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By: Connor, Lawson; Katchova, Ani L.
Crop insurance and its related components, such as premium subsidies, have impacts on farm management decisions, production practices, and output. We use county-level USDA survey data combined with instrumental variables analysis to investigate asymmetric impacts of crop insurance on corn and soybean yield variance. Our results indicate an increase in yield downside risk as crop insurance participation rates increase. We also find an increase in drought susceptibility, likely due to expansion to lower-quality farmland and changes in input use. Increased yield variability could have effects on prices, farm income variability and farmer welfare.
White Bear Lake, Minnesota, has lost a large amount of water due to excessive groundwater extraction. Using a general nested spatial hedonic pricing model, this paper identifies and evaluates the impact of water loss in the lake on lakeshore properties. In addition to providing a quantitative estimate of property value loss, the results show that the marginal loss intensifies as water level persistently declines further. The findings of this study alert emerging urban areas to the negative externalities of failing to balance the tasks of meeting increased water demand as well as achieving sustainable water use.
By: Bergstrom, John C.; Stowers, Matthew; Shonkwiler, J. Scott
Using a first-difference econometric model, we estimate an aggregate demand model for assessing the determinants of the quantity of visits to the 47 national parks in the continental United States. The estimated model was then used to project visitation to these parks from the 2016 base year to 2026. Total visitation could see an average increase of about 1.2 million visitors per year through 2026, suggesting that congestion problems already experienced at many parks may get worse. Congestion and overuse strain already limited operation and maintenance budgets and can lead to environmental damage to park sites and reductions in visitor satisfaction.
By: Holley, Kristen; Jensen, Kimberley L.; Lambert, Dayton M.; Clark, Christopher D.
This study applies a bivariate Multiple Indicator–Multiple Causation model to examine farm and operator characteristics associated with the likelihood of using pasture management (PM) and prescribed grazing (PGR) practices. Data are from a survey of cattle operations. Most commonly used practices included adjusting livestock and pasture fertilization. Least used were geotextiles in trafficked areas and buffering sensitive areas. Use of PM practices was income sensitive. Land stewardship and government conservation incentive views influenced PGR. Results suggest complementarities between most PGR and PM practices. However, those with higher opportunity costs and off-farm benefits (e.g., stream crossings) are not complementary with other practices.
By: Boyer, Christopher N.; Griffith, Andrew P.; DeLong, Karen L.
We determined how reproductive failure impacts the long-term profitability of beef cows in spring- and fall-calving herds. Simulation models were established to generate distributions of net present value, payback periods, and breakeven prices of calves when a dam fails to wean zero, one, or two calves over her life. Results indicate that giving a dam another calving opportunity after failing to wean a calf would likely result in her being unprofitable. A producer would be better off selling the open dam than giving her another chance to breed. This illustrates the value in selecting replacement heifers based on fertility.
By: Moon, Donghyun; Tonsor, Glynn T.
We conducted an event study to examine the effect of E. coli recalls on prices in the vertically connected U.S. beef industry. Our findings show that the resulting price changes of beef products vary across stages in the U.S. beef industry and that the prices of disaggregated beef products are more vulnerable to E. coli recalls than the prices of aggregated products. This suggests that downstream agents transacting specific ground beef products may be more adversely affected by E. coli recalls than upstream agents trading live animals.
By: Yang, Ruoye; Raper, Kellie Curry; Lusk, Jayson L.
U.S. consumers see retail beef products with “no added hormones” (NAH) labels. However, similar labels appear on pork and chicken products, even though hormone use in their production is prohibited. This study assesses consumer perceptions of hormone use in different livestock species. Using choice experiment data, we then examine the impact of these perceptions on preferences for unlabeled meat products and willingness to pay for NAH-labeled meat products. Results suggest that consumer perceptions of hormone use in production are incorrect. Further, perceptions influence consumer preferences and willingness to pay for unlabeled products versus those with NAH labels.
