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TRANSCRIPT
THINKING ABOUT THE ECONOMIC
IMPACTS OF LOCAL FOOD SYSTEMS
Steven Deller
Department of Agricultural and Applied Economics
University of Wisconsin-Madison/Extension
Laura Brown
Center for Community Economic Development
University of Wisconsin-Extension, Cooperative Extension
I. The difficulty in defining local food systems
II. What data is available?
III. How could we start to use this data?
IV. Economic impact vs. growth vs. development
V. How do we measure the impact of businesses in
the local food system?
VI. What is a multiplier and how is it related to local
food systems?
Thinking About the Economic Impacts of Local Food Systems
Local foods initiatives are diverse and work in many
different aspects of the food system
Defining Local Food Systems
Local foods initiatives may have multiple goals
• improved nutrition-health and diet related disease
• environmental sustainability
• transparency and food safety
• food quality
• social justice
• social capital or relationship building
• rural or agricultural revitalization
• community economic growth and development
Defining Local Food Systems
The rationale offered to support the community
economic development argument ranges from
• shorter supply chains resulting in higher margins
(higher profits)
• the ability to charge premiums (higher prices)
• more profits retained in the local economy
(Goldschmidt hypothesis).
Defining Local Food Systems
There is no universally accepted definition for “local”
consumer or intermediated consumer perspective (Dunne, 2010, Zapeda, 2006).
proximity- distance, drive time, food-miles (Dunne, 2010, Darby 2008, King, 2010, Zapeda, 2006)
geo-political boundaries- states (Darby, 2008)
local ownership of farm (Low, 2011)
relationship to place (Marsden, 2000)
production techniques used
marketing channels used (Low, 2011)
size/scale (Low, 2011)
products (commodity versus non commodity crops)
quality relationships /supply chain (Marsden, 2000, King, 2010)
Integration of supply chain (Marsden, 2000)
Defining Local Food Systems
• What is the question?
• What information do we need to answer
the question?
• Who will use this information?
• How will they use it?
• When is it needed?
• How will we do it?
“Planning and Program Evaluation Worksheet.” University of Wisconsin-
Extension • Cooperative Extension • Program Development & Evaluation UW-
Extension http://www.uwex.edu/ces/pdande
Before we measure anything..
He uses statistics as a
drunken man uses
lamp-posts
for support rather than
illumination
Andrew Lang (1844-1912)
US Agricultural Census
Percent of farms with direct sales for human consumption, 2007 and 2002
Value of agricultural products sold directly to individuals for human consumption 2007 and 2002
Percent of farms with value added commodities, 2007
Percent of farms with agri-tourism or recreational services, 2007 and 2002
Income From Farm-Related Sources: 2007 and 2002 including agri-tourism and recreation
Percent of farms using Community Supported Agriculture, 2007 and 2002
USDA Farmers Market Database
What Data is Available
Walworth County • Agriculture provides 3,780 jobs
• 76.4% are family owned
• 9% of farms sell direct to consumers (WI 8%, US 6%)
• Percent of farms direct marketing declined since 2002
• Value of products sold direct to consumers declined 30% since 2002
• 2.8 % of farms produced value-added products (WI 3.6%, US 3.6%)
• 1% of farms marketed products through CSA
• Percent of farms involved in agri-tourism and recreational activities declined since 2002
What does this say about our local food system? What questions does this data bring up?
Using the Data – Walworth County
Marketing and Distribution - Direct Sales
US Agricultural Census 2002 and 2007.
www.agcensus.usda.gov Accessed 11-2011
Total amount of sales made directly to consumers(in thousands)
0
$1-$250
$250 - $499
$500 - $999
$1000 - $1499
$1500 - $2684
Low
and
Vogel 2
01
1 (U
SD
A E
RS)
Farms with Direct Sales 2007
Direct Sales Volume 2007
Farms with Direct Sales 2007
Direct Sales 2007
Direct Sales per Farm 2007
Direct Sales per Farm 2007
What we don’t know..
“…little historic data exists regarding sales by local
food farms beyond direct marketing channels.
Inter-mediated sales, which may account for
significantly more local food sales than direct to
consumer sales alone, was not collected until 2008
when it was included in the Agricultural Resource
Management Survey.” (Low and Vogel, 2011)
Direct Sales (2007): $1.2 billion
Inter-mediated Sales (2008): $4.8 billion
What we don’t know..
