Market Development Program (FMD) have on U.S. agricultural exports, the farm economy, and the larger U.S. macro-economy.  Using multivariate econometric models for bulk commodities and high-value products, they isolated the unique long-run trade impacts of market development.   (To read a full copy of this report, click here.  To see a summary of this report, click here.)  Major findings of the study are explained at the conclusion of this document.

 

A follow-up study to update the 2006 findings was completed in 2010.  A comparison between this study's updated trade models and those developed for the 2006 analysis indicates that the relationship between MAP and FMD spending and U.S. agricultural trade has strengthened in the intervening years.  Below is what IHS Global Insight found:

 

Analysis of current funding levels

  • Industry, incentivized by the government funding, unites and commits a significant level of industry funding to engage in overseas market development activities.  Industry contributions, when added to the current $234.5 million in government funding, brings the total level of funding to over $570 million per year.
  • Technical assistance and trade servicing (including trade policy support) accounted for most of USDA's market development programs (60%) while consumer promotions accounted for only 20%.
  • By 2009, increased market promotion and development spending is estimated to have increased U.S. export market share from 18.6% to 19.9% and the value of trade from $90.5 billion to $96.1 billion.
  • U.S. share of foreign imports are 1.3 percentage points higher and U.S. agricultural exports will be $6.1 billion higher as a result of the increased investment by government and industry during 2002-2009.
  • Multi-year impact of the increase in market development expenditures during 2002-2009 by both industry and government is equal to $35 in agricultural export gains for each dollar spent.
  • Total economic gain to the U.S. economy is estimated to be an annual average of $1.1 billion from 2002-2009 from increased market development activity.
  • An estimated 47% of the total trade impact of programs accrued to commodities that do not receive market development assistance - phenomenon known as the "halo" effect, i.e. non-promoted commodities benefited from increase promotion of other commodities in the same market.
  • Producer prices for bulk and high-value agriculture products increased, causing annual direct government payments to fall 0.36% (equal to $54 million).  Government spending for domestic supports (loan deficiency payments and countercyclical payments) fell about $0.30 for every $1 spent on MAP and FMD.
  • MAP and FMD are WTO compliant and thus provide another means of supporting domestic agriculture.

 

Analysis of reduction in funding

  • If these market development programs suffered a 50% decrease (less $280 million) in government and industry spending:
    • From 2009-2018, the U.S. share of rest-of-world (ROW) imports declines by $8.9 billion;
    • Farm cash receipts average $5.92 billion lower (1.8%) and net cash income drops $2.0 billion (2.6%) from 2012-2018;
    • Resulting reduced income and overall farm activity cause farm assets to decline in value by $44 billion and government farm income support payments to increase $60 million due to lower commodity prices.
  • Overall loss in economic benefits is approximately 13.5 times greater than the savings taxpayers would see from not funding the program and about 5.7 times greater than the combined cost reduction to taxpayers and cooperators.

 

Final Analysis

The MAP and FMD programs provide a basis for coordinated U.S. market development efforts that would otherwise be fragmented, under-funded or non-existent.  It dispels criticisms that the economic impact of MAP and FMD is unclear and unquantifiable.

 

II.  Historical Description

Foreign Market Development (FMD) Program

The early participation by farmers on the boards of the cooperator groups began generating broader national awareness of export markets and an appreciation for the opportunity they offered to absorb production and improve prices.  Support for these efforts was also growing among corollary industries, land grant universities, state departments of agriculture and local governments.

 

In 1959, the newly amended PL-480 provided that in all agreements negotiated with foreign governments, not less than 5% of the total sales value must be dedicated to market development for U.S. commodities.  This provision was responsible for the appreciable increase in available resources.

 

The 1960's saw exports and Congressional support for the program growing.  Economic development in Western Europe and Japan, marked by expanding populations, improving consumer incomes and diets, competitive U.S. prices, improved U.S. export quality and increased FAS services to exporters, was responsible for the growth of the program to 44 Cooperators in 67 countries.  The value of exports increased from $4.2 billion in 1956 to $5.6 billion in 1963.

