Volume 22, Issue 1, July 1997

July, 1997

COMBINING ACTUAL AND CONTINGENT BEHAVIOR DATA TO MODEL FARMER ADOPTION OF WATER QUALITY PROTECTION PRACTICES

By: Cooper, Joseph C.
Using farmer responses to contingent valuation method (CVM) survey data in combination with actual market data from four watershed regions in the United States, this study estimates the minimum incentives payments a farmer would accept in order to adopt more environmentally friendly "best management practices" (BMPs). Combining actual market data with the CVM data adds information to the analysis, thereby most likely increasing the reliability of the results compared to analyzing the contingent behavior survey response data only. Given the decision to adopt, the article also presents a pooled model for the number of acres enrolled in the BMPs as a function of the incentive payments. Adoption rates predicted with the combination data model are significantly higher over a wide range of offers than those predicted using the traditional discrete choice analysis with the hypothetical data only. Hence, using the traditional CVM analysis results to determine payments to attain a given level of adoption may result in overpayment.
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July, 1997

JAPANESE DEMAND FOR WHEAT PROTEIN QUANTITY AND QUALITY

By: Stiegert, Kyle W.; Blanc, Jean-Pierre
Ladd and Martin's hedonic pricing model is extended to include the interactive effect of noncontracted characteristics on the value of contracted characteristics. Marginal values of wheat protein in the Japanese import market are estimated using the interactive effects of noncontracted dough/flour characteristics typically proxied by protein. Protein value is linked positively to farinograph stability, a prime factor in blending different flours. Three high protein wheats maintained about the same marginal value of protein. The marginal value for the two low protein wheats appear more end-use dependant. They varied in a $2.00/ton range depending on protein absorption, stability, and extensibility.
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July, 1997

CONTINGENT VALUATION OF RURAL TOURISM DEVELOPMENT WITH TESTS OF SCOPE AND MODE STABILITY

By: Lindberg, Kreg; Johnson, Rebecca L.; Berrens, Robert P.
Contingent valuation is used to measure the social impacts of tourism in rural Oregon communities. Impacts are substantial, for example, annual household willingness to pay (WTP) to reduce traffic congestion is $186. Study features include tests of sensitivity to a change in scope, tests of stability across survey mode, and a thorough system of no vote follow-up questions in a referendum format. While there is no evidence of scope effects (at the 0.05 level), results indicate that conclusions regarding sensitivity to scope may be dependent on the test used. WTP estimates are substantially less with the mail versus telephone survey mode.
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July, 1997

IMPACTS OF GATT/URUGUAY ROUND TRADE NEGOTIATIONS ON U.S. BEEF AND CATTLE PRICES

By: Brester, Gary W.; Wohlgenant, Michael K.
The GATT/Uruguay Round trade negotiations have resulted in a multilateral relaxation of beef trade restrictions. A linear elasticity model of the U.S. beef industry is developed using log differentials equations. Beef consumption, production, and trade are disaggregated into appropriate ground and table cut components. The model predicts that GATT/Uruguay Round will cause asymmetric effects on ground and table cut beef consumers. In general, fed cattle and cow/calf producers will benefit from trade liberalization because of increases in fed and feeder cattle prices. However, nonfed cattle price will decrease.
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July, 1997

FACTORS INFLUENCING RATES OF ADOPTION OF TRICHOMONIASIS VACCINE BY NEVADA RANGE CATTLE PRODUCERS

By: Bhattacharyya, Arunava; Harris, Thomas R.; Kvasnicka, William G.; Veserat, Gary M.
Tritrichimonas foetus vaccine has been marketed since 1989 to combat the trichomoniasis disease that causes reproductive failure and considerable economic loss to Nevada ranchers. An ex post technology adoption model is estimated to examine the possible adoption rate, to identify the factors that may influence the adoption behavior, and to test how the probability of adoption for five possible adopter groups would change due to changes in various ranch specific factors. Results indicate that use of computers, veterinary checkup of herd, and herd size influence the probability of adoption. Model results show that cooperative extension programs enhance the rate of adoption.
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July, 1997

ASSESSING THE RELATIONSHIP BETWEEN MARKET FACTORS AND REGIONAL PRICE DYNAMICS IN U.S. CATTLE MARKETS

By: Walburger, Allan M.; Foster, Kenneth A.
Regional live cattle prices are decomposed into two components: (a) a trend common to all regional cattle price series and (b) regional deviations or price dynamics around that trend. Tests are developed to determine if market factors are related to the regional price deviations around a common trend. Slaughter volume, distance between a market and the next closest, and forward contract deliveries are significantly related to price deviations from the estimated common trend.
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July, 1997

MARKET POWER IN THE WORLD MARKET FOR SOYMEAL EXPORTS

By: Deodhar, Satish Y.; Sheldon, Ian M.
In this article, the degree of imperfect competition in the world market for soymeal exports is estimated using a structural econometric model. The procedure consists of estimating a demand function and the industry first-order profit-maximization condition, from which an estimate of the degree of market power can be retrieved. Using a nonlinear three-stage least squares procedure, the estimate of market power shows that the world market for soymeal exports is perfectly competitive. The empirical results also indicate that this market was competitive even prior to entry by Argentinean firms in the mid-1970s.
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July, 1997

