An Economic Impact Analysis of a Peanut Buying Point in a
Three-County Region in Georgia
CR-04-10
October 2004
Prepared by:
CENTER FOR AGRIBUSINESS AND ECONOMIC DEVELOPMENT
D. Davis Waters and John C. McKissick
College of Agricultural and Environmental Sciences
The University of Georgia
I.
INTRODUCTION
An economic impact analysis evaluates the effects, or economic impacts, of a new
venture – in this case a peanut buying point – on major sectors of the economy. This
economic impact analysis measures projected economic impacts of a proposed peanut
buying point due to economic activity associated with both its construction and
operations-related activities on a three-county region in Georgia. The proposed buying
point would be located in Washington County and stimulate Jefferson and Johnson
Counties as well. An impact analysis of local peanuts produced (10,150 tons) to be
stored, cleaned, dried and sold through the buying point is included in this report as well.
IMPLAN, an economic input-output modeling program, was utilized in this
project. IMPLAN can interpret the effects of a new venture in a number of ways
including output (sales), labor income (employee compensation and proprietary income),
employment (jobs), and tax revenue. Further, the IMPLAN model can be constructed for
the economy of a single county, state, or multi-county or state region. In general, inputoutput models work by separating the economy into various sectors, such as agriculture,
construction, manufacturing, trade, services, and so forth. The model then captures how
a change in one industry (for example, Agricultural Services) will change output, labor
income, and employment in other industries. These changes, or impacts, are expressed in
terms of direct, indirect, and induced effects.
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Direct effects represent the initial impact on the economy of some feature (i.e.
construction or operations) of a new venture.
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Indirect effects are changes in other industries caused by the direct effect of a new
venture.
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Induced effects are changes in household spending due to the changes in
economic activity generated by both the direct and indirect effects.
Thus, the total economic impact is nothing more than the sum of the direct,
indirect, and induced effects.
II.
CONSTRUCTION-RELATED ECONOMIC IMPACTS
Any economic impact analysis of a new venture would be remiss to not first
evaluate the economic benefits of construction-related expenditures. Constructionrelated expenditures also include the purchase and installation of all operational
equipment, such as the peanut grading system, dryers, and scales. However, the land
acquisition is not included because it is a capital swap; it does not cause additional
economic activity. Construction-related activity only impacts the three-county region
during the construction phase. Once construction on the buying point ends, the economic
impact of its construction ends as well. In sum, capital costs of a peanut buying point of
this size are projected to be $1.375 million.
Economic Impact of Construction on the Three-County Region
First, the projected economic impacts of the buying point’s construction and
equipment purchases and installation on the three-county region of Washington,
Jefferson, and Johnson Counties are estimated. Table 1 highlights the economic impact
of this economic activity with regard to output, labor income, employment, and tax
revenue.
Table 1:
Buying Point Construction: Projected Economic Benefits to Three-County Region
ONE-TIME/FIRST YEAR ECONOMIC IMPACT
(Washington, Jefferson, and Johnson Counties)
Direct Effect Indirect Effect
Induced Effect Total Effect
Output
$1,375,000
$180,714
$271,544
$1,827,259
Labor Income
$752,736
$71,690
$77,729
$902,156
Employment
27
3
3
33
Tax
$54,261
As shown in Table 1, the direct output (sales) effect of the buying point’s
construction-related activity is the cost of construction, $1.375 million. This figure
represents the total projected construction cost of all buildings and the purchase and
installation of all operational equipment. The infusion of this $1.375 million in the threecounty region generates an indirect effect of nearly $200,000 among supporting
industries in the local area. The indirect effect represents business-to-business purchases
between businesses constructing the facility and their supplying, or supporting,
businesses (i.e., purchasing building materials, surveying services, etc.). In addition, the
construction project will induce approximately $270,000 in sales as construction
personnel and area employees spend their income on consumer products and services.
The total economic impact on the three-county region, resulting from the construction
project, is more than $1.8 million in output.
An impact analysis also provides information on wages and benefits. In Table 1,
the labor income figure provides insight into the money that households will earn from
the construction project. The direct effect of labor income supported by the buying
point’s construction is approximately $750,000. Combining the direct, indirect and
induced effects, total labor income is projected to be more than $900,000 in Jefferson,
Johnson, and Washington Counties. In other words, nearly $1 million of labor income
will be created in the three-county region because of the construction project.
The construction project is estimated to generate a total of 33 jobs throughout the
three counties. Total employment represents full- and part-time jobs, and its impact can
be broken down to show indirect and induced employment changes. Indirectly, 3 jobs
will be created as a result of business-to-business activity associated with construction.
An additional 3 jobs will be created in the three-county region to support increased
household spending by those workers affected directly and indirectly by the construction
project. The economic activity will also have a relatively significant impact on tax
revenues for the three counties. It is estimated that state and local non-education tax
revenues would increase by nearly $55,000.
Table 2 illustrates the total projected economic impact of construction on all
major sectors of the three-county regional economy. Table 2 shows to what extent – in
terms of output, labor income and employment – major sectors of the regional economy
are impacted by the construction project.