 

The Agriculture Secretary's Task Force of 1960 recommended that the program no longer be thought of as "temporary" or simply an adjunct to PL-480.  Rather, dollars should be appropriated to markets where no foreign currencies were available.  In addition, it was recommended that 1.) contributions should be flexible depending upon the nature of the market, 2.) the sufficiency of U.S. staff to capably manage the program would be a determining factor in the program's size and 3.) export-related work in the U.S. (e.g. standards development, processing, packaging, labeling improvements, etc.) would be recognized as contributions to the program.  The regulations governing the program were also streamlined and simplified.

 

In 1963, the first independent evaluation effort was launched with Cotton Council International (CCI).  The team was composed of four non-CCI private industry/academics, one CCI staff member and one FAS specialist.  The results of this effort identified areas where the program could be strengthened, the dollars more effectively spent and the markets more aggressively pursued.  In addition, annual marketing plans were developed to address long-range regional planning with component country-specific plans to grow U.S. market share.  These marketing plans, developed in consultation with the attachés and approved by the Commodity Division Director, included discussions of a specific market's threats and opportunities, an outline of the current year's explicit and measurable short-range goals, a description of activities to address the problems and to achieve the goals as well as related budgets to accomplish the task.  Soybeans became the next commodity to engage in this evaluation effort and eighteen others joined the undertaking over the next seven years.

 

The years 1967-1972 were a very volatile period.  The Viet Nam war ended, President Nixon traveled to China (trade opportunities) and the Soviet Grain Sale (a trade opportunity that ended export subsidy programs and instigated export sales reporting) took place.  The states began voting in check-off programs, reflecting an increasing commitment to export markets and promotion and generating significant regular contributions.  FAS began focusing on more value-added product promotions, including branded promotion via the Export Incentive Program (EIP) and the Brand Incentive Program (BIP).

 

The state departments of agriculture became increasingly interested in export promotions but FAS had insufficient staff and resources to work with 50 individual states.  In response to the need, the Mid-America International Agri-Trade Council (MIATCO-renamed Food Export Association of the Midwest USA in 2007), a regional association of 12 state departments of agriculture, was created in 1969.  MIATCO's purpose was to act as an FAS field office, to recruit food processors for foreign trade fairs, to assist foreign buyer teams, to provide educational seminars for potential exporters and state agricultural staff and to promote products not represented by Cooperators.  Headquartered in Chicago at the state's expense, its initial staffing consisted of an FAS employee and a state agricultural representative.  Eventually, MIATCO was joined by three other state regional trade groups: Southern U.S. Trade Association (SUSTA), Eastern U.S. Agricultural and Food Export Council (EUSAFEC - now called Food Export USA-Northeast) and Western U.S. Agricultural Trade Association (WUSATA).

 

From 1970 to 1974, world and domestic trading environments were in a state of flux.  Several major commodities were in tight supply in the early 70's but rebounded with abundant supplies and even surpluses late in the period.  The U.S. dollar was allowed to float relative to other currencies, drifting lower throughout much of the period which helped exports on the one hand but made program expenses that much more costly overseas.  Inflation in the U.S. increased, peaking in the early 1980's as the state of the U.S. economy became a major world concern.  One significant positive development was the decline in production by major competitors and the resulting increase in foreign demand forced the liberalization of markets previously closed (e.g. China for cotton and the USSR for grains).

 

Several years of record exports resulted in an unexpected consequence at home as consumers became concerned that exports were tightening domestic stocks and inflating prices.  Congress and the press reacted, encouraging export controls instead of development.  This change in emphasis endangered the reputation of the U.S. as a committed exporter, so expensively developed via the FMD program.  It was seriously jeopardized by the decision of many exporters to abandon their hard-won and carefully cultivated foreign customers and export markets in favor of healthy domestic markets.

 

FAS redoubled its trade servicing and technical assistance efforts and focused on promoting products not deemed to be in short supply.  Cooperators were also encouraged to look farther afield and to pursue new markets in Eastern Europe, the Middle East, the USSR and Latin America.  In 1974, the FMD program was converted to full dollar appropriation.

 

As with all cycles, domestic supplies and carryover resumed their traditional levels in 1975-1976, once again demonstrating the need for an aggressive export policy.  Budget constraints, however, forced more streamlined administrative and program processes.  Agricultural exports in 1977 and 1978 were continuing to break records annually, the program enjoyed strong Congressional support and budgets were increasing.

