Soybean Checkoff International Market

Transcription

Agribusiness,Food,andConsumer
EconomicsResearchCenter
TexasA&MUniversity
December2014
Dr. Gary W. Williams
Department of Agricultural Economics
Texas A&M University
College Station, Texas
Report to the U.S. Soybean
Export
Council
i
Return to the Soybean Checkoff International Market Promotion Program
RETURN TO THE SOYBEAN CHECKOFF INTERNATIONAL
MARKET PROMOTION PROGRAM
Report to the U.S. Soybean Export Council, St. Louis, Missouri, December 2014
A
uthor: Dr. Gary W. Williams is Professor and Co-Director of the Agribusiness, Food,
and Consumer Economics Research Center (AFCERC) in the Department of
Agricultural Economics at Texas A&M University. He has been doing research on
soybean markets for about 45 years.
A
cknowledgments: This study was conducted under contract with the U.S. Soybean
Export Council (USSEC). Thanks are due to various individuals who provided assistance
in the preparation of this report. Dr. Oral Capps, Jr., AFCERC Co-Director with Dr.
Williams, provided input into the report and helpful comments. In a separate companion project,
Mr. Jim Bob Ward and Mr. Darold Ziegler worked tirelessly to collect and prepare the checkoff
expenditure data used in this study. Dr. Sang Hyeon Lee did much of the work to prepare the
expenditure data from that companion project for the analysis that supported this study. Loren
Burns provided clerical assistance. The results and conclusions of this study were not influenced
or impacted in any way by anyone connected with USSEC or any other component of the
soybean checkoff program. The views and opinions expressed in this study are those of the
author and do not necessarily reflect those of USSEC, the United Soybean Board, any of its
primary contractors or subcontractors, QSSBs, or other groups associated with the checkoff, or
the Texas A&M University System. All errors and omissions in this study are those of the
author alone.
The Agribusiness, Food, and Consumer Economics Research Center
(AFCERC) provides analyses, strategic planning, and forecasts of the
market conditions impacting domestic and global agricultural,
agribusiness, and food industries. Our high-quality, objective, and timely
research supports strategic decision-making at all levels of the supply chain
from producers to processors, wholesalers, retailers, and consumers. An
enhanced emphasis on consumer economics adds depth to our research on the behavioral and
social aspects of health, nutrition, and food safety. Through research efforts, outreach
programs, and industry collaboration, AFCERC has become a leading source of knowledge on
how food reaches consumers efficiently and contributes to safe and healthy lives. AFCERC is a
research and outreach service of Texas A&M AgriLife and resides within the Department of
Agricultural Economics at Texas A&M University.
Executive Summary
T
he most recent study of the producer return from the overall soybean checkoff program
concludes that the program “continues to be highly effective in enhancing the
profitability, competitiveness, and size of the U.S. soybean industry” (Williams, Capps,
and Lee 2014). The study considered the aggregate market effects of the three main promotion
components of the program: (1) production research, (2) domestic market promotion, and (3)
international market promotion. The separate effects of the three program components, however,
were not analyzed. The primary goal of this study is to adapt the methodology used in the recent
analysis of the aggregate returns to the soybean checkoff program to analyze the relationship
between the expenditures on the international marketing promotion component of the program
and changes in U.S. exports of soybeans, soybean meal, and soybean oil over the 1980/81 to
2012/13 period. The specific objectives are to: (1) provide more detail on the effects of the
soybean checkoff program on exports than provided in the recent soybean checkoff study, (2)
determine the gross return to international market promotion in terms of the additional export
revenue generated per dollar spent on international market promotion, and (3) determine the
return to soybean producers from changes achieved in exports of soybeans and soybean products
per dollar spent on international market promotion. The study first provides some background on
the international market promotion expenditures of the soybean checkoff program. The
methodology and the data used are then discussed followed by an analysis of the foreign market
effects of the soybean checkoff program and a benefit-cost analysis of the international market
promotion program. The key conclusions of the study are then summarized and some
implications for the management of the international market promotion component of the
soybean checkoff program are discussed.
Between 1970/71 and 2011/12, over $1.39 billion of soybean checkoff funds were spent
promoting the U.S. soybean industry of which an average of 55.0% supported international
market promotion programs. In the early years of the checkoff program, international market
promotion consistently accounted for between 70% and 80% of total soybean checkoff
investments. With the implementation of the national checkoff program, increasing allocations of
checkoff funds to production research and domestic promotion quickly reduced the international
market promotion share to about 45% by the early 1990s and 35.5% by 1996/97. Allocations to
international market promotion subsequently struggled to remain at around $20 million between
1997/98 and 2005/06. By 2011/12, allocations to international marketing had increased to $36.7
million but at a much slower pace than allocations to either production research or domestic
promotion resulting in a further erosion of the international market promotion share to about
30% by 2011/12. Although Japan and Europe were the key target markets of international market
promotion in the early years, China and small but rapidly growing markets in Asia, Latin
America, the Middle East, and Africa have commanded an increasingly larger share of those
funds, currently accounting for about 90% of all international promotion expenditures. The
commodity focus of those activities funded by international promotion expenditures has varied
i
from an emphasis on soymeal in the 1980s and early 1990s to an emphasis on soybeans over
much of the last decade to more of a balance between the two in recent years. Soyoil activities
account for only about 2%-4% of international promotion expenditures.
Using the econometric simulation model of world soybean and soybean products markets developed
for the recent analysis of the soybean checkoff program by Williams, Capps, and Lee (2014) and the
related database of expenditures, two scenarios were simulated over the period of 1980/81 through
2012/13: (1) a “with expenditures” scenario that assumes the soybean checkoff program was in
place over that period and (2) a “without expenditures” scenario that assumes the soybean
checkoff program had never been implemented. Differences in the simulated levels of the model
variables (country production, demand, prices, trade, etc.) in the “with expenditures” scenario
from those in the “without expenditures” scenario were taken as direct measures of the effects of
the checkoff expenditures over time. The simulation results indicate that since the
implementation of the national checkoff program in the early 1990s, growth in expenditures for
international market promotion along with the growing shift of those funds to promote soybeans
rather than value-added soybean products and a simultaneous 4.3% lift in U.S. soybean
production from the overall checkoff program sharply boosted soybean exports over that period
with an average annual export “lift” of about 1.7 million mt (6.4%). The “lift” is the average
annual increase in market variables like production, exports, or prices generated by checkoff
expenditures over some period of time. The checkoff program also provided a lift to Brazilian
and Argentine soybean exports but to a much smaller extent so that the U.S. share of world
soybean exports increased. For U.S. soymeal and soyoil exports, the checkoff program lift was
11.2% and 18.4%, respectively, since the implementation of the national checkoff program
with a similar boost in the U.S. share of world exports of those products.
Using the “with” and “without” simulation results, the soybean checkoff program is estimated to
have generated just over $20 billion in additional export revenues (6.7%) over the 1980/81 to
2012/13 period. The gross soybean and soybean product export revenue benefit-cost ratio
(EBCR) is calculated to be 34.8 to 1. In other words, for every dollar of international promotion
expenditure over the 1980/81 to 2012/13 period, $34.8 of additional export revenue (net of the
cost of the promotion) were generated. In terms of export revenue generated, therefore, the
return to international market promotion has far exceeded its cost.
Of course, not all the revenues from the additional U.S. soybean, soymeal, and soyoil exports
generated by international market promotion have accrued to producers over the years. Others
also have benefitted who do not pay any of the costs (free riders) such as exporters, processors,
feeders, manufacturers, and others along the domestic supply chain. Also, the additional revenue
accruing to producers in the form of cash receipts from the greater production of soybeans
required additional production costs which must be netted out of the additional revenues earned
by producers. This is done in the calculation of the grower profit from exports BCR (NEBCR)
which measures the net revenue actually accruing to producers from the additional exports
generated by international market promotion per dollar of international promotion expenditure.
ii
Again, using the with expenditures and without expenditures scenario results, the additional exports
generated by the soybean checkoff program are estimated to have generated an additional nearly
$12 billion in soybean farm cash receipts (2.1%) over the 1980/81 to 2012/13 period. The
additional soybean grower profits generated by the additional exports (the additional cash
receipts minus additional production costs) amounted to $6.2 billion over the same period. Thus,
the NEBCR (the return to growers per dollar spent on international market promotion net of the
cost of international promotion) is estimated to be 10.1 to 1. In other words, soybean growers
received an estimated $10.1 in additional profits from international market promotion for every
dollar spent on international market promotion over the 1980/81-2012/13 period. Clearly, the
profits received by soybean growers from international market promotion also have far exceeded
the cost of that promotion to them.
The 10.1-to-1 BCR to producers from international market promotion is consistent with the
export promotion BCRs calculated for numerous other checkoff commodities. Also, the 10.1-to1 return to producers from international market promotion calculated in this study is higher than
the 6.5-to-1 return to producers from the overall soybean checkoff program (NBCR) reported by
Williams, Capps, and Lee (2014). This result is also consistent with the results from most other
studies of checkoff programs which have found that export promotion BCRs tend to exceed
those for domestic programs.
An important word of caution is in order. Although, the grower BCR to international market
promotion of $10.1 calculated in this report is slightly higher than the $9.2 BCR calculated in the
previous report (Williams 2012), caution should be taken in drawing implications from that fact
primarily because both the expenditure data and the model of the world soybean and soybean product
markets used for this analysis have been extensively revised and updated since the 2012 study was
completed. The most appropriate conclusion from comparing the two BCRs is that the estimated
return to producers from international market promotion is highly robust. That is, despite an updated
and extensively revised expenditure database and simulation model, the returns to international
market promotion calculated in this study are remarkably similar to those reported in the previous
study.
Another word of caution also should be mentioned. The level of any checkoff BCR is largely
independent of the size of the market impact of the checkoff investment. Thus, care must be
taken in interpreting the BCR so as to avoid implying that the reasonably high BCRs estimated
for international market promotion mean that international market promotion has had a large
absolute impact on the level of exports and export revenue. In fact, the absolute impact on
exports actually has been relatively small in most cases with, therefore, a relatively small
increase in export revenue (6%-7%). The small additional revenue, however, was generated by a
relatively smaller expenditure on international market promotion yielding a reasonably high
return per dollar spent.
iii
The clear message from this study is that international market promotion continues to work well
for the soybean checkoff program as a means of enhancing profitability within the U.S. soybean
industry. International market promotion has been and continues to be the foundation of the
soybean checkoff program, helping to keep the entire checkoff program profitable as the United
Soybean Board (USB) and Qualified State Soybean Boards (QSSBs) have explored other
promotion and production research opportunities in domestic markets since the implementation
of the national soybean checkoff program. Among the major findings of this study are the
following:
● The international market promotion component of the soybean checkoff program has
generated over $20 billion in additional export revenue since 1980/81 with a Benefit-Cost
Ratio (BCR) of $34.8 per dollar spent on international promotion.
