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WA Wheat Industry Asks Decision Makers to Consider Billion-dollar Impact by Matthew Weaver Capital Press, April 13, 2015

Washington State University grains economist Randy Fortenbery reports on the economic
impact of the state's wheat industry, and potential effects of changes in tax policy.

As state legislators consider changes in tax policy that could impact the wheat industry, a Washington State University economist has issued a report showing wheat farmers directly contribute more than a billion dollars to the state.

"It's a pretty stable contributor to the overall economy," said Randy Fortenbery, professor and small grains endowed chair in Pullman, Washington

According to the report, wheat farmers contributed more than $1.1 billion in 2012 to the earnings of non-farmers through purchases of business inputs -- seed, fertilizer and such business services as accounting and legal fees -- and personal purchases made by growers and their employees, such as eating in local restaurants, attending local sporting events or movies.

Every dollar earned on the wheat farm contributed to 51 cents in earnings by businesses supporting the business needs of wheat farms and 47 cents earned by businesses supporting personal needs of farmers and their employees, according to the report.

"Every dollar from wheat farming resulted in another 98 cents in economic activity throughout the state, much of it in the rural communities where the grain producers operate," the report states.

Due to "significantly lower" wheat prices, businesses serving private, non-business needs earned $464 million in 2013 from farm employees, down 15 percent from $546 million in 2012. According to the report, there was a larger reduction in the value of farm business-to-business practices, as farmers dealt with lower prices by cutting production costs.

If the sales tax exemption on the purchase of seed, fertilizer and chemicals were eliminated, wheat farmers would have faced increased costs of $13.3 million, assuming their input use did not change. Total profits to Washington wheat farmers would decline by roughly $25.5 million.

"This would impact the ability of wheat farmers and their employees to make purchases in support of other businesses in the state, and as a result the businesses supported by wheat farm workers would also be negatively impacted," the report states.

Some farmers may cut back on input use, affecting yields and total revenue. Others may decrease off-farm spending.

The value of the report may be for people who are less connected to the wheat sector, Fortenbery said.

"The growers already know they have a significant impact in the communities where they live and operate, and probably most people in those rural communities do as well," he said.

"It's important those who make some of the rules that govern our industry know what wheat farming means to the state," said Scott Yates, director of communications for the Washington Grain Commission. The commission requested Fortenbery's report. "Although each individual wheat farmer is not big by any means, add them together and it's a billion-dollar industry in direct impacts with another billion-dollar impact in indirect impacts."

Fortenbery hopes to monitor economic impacts of the industry over time, releasing reports every other year.

"If we ended up having some policy initiatives that we thought would impact (the industry) coming out of the legislature this year, we might want to come back and investigate exactly what those changes will mean for contributions in the coming years," he said.

Related Pages:
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