Low and Vogel (2011) also find that the direct-
to-consumer market is dominated by smaller
farms (less than $50,000 in sales) while the
intermediated market is dominated by larger
farms (more than $250,000 in sales).
Direct Sales per Farm 2007
Economic Impact vs. Growth vs. Development
Economic impact is a static concept.
(with and without)
Growth and Development are dynamic concepts.
Economic Impact vs. Growth vs. Development
90.0
110.0
130.0
150.0
170.0
190.0
210.0
Some event
The growth rate is
2% prior to the
event and is then
3% after the
event.
The “impact” of
the event is said
to be 1%.
Economic Impact vs. Growth vs. Development
• more jobs
• more businesses
• more tax base
• more residents
• more, more, more…
• quality of life
• economic security
• economic opportunities
balanced growth
Growth Development
Economic Impact vs. Growth vs. Development
Demand
Supply
Quantity
Price
Q1
P1
Before “event” economic
activity equal to P1*Q1
P2
Q2
The “event” occurs and
now economic activity is
equal to P2*Q2.
How do we measure the impact of
businesses in the local food system?
To assess the economic impact of local foods systems we
need data on how demand has changed.
New demand for products of local farmers
Lost demand for current suppliers of those products
For example, I join a local CSA for fresh produce and I
buy less produce at the local grocery store.
How do we measure the impact of
businesses in the local food system?
I am substituting one type of expenditures for
another type….
what is the net impact?
Initial $1.00of exports
40¢ respentlocally
60¢ leakage
16¢ respentlocally
24¢ leakage
6¢ respentlocally
10¢ leakage
3¢ respent
3¢ leakage
(a) (b) (c) (d) (e) (f)
2¢ leakage
1¢ respentlocally
Initial impact: $ 1.00.40.16.06.03.01
----------
Full impact: $ 1.66
But first, what is a multiplier
Example
Lets say, for example, that we see an increase in the
demand for locally grown produce:
New Local farm sales: $1M in direct sales
(plus)
Lost Local grocery store sales: $1M is direct sales
(minus)
Example
Impact Type EmploymentLabor
IncomeTotal Income
Industry
Sales
Grocery Store -6 -$157,073 n.a. -$1,000,000
Farm Produce 7 $1,030,720 n.a. $1,000,000
Net Direct Effect 1 $873,647 $278,626 $706,000
Indirect Effect 2 $67,984 $153,938 $242,567
Induced Effect 7 $252,497 $477,325 $754,354
Total Effect 9 $1,194,128 $909,888 $1,702,921
Dane County 2009
What Don’t We Know?
One of the arguments for supporting smaller scale farms is they
are more likely to make their input purchases locally.
Specifically, the initial leakages for “local foods farmers” is
smaller than for more traditional commercial farmers……..
Initial $1.00of exports
40¢ respentlocally
60¢ leakage
16¢ respentlocally
24¢ leakage
6¢ respentlocally
10¢ leakage
3¢ respent
3¢ leakage
(a) (b) (c) (d) (e) (f)
2¢ leakage
1¢ respentlocally
Initial impact: $ 1.00.40.16.06.03.01
----------
Full impact: $ 1.66
In other words, the multiplier
for “local foods farmers”
should be bigger than
traditional commercial farmers.
But we do not fully understand
if this is true or not.
What Don’t We Know?
From an economic growth perspective which type of
agriculture has a greater role in generating growth?
Two competing theories:
Export Base (more money coming in)
Import Substitution (keep money local)
Should we be promoting local foods for local consumption or
products for export to California or overseas? Or both?
What Don’t We Know?
• What role does value added processing play?
• How do we define “local”? Is Chicago considered “local”
for an artisan cheese located in Green County?
• Does community supported agriculture yield sustainable
levels of income for farmers?
• How does a disjointed network of “local foods farmers”
form contracts for institutional purchasing?
References
Barkley, D.L. and P.N. Wilson. (1992). “Is Alternative Agriculture a Viable Rural Development Strategy?” Growth and Change. Spring:239-253.
Boarnet, M.G., S. Chalermpong and E. Geho. (2005). “Specification Issues in Models of Population and
Employment Growth.” Journal of Regional Science 84(1): 21–46
Carlino, G.A. and E.S. Mills. (1987). “The Determinants of County Growth.” Journal of Regional Science. 27:39–54
Darby, K., et al. 2008. “Decomposing Local: A Conjoint Analysis of Locally Produced Foods,” American Journal of Agricultural Economics, Vol. 90, pp. 476-486.