COTTON CULTIVAR, PLANTING, IRRIGATING, AND HARVESTING DECISIONS UNDER RISK

By: Larson, James A.; Mapp, Harry P., Jr.
Producers in southwest Oklahoma lack adequate information about optimal planting decisions for cotton. This study uses a cotton growth simulation model to evaluate alternative cultivar, planting date, irrigation, and harvest choices. Effects of using information about soil moisture at reproduction and revenue loss at harvest in making cultivar and planting data decisions are evaluated. Using soil temperature information to plant at an early date produced high net revenue some years, but reduced mean net revenue and increased risk. Producers maximizing expected net revenue should plant a short-season cultivar in late May and use soil moisture information to schedule irrigation at reproduction.
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July, 1997

GRASS ROOTS COLLECTIVE ACTION: AGRICULTURAL OPPORTUNITIES

By: Ayer, Harry W.
Agroenvironmental problems (e.g., contamination of ground- and surface water, feed lot odors, endangered species) often involve goods and activities with public goods attributes. Grass roots collective action- in contrast to top-down governmental collective actions of taxing, subsidizing, and regulating- provides one alternative means of helping resolve these problems. Here I suggest that agroenvironmental policy, research, and extension should consider the often forgotten grass roots collective action alternative. I also discuss how expected private benefits, communication and information, joint products, group size and heterogeneity, transaction costs, and rules and enforcement determine the success or failure of grass roots collective action.
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July, 1997

THE POLITICAL ECONOMY OF PUBLIC LAND USE

By: Gardner, B. Delworth
Federal ownership and management of the public lands have created a rent-seeking frenzy, inflated rhetoric, wasted resources, and squandered investment opportunities. The primary commodity user groups, grazers and timber harvesters, have declined in importance whereas conservationists and recreationists have gained. Still, historical use preferences and continued rent seeking have produced use entitlements that seem impervious to changing costs and demands and thus result in large wealth losses to consumers and taxpayers. Privatization of the public lands is probably politically infeasible, but simulated market processes can be used to replace political allocations and improve efficiency.
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July, 1997

MEAT-PACKER CONDUCT IN FED CATTLE PRICING: MULTIPLE-MARKET OLIGOPSONY POWER

By: Koontz, Stephen R.; Garcia, Philip
The exercise of market power across multiple geographic fed cattle markets is measured with an econometric model which links behavior of the margin between boxed beef and regional fed cattle prices to an oligopsony model of multiple-market conduct. The game theoretic economic model suggests that for market power to be exercised in a single market a discontinuous pricing strategy must be followed. Total market power is enhance if meat-packers coordinate this pricing strategy across geographic markets. Tests reject independence of pricing conduct across geographic markets which suggests multiple-market power is present. The extent of the market power also is consistent with the economic model. More market power is exercised across regions with the same meat-packing firms. However, the magnitude of the market power is small and decreased between the early and late 1980s.
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July, 1997

A METHOD FOR MEASURING RETURNS TO NONPRICE EXPORT PROMOTION WITH APPLICATION TO ALMONDS

By: Kinnucan, Henry W.; Christian, Jason E.
A formula is derived to indicate the marginal returns to nonprice promotion for a competitive industry that promotes in both the domestic and the export market and receives a subsidy for export promotion. Private returns to export promotion are an increasing function of the export promotion elasticity, the export share, and the promotion subsidy and a decreasing function of the domestic supply elasticity, the absolute values of the domestic and export demand elasticities, and opportunity cost. Applying the formula to almond promotion and using previously estimated elasticities, no firm conclusions can be made regarding the effectiveness of export promotion, chiefly because the estimated promotion elasticities are unstable. Assuming that the domestic promotion elasticity is robust, it appears that domestic market promotion is underfunded from a producer-welfare perspective unless the marginal rate of return on alternative uses of promotion funds is high, on the order of 115%.
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July, 1997

ECONOMIC DISCOVERY IN FEDERALLY SUPPORTED IRRIGATION DISTRICTS: A TRIBUTE TO WILLIAM E. MARTIN AND FRIENDS

By: Wilson, Paul N.
Ex post evaluation of economic projections validates our shared understanding of economic methodology and methods. The recent economic history of Central Arizona Project (CAP) agriculture reveals the predictive power of economic reasoning and its policy impotence within a political environment intent on obtaining its share of federally allocated water. The financial inability and unwillingness of large irrigation districts to pay for CAP water under existing federal rules produced an urban tax- and rate-payer controlled CAP decades earlier than planned. Yet irrigation districts remain a large residual buyer of CAP water under new pricing and allocation rules. Unfortunately, water markets remain an underutilized and distrusted tool in the water development game.
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