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UK study approves use of ag development funds

By TIM THORNBERRY
Kentucky Correspondent

LEXINGTON, Ky. — The findings of a University of Kentucky (UK) study on the effectiveness of Kentucky Agricultural Development Funds (KADF) has confirmed what agricultural leaders in the state were confident of – that money invested by the KADF has had “a significant positive impact on agriculture and agribusiness” in the state.

The final report comes after a year and a half of compiling information and making on-site visits. The report covers the investments made from 2001-07.

“I commend the Governor’s Office of Agricultural Policy (GOAP) for commissioning the evaluation to assess the goals and objectives of the Kentucky Agricultural Development Fund,” said Gov. Steve Beshear.

“I am pleased with the results of the evaluation and am committed to ensuring that 50 percent of the Master Settlement Agreement (MSA) Funds be invested each year into agriculture for diversification efforts and the creation of new opportunities for our agriculture industry.”

The fund was created with the settlement of a landmark lawsuit in 1998 among 46 state attorneys general, five U.S. territories and the District of Columbia and the four largest tobacco companies at the time. The $206 billion awarded was divided among the states with payments beginning in 2000. It was then up to each state to decide how to use the money.

Kentucky passed legislation that allocated 25 percent of the funds toward early childhood development programs and another 25 percent for tobacco cessation and research programs.

The remainder was devoted to reinvestment back into the agriculture community and the Kentucky Agricultural Development (KADB) Board was created to oversee those investments.
Since then nearly $280 million has been invested in an array of county and state projects helping to diversify the state agriculture industry in the wake of a changing tobacco environment.
In a state once home to more than 40,000 tobacco farms, the numbers have dwindled significantly, with changes in the industry brought about by the MSA and a quota buyout bill passed by Congress in 2004.

That legislation sent nearly $10 billion to quota owners in exchange for a free market without growing quotas and price supports.

The study was co-authored by UK College of Agriculture faculty members Craig Infanger, agricultural economics professor, Richard Maurer, professor of community and leadership development, and Gary Palmer, assistant director of Cooperative Extension Agriculture and Natural Resources.

It “examined the effectiveness of the non-model investments in agriculture, agribusiness and leadership, the county model program investments and the Kentucky Agricultural Finance Corporation.”
“All in all I’d say the fund is doing what is was created to do,” said Maurer. “We did a lot of site visits, which was very valuable, and we tried to be open and honest in our methodology. We tried to avoid value judgment and focused on the results.”

Maurer also said Kentucky is almost completely unique in the way it invests MSA funds. “On a broad basis, there really is nothing else like it,” he said.

Some specifics listed in the report stated “the $86 million invested in the state non-model projects has resulted in an estimated $161 million in additional farm income over a seven-year period, created or expanded markets for 148 products and impacted 50,000 tobacco farmers and more than 100,000 youth.”

The study also found that “on average, every dollar invested from the KADF in non-model projects resulted in $1.87 of additional farm income. Additional income was highest for marketing and promotion ($3.19) and livestock ($3.15). Project participants leveraged $96 million in additional funding,” according to a GOAP release.

Another key finding in the study found the investments made to the Kentucky Department of Agriculture’s “Kentucky Proud” marketing program paid off in big dividends.

The report stated “every dollar of tobacco settlement money invested in Kentucky Proud added $4.70 in additional farm income. Kentucky Proud was one of nine projects out of 64 large and medium-size non-model projects to receive a five-star rating in the report.”

The rating meant “all goals were accomplished and researchers found evidence of sustained impacts and indications that the benefits of the project were greater than the amount of the investment.”

The report also noted Kentucky Proud generates an additional $7.8 million in farm income per year and is one of the most successful programs of its kind in the nation.

“The Agricultural Development Board was extremely wise to invest $5.3 million in Kentucky Proud, and this report bears that out,” Agriculture Commissioner Richie Farmer said. “But we’ve barely scratched the surface of this program’s potential to open new markets for Kentucky farm products and raise awareness among consumers.

“A greater investment is needed to build on the momentum the Kentucky Proud movement has generated, and this report proves that the program is more than worthy.”

That “greater investment” request was granted just last week, with a $3.3 million investment made by the KADB to the marketing program.

Additionally the study specified that the KADB investments “have resulted in more agricultural diversification, higher levels of technology in production practices, more and expanded markets for products, more rapid adoption of technology through education and cost-share incentives and a positive and significant increase in agricultural incomes.”

To see a copy of the study, go to http://agpolicy.ky.gov/index.shtml

12/3/2008