Table 2:
Buying Point Construction: Projected Economic Benefits to all Major Sectors of the Three-County Region
ONE-TIME/FIRST YEAR ECONOMIC IMPACT
(Jefferson, Johnson, and Washington Counties)
Output Impact
Labor Income Impact
Employment Impact
Agriculture
$6,642
$1,896
0
Mining
$2,919
$1,286
0
Construction
$1,379,094
$754,192
27
Manufacturing
$35,218
$7,683
0
TCPU
$36,182
$10,181
0
Trade
$98,743
$40,861
2
FIRE
$44,041
$9,248
0
Services
$158,143
$74,861
4
Government
$66,277
$1,949
0
TOTAL
$1,827,259
$902,156
33
As evident in the emboldened “Construction” row of Table 2, the construction
sector of three-county regional economy enjoys the highest level of economic benefits, or
economic impact. This comes as no surprise because the cost of buying point
construction is captured within this sector. The total output impact on the region’s
construction sector is nearly $1.4 million. In the construction sector alone, such a level of
economic activity supports 27 full- and part-time jobs and approximately $750,000 of
labor income.
However, the “Services” sector is impacted by indirect and induced effects more
than any other sector in the regional economy. 4 full- and part-time jobs are created in
this sector because of the construction project, equaling nearly $75,000 in labor income.
III.
OPERATIONS-RELATED ECONOMIC IMPACTS
The construction-related economic impact on the economy of the three counties is
a one-time economic occurrence only. In other words, once construction and equipment
purchasing for a new venture ends, the economic impact ends shortly thereafter.
However, through its operations (i.e., selling its output and paying its employees),
a new venture will generate continuous economic activity, creating continuous economic
impacts on the collective economic landscape of the three-county region.
Economic Impact of Operations on Georgia’s Economy
Table 3 shows the economic impact of the buying point’s operations on the
economy of the three-county region.
Table 3:
Buying Point Operations: Projected Economic Benefits to the Three-County Region
ANNUALLY OCCURING ECONOMIC IMPACT
(Jefferson, Johnson, and Washington Counties)
Direct Effect
Indirect Effect
Induced Effect
Output
$440,003
$75,271
$70,191
Labor Income
$188,800
$26,611
$20,085
Employment
5
1
1
Tax
Total Effect
$585,466
$235,496
7
$19,363
The direct effect associated with output, approximately $440,000, is nothing more
than the projected revenues (sales) of the buying point. This direct output effect
indirectly creates another $75,000 as the operation purchases products and services from
other businesses in the region. Also part of this indirect effect, supporting businesses
purchase goods and services from other businesses throughout the regional economy to
operate their businesses. The result of increased household income from the creation of
new jobs is an induced effect of more than $70,000. The induced impact represents
households spending income in the three counties on consumer goods (i.e., eating at
restaurants, doctor and dentist visits, etc.). In summary, the total economic impact, in
terms of output, on Jefferson, Johnson, and Washington Counties is estimated to be more
than $500,000 annually.
The direct effect associated with labor income, nearly $200,000, is wages and
benefits paid to the employees of the buying point. The indirect labor income effect is
projected to be approximately $26,000. Again, this represents additional wages and
benefits associated with the increase in indirect employment. Because of the additional
labor income, regional household spending would increase by more than $20,000. The
total labor income impact is approximately $235,000.
The impact of buying point employment is similar. This business will employ 5
workers (direct effect). In this workforce total is 1 general manager, 1 clerical worker,
and 3 general laborers. These 5 jobs have an indirect effect of 1 new job in other
businesses throughout the region, and the induced effect (job(s) created from additional
household spending) is 1 job. Summing the three effects reveals a total employment
impact on the three-region economy of 7 new jobs. With this new economic activity, tax
revenues, state and local non-educational, would increase by nearly $20,000 annually.
Table 4 illustrates how major sectors of the regional economy are impacted by the
operations of the buying point.
Table 4:
Buying Point Operations: Projected Benefits to all Major Sectors of the Three-County Region
ANNUALLY OCCURRING ECONOMIC IMPACT
(Jefferson, Johnson, and Washington Counties)
Output Impact
Labor Income Impact
Employment Impact
Agriculture
$469,956
$197,880
Mining
$38
$16
Construction
$2,188
$930
Manufacturing
$9,074
$1,465
TCPU
$12,218
$3,434
Trade
$27,283
$10,807
FIRE
$12,424
$2,624
Services
$35,383
$17,910
Government
$16,898
$430
TOTAL
$585,466
$235,496
5
0
0
0
0
1
0
1
0
7
As shown above in Table 4, the emboldened “Agriculture” sector in the threeregion economy realizes the most economic benefits in all three analysis categories –
output, labor income, and employment. Like in the construction impact, however, this is
not a surprising finding because the buying point’s direct impact is in the agriculture
sector. In terms of indirect and induced effects, the “Services” sector is impacted more
than any other sector in the region. More than $35,000 in output, nearly $18,000 in labor
income and 1 new job are created in the three counties because of the buying point’s
operations.
IV.