 

The U.S. government adopted zero-based budgeting during this time and the FMD program adopted an annual strategic planning and budgeting process that calculated for every market a "Benefit Cost Ratio" (BCR) that identified export gains with and without the benefits of promotion.  These results would drive budgetary decisions.  The process included for the first time an effort to incorporate all of FAS' services and programs into a unified strategy by including cooperator input in the form of credit programs and trade policy initiatives.  It also included a mechanism that limited budget growth to only meritorious BCR-based expansion packages that identified initiatives in new markets for new products, addressed new "constraints" or funded "significantly underfunded opportunities".  This latter served to push programs toward more value-added products and into new market areas.

In 1978, Congress approved the Agricultural Export Trade Expansion Act, elevating the Assistant Secretary for Agriculture to Under Secretary, raising the rank of attachés to that of Counselor and authorizing the creation of Agricultural Trade Offices (ATO's) for the purpose of focusing exclusively on marketing efforts. The Act also authorized the employment of experienced mid-level marketing professionals from private industry to staff these offices.  The first of these offices were opened in Tokyo, Hamburg, London, Bahrain, Singapore and Hong Kong where significant numbers of cooperator offices were located, encouraging the cooperators to co-locate in the ATO, saving program costs and promoting cross-commodity cooperation and communication.

 

The years 1981 through 1985 saw a decline in U.S. exports after years of record gains.  The burgeoning surpluses necessitated costly Commodity Credit Corporation (CCC) storage and domestic support programs.  Of greater harm was the aggressive promotion and subsidization by U.S. competitors, eroding our foreign markets, as well as the imposition of trade barriers by these foreign markets, hampering further market expansion.

 

These same years also saw substantial streamlining in the administration of the program.  The format of the activity plans was simplified and standardized to better identify budgets by market.  The Marked Development Information System (MDIS), a computerized system to track budgets and expenses and produce consolidated management reports was created.  A Compliance Review Staff (CRS) was initiated to audit the cooperator accounts and other FAS functions.

 

Responding to the mounting surpluses and unfair foreign trade practices that were depressing exports, Congress passed the Food Security Act in 1985, creating a whole range of export-related initiatives, among them the Targeted Export Assistance (TEA) Program.

 

Targeted Export Assistance (TEA) Program

This program authorized the use of CCC commodity certificates or funds to "counter or offset the effects of unfair foreign trade practices on U.S. agricultural exports".  It was modeled after the FMD program with the caveat that participants would be only those eligible commodities whose exports had been adversely affected by unfair trade practices, with preference given to those that had filed successful 301 actions, and whose strategies demonstrated methods to counter or offset those effects.

 

Eventually, traditional (bulk) cooperators whose programs had been largely generic and trade servicing or technical in nature began to take advantage of the larger budgets available in TEA to promote more processed branded forms of their products (i.e. meat, poultry, peanuts, cotton, etc.).  The state regional trade groups also became very active in brand promotion providing opportunities for products for which branded programs were not available through their commodity groups.

 

As the TEA Program unfolded, demand for program participation was exceeding funds availability and a competitive allocation process was established in FY1987.  FAS published a Federal Register Notice, soliciting applications that were required to follow a specific format.  Each applicant had to address the nonprofit status of its group, its membership base, the projected contributions from its industry, the U.S. content of its promoted/exported product (at least 50%) and the export goals for each of its targeted markets.

 

Before approval of these activities was granted, the overseas agricultural posts and each of the FAS commodity divisions reviewed them and recommended refinements based on the applicant's past performance.  There were also Program Guidelines in place that required independent evaluators to assess the effectiveness of the program at the activity, market and program levels against specific quantified performance measures as described in approved activity plans.  The Assistant Administrator of FAS made the final decision.  

 

The trade environment changed in the 1990's and in response, the Congress passed the Food, Agriculture, Conservation and Trade Act in 1990, eliminating the TEA Program but creating the Market Promotion Program (MPP).

 

Market Promotion Program (MPP)

The allocation requirements for this new program were refined and standardized.   Program eligibility no longer required an unfair trade practice finding but FAS continued to give preference to those organizations that demonstrated such a finding.  A minimum contribution requirement of 5% was established for all participants.  The applicants had to demonstrate a correlation between requested budget relative to exports, requested budget relative to export goals and the achievement of actual exports as compared to prior year goals.  There were 65 non-profit associations participating with 80% of the funding being applied to promote high-value products and 40% of that earmarked for branded promotions.  These funds were distributed via the six commodity divisions within FAS: Agricultural Exports (AgEx); Cotton, Oilseeds, Tobacco & Seeds (COTS); Dairy, Livestock & Poultry (DL&P); Forest & Fishery Products (F&FP); Grain & Feed (G&F); and Horticultural & Tropical Products (H&TP).

