Friday, October 8, 2010

The Food Assistance National Input-Output Multiplier (FANIOM) Model and Stimulus Effects of SNAP

The USDA just released a study of the impact of stimulus funds spending on economic activity involving the Supplemental Nutrition Assistance Program (SNAP).

From USDA's webpage for The Food Assistance National Input-Output Multiplier (FANIOM) Model and Stimulus Effects of SNAP:
USDA’s Economic Research Service uses the Food Assistance National Input-Output Multiplier (FANIOM) model to represent and measure linkages between USDA’s domestic food assistance programs, agriculture, and the U.S. economy.

From the report summary:
IOM and macroeconomic models have been used for assessing the multiplier effects from government expenditures authorized under the American Recovery and Reinvestment Act of 2009 (ARRA), a Federal response to the recession that began in 2008.

What did they find?
The FANIOM analysis of SNAP benefits as a fiscal stimulus finds that:
  • An increase of $1 billion in SNAP expenditures is estimated to increase economic activity (GDP) by $1.79 billion. In other words, every $5 in new SNAP benefits generates as much as $9 of economic activity. This multiplier estimate replaces a similar but older estimate of $1.84 billion reported in Hanson and Golan (2002).
  • The jobs impact estimates from FANIOM range from 8,900 to 17,900 full-time-equivalent jobs plus self-employed for a $1-billion increase in SNAP benefits. The preferred jobs impact estimates are the 8,900 full-time equivalent jobs plus self-employed or the 9,800 full-time and part-time jobs plus self-employed from $1 billion of SNAP benefits (type I multiplier).
  • Imports reduce the impact of the multiplier effects on the domestic economy by about 12 percent.
Source:, viewed Oct 8, 2010

Wednesday, July 28, 2010

Farm Aid makes the Economic Case

Farm Aid just released a report, Rebuilding America’s Economy with Family Farm-Centered Food Systems, that works to make the economic case for family farming. The report holds it's own set of extensive references and endnotes.

From the report comes this quick story:

The state of Michigan has ranked poorly in economic and public health indicators for decades. Importantly, much of the $1.9 billion worth of fresh fruits and vegetables consumed by Michigan residents comes from outside the state, despite the fact that state farmers produce the second-widest variety of farm products nationwide, just behind California. The authors estimate that Michigan farmers could generate almost 2,000 new jobs and $200 million in new income if they sell up to three times more fresh produce via in-state direct and wholesale markets. This scenario assumes no necessary shift in production, just the impact of re-localizing food dollars by utilizing Michigan’s existing cornucopia to meet consumer demand for fresh produce. In a state with many economic woes, a more localized and sustainable food system can play a critical role in establishing a stable economic future.

FarmAid Report: " Rebuilding America’s Economy with Family Farm-Centered Food Systems",, viewed July 28, 2010

Example story from Cantrell, Conner, Erickcek, & Hamm, " Eat Fresh and Grow Jobs, Michigan", Beulah, Michigan, Michigan Land Use Institute, C.S. Mott Group. September 2006,, viewed July 28, 2010

Tuesday, July 20, 2010

Economic Impact of Organic Production Systems

From the National Research Council recent report Toward Sustainable Agricultural Systems in the 21st Century come these factoids related to the economic impact of organic productions systems:

... Production costs per acre for the organic system were lower. Total labor for the organic system was higher, but because it was spread more equally through the growing season, the organic system had fewer off-farm hired workers.
- p. 228

... despite the lower yields of organic crops compared to conventional crops, organic systems can still be more profitable than conventional systems because of lower input costs and organic price premiums. When organic premiums were not included, conventional systems were generally more profitable.
- p. 229

... Organic practices tend to be more labor intensive (Klepper et al., 1977; Pimental et al., 2005) and often need more intensive management time (Porter et al., 2003) than conventional agriculture. In general, unpaid family members provide a larger proportion of the overall farm labor (Tegegne et al., 2001; Macombe, 2007; MacRae et al., 2007). As a result, the economic performance of organic farming systems can depend heavily on the input costs attributed to unpaid family labor (Hanson et al., 1997; Brumfield et al., 2000).
- p. 229

So, to push forward some discussion points:
  • Organic production systems may create year round jobs better than conventional systems, thereby assisting the stability and growth of rural communities.
  • Some organic producers may be profitable because they receive free labor.
  • Organic needs a price premium in order to achieve profitability, to cover the additional labor costs (and other costs?). A price premium of 10% may be the magic number, but this is determined by the market pricing.
  • Hiring people is always seen as a drain on the bottom line; however what we need is job creation.
Can we consider that hiring and paying people to work is good business?

