Issue
Volume 23, Issue 2, December 1998
Input subsidies have the potential to increase production, promote more input use, and impact the environment. Unlike many other federal agricultural subsidies, livestock feed programs have not been the subject of previous economic research. During 1992-96, the U.S. Department of Agriculture paid livestock producers an annual average of $73.2 million in feed subsidies. The objective of this research is to estimate the market and welfare effects of feed subsidies in one region of New Mexico. The price and output effects of the subsidy are found to be small, and the welfare impacts of the subsidy unevenly distributed between subsidized and nonsubsidized producers.
This analysis empirically evaluates a subset of Japanese agricultural policies during the 1970s and 1980s using the Trade Restrictiveness Index recently developed by Anderson and Neary. This index, though theoretically rigorous, is empirically demanding, resulting in relatively few applications. Inferences obtained from the index are in general accordance with policy changes and economic events over the period of analysis. Using 1970 as the base, the estimated TRI suggests that policy changes during 1970-87 resulted in moderately liberalized trade. Comparison with a conventional measure of trade distortion- producer and consumer subsidy equivalents (PSEs and CSEs)- reveals contrasting inference. This suggests the choice of empirical measures in evaluating trade policies in nontrivial.
In the late 1980s, grain-hauling railroads began offering alternatives that have made shipping decisions more strategic. Shippers now confront alternatives ranging from nearby and unguaranteed ordering to various durations of forward and guaranteed shipment. Each has varying penalties for cancellation and payments from the railroad for nonperformance, and differing risks and payoffs. Because of the configuration of choices, shippers confront a portfolio of shipping alternatives. A dynamic stochastic simulation model was developed to analyze alternative strategies. The model includes the effects of uncertainties in tariff rate changes, car premiums, basis levels, forward and spot grain purchases, and receiving railcars under each of three alternatives. Shipping demand is determined by inter-month commodity price differences, carrying costs, transport costs, and storage capacity. Considering these factors, the shipper chooses grain sales and shipping strategies that maximize net payoffs and confronts a tradeoff between expected profits and risk.
Economics can make good policy better and bad policy go away- a message often constrained by the political realities surrounding federal resource policy toward the West. This essay responds to these challenges to economic reasoning based on the lessons learned after a stay at the Council of Economic Advisers. My goal is to help make apolitical economists more effective advocates of efficiency.
The economic threshold for thick infestations on Zambian cattle was analyzed considering both direct production losses and mortality from transmitted diseases. Probability theory applied to mortality risks was used to derive the functional form for disease damage. With only noninfectious ticks, the economic threshold based on liveweight gain losses was three ticks per calf. The threshold recommended dipping calves whenever any disease-infectious ticks were present. Similar threshold results held for cows when considering milk production and disease mortality losses. If disease control benefits are omitted, as in some past work, thresholds will be overstated and dipping recommendations understated when infectious ticks are present.
Increased use of noncash-price procurement methods has concerned cattlemen for the past several years. This research estimated impacts of captive supplies on transaction prices for fed cattle. Negative relationships were found between transaction prices and percentage deliveries from the inventory of forward contracted and marketing agreement cattle. However, impacts from the absolute size of the total captive supply inventory were not significant. Price differences were found among procurement methods with forward contract prices being much lower. On balance, captive supplies had small but often negative effects on fed cattle transaction prices.
Soil phosphorus levels have increased as pork production has become concentrated. Phosphorus-based manure management regulations for land application have been proposed by policy makers. The objective of this study is to determine benefits/costs of adopting two alternatives for reducing phosphorus: synthetic amino acids or phytase. An optimization model is constructed to determine optimal excreted nitrogen and phosphorus from alternative feed ingredients. Results are derived using different manure storage and application systems. While the two alternatives are not least-cost ingredients, they become profitable when producers are constrained by land. An important result is that the net cost of manure is negative.
This study evaluates the long-term profitability and environmental impacts of variable rate versus uniform nitrogen application in seed potato production with nitrogen carry-over effects included. Seed potato yields were simulated for four different areas of a field using the EPIC crop growth model. A dynamic optimization model was used to determine optimal steady-state nitrogen levels for each area and the entire field. Average nitrogen losses and economic returns were evaluated for both uniform and variable rate nitrogen fertilizer. Variable rate nitrogen application was found to be unprofitable for the field when compared to uniform nitrogen application. Nitrogen losses for the field were about the same under both strategies. The results indicate greater economic and environmental benefits may be achieved by splitting nitrogen applications, especially for areas of the field exhibiting low yield productivity.