● The international market promotion component of the soybean checkoff program has also
generated over $6.2 billion in additional soybean grower profits since 1980/81 with a
producer Benefit-Cost Ratio (BCR) of $10.1 per dollar spent on international market
promotion.
● The return to growers per dollar spent on international market promotion has been larger
than the grower return per dollar spent on the overall soybean checkoff program.
● Soybean checkoff investments in international market promotion have enhanced the
international competitiveness of the U.S. soybean industry and increased the global market
share of U.S. soybean and product exports.
● Soybean checkoff investments in international market promotion have boosted imports of
soybeans and soybean products around the world, particularly by China and many smaller,
less developed countries.
These conclusions suggest a number of implications for the management of the international
market component of the soybean checkoff program. First, the high BCR for international
market promotion suggests that the U.S. soybean industry continues to underinvest in
international market promotion despite the increase in funding that has occurred since the
implementation of the national checkoff program. The underfunding imposes an opportunity cost
on the soybean industry. The estimated grower BCR indicates that for every dollar not
contributed by producers and spent on international promotion, the industry loses $10.1 in
additional grower profit.
Second, the higher grower BCR to international market promotion calculated in this study
compared to that of the overall checkoff program implies that large additional benefits in terms
of grower profits could be realized without an increase in the checkoff assessment by simply
allocating a larger share of current checkoff funds to international market promotion. However,
such a reallocation could have implications for the international competitiveness of the U.S.
iv
soybean industry if the additional funds for international market promotion came from the
allocation to production research.
Third, the commodity mix of international market promotion should be carefully considered
because the particular mix of those expenditures can impact the return from those expenditures.
For example, the focus on soybeans rather than soymeal in international market promotion over
much of the period since the implementation of the national checkoff program in 1992/93 may
be responsible, in part, for the lower revenue from exports BCR and the lower grower profits
from exports BCR during those years ($33.2 and $8.3, respectively) compared to the pre-national
checkoff program period ($40.7 and $16.3, respectively).
Fourth, the country/region mix of international promotion expenditures should also be carefully
considered since that mix can also affect the return from those expenditures. For example, the
study results indicate that a given percentage increase in promotion expenditures in the European
Union would have a smaller percentage impact on their soybean and soymeal demand than the
impact that same percentage increase in expenditures would have on soybean and soymeal
demand in China and the rest of the world.
Finally, although this study shows that U.S promotional efforts have successfully created foreign
demand for soybeans and products, that increase in demand has also benefitted producers in
Brazil, Argentina, and elsewhere and not just in the United States. Clearly, therefore, the foreign
promotion strategy to boost U.S. soybean and product exports relative to those of Brazil and
Argentina must focus on not only generating demand in foreign markets but also creating buyer
loyalty through providing service, developing business relationships with foreign buyers, and
building their confidence in the U.S. as a reliable supplier of consistently high quality soybeans
and products.
v
Table of Contents
Executive Summary ......................................................................................................................... i
Background on Soybean Checkoff International Market Promotion ............................................. 2
Methodology and Data .................................................................................................................. 10
Analysis of the Effectiveness of and Returns to International Market Promotion ....................... 18
Soybean and Soybean Product Export Effects of the Soybean Checkoff Program .................. 18
Benefit-Cost Analysis: Return on Investment from International Market Promotion .............. 21
Conclusions and Implications ....................................................................................................... 27
References ..................................................................................................................................... 33
Tables
Table 1: Estimated International Market Promotion Expenditure Elasticities of Foreign Demand
for Soybeans and Products by Region ........................................................................... 13
Table 2: Selected Checkoff Studies: Domestic Demand BCRs and Promotion Elasticities ........ 14
Table 3: Selected Checkoff Analyses: Export Promotion BCRs and Promotion Elasticities....... 15
Table 4: Checkoff Effects on World Trade and U.S. Market Share, 1980/81-2012/13 ............... 20
Table 5: Benefit-Cost Analysis for International Market Promotion, 1980/81-2012/13 .............. 25
Figures
Figure 1: Total Soybean Checkoff Expenditures by Major Programs, 1970/71-2011/12 .............. 3 Figure 2: Major Program Shares of Total Soybean Checkoff Expenditures, 1970/71-2011/12 ..... 3 Figure 3: International Market Promotion Expenditures by Contributor, 1970/71-2011/12 .......... 4 Figure 4: Contributor Shares of International market Promotion, 1970/71-2011/12 ..................... 4 Figure 5: Country Shares of International Market Promotion Expenditures, 1970/71-2011/12 .... 6 Figure 6: Commodity Shares of International Market Promotion Expenditures,
1970/71-2011/12 .............................................................................................................. 6 Figure 7: EU15/27 International Market Promotion Expenditures, Nominal (million $US) vs.
Real (million 1970/71 SDRs), 1970/71-2011/12 ............................................................. 8 vi
Figures continued
Figure 8: Japan International Market Promotion Expenditures, Nominal (million $US) vs. Real
(million 1970/71 Yen), 1970/71-2011/12 ........................................................................ 8 Figure 9: Rest of the World International Market Promotion Expenditures, Nominal (million
$US) vs. Real (million 1970/71 $US), 1970/71-2011/12 ................................................ 9 Figure 10: China International Market Promotion Expenditures, Nominal (million $US) vs. Real
(million 1970/71 Renmimbi), 1980/81-2011/12 .............................................................. 9 Figure 11: Structure of SOYMOD................................................................................................ 11 Figure 12: Additional Exports as a Result of the Soybean Checkoff Program,
1970/71-2012/13 ............................................................................................................ 19 vii
RETURN TO THE SOYBEAN CHECKOFF INTERNATIONAL
MARKET PROMOTION PROGRAM
L
ike previous studies, the most recent study of the producer return from the overall
soybean checkoff program concludes that the program “continues to be highly effective
in enhancing the profitability, competitiveness, and size of the U.S. soybean industry”
(Williams, Capps, and Lee 2014). The key conclusion of that study is that the Benefit-Cost
Ratio (BCR) of the soybean checkoff program has been relatively high at $6.5 in additional
profit earned by U.S. soybean farmers for every checkoff dollar spent between 1980/81 and
2012/13 and $5.2 since the implementation of the national checkoff program in 1992/93. In
measuring the markets effects of the soybean checkoff program and calculating the related return
on investment, the study considered the aggregate market effects of the three main promotion
components of the program: (1) production research, (2) domestic market promotion, and (3)
international market promotion. The separate effects of the three program components
independent of each other, however, were not analyzed.
The primary goal of this study is to adapt the methodology used in the recent analysis of the
aggregate returns to the soybean checkoff program by Williams, Capps and Lee (2014) to
analyze the relationship between the international marketing promotion expenditures and
changes in U.S. exports of soybeans, soybean meal, and soybean oil over the 1980/81 to 2012/13
period. The specific objectives are to: (1) provide more detail on the effects of the soybean
checkoff program on exports than provided in the recent soybean checkoff study, (2) determine
the gross return to international marketing promotion in terms of the additional export revenue
generated per dollar spent on international market promotion, and (3) determine the return to
soybean producers attributable to international market promotion per dollar spent on
international market promotion. An important difference in this analysis of the return to soybean
checkoff international market promotion from that of the 2012 study (Williams) is that a recent
but separate USB-funded project to collect, correct, and warehouse historical soybean checkoff
expenditure data resulted in extensive revisions to that data. The consequence has been some
changes in the historical estimated returns to both the aggregate soybean checkoff program as
well as to the international market promotion component of that program.
Following some background discussion of the international market promotion component of the
soybean checkoff program based on the revised soybean checkoff expenditure data set, the study
discusses the methodology and the data used. An analysis of the foreign market effects of the
soybean checkoff program is then followed by an analysis of the returns to the historical
investment of soybean checkoff dollars in international market promotion in terms of both the
additional export dollars and the additional producer dollars generated over the years. Following
a summary of the key conclusions of this study, some implications for the management of the
international market promotion component of the soybean checkoff program are discussed.
1
Background on Soybean Checkoff International Market Promotion
B
etween 1970/71 and 2011/12, over $1.39 billion of soybean checkoff funds1 were spent
promoting the U.S. soybean industry of which an average of 55.0% supported
international market promotion programs over that period (Figures 1 and 2). In the
period before the national soybean checkoff program was implemented (1970/71 - 1991/92),
total annual soybean checkoff expenditures increased from $1.3 million to $15.0 million. For
much of that period, international market promotion consistently accounted for between 70% and
80% of total soybean checkoff investments with production research accounting for the
remainder (see Figure 2). Increasing allocations of checkoff funds to production research
reduced the international market promotion share to about 45% by the early 1990s when the
national soybean checkoff program was implemented. Under the national program, total soybean
checkoff expenditures experienced a dramatic 8-fold increase to $120.6 million by 2011/12 (see
Figure 1). A relative increase in the allocation of the growing checkoff funds to domestic
programs further reduced the international market promotion share to 35.5% by 1996/97.
Allocations to international market promotion subsequently struggled to remain at around $20
million between 1997/98 and 2005/06. By 2011/12, allocations to international market
promotion had increased to $36.7 million but at a much slower pace than allocations to either
production research or domestic promotion resulting in a further erosion of the international
market promotion share to about 30% by 2011/12.
The American Soybean Association (ASA) and its state soybean association affiliates managed
the soybean checkoff program until the creation of the United Soybean Board (USB) and the
Qualified State Soybean Boards (QSSBs) under the mandatory national soybean checkoff
program established by the Soybean Promotion, Research, & Consumer Information Act of
19902. The ASA continued as USB’s primary international market promotion contractor until
2005 when responsibility for that program was transferred to the United States Soybean Export
Council (USSEC). Over the years, soybean checkoff dollars allocated to international market
promotion programs have been supplemented by funds made available for that purpose by the
Foreign Agriculture Service (FAS) of the U.S. Department of Agriculture (USDA) through the
Foreign Market Development Program (FMD) and the Market Access Program (MAP) (Figure
3). Although ASA/USB and USDA have each contributed about half the total funds for
international market promotion on average over the years (not including other sources of
international market promotion funding), the variation in the contributions by both contributors
above and below that average was substantial in many years (Figure 4). For example, in the late
1980s and early 1990s, USDA accounted for an increasing share of international market
promotion expenditures as soybean checkoff dollars allocated to international promotion dropped
1
Includes matching funds through the Foreign Market Development Program (FMD) and the Market Access
Program (MAP) administered by the Foreign Agriculture Service (FAS) of the U.S. Department of Agriculture
(USDA) but does not include in-country third party contributions that were abruptly discontinued (or perhaps no
longer reported) after 1998/99.
