Abstract
Many agricultural commodities have industry-funded generic promotion and/or research
(“checkoff”) programs designed to improve the economic performance of producers. To determine the
effectiveness of these programs, the net benefits to producers attributable to activities funded by the
checkoff must be separated from those due to other factors influencing commodity markets. One such
factor that is very important in many agricultural commodity markets is the effect of government
programs. However, studies evaluating the returns to checkoff programs often do not explicitly discuss
the impact of pre-existing distortions caused by federal farm programs. Because the distortions caused by
farm programs can be quite large, this omission can lead to seriously biased estimates of the returns to the
checkoff programs. In this study, we develop a model that captures the influence of two Federal
programs (loan deficiency payments to farmers and subsidies to consuming mills) on the estimated
returns to the Cotton Research and Promotion Program. Using an econometrically estimated model of the
U.S. cotton market, we find that the program interaction effects have a large impact on checkoff program
returns.
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