By: Zhao, Shuoli; Yue, Chengyan
Using the framework of cumulative prospect theory (CPT), we investigate consumers’ decision to participate in community-supported agriculture (CSA) under risk and uncertainty. We analyze discrete choice experiment data using a CPT framework that allows for flexible reference points and individual preference heterogeneity. Comparison between model specifications suggests that the CPT model with the control of all risk parameters generates better goodness of fit than the expected utility model. Market sensitivity analysis further indicates that, while CSA operators benefit from transferring production risk partially to consumers, the level of transferred risk has a great impact on market share.
By: Kumar, Anjani; Mishra, Ashok K.; Sonkar, Vinay K.; Saroj, Sunil
We evaluate the impact of access to credit on rural households’ annual income using an endogenous switching regression approach, an increasingly popular method of tackling the selection bias issue in impact analyses. Using a large survey of rural households in eastern India, we find that access to credit is strongly associated with rural households’ socioeconomic and demographic characteristics. Additionally, access to credit increases rural households’ economic well-being; nonborrower rural households would benefit the most from access to credit. Access to credit affects recipients heterogeneously, implying that credit policies should be adaptable to different rural household groups.
By: Devadoss, Stephen; Zhao, Xin; Luckstead, Jeff
We develop a four-sector (labor-intensive agriculture, capital-intensive agriculture, service & construction, and manufacturing) general-equilibrium model of North American countries to analyze the effects of tighter U.S. immigration policies. Results show that these policies erode the comparative advantage of U.S. labor-intensive agriculture, causing U.S. production and exports to fall and other countries to expand their exports to the United States. In Mexico, low-skilled labor demand in labor-intensive agriculture increases as production rises. The effectiveness of U.S. tighter immigration policies depends on the substitutability between U.S. domestic and undocumented workers. Immigration policies exacerbate the wedge between Mexican low-skilled wage rate and the undocumented wage rate, intensifying the underlying cause for unauthorized entry.
By: Bastian, Christopher T.
This paper discusses the implications, challenges, and opportunities arising from increased contracting and the use of private negotiation as a trading institution within agribusiness supply chains. I address the following questions: (i) As these changes occur and private negotiation becomes a dominant institution, are market signals and economic performance improved?; (ii) Are we preparing our students to be successful in this agribusiness market environment?; and (iii) Are we helping our extension clientele be successful as these changes occur?
By: Skolrud, Tristan D.; Galinato, Gregmar I.
We assess the welfare implications of a revenue-neutral tax in the presence of two Renewable Fuel Standard (RFS) policies for cellulosic biofuels: the waiver credit and the input-ratio requirement. We extend the model of revenue-neutral taxation to allow for the taxation of a dirty input in an imperfectly competitive market while integrating RFS-specific policies. Simulations from Washington and Oregon indicate that a revenue-neutral tax raises welfare by 19%'21% but growth in cellulosic ethanol production is minimal, ranging from 0.6% to 1.5%. Pollution taxes, cellulosic ethanol production, and welfare are more responsive to the waiver credit than to the input-ratio requirement.
By: Silva, Felipe de Figueiredo; Fulginiti, Lilyan E.; Perrin, Richard K.
We estimate the trade-off between agricultural production and forest preservation for the municipalities in Brazil's agricultural frontier, the so-called 'arc of deforestation,' using census and deforestation data for 2006. We use a nonparametric directional output distance function that allows us to identify the gradients of the production possibility frontier, which are the trade-offs of interest. We found that, on average, $979 is forgone in annual livestock, timber, and grain revenues to conserve 1 hectare of forest. This translates, ceteris paribus, to an average present value of costs to permanently sequester CO2 of $16.36/t, higher than most previous estimates.
By: Chavas, Jean-Paul; Cooper, Joseph; Wallander, Steven
This paper investigates the measurement of risk exposure in agriculture and its linkages with input and output decisions. We develop a conceptual analysis of risk under general risk preferences, including cumulative prospect theory. The approach is applied to a sample of U.S. farms from 1996 to 2011. In a multi-input, multi-output framework, the analysis documents the effects of management on production risk exposure and estimates the cost of risk under alternative frameworks. We find that variable inputs contribute to increasing risk, while livestock contributes to reducing risk. Nonfarm income reduces the cost of risk.