2
7 U.S.C. 6301-6311; 56 F.R. 31048-31068, CFR. pt. 1220.
2
Figure 1: Total Soybean Checkoff Expenditures by Major Programs, 1970/71-2011/12
140
120
80
60
40
20
0
1970/71 1973/74 1976/77 1979/80 1982/83 1985/86 1988/89 1991/92 1994/95 1997/98 2000/01 2003/04 2006/07 2009/10
International Promotion
Domestic Promotion
Production Research
Figure 2: Major Program Shares of Total Soybean Checkoff Expenditures, 1970/712011/12
90.0
80.0
70.0
60.0
percent
$US million
100
50.0
40.0
30.0
20.0
10.0
0.0
1970/71 1973/74 1976/77 1979/80 1982/83 1985/86 1988/89 1991/92 1994/95 1997/98 2000/01 2003/04 2006/07 2009/10
International Promotion
Domestic Promotion
3
Production Research
Figure 3: International Market Promotion Expenditures by Contributor, 1970/71-2011/12
45
40
35
25
20
15
10
5
0
1970/71
1973/74
1976/77
1979/80
1982/83
1985/86
1988/89
1991/92
1994/95
1997/98
2000/01
2003/04
2006/07
2009/10
Marketing Years
ASA/USB
USDA (FMD+MAP)
Third Party (discontinued after1998/99)
QSSBs (not available before 2007/08)
Figure 4: Contributor Shares of International Market Promotion, 1970/71-2011/12
90.0
80.0
70.0
60.0
percent
$US millions
30
50.0
40.0
30.0
20.0
10.0
0.0
1970/71
1973/74
1976/77
1979/80
1982/83
1985/86
1988/89
1991/92
1994/95
1997/98
Marketing Years
ASA/USB
USDA (FMD+MAP)
4
2000/01
2003/04
2006/07
2009/10
substantially. When allocations of soybean checkoff dollars to international market promotion
rebounded in the late 1990s, the ASA/USB share jumped to between 60% and 70%. In recent
years, a substantial decline in USDA contributions combined with an increase in soybean
checkoff dollar allocations to international market promotion have reduced the USDA share to
around only 20% (Figure 4).
In-country, third party cash and in-kind contributions also supplemented international market
promotion activities through 1998/99 after which such contributions were either discontinued or
no longer reported (see Figure 3). Third party, in-country contributions over the years for which
such contributions were reported accounted for a substantial share of the total investment in
international market promotion in many of those years from a high of 62.2% in 1972/73 to a low
of 13.6% in 1998/99, the last year such contributions were reported. The Qualified State Soybean
Boards (QSSBs) have also invested in international market promotion but data on the level of
those investments are not available before 2007/08 (see Figure 3). Between 2007/08 and
2011/12, however, QSSB investments in international promotion varied from a low of $4.4
million in 2010/11 to a high in the very next year of $5.5 million accounting for between 11.1%
and 16.4% of the total investment in international promotion by all contributors.
During the early years of the soybean checkoff program, international market promotion
activities focused primarily on the industry’s two largest export markets, Japan and Europe,
consistently accounting for 75-80% of the expenditures during that period (Figure 5). Beginning
in the 1980s, however, a strategic decision to re-allocate international market promotion
expenditures away from those larger, more mature markets to China and smaller but more
rapidly growing markets in Asia, Latin America, the Middle East, and Africa sharply reduced the
share of spending in Japan and Europe to about 50% in the mid-1980s, 30% in the mid-1990s,
and about 20% between 1998/99 and 2002/03. Since that time, Europe and Japan have accounted
for only about 10% of international market expenditures. The share of international market
promotion funds allocated to China increased from about 2% in 1980/81 to a high of 16.5% in
2002/03. Since that time, however, China’s share of those international market promotion
expenditures has receded to between 11% and 12% (Figure 5).
The commodity composition of international market promotion expenditures was fairly balanced
during the mid-1970s to the mid-1980s with soybeans accounting for 28% of the expenditures,
soymeal 35.9%, and soyoil 36% (Figure 6). The shift in the country composition of international
market promotion expenditures to emphasize new, emerging markets during the latter part of that
period coincided with a shift in the commodity composition of those expenditures to emphasize
soymeal over either soybeans or soyoil. Between 1985/86 and 1998/99, soymeal accounted for
an average of nearly 60% of international market promotion expenditures while soybeans and
soyoil each accounted for about 20%. After hitting a low of 7.5% in 1985/86, the soybean share
of international market promotion increased slowly to 72% by 2004/05 taking away share first
from soyoil and then from soymeal. The soyoil share of international market promotion
5
Figure 5: Country Shares of International Market Promotion Expenditures, 1970/71-2011/12
90.0
80.0
70.0
percent
60.0
50.0
40.0
30.0
20.0
10.0
0.0
1970/71 1973/74 1976/77 1979/80 1982/83 1985/86 1988/89 1991/92 1994/95 1997/98 2000/01 2003/04 2006/07 2009/10
EU 15/27
Japan
China
Rest of the World
Figure 6: Commodity Shares of International Market Promotion Expenditures, 1970/71-2011/12
100.0
90.0
80.0
70.0
percent
60.0
50.0
40.0
30.0
20.0
10.0
0.0
1970/71 1973/74 1976/77 1979/80 1982/83 1985/86 1988/89 1991/92 1994/95 1997/98 2000/01 2003/04 2006/07 2009/10
Soybeans
Soymeal
6
Soyoil
expenditures never recovered, dropping almost continually from about 42% in 1985/86 to
between about 2% to 4% in most recent years. A return to growth in the allocation of
international marketing funds to soybeans since the mid-1980s has emphasized soybeans as the
primary focus of international market promotion efforts since at least 1999/00. The consequence
was an eventual decline in the soymeal share of those funds from about 66% in 1993/94 to 25%
in 2004/05. Since that time, an increased emphasis on international promotion of soymeal has
eroded the soybean share of international market promotion expenditures leading to more
balance in the allocations to each commodity. By 2007/08, the soymeal share recovered to about
50% while that of soybeans dropped to about 47%. Between 2008/09 and 2011/12, however, the
soybean share of international promotion expenditures surged back to about 58% while that of
soymeal slipped back to about 38%.
As impressive as the upward trend in soybean checkoff dollars allocated for international market
promotion has been over the years, the growth in the purchasing power of those checkoff
dollars in importing countries has lagged far behind. Inflation in foreign markets and a general
depreciation in the value of the U.S. dollar against foreign currencies in many years severely
limited the impact of the growth in checkoff dollars on foreign market demand for U.S. soybeans
and soybean products. Inflation has also eroded the purchasing power of checkoff dollars in the
U.S. market. However, the more rampant pace of inflation in foreign markets, particularly in
developing countries and the new and emerging markets which have been the growing focus of
international market promotion efforts, along with the undervaluation of the U.S. dollar have
combined to more severely limit the ability of international promotion efforts to maintain, much
less expand, markets for U.S. soybeans and soybean products than has been the case for
production research and domestic promotion efforts in the U.S. domestic market.
In both the EU15/27 and Japan, for example, inflation and a declining value of the dollar reduced
the purchasing power of soybean checkoff expenditures in those countries even more rapidly
than the actual reduction in nominal dollars (Figures 7 and 8). In other, smaller countries to
which checkoff dollars have been increasingly shifted over the years, progressively rapid
inflation, particularly since the mid-1980s, has seriously reduced the purchasing power of
checkoff dollars and limited the effectiveness of the market development activities in many of
those countries (Figure 9). In essence, the rate of inflation in the cost of goods and services in
many of those countries has far outpaced the annual rate of increase in checkoff dollars expended
in those same countries. The consequence has been serious erosion in the purchasing power of
the budgets of the foreign soybean promotion offices (USSEC) which has hindered their ability
to maintain levels of promotion much less expand activities in many cases. China may be an
exception as the undervaluation of the Renmimbi may have actually increased the purchasing
power of soybean checkoff expenditures in that country over time (Figure 10).
7
Figure 7: EU15/27 International Market Promotion Expenditures, Nominal (million $US)
vs. Real (million 1970/71 SDRs), 1970/71-2011/12
1.4
4
3.5
1.2
3
million $US
2.5
0.8
2
0.6
1.5
0.4
million 1970/71 SDR
1
1
0.2
0.5
0
1970/71 1973/74 1976/77 1979/80 1982/83 1985/86 1988/89 1991/92 1994/95 1997/98 2000/01 2003/04 2006/07 2009/10
Nominal
0
Real (1970/71 SDRs)
million US$
million 1970/71 Yen
Figure 8: Japan International Market Promotion Expenditures, Nominal (million $US) vs.
Real (million 1970/71 Yen), 1970/71-2011/12
8
million US$
million 1970/71 US$
Figure 9: Rest of the World International Market Promotion Expenditures, Nominal
(million $US) vs. Real (million 1970/71 $US), 1970/71-2011/12
million US$
million 1970/71 Renmimbi
Figure 10: China International Market Promotion Expenditures, Nominal (million $US) vs.
Real (million 1970/71 Renmimbi), 1980/81-2011/12
9
Methodology and Data
T
his analysis of the effects of and returns to soybean checkoff international market promotion
expenditures is based on the methodology used in the most recent analysis of the returns to
the overall soybean checkoff program (Williams, Capps, and Lee 2014). The basic tool of
analysis in that study was a 200-equation, annual econometric simulation model of world
soybean and product markets (known as SOYMOD) that allows for the simultaneous
determination of the supplies, demands, prices, and trade of soybeans, soymeal, and soyoil in
seven major world trading regions: (1) the United States, (2) Brazil, (3) Argentina, (4) the
European Union, (5) Japan, (6) China, and (7) a Rest-of-the-World region which accounts for the
effects of primarily smaller, new demand growth areas in world soybean markets3.
The domestic market of each region in the model is divided into four simultaneous blocks of
equations: (1) a soybean block, (2) a soybean meal block, (3) a soybean oil block, and (4) an
excess supply or excess demand block (Figure 11). For each region, the first three blocks
contain behavioral relationships specifying the manner in which soybean supply (acreage
planted, acreage harvested, soybean yields, and production), soybean domestic demand (crush and
stocks), and the supply, consumption, and stocks of soybean meal and soybean oil behave in
response to changes in variables like prices of soybeans and products, prices of various
competing commodities, technology, income, livestock production and prices, government
policy, etc. as appropriate.
Simultaneous interaction of soybean and soybean product markets within each region in
SOYMOD is insured through the endogenous soybean crush margin (equations (10) and (23) in
Figure 11) which is the own price variable in the crush demand equations ((2) and (15) in Figure
11). The fourth block in each domestic market of the model (equations (11)-(13) and (24)-(26) in
Figure 11) includes net excess supply relationships for exporting regions and net excess demand
relationships for importing regions specified as the residual differences between their respective
domestic supply and demand schedules.
