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Annual Economic Impact of the U.S. Sunflower Industry

Wednesday, March 1, 1995
filed under: Utilization/Trade

What’s the annual impact of the U.S. sunflower industry on the nation’s economy? Nearly $2.7 billion, according to a just-concluded landmark study.*

The study, conducted by North Dakota State University agricultural economists Dean Bangsund and F. Larry Leistritz, used 1991-93 as its base period, with the annual impact determined by averaging the figures for those three years. Along with estimating the industry’s overall economic activity, the NDSU researchers also broke down that activity into four major industry segments: (1) crop production; (2) the sunflower oil industry; (3) confection sunflower; and (4) the birdfood sector. Of the overall annual impact of $2.67 billion, $799 million was attributed to the crop production segment; $743 million to the sunflower oil industry; $702 million to the confection sector; and $423 million to the birdfood portion of the sunflower industry.

“These numbers represent the most in-depth and comprehensive analysis ever conducted of the U.S. sunflower industry’s economic importance,” states Larry Kleingartner, executive director of the National Sunflower Association. “Though sunflower has often been referred as a ‘minor’ crop, that $2.7 billion figure under-scores the fact that this industry is, in reality, a very notable player in U.S. agriculture.”

Kleingartner adds that had the study’s timing allowed for inclusion of the 1994 sunflower crop year, the economic impact figures would have been even larger due to the size of the 1994 crop and increased processing and distribution activity.

NSA leaders are expected to emphasize these economic impact figures to Congress and USDA during the coming months as the 1995 farm bill is deliberated. “Given the intense scrutiny that federal agricultural budgets are receiving this year, each commodity is under more pressure than ever to justify itself and its receipt of any type of federal aid, be it in the form of loan programs, deficiency payments, export subsidies or other government involvement,” Kleingartner notes. “We believe the conclusions of this study strongly underscore the contributions and importance of the sunflower industry to the economies of major producing states — and to the nation in general.”

In compiling their economic impact figures, Bangsund and Leistritz mea-sured five general categories: (1) personal income; (2) retail trade volume; (3) total business activity; (4) direct and secondary employment; and (5) state tax revenues. Numerous companies and individuals throughout the nation’s sunflower industry provided information on their own activity through surveys and interviews, thereby making possible this unprecedented documentation of sunflower-generated economic activity within the United States.

Along with the $2.67-billion overall impact figure and the totals for each of the four major categories, the NDSU study also produced these figures:

• The direct and secondary economic impact of the sunflower industry in the nation’s major producing states is, per year: North Dakota — $724 million; Minnesota — $227 million; South Dakota — $194 million; Kansas — $93 million; Colorado, Nebraska and Texas combined — $54 million. Collectively, all the remaining states (minor sunflower-producing states as well as other states involved in processing and distributing sunflower products) experienced about $1.39 billion in total economic impacts.

• Direct and secondary employment generated by the U.S. sunflower industry totals nearly 35,200 full-time-equivalent jobs. Most of that employment would be secondary, i.e., as a result of business activity created by the sunflower industry.

• State tax revenues generated annually by the sunflower industry in the seven major sunflower-producing states totals $24.3 million dollars. Of that, about $16.1 million is in the form of sales and use taxes; $6.3 million in personal income taxes; and $1.9 million in corporate income taxes. The sunflower industry is also estimated to be directly responsible for approximately $11.9 million in property taxes, for a total tax generation of $36.2 million.

• Total economic activity per planted acre of sunflower averages $1,038. That figure encompasses inputs and sales beginning with the farmer’s purchases through the retail phase, i.e., end user of the sunflower or its products.

What were the main calculation ingredients that went into the study’s conclusions for the four major industry segments?

For the “crop production” sector, the NDSU economists incorporated acreage, yields, prices and the farmer’s production expenses and returns. For the three-year study period (1991-93), U.S. sunflower acreage averaged 2.58 million, with average yield of 1,140 per planted acre and overall production of 1.5 million tons. Total annual direct impacts (expenditures and returns) from sunflower production were estimated at $316.8 million (about $123 per acre), with that amount generating another $482 million in secondary economic impacts, for a total of $798.8 million.

The “sunflower oil” portion of the study encompassed oil sunflower seed exports, elevator handling margins, crushing, oil refining, oil and meal exports, and domestic consumption of sunflower oil and meal. The industry produced about 384,335 tons of crude sunflower oil annually during 1991-93, along with 448,270 tons of sunflower meal each year. Exports averaged 42,300 tons of oil-type sunflower seed, 249,300 tons of sunflower oil and 42,100 tons of meal. Annual direct impacts for the sun oil sector averaged $255 million, with an additional $488 generated in secondary economic impacts, for a total of $743 million.

For 1991-93, the “confection” sector of the industry initially processed an average of 266,100 tons of confection sunflower seed each year, generating an annual direct economic impact of $31.8 million. Approximately 69,900 tons of confections (kernels and whole seed) were salted and roasted, producing another $17.3 million annually in direct economic impact. About 71,500 tons of confection sunflower were consumed within the United States annually from 1991 through 1993, with the process of packaging, distributing and selling these products for consumers generating about $221.1 million in direct impacts. The bottom line for the confection sunflower industry was $279 million in direct impacts and $423 million in secondary impacts, for a total annual economic impact of $702 million during the analyzed period.

As this study clearly indicates, the “birdfood” sector has become a major part of the overall U.S. sunflower industry. Direct economic impact from the primary processing of oil sunflower for birdfood was estimated to be about $45.4 million annually, with the domestic consumption of sunflower for birdfood resulting in $91.9 million of direct economic activity each year. That total of $137.3 million in direct impacts, coupled with an estimated $285 million in secondary impacts each year, brings the overall annual impact of the birdfood sector up to nearly $423 million.
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