Regional Food Economic Impact Research Highlights

A quick compilation of factoids from around the country related to the economic impact of regional production for regional consumption:

King County
“A shift of 20% of our food dollars into locally directed spending would result in a nearly half billion dollar annual income increase in King County alone and double that in the Central Puget Sound region.”
Source: Viki Sonntag, “Why Local Linkages Matter: Findings from the Local Food Economy Study,” Sustainable Seattle, April 2008,

“ For every food dollar spent locally by the two school districts, an additional 87 cents was spent in Oregon, generating a multiplier of 1.87 for farm to school spending.”
“Dollars spent in Oregon agriculture reverberated into 401 of 409 of the state’s economic sectors.”
Source: Ecotrust, " Farm to School Investment Yields a Healthy Return into State Coffers", March 18, 2009,, viewed March 19, 2009

“ If Iowans purchased a quarter of their produce from Iowa farmers, it would create $139.9 million in new economic output and more than 2,000 jobs for the state.”
Source: Sarah DeWeerdt, "Local Food: The Economics", Worldwatch Magazine, Worldwatch Institute, July/August 2009

“ Iowa State University research showed that if that region’s consumers ate five locally-grown fruits and vegetables each day for only the three months when they are in season, it would create $6.3 million of labor income, and 475 new jobs within the locale.”
Secondary Source: Ken Meter, "Local Food as Economic Development" Crossroads Resource Center October, 2008,
Primary Source: Swenson, David, “Economic Impact Summaries” covering Black Hawk County region. March. University of Northern Iowa Center for Energy and Environmental Education, 2008

“A 20 percent increase in local production, processing, and purchasing will generate $20 to $30 billion of new economic activity annually within the state’s borders. Thousands of new jobs will be created for farmers and farm-related businesses.”
Source: Illinois Local and Organic Food and Farm Task Force, " Local Food, Farms & Jobs: Growing the Illinois Economy: A Report to the Illinois General Assembly By The Illinois Local and Organic Food and Farm Task Force", March 2009, , viewed May 14, 2009

“Just in the city of Detroit, shifting twenty percent of food spending would increase annual output by nearly half a billion dollars. More than 4,700 jobs would be created, paying $125 million more in earnings. The city would receive nearly $20 million more in business taxes each year.”
Source: Michael Shuman, “Economic Impact of Localizing Detroit’s Food System”, Fair Food Foundation, , viewed May 18, 2009

New Jersey Fresh
“The study showed that each dollar spent on the Jersey Fresh program increased farm revenues by $31.54 … and $54.49 of increased economic output in the State. With a current budget for Jersey Fresh being about $800,000, this means an increase in farm revenues of $25.2 million, and a total increase in economic output for the state of $43.6 million.”
Source: New Jersey Dept. of Agriculture, 2004 Annual Report: Agricultural Statistics,

Washington Food Expenditures

Trying to calculate how much Washington State citizens spend on food I compiled and created these quick stats:

U.S. total annual food expenditures per capita (2008 dollars): $3,888
Source: US GAO report,” U.S. Agriculture: Retail Food Prices Grew Faster Than the Prices Farmers Received for Agricultural Commodities, but Economic Research Has Not Established That Concentration Has Affected These Trends”, GAO-09-746R June 30, 2009,, viewed Jan 20, 2010

Washington State Population: 6,549,224
Source: 2008 US Census

Total food expenditures for Washington citizens: $25,463,382,912

The Economic Impact of Increasing Production of Healthy food for Regional Markets

The Leopold Center for Sustainable Agriculture continues to kick out strong, timely research. In March 2010 the center released Selected Measures of the Economic Values of Increased Fruit and Vegetable Production and Consumption in the Upper Midwest. From the executive summary:

Two separate analyses were conducted. The first provides state-only estimates where the economic values are compiled considering each state’s farmers and each state’s consumption as a distinct and closed study area. The second analysis evaluates individual counties within the six-state region considering both their capacity and potential to produce fresh fruits or vegetables to serve medium to large metropolitan regional markets with populations in excess of 250,000 persons. This second analysis is indifferent to state boundaries.

Both research scenarios also presuppose that 50 percent of the local fruit and vegetable production will be marketed via producer-owned fruit and vegetable stores. The economic values of those activities also are partially estimated.

These are the relevant findings:

Under the first scenario:

* 270,025 cropland acres would be needed to produce the partial-year demands of 28 fresh fruits and vegetables in the six-state region. That is roughly equivalent to the average amount of cropland in one of Iowa’s 99 counties. Those acres would produce $882.44 million in farm-level sales, which would be worth $3.31 billion when sold at retail.
* Considering all industrial linkages, farm-level production would result in 9,302 total jobs region-wide, earning a total of $395.12 million in labor incomes.
* The land required to produce those fruits and vegetables would have to come from conventional agriculture as the amount of cropland is fixed. Considering all industrial linkages, corn and soybean production on those same acres supported 2,578 jobs and $59.12 million in labor incomes.
* If 50 percent of that production were sold via producer-owned markets, the region would need a total of 1,405 establishments staffed by 9,652 jobs earning $287.64 million in labor incomes.

Under the second scenario:

* The 28 metropolitan markets would require 195,669 fruit and vegetable acres to produce $637.44 million in farm-level sales.
* Considering all relevant multipliers, that farm-level production would support 6,694 jobs and $284.61 million in labor income in the six-state area.
* The land required to produce those fruits and vegetables would have to come from conventional agriculture as the amount of cropland is fixed. Considering all industrial linkages, corn and soybean production on those same acres supported 1,892 jobs and $42.517 million in labor incomes.
* It would take 875 fruit and vegetable markets to distribute these crops using the producer-retailers in the metropolitan areas that are actually within the region, which would in turn support 6,021 jobs in those establishments earning $180.7 million in labor incomes.