The soybean and soybean product markets of all countries in the model are linked through
international price and trade flow relationships. The prices of soybeans, soymeal, and soyoil in
exporting and importing regions are linked through price transmission equations (equations (27)(29) in Figure 11) which account for the effects of exchange rates as well as tariffs, export
subsidies, border taxes, transportation costs, etc. and other factors (the Zij) that drive a wedge
between prices in each world region. International market clearing conditions (equations (30)(32) in Figure 11) require equality of the world excess supply and demand for soybeans,
soymeal, and soyoil in each time period.
3
More details about the model used than are provided here are available in the most recent analysis of the return to the overall soybean checkoff
program (Williams, Capps, and Lee 2014).
10
Figure 11: Structure of SOYMOD
Domestic Market of Exporter i
Domestic Market of Importer j
SOYBEAN BLOCK
SOYBEAN BLOCK
(1) Soybean Production (SPi )
(14) Soybean Production (SPj )
(2) Soybean Crush Demand (SDi )
(15) Soybean Crush Demand (SDj )
(3) Soybean Stock Demand (SI i )
(16) Soybean Stock Demand (SI j )
1
International Price Linkages
SOYBEAN MEAL BLOCK
(4) Soymeal Production (MSi )
SOYBEAN MEAL BLOCK
(17) Soymeal Production (MSj )
(5) Soymeal Demand (MDi )
(27) PS i = ZS1ij PSj + ZS 2ij
(18) Soymeal Demand (MDj )
(6) Soymeal Stock Demand (MIi )
(28) PMi = ZM1ij PM j + ZM 2ij
(19) Soymeal Stock Demand (MIj )
(29) POi = ZO1ij POj + ZO2ij
SOYBEAN OIL BLOCK
SOYBEAN OIL BLOCK
(7) Soyoil Production (OSi )
(20) Soyoil Production (OSj )
(8) Soyoil Demand (ODi )
(21) Soyoil Demand (ODj )
(9) Soyoil Stock Demand (OIi )
(22) Soyoil Stock Demand (OIj )
Block Price Linkage2
Block Price Linkage2
(10) Crush Margin (CMi ) =
(PM )+ (PO ) - (PS )
i
i
i
i
(23) Crush Margin (CM j ) =
(PM )+ (PO ) - (PS )
j
i
j
j
j
j
International Trade Flow Linkages
EXCESS SUPPLY (ES) BLOCK
(30) ESS i =
(11) Soybean ES (ESS i ) = SPi - CD i(12) Soyoil ES (ESOi ) = OSi - ODi -
SI i
OI i
(13) Soymeal ES (ESMi ) = MS i - MDi -
MI i
i
(31) ESMi =
i
j
EDS j
j
EDM j
(32) ESOi = EDOj
i
j
EXCESS DEMAND (ED) BLOCK
(24) Soybean ED (EDS j ) = CDj + SI j - SPj
(25) Soyoil ED (EDOj ) = OD j + OIj - OS j
(26) Soymeal ED (EDMj ) = MD j + MIj - MS j
Note: i = any exporter i=1, ... , n; and j = any importer j=1, ... , k. Also,
should be read "change in."
1
The Z 1 and Z 2 include all multiplicative (e.g. exchange rates and ad valorem subsidies) and additive (transportation costs, specific tariffs, etc.) measures that come between prices of country i and j.
2
and
are meal and oil extraction rates; PS, PO, and PM are soybean, soyoil, soymeal prices.
11
To determine the effectiveness of the soybean checkoff program, the first step was to isolate
the effects of checkoff expenditures on the U.S. production of soybeans and on the demand
for soybeans and soybean products in both domestic and foreign markets from those of other
events that may have affected those production and demand variables in those same markets over
the years. For this purpose, soybean checkoff research, domestic promotion, and foreign
demand promotion stock variables were constructed and treated as regressors in the U.S. supply
(acreage and yield), domestic demand, and foreign demand equations of SOYMOD4 (see Figure
11). The parameters of those and the other equations in SOYMOD were estimated using standard
econometric procedures. The estimated international market promotion elasticities of the foreign
demand for soybeans, soymeal, and soyoil are provided in Table 1. A promotion elasticity
indicates the estimated percentage change in the market demand for the respective product in
each region given a 1% change in the real (inflation-adjusted) and exchange-rate-adjusted
promotion expenditures for those products in each region. Thus, for example, a 10% increase in
international promotion expenditures (corrected for inflation and denominated in yen) to promote
soymeal in Japan is estimated to result in a 0.44% increase in the Japanese demand for soymeal.
In contrast, a 10% increase in inflation- and exchange-rate-corrected promotion expenditures in
the European Union to promote soymeal is estimated to result in a slightly smaller increase of
0.30% in the EU demand for soymeal. So a doubling (100% increase) of those expenditures in
the European Union, for example, would lead to a 3.0% increase in EU soymeal demand. Most
of the estimated international market promotion elasticities are statistically significant at the 1%
or 5% level.
Note that the estimated promotion elasticities of the foreign demand for soybeans and products
are all quite small (see Table 1). They are consistent in both magnitude and sign with those of
previous studies of the soybean checkoff program (for example, Williams, Capps, and Bessler,
2009). They are also consistent with the demand promotion elasticities estimated by numerous
studies of other checkoff commodities (Table 2). The elasticities of domestic demand promotion
estimated for various checkoff activities across 20 of the most recent commodity checkoff
program evaluations are given in the last column of Table 2. Those elasticities range from a low
of 0.005 to a high of 0.428 with a mean of 0.076. The elasticities of foreign (export) demand
promotion estimated for various countries and commodities across 17 commodity checkoff
programs are given in the last column of Table 3. Those elasticities range even more widely than
the domestic promotion elasticity estimates from a low of -0.330 to a high of 0.98 and have a
substantially higher mean of 0.213. Clearly, the international market promotion elasticities
estimated by Williams, Capps, and Lee (2014) for soybeans, soymeal, and soyoil that are used in
this analysis (shown in Table 1) are comfortably within the range of both domestic and export
promotion elasticities estimated by a large number of checkoff program evaluations for a wide
range of checkoff commodities.
4
More details about the construction of the research and promotion stock variables are available in Williams, Capps, and Lee (2014).
12
Table 1: Estimated International Market Promotion Expenditure Elasticities of Foreign
Demand for Soybeans and Products by Regiona
Promotion Stock
Region
Soybeans
Soymeal
Soyoil
U.S.
0.023***
0.032***
0.035***
EU-15/27
0.027*
0.030**
0.035**
Japan
0.035*
0.044*
0.047***
China
0.035***
0.032*
0.026**
ROW
0.032*
0.032*
0.033*
a
All elasticities evaluated at the means of the data.. * = significant at the 1% level. **= significant at the 5% level, and ***=significant at the
10% level.
Given that SOYMOD includes 200 equations and endogenous variables and over 400 exogenous
and predetermined variables, the estimation of the model parameters and simulation analysis
with the model requires a large amount of data. Two categories of data were needed for the
analysis of the soybean checkoff program by Williams, Capps, and Lee (2014): (1) data to
support SOYMOD (e.g., supply, demand, trade, price, policy, etc. data by country and
commodity over time) and (2) soybean checkoff expenditures over time by country (U.S.. Japan,
EU 15/27, China, and Rest-of-the-World), commodity (soybeans, soymeal, and soyoil), and type
(production research, domestic promotion, international market promotion). The first set of data
relate to most of the model endogenous and exogenous variables (supply, demand, trade, price,
policy, etc. by country, commodity, and activity over time) and are taken from numerous public
sources, including USDA (for example, USDA-ERS, USDA-FAS, and USDA-NASS) for
1959/60 through 2012/13 as available. The International Financial Statistics of the International
Monetary Fund (IMF 2014) was particularly useful for many of the exogenous macro variables
(income, inflation exchange rates, etc.) required in the model. The remainder of the data came
from numerous country-specific private and government sources.
The checkoff expenditure data for ASA/USB international marketing promotion activities by
commodity, country, and contributor for 1970/71 through 2006/07 were available to the authors
from previous studies. Those data were previously compiled manually by the authors from
various sources, primarily the American Soybean Association (ASA), the U.S. Soybean Export
Council (USSEC), the USDA Foreign Agriculture Service (FAS) (Foreign Market Development
Program and Market Access Program Funds), SmithBucklin, Corp., and various other previous
USB subcontractors. State-level (QSSB) data on international promotion expenditures were not
available for that time period. Both the national- and state-level expenditure data on international
marketing for 2007/08-2011/12 were made available through a separate USB-funded project to
13
Table 2: Selected Checkoff Studies: Domestic Demand BCRs and Promotion Elasticities
Commodity
Study
Benefit-Cost Ratio Promotion Elasticity
average $ producer return % demand change from a
per $ spent on promotion
1% expend. change
Almondsd
Crespi and Sexton (2005)
6.2b
0.13
Cotton
Williams et al. (2011)
Producer
Importer
5.7
14.4
Retail 0.05
Mill 0.03
Dairy
USDA (2012)
All Dairy
Fluid milk
Cheese
Butter
3.05
2.14
4.26
9.63
0.078
0.071
0.033
0.042
Dried Plumsd
Eggs
2.7b
Alston et al. (1997)
0.05
a
Schmit and Kaiser (1998)
0.54-6.33
0.006
Carman, Li, and Sexton (2009)
2.5-4.0a
0.148-0.372a
Highbush Blueberries
Kaiser (2010)
9.12
0.109
Honey
Ward (2008)
6.02-7.91a
0.082
Kaiser (2014)
Kaiser (2012)
Ghosh and Williams (2014)
11.2
17.4
14.44
0.018
0.006-0.046c
0.037
Hass Avocados
Meat:
Beef
Pork
Lamb
Mushrooms
Orange Juicee
Retail
9.4-18.3f
Food Ser. 1.41-5.35f
Richards (2011)
0.008-0.089f
0.039-0.058f
Williams et al. (2004)
2.9-7.0a
0.127-0.428a
Potatoes
Richards and Kaiser (2012)
5.17
0.32-0.116f
Sorghum
Capps, Williams, Málaga (2013)
Soybeans
Williams, Capps, and Lee (2014)
6.5
0.023-0.047f
Strawberriesd
Carter et al. (2005)
44.0b
0.16g
Table Grapesd
Alston et al. (1998)
44.9
0.16
Walnutsd
Kaiser (2005)
1.65-9.72a
0.005
Watermelon
Kaiser (2012)
27.73
0.098g
9.8 (6.4)
0.076 (0.049)
STD DEV
9.98
0.081
MIN
0.54
0.005
44.9
0.428
MEAN (MEDIAN)
MAX
a
d
b
c
Food/Ind. Use 8.48
0.046-0.048a
Depending on the model used or elasticities assumed. Marginal BCR. Long-run and depending on the market segment analyzed.
