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New toolkit clarifies agricultural economic assessment

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Melissa Osgood
Todd Schmit

The surge in consumer demand for local foods in recent years has prompted fresh investment in agricultural enterprises, from farmers expanding their marketing efforts to communities establishing new co-ops.

But evaluating the economic impacts of these enterprises and others like it has been a spotty undertaking as businesses and government agencies attempt to ascertain what impact these projects will have, often with no clear idea on where to start.

Now a Cornell University economist has teamed up with the Agricultural Marketing Service of the U.S. Department of Agriculture and other researchers to provide a standardized toolkit to evaluate the economic benefits of investing in local and regional food systems.

Agribusiness expert Todd Schmit, associate professor in the Charles H. Dyson School of Applied Economics and Management, says the rising demand for food-system innovations that benefit rural development and strengthen farm viability has come with a parallel groundswell for better assessment mechanisms to evaluate potential economic outcomes. The toolkit he helped develop addresses that need.

“Investment is crucial to support demand expansion, but until now there has never been a replicable, rigorous framework in place to judge a proposal on its merits,” Schmit says. “Rather than simply throwing money at ventures without a clear understanding of its impact, the toolkit gives clear instructions on everything from the questions to ask to the data to collect.

“Indeed, the toolkit is flexible enough to aid groups to estimate potential economic impacts of proposed initiatives, something becoming more popular as a requirement in grant proposals.”

In the past, varying degrees of expertise by businesses and communities made economic projections hazy for many projects. A new farmers’ market may sound tantalizing, but how many new jobs or new revenue might it create? Are there offsetting effects of this new market by decreases elsewhere in the local area (e.g., a grocery store)? A vegetable farmer expanding sales and acreage in one crop will come at what cost to the sale of another crop? Those answers were harder to pin down, and the mechanism varied from one community to the next.

Using seven modules complete with examples and simplified instructions, the Local Food System Toolkit provides a framework in which to measure and assess expected economic impacts of local food investments. The modules direct users on a range of topics, from how to construct an assessment team to the data needed to inform deliberations.

Schmit says the toolkit is a powerful resource that takes some of the guesswork out of economic assessment while remaining useable by a broader range of audiences, from private individuals to local government agencies.

“The toolkit was specifically designed to give a standardized approach to measure economic indicators like job creation and value added through a step-by-step process,” he said. “It’s flexible enough to look at lots of different activities and market developments, and specific enough to give reliable estimates to inform investment decisions.”

The toolkit can be used with just standalone modules or as a whole. Each module features real-life illustrations and best-practice approaches that help people frame their own situation and address the questions they need to address.

The toolkit is a collaboration between Schmit and other experts from Colorado State University, the University of Tennessee, the University of Wisconsin-Madison, Iowa State University, University of Vermont, Crossroads Resource Center, and U.S. Department of Agriculture, Agricultural Marketing Service.

Matt Hayes is managing editor and social media manager for the College of Agriculture and Life Sciences.

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