Volume 24, Issue 1, July 1999

July, 1999

By: Henneberry, Shida Rastegari; Piewthongngam, Kullapapruk; Qiang, Han
The linear approximation of an almost ideal demand system model was used to measure the impacts of prices, expenditures, and consumer food safety concerns on the consumption of 14 major fresh produce categories in the United States for the period 1970-92. The changes in fresh produce consumption due to food safety concerns was calculated. The results indicate that risk information has not had a significant impact on the consumption of most of the fresh produce items studied.

July, 1999

By: Arndt, Channing
Price responsiveness of herbicide demand in corn for farmers in Indiana's White River Basin using cross-section data from individual farms is estimated. Particular attention is paid to appropriate treatment of binding nonnegativity constraints. Estimation was first attempted using an approach to demand systems estimation suggested by Lee and Pitt. However, analytical and computational difficulties effectively preclude estimation by the Lee and Pitt approach. As an alternative, a maximum entropy (ME) approach is presented and discussed. Results from the ME estimator tentatively indicate limited response of herbicide demand to changes in own prices. The maximum entropy approach to demand systems estimation appears to have merit and warrants further attention.

July, 1999

By: Tozer, Peter R.; Huffaker, Ray G.
Deregulation of the Australian dairy industry could affect the utilization of resources by milk producers and the profitability of dairy production. In this study we examine the feed mix that dairy producers use, both pastures and supplements, under partial and total deregulation. We are particularly interested in the interaction of pasture utilization and farm profitability. The results of this research demonstrate that profitable low-input dairy is constrained by the most limiting resource, feed supplied by pasture, and that the interactions between economic and biological processes are critical to farm profitability.

July, 1999

By: Love, H. Alan; Burton, Diana M.
Partial backward integration is prevalent in many agricultural and natural resource processing industries. A strategic rationale for partial backward integration is developed for a dominant firm with a competitive fringe purchasing from competitive input suppliers. A partially backward integrated dominant firm potentially can increase profit through production efficiency gains and through a lower price for externally purchasing input. The optimal degree of backward integration results when the dominant firm's profit from exerting monopsony market power in the external spot market equals its profit from producing raw input internally, less the incremental cost of acquiring internal raw input production capacity. Comparative statics results are consistent with recent empirical studies of the beef packing industry.

July, 1999

By: Gopinath, Munisamy; Vasavada, Utpal
This study investigates the effects of market structure and research and development (R&D) on the innovation activities of firms. Fixed and random effects count data models are estimated with firm-level data for the U.S. food processing industry. Results show a positive association between patents and R&D, and patents and market structure, suggesting that firms which exhibit noncompetitive behavior are likely to develop new products and processes. Significant intra-industry spillovers of knowledge are identified using industry R&D. For this industry, deadweight losses from imperfect competition may be offset by greater product variety and quality of food products for consumers.

July, 1999

By: Anderson, David P.; Wilson, Paul N.; Thompson, Gary D.
Strategic investments in agriculture often are lumpy and irreversible, with significant impacts on operating and fixed costs. Leveling cotton fields to zero slope in central Arizona is a strategic decision made by relatively younger farmers who are farming fine-textured soils in irrigation districts with higher expected water costs. The diffusion of the technology across the region between 1968-89 appears to be both a function of institutional changes (e.g., the Groundwater Management Act of 1980, the Central Arizona Project) and the long-run expected price changes induced by these new policies.

July, 1999

By: Michelsen, Ari M.; Taylor, R. Garth; Huffaker, Ray G.; McGuckin, J. Thomas
Recent Bureau of Reclamation policies encourage or require irrigation districts to adopt price conservation incentives. Using unpublished survey results and new district-level information, we examine the rate structures and incentives of district water pricing. Our findings reveal that the majority of districts use fixed charges independent of the quantity of water delivered and that most conservation rate structures recently implemented are designed so that the first tier quantity allocation satisfies most crop water needs. Although other district management objectives may be satisfied, price incentives are diminished or nonexistent. The question of whether conservation is being achieved is tautological and depends on how each district defines conservation.

July, 1999

By: Kinnucan, Henry W.
Nerlove and Waugh's theory of cooperative (generic) advertising is extended to the case of traded goods. Results suggest that trade reduces the incentive to promote by enlarging the effective supply or demand elasticity facing the industry. This is especially true in the net exporter situation where the enlarged demand elasticity (relative to the autarky case) limits the ability to shift advertising costs onto consumers. Simulations of the model using data and parameter values for the California egg industry suggest that ignoring trade prejudices benefit-cost ratios in favor of the promotion program. The upward bias, moreover, is significant even when the trade share is modest.

July, 1999

By: Eales, James S.; Roheim, Cathy A.
The separability of meat products from fish products is investigated to gain a better understanding of Japanese consumer choices in protein demand. Rather than view fish as a single homogeneous commodity, fish and seafood are categorized into several groups of products. Separability is investigated using a demand system approach in which a generalized system of demand equations is specified and used, first to identify if any of the alternative demand structures nested within the general system are appropriate for these data, and then, conditional on those results, to test separability of meats from fish products following Moschini, Moro, and Green. Results indicate that meats and fish were separable prior to 1990; however, when examined over the entire 1981-95 study period, they are not.