California. e Florida. g Depending on market segment and/or program type. g Expenditure flexibility.
14
Table 3: Selected Checkoff Studies: Export Promotion BCRs and Promotion Elasticities
Commodity
Study
Benefit-Cost Ratio Promotion Elasticity
average $ producer return % export demand change
per $ spent on promotion from a 1% expend. change
All Foods
Dwyer (1995)
16.0
0.135-0.15d
Almondse
Halliburton and Henneberry (1995)
3.69-5.94g
-0.0279-0.85g
Apples
Rosson, Hammig, and Jones (1986)
60.0
0.51
USDA (2012)
5.12
0.066
Fuller, Bello, and Capps (1992)
4.13-6.65
0.109-0.234
Armah and Epperson (1997)
5.61-37.1f,g
0.014-0.302f,g
Onunkwo and Epperson (2000)
6.45-6.75a
0.06-0.98a
Kaiser (2012)
17.4
0.006-0.046d
Potatoes
Richards and Kaiser (2012)
2.47-14.8
0.32-0.116g
Raisins
Kaiser, Liu, and Consignado (2003)
0.42-15.3a
0.029-0.133a
Dairy
Grapefruit
f
Orange Juice
Pecans
Pork
Red Meat
Comeau, Mittelhammer & Wahl (1997)
15.56-18.11g
0.11-0.128g,h
Red Meat
Le, Kaiser, and Tomek (1998)
15.62-47.32g
-0.019-0.598g
Rusmevichientong & Kaiser (2005)
6.21-14.48a
0.21
Sorghum
Capps, Williams, Málaga (2013)
-0.144c
-0.33-0.66c,g
Soybeans
Williams (2012)
9.2
0.029-0.063g
Walnutse
Weiss, Green, and Havenner (1996)
5.85b
4.5 ton export increase
from $1,000 promotion
Kaiser (2012)
9.51-20.00a
0.295-0.412a
13.9 (9.2)
0.213 (0.128)
13.87
0.281
-0.1
-0.330
Rice
Wheat
MEAN (MEDIAN)
STD DEV
MIN
MAX
a
60.0
b
c
0.980
d
Depending on the model used or elasticities assumed. Marginal BCR. Not statistically different from zero. Depending on short-run or longrun. e California. f Florida. g Depending on country and/or program type. h Expenditure flexibility.
collect all soybean checkoff expenditure data over that period. The national-level international
marketing expenditure data were provided through that project by USSEC, SmithBucklin, and
USB (direct-managed) and merged with the corresponding earlier data available from previous
research on the soybean checkoff program. The state-level international marketing expenditures
were also made available through the separate USB expenditure data collection project by the
QSSBs for the 2007/08-20011/12 time period. Given the smaller level of international promotion
by QSSBs, their international marketing expenditure data for 2007/08-2011/12 were merged with
15
the national level data for 1970/71-2011/12. The result was a complete series of available
national- and state-level international marketing expenditure data by commodity and country
from 1970/71 through 2011/12. Expenditures for international promotion activities prior to
1970/71 are not available but were reportedly small and occurred mostly in Japan (Williams
1985). Consequently, soybean and product international market promotion expenditures were
assumed to be zero for the pre-1970/71 period.
All expenditure data used in the study were converted to a constant dollar basis to remove the
effects of inflation. Expenditures in foreign markets were also converted to the respective local
currencies to account for changes in exchange rates. The data were then transformed into
promotion stock variables to account for the time lag between expenditure and market impact for
each commodity (soybeans, soymeal, and soyoil) in domestic and international markets. Model
specification tests were conducted to determine appropriate lag structures for calculating the
stock variables5. The international soybean, soybean meal, and soybean oil demand promotion
expenditure stock variables enter the model as arguments of the respective demand functions of
the importing countries or regions in the model in which the expenditures were made.
Validation of the world soybean and products model (SOYMOD) was conducted through
dynamic, within-sample simulations which indicated a highly satisfactory fit of the historical,
dynamic simulation solution values to observed data. A sensitivity test indicated that the model
is highly stable to changes in checkoff expenditures over time (see the Williams, Capps, and Lee
(2014) study for more details).
To conduct the analysis of the soybean checkoff program, SOYMOD was simulated over the
period of 1980/81 through 2012/13 under two scenarios regarding soybean checkoff
expenditure levels6. The simulation results were used to calculate benefit-cost ratios for the
soybean checkoff program. The first scenario, referred to as the “with expenditures”
scenario, represented actual history over the 1980/81 to 2012/13 period of analysis under the
assumption that the checkoff program operated exactly as occurred over the historical period.
Thus, the simulation results for the levels of supply, demand, prices, trade, etc. in world soybean
and soybean product markets included the impacts on those markets of soybean checkoff
expenditures in the U.S. and around the world. The second scenario, referred to as the “without
expenditures” scenario, assumed that the soybean checkoff program had never been
implemented. This second simulation was conducted by setting the historic values of soybean
checkoff expenditures to zero in SOYMOD and then simulating the model once again over the
same period to generate new values for U.S. and world soybean and product production,
consumption, trade, prices, etc. Because the levels of the model variables in the “without
5
Again, more details about the construction of the research and promotion stock variables are available in Williams, Capps, and Lee (2014).
The initial year in the simulation analysis was 1980/81 because no expenditures were made in China prior to that period. Even though the
expenditure data end in 2011/12, the simulation runs through 2012/13 because the promotion and research stock variables enter the model with at
least a one year lag. Additional details of the simulation process and results can be found in Williams, Capps, and Lee (2014).
6
16
expenditures” scenario were generated by changing only the levels of checkoff expenditures,
they represent the levels of supply, demand, prices, trade, etc. that would have existed over time
in the absence of a soybean checkoff program.
Differences in the simulated levels of the model variables (production, demand, prices, trade,
etc.) in the “with expenditures” scenario from those in the “without expenditures” scenario are
then taken as direct measures of the effects of the checkoff expenditures over time. Because no
other exogenous variable in the model (e.g., levels of inflation, exchange rates, income levels,
agricultural and trade policies, etc.) other than checkoff expenditures is allowed to change in
either scenario, this process effectively isolates the effects of the soybean checkoff program on
the U.S. and world soybean markets, prices, and trade. That is, the simulated differences between
the values of the endogenous variables from the “with expenditures” scenario and from the
“without expenditures” scenario in which those expenditures are set to zero provide direct
measures of the historical effects of the soybean checkoff expenditures (and only those
expenditures) on the U.S. and world soybean and product markets.
The Williams, Capps, and Lee (2014) study measured the joint effects of all promotion
expenditures in all regions for all commodities by all contributors on world soybean and product
markets. However, that study did not analyze the effects of international promotion expenditures
independent of those of the other two main categories of soybean checkoff expenditure
(production research and domestic market promotion) primarily because such an analysis would
have required an assumption that international promotion over the years was done in a vacuum.
The results of such an analysis would have ignored the synergistic effects (both positive and
negative interactions) of the three main checkoff program components in the market and would
have provided unrealistic and largely meaningless results. For example, domestic market
promotion tends to increase the domestic demand for soybeans and soybean products and reduce
their availability for export. Production research boosts export availability but tends to depress
price, and therefore, the value of exports. Analyzing the returns only to international market
promotion while ignoring the export-reducing effects of domestic market promotion or the
export-enhancing but price-depressing effects of production research would lead to a conclusion
that international market promotion expenditures are more (or less) effective in enhancing
exports than has actually been the case. Nevertheless, the results of the Williams, Capps, and Lee
(2014) study, some of which were unpublished, provide the basis for exploring the relationship
between international market promotion and the net changes in exports of soybeans and soybean
products achieved as a result of the checkoff program. In using SOYMOD and the results of the
Williams, Capps, and Lee (2014) study, this analysis of the returns to international market
promotion makes the realistic assumption that over the period of analysis, domestic market
promotion and production research were on-going over that same period.
17
Analysis of the Effectiveness of and Returns to International Market Promotion
I
n this section, the effects of the soybean checkoff program on U.S. soybean and soybean
product exports as determined through the methodology described in the preceding section
are discussed. Those results are then used to measure the return to international market
promotion through the calculation of two benefit-cost ratios: (1) the gross export revenue
benefit-cost ratio (EBCR) which measures the additional export revenue generated per dollar
spent on international market promotion (net of the cost of promotion) and (2) the grower profit
from exports benefit-cost ratio (NEBCR) which measures the additional soybean grower profit
generated from the additional exports (net of additional production costs and the cost of
promotion) per dollar spent on international market promotion.
Soybean and Soybean Product Export Effects of the Soybean Checkoff Program
A comparison of the SOYMOD simulation results for the “with expenditures” and “without
expenditures” scenarios described above clearly indicates that the soybean checkoff program has
provided an effective “lift” of the entire U.S. soybean industry. The “lift” is the average annual
increase in market variables like production, demand, trade, or prices generated by the soybean
checkoff over some period of time. The results indicate that, since the implementation of the
national checkoff program in the early 1990s, growth in soybean checkoff expenditures for
international promotion along with the growing shift of those funds to promote soybeans rather
than value-added soybean products and a simultaneous 4.3% lift in U.S. soybean production
from the overall checkoff program sharply boosted soybean exports over that period with an
average annual export lift of about 1.7 million mt (6.4%) (Figure 12). The checkoff program also
created a positive soybean export lift for Brazil and Argentina but to a much smaller extent
(137,900 mt or 0.8% and 84,200 mt or 1.3%, respectively). As a consequence, the U.S. share of
world soybean imports was also higher by 1.3 percentage points as a result of the checkoff
program since the implementation of the national program while those of Brazil and Argentina
were lower by 0.9 and 0.3 percentage points, respectively (Table 4).
For U.S. soymeal and soyoil exports, the checkoff program lift was 11.2% and 18.4%,
respectively, since the implementation of the national program (Table 4). Although both
Brazil and Argentina also experienced higher soymeal and soyoil exports as a result of the
checkoff, the lift in those exports was less than 1% and, therefore, insufficient to maintain their
shares of world trade in the two products. Consequently, the U.S. share of world soymeal and
soyoil exports increased by 1.2 and 1.8 percentage points, respectively, while those of Brazil and
Argentina declined. Thus, the U.S. soybean checkoff program not only boosted U.S. soybean,
soymeal, and soyoil exports but also the U.S. share of world imports of all three products while
U.S. export competitor shares of world imports of those products declined.
