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Economic Impact of the Erath County Dairy Industry

Economic Impact of the Erath County Dairy Industry. By David Buland Economist Temple, Texas S. Hussain Ali Jafri Professor of Economics Tarleton State University Stacie A. Randals Tarleton State University. Texas and Erath Milk Production. Erath Co. Milk Production.

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Economic Impact of the Erath County Dairy Industry

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  1. Economic Impact of the Erath County Dairy Industry By David Buland Economist Temple, Texas S. Hussain Ali Jafri Professor of Economics Tarleton State University Stacie A. Randals Tarleton State University

  2. Texas and Erath Milk Production

  3. Erath Co. Milk Production

  4. Changes in regional Milk Production

  5. Wholesale Milk Price

  6. Conceptual Model Dairy Industry as an Purchasing Institution Milk Sales Sales of calves, bulls and heifers Avg. Capital Expenses Other farm income Local Economy

  7. Input-Output Analysis • Definition - The assessment of change in overall economic activity as the result of some corresponding change in one or several activities. • Input-Output Assumptions - Constant returns to scale production function -i.e., linear - Homogeneous sector output - No input substitution - No supply constraints

  8. IMPLAN Model Datasets Features: - 528 Industrial Sectors - Most 3 or 4 Digit SIC - All States and Counties in the U.S - All elements balanced to National Income and Product Account totals.

  9. Multiplier Terms Defined Direct Effects – The initial immediate effects caused bya specific activity; for example, the initial investment in the construction of a new lagoon or the effects of the purchase of feed or medicines and the hiring of local labor, etc. The direct effect, or impact, will subsequently initiate a series of iterative rounds of income creation, spending, and re-spending that will result in Indirect Effectsand Induced Effects. These three component effects—direct, indirect, and induced effects—constitute the Total Effects resulting from the initial, direct effect.

  10. Definitions (cont.) Indirect Effects – The effects that result from the actions of the processing sectors to produce the Direct Effects. Therefore, the indirect effects are those changes to production, employment, incomes, etc., which take place as a result of the direct effects and include the effects on industry sectors that may be directly or indirectly related to the initially impacted sector.

  11. Definitions (cont.) Induced Effects– The effects of spending by the households in the regional economy as the result of Direct and Indirect Effects from some economic activity. The induced effects arise from a general change in the earnings and spending patterns of the household sector of an economy due to the direct and indirect effects.

  12. Definitions (cont.) Multiplier – A numeric measurement, expressed as a mathematical ratio, of the Total Effects, including the Direct, Indirect, and Induced Effects, to the direct effects of a specific activity, or a change in some activity.

  13. Erath County’s Dairy Production Function

  14. Leakages • Leakages are items purchased or produced outside of the Impact Area. • Leakages are less for the large state of Texas than for Erath County alone. • Erath 125 industrial sectors • Texas 497 industrial sectors

  15. Regional Purchase Coefficients (RPC’s) % From ERATH % From TEXAS 1. Feed 51.0% 74.1% 2. Labor - Wages Paid 100% 100% - Health Benefits 73.5% 89.4% - Owner’s Draw 90.1% 90.1% 3. Supplies 96.2% 96.8% 4. Insurance 76.3% 77.4% 5. Vet, Medicines 99.8% 100% 6. Breeding 62.6% 62.7% 7. Testing & Trimming 99.5% 100% 8. Repairs/Maintenance 96.7% 97.5% 9. Interest 45.1% 51.9% 10. Utilities 99.9% 99.9% 11. Milk Hauling 98.5% 100% 12. Promotion 67.4% 70.7% 13. Crop Expenses 97.7% 100% 14. Fuel, Oil, Gas 99.2% 100% 15. Taxes - Farm & Property 99.9% 100% - School 99.2% 100% 16. Mortgage/Rent Payments 83.2% 83.2% 17. Legal & Accounting 65.8% 66.1% 18. Cost of raising heifers 91.5% 100% 19. Repl. Heifers Purchased 57.9% 63.7% 20. Miscellaneous 94.5% 95.9%

  16. Major Adjustments at the local level. • Feed purchased from the local store or imported. • Replacement heifers from local and imported sources. • Interest paid to local creditors.

  17. Erath County Impacts

  18. Total Impact

  19. Jobs Created by Erath County’s Dairy Industry Dairy Industry 1,980 Added Employment (Erath County) 3,615 Total Employment provided (Erath County) 5,595 Added Employment (State of Texas) 8,501 Total Employment provided (State of Texas) 10,481

  20. Summary of Dairy Impacts

  21. Value Added Categories

  22. Loss of a 1,000 cow Dairy

  23. Impact of $1 change in Milk Price

  24. Conclusions • The IMPLAN model provides a valuable tool for Economic Impact Studies • But if you are concentrating on one particular industry, the core production functions and RPCs must be closely adjusted to match real local data. • Secondary industries are not sensitive to these adjustments.

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