Source: David Swenson, "Selected Measures of the Economic Values of Increased Fruit and Vegetable Production and Consumption in the Upper Midwest", Department of Economics, Iowa State University, March 2010,

Satisfying Human Food, Feed, and Fiber Needs

Recently the National Research Council released a comprehensive report entitled Toward Sustainable Agricultural Systems in the 21st Century. I have grabbed a few key quotes from that report and encourage you to go purchase a copy of the almost 600 pages of information. From that conclusion chapter:

" As discussed in Chapter 1, satisfying human food, feed, and fiber needs is one of the sustainability goals in agriculture. Although practices for improving sustainability require taking some land out of production (for example, maintaining wetlands and riparian buffer strips), many farming practices for improving environmental sustainability do not compromise productivity and might even enhance yield (for example, cover cropping, crop rotations, and integrated pest management), as reported in Chapter 3. The determination of the production potential associated with various farming practices or systems at a regional or global level is actually a complex result of several interacting factors: production potentials (typical per acre crop yields or indicators of livestock feed efficiency and growth rates), land and input requirements, and biophysical resource qualities (Smil, 2000). Many studies have shown that with the right conditions and management, low-input and organic systems can have yields, productivity, and economic returns that are comparable to conventional systems (Liebman et al., 2008; Posner et al., 2008)."

Source: Committee on Twenty-First Century Systems Agriculture, "Toward Sustainable Agricultural Systems in the 21st Century", National Research Council, 2010, p. 207,

Profitability of US Farm Sector

Another NRC factoid:

" Statistics on the aggregate profitability of the U.S. farm sector disguise considerable variation in the economic performance of individual farms. For example, in 2007, only 47 percent of all U.S. farms reported positive net farm income, a drop from 57 percent of all farms in 1987. Most farms that lost money were relatively small operations that relied principally on nonfarm sources of income. Most farms in the United States are essentially family businesses that rely mainly on farm family members for their labor force (Gasson and Errington, 1993; Hoppe et al., 2007), and the majority of farm families also gain income from off-farm work. Nonfarm work or transfer payments are commonly used to supplement income from the farm business. The proportion of farm operators who work off-farm increased from 44 percent in 1979 to 52 percent in 2004. The proportion of spouses working off-farm grew from 28 percent to 45 percent during the same period (Fernandez-Cornejo et al., 2007). The contribution of off-farm income to the total household income of U.S. farmers rose from about 50 percent in 1960 to more than 80 percent in 2004 (Fernandez-Cornejo et al., 2007).

Source: Committee on Twenty-First Century Systems Agriculture, "Toward Sustainable Agricultural Systems in the 21st Century", National Research Council, 2010, p. 68,

Current state of small and mid-size farms

Another factoid from the NRC/NAS report:

" The mid-sized family farms (sales between $100,000 and $500,000) are examples of the prototypical “family farm” that has captured much of the public imagination and public policy debates over the future of American agriculture (Browne et al., 1992). According to the 2007 census, these mid-sized farms represented just under 10 percent of all U.S. farms, produced 16.5 percent of all farm sales, and managed another quarter of the nation’s farmland and nearly 30 percent of its cropland.

" Small and mid-sized family farms together owned two-thirds of the total value of farmland, buildings, and equipment and managed roughly 60 percent of all U.S. farmland and cropland in 2007."

Source: Committee on Twenty-First Century Systems Agriculture, "Toward Sustainable Agricultural Systems in the 21st Century", National Research Council, 2010, p. 49,

Local food markets account for a small but growing share of total U.S. agricultural sales

From USDA's Economic Research Service Report "Local Food Systems:
Concepts, Impacts, and Issues

• Direct-to-consumer marketing amounted to $1.2 billion in current dollar sales in 2007, according to the 2007 Census of Agriculture, compared with $551 million in 1997.
• Direct-to-consumer sales accounted for 0.4 percent of total agricultural sales in 2007, up from 0.3 percent in 1997. If nonedible products are excluded from total agricultural sales, direct-to consumer sales accounted for 0.8 percent of agricultural sales in 2007.
• The number of farmers’ markets rose to 5,274 in 2009, up from 2,756 in 1998 and 1,755 in 1994, according to USDA’s Agricultural Marketing Service.
• In 2005, there were 1,144 community-supported agriculture organizations, up from 400 in 2001 and 2 in 1986, according to a study by the National Center for Appropriate Technology. In early 2010, estimates exceeded 1,400, but the number could be much larger.
• The number of farm to school programs, which use local farms as food suppliers for school meals programs and promote relationships between schools and farms, increased to 2,095 in 2009, up from 400 in 2004 and 2 in the 1996-97 school year, according to the National Farm to School Network. Data from the 2005 School Nutrition and Dietary Assessment Survey, sponsored by USDA’s Food and Nutrition Service, showed that 14 percent of school districts participated in Farm to School programs, and 16 percent reported having guidelines for purchasing locally grown produce.