PR 07 10

Slide1: 

Community Economic Analysis and Impacts of Georgia Cotton Production Archie Flanders ~ Center for Agribusiness and Economic Development University of Georgia ~ Athens, Georgia Agricultural production is a major source of employment and income in southern Georgia counties. These rural areas have few alternatives to agriculture for economic development. The cotton region has lower employment and lower average household income in Table 1 than both the Georgia and U.S. averages. The primary crop production region of Georgia includes counties in the southern portion of the state. The major cotton producing counties in Figure 1 accounted for 98.4% of Georgia harvested acreage in 2006. Turner County (highlighted in Figure 1) has the average level of acreage for all counties and is in the geographic center of the region. Simulation analysis of the Georgia cotton industry is applied to evaluate the economic characteristics of production. Table 2 shows the model prices and yields. Cotton prices are determined by estimates from the Food and Agricultural Policy Research Institute at Iowa State University and the University of Missouri. Cotton yield is the 5 year Georgia average. AWP and commodity program yields are from USDA. Table 3 presents the variable costs and fixed costs for average farm cotton acreage of 700 acres (UGA estimates). Table 4 presents simulation results with net returns of $39,224. Without government payments from DP, CCP, and LDP, net returns would be -$46,737. Paying landlords for average rented acreage at typical rates results in farm income of $19,974. Farm income represents 23.2% of government payments received by cotton farmers. Farmers pay 22.4% of government payments to landlords for rent. The balance of government payments, 54.4%, is paid by farmers for inputs in cotton production. Farm purchases of inputs create economic activity in Turner County. Direct impacts from input purchases create indirect effects due to local businesses purchasing from other businesses in the county, as well as due to employees of these businesses spending their income. Table 5 shows the economic impacts due to cotton production in Turner County. Results are based on county acreage estimates for 2007. A county economy has limited capacity to provide inputs to the cotton industry. Inputs that come from outside of the county represent leakages to the county economy. Leakages to the county economy are purchases from other economies. Table 6 indicates the total impacts to Turner County, Georgia, and the U.S. due to cotton production in Turner County. Impacts increase for larger economies with increasing capacity to supply inputs that are leakages from smaller economies. Taxes in Table 6 are total local, state, and federal taxes that are generated from economic activity in the corresponding economy. Figure 2 compares total government payments received by farmers in Turner County to total taxes generated in the U.S. economy due to their cotton production. For each dollar received in government payments, $1.37 of new tax revenues are generated in the U.S. economy. Summary Cotton production is important to rural Georgia county economies. The Georgia cotton industry is not financially viable without government payments. Production in one county creates economic activity throughout the U.S. economy. For each dollar that Georgia cotton farmers receive in government payments, $1.37 in tax revenues are generated in the U.S. economy. The results from this analysis are consistent with the U.S. system of Federalism in which each level of local, state, and federal governments allocates public funding to purposes for which it is best suited. Public funding stimulates economic development at all levels of the economy and generates new tax revenues. Figure 1. Major Georgia Cotton Producing Region, Designated County Economy