October 6, 2003

Study shows impact of buying California goods

Shifts in spending by California consumers could bear bountiful fruit for the state’s economy, according to a new study by Dennis Tootelian, marketing professor and director of the CSUS Center for Small Business.

The study, commissioned by the Buy California Marketing Agreement, found that if in-state consumers bought more California-produced agricultural products – such as tomatoes, lettuce, milk and other commodities from California’s farms, ranches and fisheries – instead of products produced elsewhere, the impact on the state’s economy would be significant.

“This shift does not necessitate an increase in total consumption or consumer spending,” Tootelian said. “It merely represents a redirecting of spending from purchasing agricultural products grown in other states and countries to those grown in California.”

According to the study, if Californians increased their purchases of native-grown products by 10 percent annually – which equates to about $1.63 per week for the average resident – the result would be approximately 5,565 new jobs and about $1.38 billion in additional spending due to increased business activity. The added economic activity would also generate approximately $188 million in tax revenues for local and state governments.

An annual increase of 25 percent – about $4.12 per week for the average Californian – would result in approximately 13,910 new jobs and about $3.46 billion in additional spending, according to the study. The growth in business activity would also generate approximately $470 million in local and state tax revenues.

The commodities included in the study were fresh fruits and vegetables, dairy products, nuts, chicken, salmon and lamb. These products represent about $18.5 billion (or 67 percent) of California’s $27.6 billion agriculture industry, according to the study.

California is the nation’s leading producer of a wide range of products, including broccoli, carrots, lettuce, melons, tomatoes and many other fruits and vegetables. Milk and cream, grapes and nursery products are the state’s three most valuable agricultural commodities, representing about 35 percent of the state’s total agricultural production value. California also leads the nation in agricultural exports to other countries.

According to the study, shifts in spending on agricultural goods would produce such a dramatic economic impact primarily because the average California farm spends 95.4 percent of its total revenues on operating and other costs. As a result, about 95 cents of every farm dollar gets pumped back into the economy.

Even relatively minor shifts in purchasing patterns by in-state consumers in favor of California grown products would have a major affect on the state’s economy, Tootelian’s study concludes.

“The benefits come not only to farms,” Tootelian said, “but also to other businesses due to the increased demand for their goods and services, to people who will find new jobs, and to local and state government in additional taxes generated by the increased economic activity.”

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