PEANUT PRODUCTION IN THE THREE-COUNTY REGION
It is important to include an impact analysis of peanut production in the threecounty region because, in many cases, a new peanut buying point will provide an
increased market for peanuts. Below, Table 5 showcases the economic impact from the
production of 10,150 tons of peanuts. This is the quantity handled by the local buying
point.
Table 5:
Peanut Production: Projected Economic Benefits to the Three-County Region
ANNUALLY OCCURRING ECONOMIC IMPACT
(Jefferson, Johnson, and Washington Counties)
Direct Effect
Indirect Effect
Induced Effect
Output
$4,060,000
$45,667
$463,777
Labor Income
$1,280,653
$15,846
$132,705
Employment
124
1
6
Tax
Total Effect
$4,569,444
$1,429,204
131
$287,069
As shown in Table 5, direct production associated with the buying point is $4.060
million. This is the direct effect of 10,150 tons of peanuts valued at $400 per ton. As
producers purchase additional inputs to meet this increased demand, another $45,000 of
economic output is created in Jefferson, Johnson, and Washington Counties. Peanut
production of this magnitude will induce more than $460,000 in sales as farm workers
and laborers spend their income on products and services in the three-county region. The
total economic impact on the three counties, resulting from peanut production, is more
than $4.6 million in increased output.
The direct effect of labor income due to peanut production is nearly $1.3 million.
Representing additional wages and benefits associated with an increase in indirect
employment, the indirect labor income effect is nearly $16,000. Household spending in
the region would increase by more than $130,000. Thus, the total labor income impact is
approximately $1.4 million.
Employment directly in peanut production is 124 workers. Peanut production
would create another 7 jobs in the three-county region, bringing total employment due to
this level of peanut production to 131 jobs. Furthermore, state and local non-education
tax revenues increase by nearly $300,000.
Below, Table 6 demonstrates how major sectors of the three-region economy are
impacted by peanut production associated with the buying point.
Table 6:
Peanut Production: Projected Benefits to all Major Sectors of the Three-County Region
ANNUALLY OCCURRING ECONOMIC IMPACT
(Jefferson, Johnson, and Washington Counties)
Output Impact
Labor Income Impact
Employment Impact
Agriculture
$4,082,239
$1,290,403
125
Mining
$163
$71
0
Construction
$4,463
$1,558
0
Manufacturing
$25,904
$3,858
0
TCPU
$36,104
$10,119
0
Trade
$101,607
$41,975
2
FIRE
$63,541
$12,464
1
Services
$143,302
$65,818
3
Government
$112,119
$2,938
0
TOTAL
$4,569,444
$1,429,204
131
As evident in the emboldened “Agriculture” row of Table 6, the agriculture sector
of three-county regional economy enjoys the highest level of economic benefits.
Agriculture is appropriately higher than other sectors because peanut production is
housed within the sector. Or, it can be said that the direct effect of peanut production
causes this sector to rank first in terms impact. The total output impact on the region’s
agriculture sector is nearly $4.1 million. In this sector alone, such a level of economic
activity supports 125 full- and part-time jobs and approximately $1.3 million of labor
income.
However, like in previous sections of this report, the “Services” sector is impacted
by indirect and induced effects more than any other sector in the regional economy. 3
full- and part-time jobs are created in this sector because of this level of peanut
production, equaling more than $65,000 in labor income.
V.
CONCLUSION
In summary, this economic impact analysis shows how the construction and
operations as well as the associated peanut production of a local peanut buying point
might contribute to and impact the economies of Jefferson, Johnson, and Washington
Counties. However, the economic impacts of construction and operations should not be
summed in order to reveal a “grand total” economic impact on Georgia’s economy. As
discussed above, economic impacts due to construction are a one-time economic
occurrence, unlike those associated with the operations of a business. Constructionrelated economic impacts do not occur on an annual basis; the impact ends when
construction of the buying point ends. Operations-related economic activity is said to be
continuous, or annual, as long as the business continues to function in the three-county
region.
Summary Table 7 summarizes the year-after-year, or annually occurring,
economic impacts of buying point operations and the corresponding level of peanut
production in terms of output, labor income, employment, and tax revenues.
Summary Table 7:
Buying Point Operations and Peanut Production: Total Projected Economic Benefits to
the Three-County Region
TOTAL ANNUALLY OCCURRING ECONOMIC IMPACT
(Jefferson, Johnson, and Washington Counties)
Direct Effect
Indirect Effect
Induced Effect
Output
$4,500,003
$120,938
$533,968
Labor Income
$1,469,453
$42,457
$152,790
Employment
129
2
7
Tax
Total Effect
$5,154,909
$1,664,700
138
$306,432
As evident in Summary Table 7, all three categories of economic effects have
been summed to reveal the total economic impact of buying point operations and peanut
production. The total economic impact will affect the economies of the three counties on
an annual basis as peanuts are cultivated and handled and sold through the local buying
point. Per prior discussion, the economic impact of constructing the buying point is not
included in Summary Table 7 because it only occurs in the first year. That is, its
economic reach is limited to the construction phase.