 

The 1993 Omnibus Budget Reconciliation Act inserted some additional requirements.  It provided priority assistance to small-sized firms, per the SBA definition, in brand promotions.  It required certification that promotional expenditures are in addition to what would have been spent in the absence of the program and required participants to perform an independent audit of their program records.  (Both of these are now compliance factors and subject to audit by the Compliance Review Staff (CRS) of FAS).  In addition, it prohibited funds for tobacco, required a 10% minimum contribution, imposed a "sunset" clause on brand promotions, limiting them to no more than five years per product per company per market, and reinstated the unfair trade practice finding as an eligibility requirement.  Finally, it added factors to the allocation criteria, giving preference to U.S. firms over foreign firms and small firms over large ones in brand promotions, and it increased the allocations to the state regional trade groups (SRTG's) whose mission is to involve small and new-to-export companies in exporting.

 

The year 1994 saw NAFTA and the GATT Uruguay Round reduce or eliminate trade barriers within North America and worldwide and FAS establish a fixed allocation criteria and weights for assessing allocation recommendations across Divisions.  The program evolved further in 1994 with the publication of revised regulations that explained in detail the application process and allocation criteria, reduced paperwork requirements and clarified program evaluation requirements.

 

The Farm Bill of 1996 renamed MPP as the Market Access Program (MAP).

 

Market Access Program (MAP)

The value of this program has proven itself and it has been reauthorized in each subsequent Farm Bill.  Congress has supported the program and has annually approved the current authorization level of $200 million.

 

 

Major findings of 2006 IHS-Global Insight study:

Industry, not government, provides the majority of funding to carry out overseas market development activities.  MAP and FMD are public-private partnerships.  Using program allocation formulas that stress the importance of industry contributions to receive government funds, USDA has administered the programs to boost the overall level of market development (government and industry funds combined).  Government funds attract, not replace, industry funds.  As a result, total partnership spending grew 150% to over $500 million in 2007. This growth is largely due to sharp increases in industry contributions (up 222%) which have grew twice as fast as government funding under MAP and FMD (which rose 95%).  While government is an important partner, industry funds are now estimated to represent 59 percent of total annual spending, up from 46% in 1996 and less than 30% in 1991 which demonstrates industry commitment to the effort.  The sharpest gains in partnership spending occurred during the 2002 Farm Bill, rising by over $200 million in 2007 from 2001 levels as both government and industry spending increased.

 

Most market development is directed at technical assistance and trade servicing (including trade policy support), not consumer promotions such as advertising.  Many have characterized market development as synonymous with advertising.  However, the reality is 66% of program funding is used to carry out technical assistance and trade servicing.  This category includes trade policy support, which has grown rapidly in recent years, as industry groups use program funds to help address rising levels of SPS barriers that U.S. products face in global markets.  Only 20% of program funds are used in consumer promotions, largely for high value products under the MAP program.

 

Impacts Associated With Increased Market Development Under 2002 Farm Bill

 

Market development increases U.S. competitiveness by boosting the U.S. share of world agricultural trade.  Global Insight found that the increase in the government's investment in market development (MAP and FMD) authorized in the 2002 Farm Bill - combined with the increased contributions from industry -increased the U.S. share of world trade by over 1 market share point to 19%.  Without the increase in market development since 2001, the U.S. share would have been 18%.

 

Market development increases U.S. agricultural exports.  U.S. agricultural exports are forecast to be $3.8 billion higher in 2008 than they would have been had market development not been increased in the 2002 Farm Bill.  However, export gains will accrue well beyond 2008, reaching $5 billion once the full lagged impacts of market development are taken into account.  For every additional dollar spent on market development, $25 in additional exports result within 3-7 years.  Global Insight also found that 39 percent of the export benefits of market development accrued to U.S. agricultural products other than those that were being promoted.  Known as the "halo" effect, this provides empirical evidence that the program generates substantial export benefits not only for industry partners carrying out the activity (they receive 61% of the total export benefit) but for other non-recipient agricultural sectors as well (39% of the total export benefit).  This is a positive externality that has not previously been recognized.