18
Figure 12: Additional Exports as a Result of the Soybean Checkoff Program, 1970/712012/13
6.0
5.0
million mt
4.0
3.0
2.0
1.0
0.0
80/81
82/83
84/85
86/87
88/89
90/91
92/93
94/95
96/97
98/99
00/01
02/03
04/05
06/07
08/09
10/11
12/13
Marketing Year
Soybeans
Soymeal
Soyoil
By comparing the lift of world soybean and product trade from the checkoff program before and
after the implementation of the national soybean checkoff program, the effects of changes in
international market promotion strategies over time become more clear. The growing share of
international market promotion funds allocated to China and to smaller, less developed countries
and the declining shares allocated to the EU-15/27 and to Japan during the national checkoff
program period (1992/93-2012/13) compared to the voluntary checkoff program period
(1980/81-1991/92) resulted in a decline in the soybean and product import lift for the EU-15/27
and Japan and a surge in the import lift in other countries in the more recent period (Table 4).
The lift in the EU-15/27 soybean imports from the checkoff program dropped between the
voluntary and national periods from 474,800 mt (3.7%) to only 312,100 mt (2.3%). In Japan, the
lift dropped from 120,000 mt (2.7%) to 106,100 mt (2.5%) between those two periods. In
contrast, the checkoff-induced lift in soybean imports by China and other importing countries
(“rest of the world”) jumped substantially from only 297,200 mt and 43,300 mt (0.6%),
respectively, in the voluntary period to over 1.2 million mt (6.0%) and 383,200 mt (3.3%),
respectively, in the national checkoff period. The story is the much the same for the changes in
the lifts in world soymeal and soyoil imports as a result of the soybean checkoff program.
19
Table 4: Checkoff Effects on World Trade and U.S. Market Share, 1980/81-2012/13
1980/81-1991/92
1992/93-2012/13
1980/81-2012/13
1,000 mt
%
1,000 mt
%
1,000 mt
%
AVERAGE ADDITION TO EXPORTS
Soybeans
United States
Brazil
Argentina
Total
756.2
162.0
17.2
935.4
4.0
7.9
0.7
4.0
1,715.3
137.9
84.2
1,937.4
6.4
0.8
1.3
3.8
1,366.5
146.6
59.9
1,573.0
5.8
1.2
1.2
3.9
Soymeal
United States
Brazil
Argentina
Total
319.6
145.1
57.8
543.5
6.0
1.8
1.7
1.8
726.0
24.5
4.8
1,256.1
11.2
0.2
0.0
3.5
578.2
68.4
24.1
997.0
9.5
0.6
0.2
3.4
Soyoil
United States
Brazil
Argentina
EU-27
Total
75.2
31.1
12.8
-36.9
82.3
11.7
4.3
2.0
-4.9
3.0
142.3
4.5
0.2
17.9
164.9
18.4
0.3
0.0
6.2
2.6
117.9
14.2
4.8
-2.0
134.8
16.3
1.1
0.2
-0.4
2.7
AVERAGE ADDITION TO IMPORTS
Soybeans
EU-27
Japan
474.8
120.0
3.7
2.7
219.1
98.1
1.5
2.3
312.1
106.1
2.3
2.5
297.2
--
a
1237.0
6.0
895.2
7.0
43.3
0.6
383.2
3.3
259.6
2.6
935.4
4.0
1,937.4
3.8
1,573.0
3.9
533.3
46.8
-36.6
543.5
6.5
14.1
-0.4
1.8
417.6
62.5
776.1
1,256.1
2.4
5.0
4.6
3.5
459.7
56.8
480.5
997.0
3.2
6.2
3.4
3.4
24.4
-69.6
127.5
82.3
--24.4
5.1
3.0
a
-7.6
-30.7
203.2
164.9
-27.8
-2.1
4.2
2.6
4.0
-44.9
175.7
134.8
35.8
-4.4
4.4
2.7
China
Rest of the world
Total
Soymeal
EU-27
Japan
Rest of the world
Total
Soyoil
Japan
China
Rest of the world
Total
AVERAGE ADDITION TO EXPORT SHARE
ratio
%
ratio
%
ratio
%
Soybeans
United States
Brazil
Argentina
0.1
0.3
-0.4
0.1
4.2
-3.4
1.3
-0.9
-0.3
2.6
-3.1
-2.3
0.9
-0.5
-0.3
1.7
-0.4
-2.7
Soymeal
United States
Brazil
Argentina
0.9
-0.5
-0.3
3.1
-1.1
-0.7
1.2
-0.9
-1.5
8.6
-2.7
-3.0
1.1
-0.8
-1.1
6.6
-2.1
-2.2
Soyoil
United States
Brazil
Argentina
EU-27
2.1
0.5
-0.6
-2.0
2.0
0.3
-0.7
-2.1
1.8
-0.6
-1.5
0.3
1.7
-0.8
-2.1
0.2
1.9
-0.2
-1.2
-0.6
1.8
-0.4
-1.6
-0.6
a
Mathematically undefined percentage change from a negative number to a positive number.
20
These results also provide important insights on the consequences for exports of shifting
checkoff expenditures away from international market promotion. During the voluntary period of
the soybean checkoff program (1980/81 to 1991/92), checkoff expenditures consistently added
just under a million metric tons (mt) to annual exports of soybeans plus 300,000 - 400,000 mt to
annual soymeal exports and just under 100,000 mt to annual soyoil exports for a total of about
1.5 million mt in additional export volume each year (Figure 12). That was during the period
when international market promotion accounted for the majority of checkoff expenditures. With
the sharp decline in the share of expenditures allocated to international promotion beginning in
the early 1990s, the annual addition to total soybean and product export volume dropped by
about 500,000 mt to only about 1 million by 1996/97. Note that even though expenditures
allocated to international market promotion first began to decline in the early 1990s, the full
impact of the expenditure reduction on the addition to soybean and product exports by the
checkoff program was not apparent until several years later (see Figure 14). The many
previous years of work to develop overseas markets continued to buoy U.S. soybean and
product exports for a few years despite the reduction in expenditures. This “carryover” effect
then worked in reverse once expenditures for international promotion increased from the low of
$8.0 million in 1992/93 to an historic high of $22.9 million in 1998/99 (see Figure 1). Exports
recovered slowly, not reaching a high until 2002/03 because of the time required to re-build
foreign demand for U.S. soybeans and products again. The pattern repeated itself when
expenditures for international market promotion were once again reduced between 1998/99 and
2002/03 (see Figure 1). The addition to exports once again stalled through 2006/07. International
market promotion expenditures increased once again after 2002/03 leading to general growth in
the level of exports added by the checkoff program though 2012/13.
An important lesson here is that the up and down pattern of international market expenditures
over the years has had serious consequences for the effectiveness of those expenditures in
generating additional exports and, therefore, export revenues. International promotion
expenditures are intended to create a stream of additional export revenues over time. The export
and revenue impacts of those expenditures in any given year, however, are not fully realized
immediately but rather are distributed over a number of years. Consequently, any reduction in
funding for even one year can seriously erode the effectiveness of the program in boosting
exports and export revenues not just in that year but over a longer period of time. By the same
token, increasing funding levels again after some period of lapse usually requires years before
the benefits are fully realized once again. In the meantime, the returns from the program are
lower than they might have been.
Benefit-Cost Analysis: Return on Investment from International Market Promotion
For investments in international market promotion to benefit the soybean producers who finance
those investments through the checkoff program, two key things must occur. First, the checkoff-
21
financed export promotion efforts must actually increase the demand by foreign consumers for
U.S. soybeans and soybean products. If that does not happen then, of course, there is obviously
little benefit from investing in foreign market promotion. The analysis in the preceding section
clearly shows that the soybean checkoff program has effectively boosted both the level of U.S.
soybean and soybean product exports and the U.S. share of world soybean and soybean product
trade. Nevertheless, even if investments in foreign market promotion have added to the level of
U.S. soybean and soybean product exports, producers do not necessarily benefit from the export
expansion achieved. Thus, the second thing that must happen if producers are to benefit from
international promotion is that the revenue increase accruing to them as a result of any increase
in foreign demand achieved must be greater than the cost of generating that revenue increase. In
other words, the promotion program must be cost effective. Producers only gain from promotion
if they profit from their investments in the checkoff program.
Assessing the returns to investments in international market promotion, therefore, requires a
benefit-cost analysis to determine if the additional revenues flowing to producers from those
investments are greater than the investment cost. In this section, two benefit-cost measures of
returns are calculated: (1) the gross export revenue benefit-cost ratio (EBCR) and (2) the grower
profit from exports benefit-cost ratio (NEBCR). The first BCR measures the per dollar return to
international export promotion at the export level of the market calculated as the additional
combined soybean, soymeal, and soyoil export revenue generated (net of the expenditures on
international market promotion) per dollar spent on international market promotion. To calculate
the gross export revenue benefit-cost ratio (EBCR), the additional soybean and soybean product
export revenue (XR) generated by the checkoff program in any given year (t) is first calculated
as:
(1) XRt =
wo
x
 pwxitx wit -  pwo
xit it
i
i
where px is export price ($/mt); x is the volume of exports (million mt); i = soybeans, soymeal,
and soyoil; and “w” and “wo” indicate the values from the with checkoff expenditure scenario
and the without checkoff expenditures scenario, respectively. Then using equation (1), the gross
export revenue benefit-cost ratio (EBCR) is calculated as:
(2) EBCR =
T
XRt - Et
t=1
Et

where E is international market promotion expenditures ($US million) across all commodities
and regions. Note that Et is first netted out of the additional export revenues generated (XR) in
those years (i.e., XRt - Et) since the checkoff represents the cost of generating those revenues.
22
The second benefit-cost ratio, the grower profit from exports benefit-cost ratio (NEBCR),
measures the per dollar return to international market promotion at the producer level of the
market calculated as the additional soybean grower profits (additional cash receipts net of both
the additional production costs and the cost of international promotion) generated per dollar
spent on international market promotion. To calculate the NEBCR, the additional soybean
industry profits (R*) generated in any given year (t) are first calculated as:
w w w
w w
wo wo wo
t
t
t
wo wo
(3) R* = γ (p q - c A ) - γ (p q - c A )
t
t
t
t
t
t
t
t
where p is the farm price of soybeans ($/bu.); c is production cost ($/acre); A is the area planted
to soybeans (million acres); q is the production of soybeans (million bu.); γ is the export share of
total soybean industry revenues; and “w” and “wo” indicate the values from the with and without
checkoff expenditures scenarios, respectively. Using equation (3), the NEBCR is then calculated
as:
R*t Et
T
(4) NEBCR =

t=1
Et
where E is again international market promotion expenditures ($US million) across all
commodities and regions. Again, note that Et is first netted out of the additional profit generated
(R*)
in those years (i.e., R*t - Et) since the expenditures represent a cost to producers.
t
To account for the time value of money, as various researchers have done in considering the
soybean and other commodity checkoff programs, a discounted grower profit from exports BCR
is calculated as:
T
 (R*t – Et )/(1+r)t
(5) DEBCR =
t=1
T
 Et
t=1
where r is the interest rate chosen to discount the additional profit flows to present value.
