Dairy Promotion Programs Increased Dairy Product Demand: USDA Report

Dairy promotion under the dairy producer, dairy importer, and fluid milk processor promotion programs “has effectively increased US demand (domestic and exports) for dairy products,” according to a report recently released by USDA.

The enabling legislation of the dairy producer, dairy importer, and fluid milk processor promotion programs requires USDA to submit an annual report to the House and Senate Agriculture Committees. The most recent report, released earlier this month, addresses program activities for 2017.

The report’s third chapter describes the results of an independent econometric analysis, conducted by Texas A&M University, on the effectiveness of the programs implemented by the National Dairy Promotion and Research Board and the Fluid Milk Processor Promotion Board.

Those programs are evaluated with the key question in mind: Have the demand-enhancing activities conducted by dairy producers, importers, and fluid milk processors actually increased the demand for fluid milk and manufactured dairy products?

Historically, this question has been answered through econometric studies of the relationships between dairy product consumption and promotion program demand-enhancing expenditures. Economic returns to dairy producers, importers, and fluid milk processors that result from marketing and promotion activities and the associated changes in consumption are calculated using the parameters obtained from the estimated demand models.

The summary indicator of economic return on investment is a benefit-cost ratio (BCR), the evaluation explained. The level of the BCR is often taken as an indication of the impact of a program. For example, a one-dollar investment that returns five dollars is incremental revenue generates a BCR of five to one.

Over the period of 1995 to 2017, the BCRs expressed in terms of producer profit at the farm level were calculated to be $3.27 for every dollar invested in demand-enhancing activities for fluid milk; $3.94 for every dollar invested in demand-enhancing activities for cheese; and $15.93 for every dollar invested in demand-enhancing activities for butter. Over the same period, the BCR of export promotion was $6.91 per dollar invested.

On a fat and skim solids basis, a significant positive relationship existed between the demand for all dairy products and the advertising and promotion expenditures associated with the national promotion programs, the evaluation stated. The aggregate all-dairy BCR was 4.35, meaning that, on average, producer profit increased by $4.35 for each dollar invested in demand-enhancing activities.

The US imported between $3.0 billion and $3.5 billion in dairy products over the 2012 to 2017 period. Cheese products accounted for about just over 40 percent, by value, of those imports.

Dairy product importers have paid assessments to the National Dairy Research and Promotion Program since 2011. Total import assessment funds varied between . ...

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