Deller, S.C., B.W. Gould and B. Jones. (2003). “Agriculture and Rural Economic Growth.” Journal of
Agricultural and Applied Economics. 35(3):517-527.
Dunn, J.B., K.J. Chambers, K.J. Giombolini and S.A. Schlegel. (2010). “What Does ‘Local’ Mean in the Grocery Store? Multiplicity in Food Retailers’ Perspectives on Sourcing and Marketing Local Foods.” Renewable Agriculture and Food Systems. 26(1):46-59.
Durham, C.A., R.P. King, and C.A. Roheim. ( 2009). “Consumer Definitions of ‘Locally Grown’ for Fresh
Fruits and Vegetables.” Journal of Food Distribution Research , Vol. 40, pp 56-62. Goldschmidt, W. (1947). As You Sow. Glencoe, IL: Free Press.
Goldschmidt, W. (1978) “Large-scale Farming and the Quality of Life in Rural Communities: Further Specification of the Goldschmi dt Hypothesis.” Rural Sociology. 43:362-366.
Hammond, G.W. and M.S. Tosum. (2009). “The Impact of Local Decentralization on Economic Growth: Evidency from U.S. Counties.” Institute for the Study of Labor IZA Discussion Paper No. 4574. Bonn, Germany. ftp://ftp.iza.org/RePEc/Discussionpaper/dp4574.pdf
Henry, M. (1986). “Agriculture’s Stake in Rural Economic Development.” Northeast Journal of
Agricultural and Resource Economics. October:75-85.
Ikerd, J. (2005). Eating Local: A Matter of Integrity, presentation at The Eat Local Challenge kickoff event, Portland, OR, June 2. http://www.tierramiguelfarm.org/f iles/20081126_Eating%20Local.pdf
Irwin, E.G., A.M. Isserman, M. Kilkenny, and M.D. Partridge. (2010) “A Century of Research on Rural
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King, R.P., M.S. Hand, G. DiGiacomo, K. Clancy, M.I. Gomez, S.D. Hardesty, L.Lev and E.W. McLaughlin. (2010). Comparing the Structure, Size and Performance of Local and Mainstream Food Supply Chains . USDA ERS Report Number 99. June.
Lapping, M.B. (2004). “Toward the Recovery of the Local in the Globalizing Food System: The Role of Alternative Agricultural and Food Models in the US.” Ethics, Place and Environment. 7(3):141-150.
Lewis, D.J., G.L. Hunt and A.J. Plantinga. (2003). “Does Public Lands Policy Affect Local Wage Growth.” Growth and Change. 34(1):64-86.
Low, S.A., and S. Vogel. (2011). Direct and Intermediated Marketing of Local Foods in the United States , ERR-128, U.S. Department of Agriculture, Economic Research Service, N ovember.
Marsden, T., J. Banks and G. Bristow. (2000). “Food Supply Chain Approaches: Exploring their Role in
Rural Development.” Sociologia Ruralis. 40(4):424-438.
Martinez, S., M. Hand, M. DaPra, S. Pollack, K. Ralston, T. Smith, S. Vogel, S. Clark, L. Lohr, S. Low and C. Newman. (2010). Local Food Systems: Concepts, Impacts, and Issues, ERR-97, U.S. Department of Agriculture, Economic Research Service, May.
Nzaku, K. and J.O. Bukenya. (2005). “Examining the Relationship Between Quality of Life Amenities and Economic Development in the Southeast USA.” Review of Urban and Regional Development Studies . 17(2):89-103.
Park, J.R., Stabler, M.J., Jones, P.J., Mortimer, S. R., Tiffin, J.R., Tranter, R.B. (2009). “Evaluating the Role of Environmental Quality in the Sustainable Rural Economic Development of England.” Environment, Development and Sustainability. 11 (4):735–750.
Waltert, Schulz and Schlapfer (2009). “The Role of Landscape Amenities in Regional Development: Evidence from Swiss Municipality Data.” Paper presented 1st International Conference on Landscape Economics, Vienna March 2.
Zepeda, L., and J. Li. (2006). “Who Buys Local Food?” Journal of Food Distribution Research. 37:1-11.
References
Discussion
THINKING ABOUT THE ECONOMIC IMPACTS
OF LOCAL FOOD SYSTEMS
Is economic impact important to your work in local
food systems? If so how?
What other impacts are you most interested in and
how are you measuring them?
What successes have you had in measuring impacts?
What are the challenges to measuring impacts?
What impacts should we be measuring statewide?