Obviously the level of the DEBCR depends on the rate used to discount the benefits over time.
The DEBCR was calculated using the 30-day Treasury bill interest rates (IMF) for 1980/81
through 2012/113 as done by Williams (1999), Williams, Shumway, and Love (2002), Williams,
Capps, and Bessler (2009), and Williams, Capps, and Lee (2014) for soybeans and by others for
other checkoff commodities. The Treasury bill interest rate, which averaged 4.84% between
1980/81 and 2012/13, was selected because it represents a realistic alternative investment rate for
the 1980/81 through 2012/13 period of analysis.
23
A BCR as calculated in equations (2), (4), and (5) that is greater than 1 is interpreted as meaning
that the program has more than paid for itself. Otherwise, the program would be considered to be
ineffective in increasing export revenues (equation (2)) or profits of the soybean producers
(equation (4) and (5)) who pay for the program.
Using the “with” and “without” simulation results and equation (1) above, the soybean checkoff
program is estimated to have generated just over $20 billion in additional export revenues (6.7%
lift) over the 1980/81 to 2012/13 period (Table 5). Then using equation (2) above, the gross
soybean and soybean product export revenue benefit-cost ratio (EBCR) is calculated to be 34.8
to 1. In other words, for every dollar of international promotion expenditure over the 1980/81 to
2012/13 period, $34.8 of additional export revenue (net of the cost of the promotion) were
generated. In terms of export revenue generated, therefore, the return to international market
promotion has far exceeded its cost. Note from Table 5 that the EBCR was higher during the
earlier years (1980/81-1991/92) when the majority of checkoff expenditures were allocated to
international market promotion (40.7 to 1) than in the later years of the analysis (1992/932012/13) when the share of checkoff expenditures allocated to international market promotion
was declining (33.2 to 1).
Of course, not all the revenues from the additional U.S. soybean, soymeal, and soyoil exports
generated by international market promotion have accrued to producers over the years. Others
also have benefitted who do not pay any of the costs (free riders) such as exporters, processors,
feeders, manufacturers, and others along the domestic supply chain. Also, the additional revenue
accruing to producers in the form of cash receipts from the greater production of soybeans
required additional production costs which must be netted out of the additional revenues earned
by producers. This is done through the calculation of a grower profit from exports benefit-costratio (NEBCR) which measures the net revenue actually accruing to producers from the
additional exports generated by international market promotion per dollar of international
promotion expenditures. Using the with expenditures and without expenditures scenario results, the
additional exports generated by the soybean checkoff program are estimated to have generated
an additional nearly $12 billion in soybean farm cash receipts (2.1% lift) over the 1980/81 to
2012/13 period. Using equation (3) to calculate the additional revenue generated by the
additional exports net of the additional production costs and equation (4) to calculate the net
return (profits) to producers per dollar spent on international market promotion yields an
NEBCR of 10.1 to 1. In other words, soybean producers received an estimated $10.1 in
additional profits from international market promotion for every dollar spent on international
market promotion. Clearly, the profits received by soybean growers from international market
promotion also have far exceeded the cost of that promotion to them (Table 4).
The 10.1-to-1 NEBCR estimated for the international market promotion component of the
soybean checkoff program is consistent with the export promotion BCRs calculated for numerous
24
Table 5: Benefit-Cost Analysis for International Market Promotion, 1980/81-2012/13
1980/811991/92a
1992/932012/13
1980/812012/13
5,024.5
15,001.3
20,025.8
120.6
438.4
559.0
40.7
33.2
34.8
Added Soybean Cash Receipts from Exports ($ million)
2,888.6
9,066.2
11,954.8
Cost of Production ($/acre)
Total
Variable cash expenses
All other (capital, land, etc.)
179.71
60.44
119.27
275.16
93.60
181.56
240.45
81.54
158.90
Cost of Production ($/bu)
Total
5.87
1.97
3.90
6.98
2.36
4.59
6.58
2.22
4.34
800.4
269.7
530.7
4,972.2
1,530.6
3,441.6
5,772.6
1,800.2
3,972.4
2,088.2
4,094.0
6,182.1
Grower Profit from Exports Benefit-Cost Ratio (PEBCR) ($/$ spent)
17.3
9.3
11.1
Grower Net Profit from Exports Benefit-Cost Ratio (NEBCR)c ($/$ spent)
16.3
8.3
10.1
Discounted NEBCR (DEBCR)e ($/$ spent)
10.2
6.5
7.3
Added Export Revenue ($ million)
Foreign Market Promotion Investmentb ($ million)
Gross Export Revenue Benefit-Cost Ratio (EBCR)c ($/$ spent)
Total Cost of Production Added by Exports ($ million)
Total
Added Grower Profits from Exportsd ($ million)
a
To maintain comparability of results across years, the foreign market promotion investment data do not include the in-country
third party contributions to promotion that were included in the previous analysis because such contributions were no longer
provided after the late 1990s. Consequently, the export revenue effects of foreign market promotion are somewhat lower than
previously calculated for the years through the late 1990s.
b
Foreign Market Promotion Expenditures (ASA/USB, FAS). Third Party contributions not included.
c
Cost of international market promotion netted out.
d
Added cash receipts from exports minus production costs added by exports.
e
The interest rate on the 30-day Treasury Bill used as the discount rate.
25
other checkoff commodities. The next to last column of Table 3 shows that the export promotion
BCRs calculated for 17 commodity checkoff programs range from -0.1 to 60.0 with a mean of
13.9. Note that the 10.1-to-1 NEBCR is just under the mean export promotion elasticity across
those other studies and well within one standard deviation of that mean. However, the 10.1-to-1
return to producers from international market promotion calculated in this study is higher than
the 6.5-to-1 return to producers from the overall soybean checkoff program (NBCR) as reported
by Williams, Capps, and Lee (2014). This result is also consistent with the BCR results from
most other studies of checkoff programs. Tables 2 and 3 show that the mean BCR to domestic
promotion across many checkoff programs is 9.8 to 1 while that of export promotion is higher at
13.9 to 1, similar to the results for the soybean checkoff program.
An important word of caution is in order. Note that the NEBCR of $10.1 calculated in this report is
slightly higher than the $9.2 NEBCR calculated in the previous report of the returns to the
international market promotion component of the soybean checkoff program (Williams 2012).
However, attempting to draw implications from that fact is not advisable for at least two reasons.
First, the simulation analysis supporting the NEBCR calculation in the previous report included third
party contributions that were reported through 1998/99. Those contributions were not included in the
simulation analysis supporting the calculation of the NEBCR in this report because such
contributions have not been reported now for almost 15 years so that continuing to include that data
in the analysis leads to increasingly skewed results over the full period of analysis. Thus, to maintain
consistency in the expenditure data used for the analysis, third party contributions were not included
for the current analysis. The consequence was lower expenditures used in the analysis and, therefore,
a lower estimated value of added export revenue than would have been the case with third party
contributions added into the expenditure database. Because of the principle of diminishing returns,
however, the reduction in the level of expenditures by excluding the third party contributions was
greater than the reduction in the added revenue estimate resulting in a higher ratio of revenue to
expenditures. Second, all expenditure data used in this analysis were substantially revised compared
to the data used in the previous analysis as the result of a separate USB-funded project to develop a
comprehensive soybean checkoff expenditure database. Also, the world soybean and soybean
products model used in the current analysis (SOYMOD) has been extensively revised since the
previous analysis of the returns to international market promotion by Williams (2012). The most
appropriate conclusion from comparing the estimated NEBCRs for the international market
promotion component of the soybean checkoff program between the two studies is that the calculated
NEBCR is highly robust to changes in the expenditure data and model specification. That is, despite
updated and revised expenditure data and an updated and revised world soybean and soybean
products model, the return to international market promotion calculated in this study is remarkably
similar to what was reported in the previous study.
Other important caveats on the interpretation of the BCR measures presented in Table 5 also are
important to mention. Estimated BCRs for checkoff programs much in excess of 1:1 often are
26
taken to imply large absolute impacts of a checkoff program on the market. Nothing could be
less true. A BCR of 10:1 results from dividing a $10 billion industry profit benefit by a $1 billion
checkoff investment or from dividing a $10 benefit by a $1 investment. Either way, the result is a
10-to-1 BCR. Like most commodity promotion programs, expenditures on research and
promotion activities by the soybean checkoff program have been extremely small in comparison
to the total value of industry sales (only about 0.3% for the soybean checkoff program according
to Williams, Capps, and Lee (2014)). With such a low level of investment compared to sales, the
overall impact of the checkoff program could hardly be expected to be significant in a practical
sense in its effects on domestic demand, exports, price, and market share even if the impact
could be said to be statistically significant. Thus, care must be taken in interpreting the results in
Table 5 so as to avoid implying that the reasonably high BCRs estimated for international market
promotion mean that international market promotion has had a large absolute impact on the level
of exports and export revenue. In fact, as Table 1 shows, the absolute impact actually has been
relatively small in most cases. Many market factors have a much larger effect on the volume and
value of soybean and product export sales than international market promotion, such as relative
price changes, agricultural policies, changes in incomes, population growth, competition from
other producing countries, exchange rates, and consumer health concerns and demographics, just
to name a few. The BCR simply indicates the returns from whatever the level of investment has
been and not whether the investment has been a major factor in impacting sales.
Conclusions and Implications
T
he clear message from this study is that international market promotion continues to
work well for the soybean checkoff program as a means of enhancing profitability within
the U.S. soybean industry. International market promotion has been and continues to be
the foundation of the soybean checkoff program, helping to keep the entire checkoff program
profitable as the United Soybean Board (USB) and Qualified State Soybean Boards (QSSBs)
have explored other promotion and production research opportunities in domestic markets since
the implementation of the national soybean checkoff program. Among the major findings of this
study are the following:
● The international market promotion component of the soybean checkoff program has
generated over $20 billion in additional export revenue since 1980/81with a Benefit-Cost
Ratio (BCR) of $34.8 per dollar spent on international promotion.
The $20 billion added to U.S. soybean and soybean product export revenue through soybean
checkoff program activities represents roughly a 6%-7% lift of those revenues since 1980/81.