By: Lusk, Jayson L.; Thompson, Nathanael M.; Weimer, Shawna L.
There has been substantial productivity growth in the broiler industry; however, high growth rates might adversely affect animal welfare, resulting in calls for slow-growth breeds. This research shows production costs are 11%'25% per pound higher for slower-growing breeds than for modern breeds, depending on the target endpoint. Breakeven wholesale price premiums needed equate net returns of slow- to fast-growth broilers range from $0.10/lb to $0.36/lb. Annual costs of an industry-wide conversion to slow growth are $450 million for consumers and $3.1 billion for producers. Consumer willingness-to-pay would need to increase 10.8% to offset the producer losses.
By: Drugova, Tatiana; Pozo, Veronica F.; Curtis, Kynda R.; Fortenbery, T. Randall
We compare the volatility of organic wheat prices to that of conventional wheat prices using historical measures. To reduce uncertainty, we examine the possibility of cross hedging using conventional wheat futures and the ability of futures to forecast the organic premium. Results provide evidence that conventional futures can be used to cross hedge organic wheat price risk, but results depend on the method used to impute the missing values. We also find a long-run equilibrium relationship between organic wheat prices and conventional wheat futures prices. Finally, futures prices contain some information useful in predicting organic prices in the short run.
By: Thompson, Nathanael M.; Edwards, Aaron J.; Mintert, James R.; Hurt, Christopher A.
This paper re-evaluates practical methods of forecasting corn and soybean basis in the eastern Corn Belt. The accuracy of forecast methods differs over the course of the crop-marketing year. At harvest, historical moving average forecasts perform best. Post-harvest forecasts may be improved at short forecast horizons (<8'12 weeks ahead) by combining historical moving averages and recent basis levels. Results suggest that using 3-to-5-year moving average forecasts for corn basis and a 2- or 5-year moving average for soybean basis from harvest through April. The accuracy of these corn and soybean basis forecasts decreases markedly during the summer months.
By: Karali, Berna; Isengildina-Massa, Olga; Irwin, Scott H.
Using traditional price volatility tests, we find that the market impact of USDA Cattle on Feed and Hogs and Pigs reports largely disappeared after 2000. In contrast, using market surprise tests, we find no evidence that the impact of Cattle on Feed information changed significantly after 2000. The evidence is mixed for Hogs and Pigs reports using market surprise tests, with market inventory information increasing in value and breeding inventory decreasing. The contrasting results can be explained by increasing market concentration in cattle and hogs leading to smaller market surprises and smaller futures price reactions.
By: Barrowclough, Michael; Boys, Kathryn A.; Carpio, Carlos
There is increasing interest in accessing local food products through 'conventional' food marketing systems. This study identifies and quantifies key contract characteristics and buyer attributes valued by small-scale produce farmers who are currently or are considering marketing into wholesale channels. Overall, produce farmers are receptive to entering into contracts with wholesale buyers. Substantial heterogeneity, however, is found among farmer attitudes toward the specific contract terms and in the trade-offs farmers are willing to accept between contract terms and buyer characteristics. Insights offered will enable produce buyers to more efficiently target potential suppliers and will facilitate more effective contract design.
By: Reimer, Jeffrey J.; Weerasooriya, Senal
This study estimates the economy-wide impacts of two components of U.S. federal spending'nutrition programs and farm support programs'using an applied general equilibrium model. Both programs slightly reduce overall economic output and have important distributional effects. Farm programs reduce expenditures on a wide array of goods and services throughout the economy, including agricultural products, primarily since the programs reduce the spending power of taxpayers in general. Nutrition programs also reduce expenditures for some goods and services but raise the demand for agricultural products as well certain sectors for which the marginal propensity to consume is high among low-income households.