State governments are concerned with their economies since the condition of an economy determines residents' standard of living. Therefore, state governments are interested in strategies for strengthening their economies. Measures of strength include output, income, and employment. States with substantial agricultural production can implement a strategy of maintaining or increasing markets for that production, positively affecting all of the aforementioned measures. In some states, the focus has been to "add value" to raw agricultural commodities. The objective of this dissertation is to aid government funding decisions regarding competing value-added opportunities in various food processing industries. Texas' food processing industry is the focus of this research. Data from the two most recent Census of Manufactures were analyzed for trends in the Texas food processing industry. A survey was conducted to determine the cost components of Texas food processors, the percent of purchases from Texas, and reasons for these purchases. The McMenamin-Haring procedure was used to update the Texas Input-Output Model to investigate output, income, and employment impacts of increased processing of agricultural commodities. Agricultural processing sectors' primary output markets are households and export markets, while agricultural production sectors' primary output markets are export and domestic food processing sectors. The processing sectors' primary input markets are final demand and nonfood manufacturing sectors, whereas the production sectors' primary input markets are agricultural production, household, and imports sectors. The model cannot detect if exports go to "foreign" final demand or processing sectors. Multipliers and elasticities were gleaned from the input-output analysis. Food processing industries with the highest elasticities are the meat, dairy, grain, and beverage industries. The input output results were combined with information about food processing industry trends obtained from secondary sources and from the survey. As a result, potential benefits associated with the gain or loss of selected Texas food processing plants were identified.