About 75% of those additional revenues were added after the implementation of the national
soybean checkoff program. The export revenue BCR of 34.8 to 1 indicates that the return to
international market promotion has far exceeded its cost. The fact that this BCR is somewhat
27
higher than the BCR calculated in the previous study of the return to international market
promotion (Williams 2012) may not be meaningful due to extensive revisions and changes in
the expenditure data and model since the previous analysis. However, the BCR in the two
studies are of the same order of magnitude implying robustness in the export revenue BCR
measure.
● The international market promotion component of the soybean checkoff program has also
generated over $6.2 billion in additional soybean grower profits since 1980/81 with a
producer Benefit-Cost Ratio (BCR) of $10.1 in producer profit per dollar spent on
international promotion.
About two-thirds of the $6.2 billion addition to grower profits through soybean checkoff
activities was added since the implementation of the national soybean checkoff program.
Clearly, soybean growers have benefited from their investment in international market
promotion. Again, meaningful implications of the fact that this calculated BCR is higher than
that calculated in the previous study by Williams (2012) cannot be confidently drawn due to
extensive revisions and changes in the expenditure data and model used in the current
analysis. As with the export BCR, however, the producer profit BCRs from international
market promotion calculated by the two studies are quite similar implying robustness in the
producer profit BCR measure.
● The return to growers per dollar spent on international promotion has been larger than the
return to growers per dollar spent on the overall soybean checkoff program.
International market promotion over the years has helped raise the average return to the
overall soybean checkoff promotion program. Previous analyses of the effectiveness of the
soybean checkoff program have consistently concluded that the historic shift in funding
allocation strategy to funnel relatively more funds to production research and relatively less
to international market promotion has likely moderated the level of the grower BCR from the
checkoff program over time. The share of checkoff funds allocated to production research
was only 21.5% in 1988/89 but 50.6% in 2010/11. At the same time, the share of checkoff
expenditures allocated to international market promotion dropped from 78.5% to 26.0% over
the same period. The continuing increase in the allocation of checkoff funds to production
research has come at the expense of the allocation to international market promotion.
Particularly since the implementation of the national checkoff program, this checkoff fund
allocation strategy has added tremendous “supply push” to the market effects of the soybean
checkoff program while reducing the “demand pull” of the program from international
market promotion. In fact, the simulation results indicate that the “supply push” of
production research expenditures began to have a greater impact on U.S. and world soybean
and product markets than the “demand pull” of the domestic and international marketing
promotion programs in about 2000/01. This result does not necessarily imply, however, that
28
investments in production research should be abandoned. Even though soybean checkoff
funded production research tends to moderate market prices and depress the calculated BCR,
previous research (e.g., Williams, Shumway, and Love 2002) indicates that reducing
checkoff investments in new, high yielding and cost-efficient soybean production
technologies and techniques would likely lead to a loss of U.S. competitiveness in world
soybean and soybean products markets over the long run and would build the comparative
advantage of Brazil and Argentina in the production and export of soybeans and soybean
products as they continue to operate aggressive soybean production research programs of
their own. The negative market price and revenue effects of production research investments
should be seen as simply the cost to U.S. soybean producers of staying competitive in world
markets. In that sense, a strong international market promotion program plays a critical role
in offsetting the cost of staying competitive by generating high positive returns to producers.
A critical issue to consider is the proper funding mix between production research and
demand enhancement programs like international promotion. Soybean growers must weigh
carefully the tradeoff between the possible cost to them of investing in production research to
help maintain global competitiveness and the positive return from investing in international
promotion.
● Soybean checkoff investments in international market promotion have enhanced the
international competitiveness of the U.S. soybean industry and increased the global market
share of U.S. soybean and product exports.
A common concern about international market promotion programs is that free riders (export
competitors) likely benefit from such checkoff expenditures without paying any of the cost.
The hope is that U.S. export promotion results in an increase in only U.S. exports. The fact
is, however, that there is no guarantee that other countries like Brazil and Argentina will not
benefit from U.S. efforts to build foreign processor, feeder, manufacturer, industrial, and
consumer use of soybeans and soy-based products. The real question is usually not whether
any of the benefit is lost to foreign competitors but rather how much is lost. This study
concludes that the international market promotion program provided a lift to U.S. soybean,
soymeal, and soyoil exports of 6.4%, 11.2%, and 18.4%, respectively, since the
implementation of the national checkoff program. At the same time, the program also
boosted the U.S. shares of world soybean, soybean meal, and soybean oil exports over that
period by 1.3, 1.2, and 1.8 percentage points, respectively.
● Soybean checkoff investments in international market promotion have boosted imports of
soybeans and soybean products around the world, particularly by China and many smaller,
less developed countries.
China experienced by far the largest soybean-checkoff-induced lift of soybean imports of all
importing regions (1.24 million mt, a 6% lift) since the implementation of the national
29
checkoff program. The soybean import lift was 383,000 mt (3.3%) for the group of smaller
importing countries (referred to as “rest of the world”), nearly 220,000 mt (1.5%) for the EU
15/27, and almost 100,000 mt (2.3%) for Japan. For soymeal imports over the same period,
the rest of the world experienced the largest lift of about 776,100 mt (4.6%), followed by the
EU 15/27 of about 418,000 mt (2.4%) and Japan of only about 62,500 mt (5.0%). For soyoil
imports over the same period, the rest of the world experienced the largest lift of just over
200,000 mt (4.2%).
These conclusions suggest a number of implications for the management of the international
market component of the soybean checkoff program:
1. The high BCR for international market promotion suggests that the U.S. soybean industry
continues to underinvest in international market promotion despite the increase in funding
that has occurred since the implementation of the national checkoff program. The
underfunding imposes an opportunity cost on the soybean industry. The estimated
international market promotion BCR of 10.1 to 1 suggests that for every dollar not
contributed by producers and spent on international promotion, the industry loses $10.1 in
additional revenues. As the level of expenditures increases, of course, the BCR would be
expected to drop to some extent. That is the principle of diminishing returns. But because the
current level of expenditure is still low relative to the size of the soybean industry (currently
only about 0.3% of soybean farm cash receipts), even an extraordinary expansion in the
current level of investment in international promotion would likely have only a modest
negative effect on the corresponding benefit-cost ratio.
2. The higher grower BCR to international market promotion of 10.1 to 1 calculated in this
study compared to that of the overall checkoff program of 6.5 to 1 calculated by Williams,
Capps, and Lee (2014) implies that large additional benefits in terms of grower profits could
be realized without an increase in the checkoff assessment by simply allocating a larger share
of current checkoff funds to international market promotion. As the level of international
market promotion expenditures increase, the export revenue BCR (EBCR) and the grower
profit from exports BCR (NEBCR) would be expected to drop to some extent. Again, that is
the principle of diminishing returns. However, such a reallocation could have implications
for the international competitiveness of the U.S. soybean industry if the additional funds for
international market promotion came from the allocation to production research. The
important concern is setting a proper funding mix between international market promotion,
production research, and domestic promotion.
3. The commodity mix of international market promotion expenditures can impact the return
from those expenditures. For example, during the 1990s when soymeal accounted for 50%60% of international market promotion expenditures (see Figure 6), the additions to export
30
revenue from those expenditures were growing (see Figure 12). However, funds were
reallocated to soybeans from soymeal from the late 1990s through about 2003/04 leading to
an increase in the soybean share to a high of about 70% that year while the soymeal share
dropped to a low of about 25% in that same year. The consequence was stagnation in the
annual addition to total export revenues generated by international market promotion until
funds once again began to be reallocated to soymeal and away from soybeans beginning in
about 2005/06. The annual addition to exports responded strongly, hitting a high of about
$5.4 billion by 2012/13. The focus on soybeans rather than soymeal over much of the period
since the implementation of the national checkoff program in 1992/93 may be responsible, in
part, for the lower revenue from exports BCR (EBCR) and the lower grower profits from
exports BCR (NEBCR) during those years ($33.2 and $8.3, respectively) than during the prenational checkoff program period (40.7 and 16.3, respectively) (see Table 5). Determining
the optimal mix of soybean, soymeal, and soyoil promotion expenditures to maximize the
returns from international market promotion would be a useful but complex undertaking.
4. The country/region mix of international promotion expenditures can also affect the return
from those expenditures. The focus of international market promotion over the period of
analysis has switched from maintaining and building a few large, mature markets to opening
and developing many new, smaller markets. This strategy has pitted a philosophy of
maintaining sales in large but stable markets against one of building sales in a large number
of smaller, growing markets. For example, the expenditure elasticities estimated for the
EU15/27 (see Table 1) indicate clearly that a given percentage increase in promotion
expenditures in that region would have a smaller percentage impact on their soybean and
soymeal demand than the impact that same percentage increase in expenditures would have
on soybean and soymeal demand in China and the rest of the world. Moving such
expenditures out of the EU15/27 and into those newer, growing markets, therefore, should be
expected to enhance the returns to international export promotion with two caveats. First,
while the effects of promotion activities often persist beyond the period when the
expenditures are made, they do not last forever. A decay in those effects occurs if the
expenditures are reduced or terminated. Research shows that the promotion message will be
forgotten if the potential users are not continuously exposed to it (see Zielske 1959, for
example). Consequently, when expenditures are shifted away from the EU15/27, any
increase in export sales achieved in that region from past promotion expenditures will taper
off over time. So a strategy to maintain at least some minimum level of promotion
expenditures in that region to maintain some of the gains achieved from previous
promotional efforts would seem reasonable. The second caveat is that re-directing
international market promotion expenditures from mature to new markets must achieve at
least the same return to the checkoff dollars spent as might have been achieved without redirecting those expenditures to avoid revenue losses. A number of years of continued
expenditures in new markets are often required before substantial returns are generated.
31
Conversely, only a short period of no expenditures is necessary for any gains previously
achieved to be lost. Determining the optimal country/region mix of promotion expenditures
to maximize the returns from international market promotion would also be a useful but
complex undertaking.
5. Finally, an unavoidable fact of international promotion is that, while such expenditures may
increase foreign demand for soybeans and products, U.S. competitors can benefit from those
efforts as well. While this study shows that U.S promotional efforts have successfully created
foreign demand for soybeans and products, that increase in demand as well as in world
market prices have also benefitted producers in Brazil, Argentina, and elsewhere and not just
in the United States. Assuring that any new demand created by U.S. promotion in foreign
markets results in additional foreign purchases of only U.S. soybeans and products is difficult
at best. While the hope may be that little of the overall benefit will accrue to U.S. export
competitors, such an outcome cannot be guaranteed. Clearly, therefore, the foreign
promotion strategy must include more than simply generating demand. The strategy must
also focus on building customer loyalty through providing service, developing business
relationships with foreign buyers, and building confidence in the U.S. as a reliable supplier of
consistently high quality soybeans and products.
32
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Soybean Checkoff International Market

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