CONTENTS

Effects of Supply Response on Returns to Catfish Promotion

Effectiveness of Almond Export Promotion Programs in Pacific Rim Markets

Manager's Viewpoint

Editor's Notes

Director’s Corner

Selected Reading

Next Meeting

Effectiveness of Almond Export Promotion Programs
in Pacific Rim Markets

by Shida Rastegari Henneberry

The U.S. government spent nearly 20 million dollars promoting almonds in the Pacific Rim during the seven year period 1986-92. These expenditures were mainly funded by the Market Promotion Program (MPP), which replaced the Targeted Export Assistance Program (TEA) in 1991. The nonprice export promotion programs (MPP and the Foreign Market Development Program [FMDP]) are currently administered by the United States Department of Agriculture’s Foreign Agricultural Service (FAS).

Although agricultural products receive the majority of federal export assistance, FAS has not established a consistent method for evaluating the effectiveness of promotion expenditures. The larger magnitudes of MPP funding have brought increased public and Congressional scrutiny to government promotion programs in general. The MPP, in particular, has recently been criticized for assisting large U.S. food companies, such as Blue Diamond, with branded promotion. Although calls to repeal the MPP have been suppressed, legislation has been proposed to tighten both FAS and participant management practices of the program. Without analysis of their effectiveness, it has become increasingly difficult for their supporters to justify the continuation of these programs.

This article summarizes the results of a recent study completed by Karen Halliburton and Shida Henneberry at Oklahoma State University. Our study examined the effectiveness of the U.S. government’s nonprice export promotion programs for almonds in the Pacific Rim markets of Japan, South Korea, Taiwan, Hong Kong, and Singapore. More specifically, part of this research was intended to answer the following questions: 1. Have the promotion expenditures had a positive impact on almond imports of selected Pacific Rim countries? and 2. Has there been a difference in the effectiveness of promotion programs based on the level of promotions? That is, how does the effectiveness of promotion vary in markets with large-scale promotions compared to markets with medium- or small-scale promotions?

The Pacific Rim is the second-largest regional market (the largest being the European Community) for U.S. almond exports. Japan has been the largest recipient of U.S. promotion expenditures in the Pacific Rim. Although Japan has historically been a strong and growing import market for almonds, in recent years growth has begun to slow in this market. This has coincided with acceleration of imports by other East Asian and Southeast Asian countries where medium-scale promotions (South Korea, Taiwan, and Hong Kong) and small-scale promotions (Singapore) have been conducted.

METHODOLOGY
To measure the effectiveness of Almond export promotion programs, an econometric import demand model was developed and estimated using data for the seven year period 1986-92 across five countries (Japan, South Korea, Taiwan, Hong Kong, and Singapore). The model specified total volume of almond imports of each country to depend on the import price of almonds, import price of almond substitutes such as cashews and other nuts, import price of almond complements such as sugar and cocoa butter, income, and almond promotion expenditures in the studied countries. In theory, the promotion expenditures, income, and price of substitutes are expected to be positively correlated with imports (direct relationship), while price of almonds and price of complements are expected to be negatively correlated with almond imports.

Data for promotion expenditures were provided by USDA/FAS, data on other variables were collected from publications by the United Nations and the International Monetary Fund. Three specifications of the model were used to compare the results for consistencies.

RESULTS
Our results consistently indicated a strong relationship between the price of almonds and the demand for almond imports in the Pacific Rim. Nevertheless, the empirical evidence suggests that promotion expenditures in South Korea and Singapore were ineffective during the 1986-92 period. However, results concerning Japan, Taiwan, and Hong Kong were less conclusive. Under some specifications of the model, promotions were effective in increasing almond imports in Japan, Taiwan, and Hong Kong. Using the results from these specifications, further analysis showed that the government received returns ranging from $4 to $9 for every dollar of TEA/MPP expenditures spent in these three Pacific Rim countries.

Ineffectiveness of promotion in some of the Pacific Rim countries may be due to various reasons. While ineffectiveness in countries where promotion has been medium- or small-scale may have been because the government did not spend enough money on promotions in these markets (particularly in Singapore where promotion expenditures were less that one percent of Japan), ineffectiveness in more developed markets may have been caused by the mature level of U.S. almond exports to these markets. Also, ineffectiveness may have been a result of inefficient allocation of funds to activities within each of the countries. For example, too much emphasis on processors compared to the retail level.

Shida Rastegari Henneberry is an Associate Professor in the Department of Agricultural Economics at Oklahoma State University.