Volume 19, Issue 2, December 1994

December, 1994

This section includes: Invited Papers Abstracts; Editor's Report for 1993-94; Reviewers, July 1993-June 1994; WAEA 1993 Award Winners; Past Presidents, Western Agricultural Economics Association 1927-94; Past Editors; JARE Author Index, Volumes 17-19, 1992-94; Guidelines for Submitting Manuscripts; Membership Information; Back Cover

December, 1994

By: Goodwin, Barry K.
This article reviews actuarial procedures used to calculate premium rates in the federal crop insurance program. Average yields are used as an important indicator of risk under current rating practices. The strength and validity of this relationship is examined using historical yield data drawn from a large sample of Kansas farms. The results indicate that assumed relationships between average yields and yield variation are tenuous and imply that rating procedures that rely on average yields may induce adverse selection.

December, 1994

By: Gould, Brian W.; Lin, Huei Chin
An endogenous switching regression model is used to examine how meal planner health knowledge affects dietary fat intake. Ethnicity, income, meal planner age, being on a low-fat diet, and other health awareness behaviors had significant effects on health knowledge. After controlling for differences in household and meal planner characteristics, intake of total and saturated fat was found to depend on health knowledge status.

December, 1994

By: Holt, Matthew T.
The impacts of introducing a partial price stabilization scheme in the U.S. corn market are investigated by using a modified version of the bounded price variation model. Specifically, a model is developed and estimated that includes rational expectations of the first three central moments of the (truncated) equilibrium price distribution. The estimated model is used to stimulate market equilibrium effects of introducing upper and lower price limits through a tax-subsidy scheme. The results show that corn producers are downside risk averse, and that market feedback effects of price stabilization can, at times, be more important than direct effects.

December, 1994

By: Helmberger, Peter G.; Chen, Yu-Hui
Based on econometric analysis, this article estimates effects of terminating the milk order system and milk price support, singly and together, over the period 1966-90. Since 1980, milk orders have raised the national blend price by 1-2%; price support has raised the blend price to well above the market clearing price, by over 21% in 1983. Short- and long-run benefits and costs are estimated for various policy options under 1990 conditions.

December, 1994

By: Pannell, David J.
Most weed control decisions are made with the benefit of some information about weather conditions and actual weed densities. This study is an investigation of the value of adjusting weed control decisions in response to these types of information. For a specific example, it is found that the expected value of information can reach 15% of expected gross margin. The value of information about yield prospects is higher than that for weed density. The value of information is markedly affected by the degree of risk aversion and the type of decision rule adopted. Use of information reduces the expected level of herbicide usage.

December, 1994

By: Novak, Frank S.; Schnitkey, Gary D.
This article evaluates the effects of including the costs of bankruptcy in a dynamic model of off-farm investment decisions using a stochastic dynamic programming (SDP) model which incorporates the stochastic dynamic nature of investment returns and the interrelationships between financial structure and investment decisions. Our results suggest that in the presence of bankruptcy, optimal investment decisions are affected by financial structure and financial market conditions. Ignoring bankruptcy costs in determining investment decisions results in a high probability of bankruptcy.

December, 1994

By: Skaggs, Rhonda K.; Kirksey, R.E.; Harper, Wilmer M.
Conservation Reserve Program (CRP) land retirement contracts will begin to expire in late 1995. A multinomial logit model is used to identify characteristics influencing New Mexico CRP participant post-CRP land use plans. Results indicate post-CRP land uses intentions will vary with attributes reflecting characteristics of the land enrolled, socioeconomic variables, and participant attitudes. Results point to a CRP-facilitated retreat from crop production to future ranching by many producers. The analysis suggests future changes in the structure and character of southern Great Plains agriculture and surrounding communities.

December, 1994

By: Kastens, Terry L.; Schroeder, Ted C.
Cattle feeders appear irrational when they place cattle on feed when projected profit is negative. Long futures positions appear to offer superior returns to cattle feeding investment. Cattle feeder behavior suggests that they believe a downward bias in live cattle futures persists and that cattle feeders use different expectations than the live cattle futures market price when making placement decisions. This study examines feeder cattle placement determinants, comparing performance of expected hedgeable profit with past actual profit in explaining feeder cattle placements. Past actual profit is a more important placement determinant than expected profit based upon the live cattle futures market, even though hedgeable profit provides a superior forecast of future profit. In addition, potential deterrents to cattle feeders' use of futures as a substitute for cattle ownership are discussed.