Local Foods Scenarios Using the MSU Local Foods Spreadsheet Model to introduce standard practices, terms, interpretation, and limitations

Need to Download the Spreadsheet Model Google “Dave Swenson” (not David Swenson) I am the first one up (usually) if you use Google Go to my website and you will see the FINE section for downloads under my picture Get the I-O Model and open it up

First, just to get familiar with the spreadsheet model Understanding how the spreadsheet model works – using the construction sector first We’re next going to compare the different outcomes from a set of industries Grain and oilseeds versus fruits and vegetables -- notice the huge difference in both direct and total job outcomes Next, food and kindred processing followed by meat and poultry – huge multipliers are driven significantly by assumptions that the factory is creating net-new farm activity. “Chicken-egg” and “but-for” become issues This is a HUUUUUGE problem for novice modelers – they tend to overstate value-added agriculture outcomes

Spreadsheet model continued 3. Here we’re using data from the model to estimate the size of Michigan’s fruits and vegetables industry – this is an economic contribution assessment. According to our Michigan SAM (in the Leontief Transformation tab), there was $395.928 million of vegetable and melon output and $300.227 million of fruit output in 2013. We want to assert the economic “footprint” of this sector of the state’s economy. What do we tell ag-sector stakeholders about F & V production in the state?

Note: This practice over-estimates the total contribution We have a very minor problem with double counting when we do this because the indirect and the induced jobholders eat fruits and vegetables and stimulate a total employment number in those sectors that is larger than the direct (and total value) in the model. We merely reduce the indirect and induced values by the amount of the error. So, in the results summary we could multiply all indirect and induced columns by 7247/7268= 99.7% (as well as every item in the detailed results) and re-tally to get a better total. It’s not much of an error, but an error nonetheless

A new production example 3. We’re going to replicate work that I did for the Leopold Center and for the state of Michigan back in 2010 with some updated numbers Let’s imagine very significant new production to meet seasonal fresh fruit and vegetable consumption by MI residents that is currently mostly satisfied from purchases from other states We’re going to estimate the economic impact of that assumption But we are also going to calculate “opportunity cost” offsets because all of the new land for this scenario is coming from existing grain farming.

Potential Economic Impact Example Fruit and Fresh Vegetables Analyzed Apricots Lettuce (Leaf) Asparagus Mustard Greens Bell Peppers Onions Broccoli Peaches Cabbage Pears Cantaloupe Plums Carrots Raspberries Cauliflower Snap Beans (Collard) Greens Spinach Cucumbers Squash Eggplant Strawberries Garlic Sweet Potatoes Kale Tomatoes Lettuce (Head) Watermelon

The numbers: Acre and direct output gains and offsets Michigan New acres required 75,192 Veg & melon = $170 million Fruits = $77 million Grain producing acres lost 75,192 Reduced Gain Sector production = $118 Million We first shock the economy by F & V values We offset the grain production opportunity costs The difference represents the potential net new productivity to the state from this shift

4. Let’s do a food hub We will use an “analysis by parts” (aka “bill of goods”) method Requires us to use several sectors of your model simultaneously – here we have 14 Requires us also to piece together the finished output so that it represents the whole of what was measured This is a very simplified example. Good analysis by parts studies often include dozens of categories

Here’s our raw data

But we need to parse these data into elements pertinent to our region – we have to estimate or discern a local purchase probability

Let’s do this

But we’re not done yet! The output from our Analysis by Parts only summarizes the indirect and the induced values, i.e., the amount of inputs purchased plus the results of the workers and the owners spending their labor incomes We need to add to that the direct values. They are: $400,000 in output excluding the cost of goods sold and retail-related manufacturing not in the economy $300,000 in labor income (payments to workers and proprietors) 5 jobholders (including the proprietor)

So to put it all together