 

Market development improves producers' income statement and balance sheets while reducing direct government payments.  The income statement is improved by the price and output effect that higher exports have on cash receipts and farm net cash income.  Annual cash receipts have increased $2.2 billion during the 2002 Farm Bill due to the additional exports from market development, with roughly half of this gain coming from higher farm prices and the other half coming from increases in production.  Higher cash receipts increased annual farm net cash income by $460 million, representing a $4 increase in farm income for every additional $1 increase in government spending on market development.  This means market development is an efficient means of farm income support relative to direct government payments.  Speaking of government payments, it is interesting to note that higher farm prices resulting from market development reduced annual direct payments by $180 million.  This is greater than the increase in government spending on market development mandated in the 2002 Farm Bill, meaning the marginal net cost of the programs was actually negative.

 

Likewise, producers' balance sheet benefits from market development.  The value of farm assets increased by $15 billion, largely due to increases in land values brought about by the higher farm activity and net returns generated from market development's export effects.

 

Market development's gains for agricultural producers do not come at the expense of the rest of the economy.  The overall economy experiences positive welfare gains of roughly $800 million annually from the trade effects associated with increased market development.  In fact, given the increases in government and industry spending on market development under the 2002 Farm Bill, there was a $10 return to economic welfare for each additional government dollar expended and a $5 return for each total dollar expended (government and industry funds combined).

 

Impacts of Alternate Funding Scenarios Associated With the 2007 Farm Bill

 

Global Insight evaluated the impacts that various funding scenarios for MAP and FMD could have on agricultural exports, the farm economy, and the larger macro-economy.  Two alternate scenarios to a baseline scenario were evaluated.  The baseline scenario was a continuation of both MAP and FMD at current levels -- $200 million for MAP and $34.5 million for FMD each year for the duration of the 2007 Farm Bill with no change in industry contributions.  One alternate scenario was to gradually boost MAP by $25 million a year to $325 million by 2012 and immediately boost FMD to $50 million with comparable increases in industry contributions.  The other scenario was a complete elimination of government funding of MAP and FMD with a gradual reduction of industry funding to 50% of their current levels.  Below is a summary of projected impacts.

 

Increasing market development in the 2007 Farm Bill would moderately increase U.S. market share and exports but eliminating market development would have very negative impacts.   Increasing government and industry investment in market development would increase the U.S. share of world agricultural trade by .6 market share points by 2012 and increase U.S. agricultural exports by $2.4 billion above the baseline scenario.  Eliminating the programs would reduce U.S. market share by 2.1 market share points from the baseline scenario level which would reduce exports by $8.5 billion.

 

Increasing market development in the 2007 Farm Bill would moderately improve producers' income statement and balance sheets while eliminating market development would significantly depress them.  Increased investment would boost annual farm cash receipts by almost $2.4 billion with most of the increase coming from higher farm prices stimulated by the export gain and a lesser amount from higher farm output.  Likewise, net cash farm income would increase by $600 million and the value of farm assets would rise by almost $16 billion.  On the other hand, eliminating the two programs would reduce cash receipts by over $4 billion (largely due to lower farm prices associated with reduced exports), net cash farm income would fall by almost $1.2 billion, and the value of farm assets would decline by almost $29 billion.  For every dollar saved by eliminating MAP and FMD, farmers' incomes would be reduced by $5.

 

How about direct government payments?  Under each of the scenarios, commodity prices are projected to rise to levels that will avoid much of USDA's price-based support payments.  As a result, expected savings in reduced support payouts will not offset the increase in market development funding. Nevertheless, the programs would still generate substantial returns to farm income for every dollar invested - by a margin of 5 to 1.

 

Ultimately, the 2007 Farm Bill included the same level of funding as in the previous Farm Bill - $200 million for the Market Access Program and $34.5 million for the Foreign Market Development Program.

 

Passage of the 2014 Farm Bill (Food, Farm and Jobs Bill) continues to recognize the benefits of these programs and continued their funding within the legislation.

 

A subsequent study as requested by the Government Accountability Office will be conducted in FY2015, the results of which will be reported here.