Volume 24, Issue 2, December 1999

December, 1999

This section includes: JARE Editor's Report for 1997-99; Reviewers, September 1998-August 1999; WAEA 1998 Award Winners; WAEA Past Presidents, 1927-99; Past Editors; Author Guidelines for Submitting Manuscripts to JARE; Membership Information; Back Cover

December, 1999

By: Asche, Frank; Tveteras, Ragnar
This study deals with modeling of production risk by means of a two-step procedure. In contrast to earlier studies of production risk, we do not immediately adopt restrictive functional forms for the risky production technology. We first test for the presence of production risk. If production risk is found to be present, the mean and risk functions are estimated separately. This allows the use of more flexible functional forms for both the mean and the risk functions than commonly found in the literature. An empirical application to Norwegian salmon farming, where restrictive specifications of the technology are rejected, demonstrates the validity of our approach. Presence of production risk many primary production sectors implies that this approach should be considered in productivity studies.

December, 1999

By: Dahl, Bruce L.; Wilson, William W.; Gustafson, Cole R.
All major exporting countries of agricultural commodities have some form of credit guarantee program. As the importance of credit programs escalates, it is incumbent on policy makers to examine the value of their program relative to those of competitors. In this study, a model based on option pricing theory was developed to estimate the value of credit guarantees extended to importers and applied to U.S. and competing countries' programs. The Canadian guarantee has the lowest implicit value, followed by the U.S., Australian, and French guarantees. French guarantees had the highest implicit value due to higher coverage for interest and freight and insurance.

December, 1999

By: Holt, Matthew T.
It is shown that the first-order differential acreage allocation model developed by Bettendorf an Bloome and by Barten and Vanloot, and based on certainty equivalent profit maximization, may be extended to a levels version. The levels model, referred to as a linear approximate acreage allocation model, is potentially useful when panel or cross-sectional data are employed. An empirical application with U.S. state-level corn flex acreage data for the period 1991-95 indicates the feasibility of the approach. Estimated price and scale elasticities are generally larger than previous estimates, and are perhaps indicative of acreage response under the provisions of the 1996 Farm Act.

December, 1999

By: Menkhaus, Dale J.; Bastian, Christopher T.; Phillips, Owen R.; O’Neill, Patrick D.
Laboratory methods are used to investigate the impacts of supply and demand risks in a forward market on prices, quantities traded, and earnings when the choice of transacting in a forward or spot market is endogenous. Forward market activity dominates spot trading, with 80-90% of the trades taking place in the forward market regardless of how risk arises. Buyer earnings tend to be higher than earnings for sellers when there is risk. A correspondence exists between risk type and the relative increase in buyer earnings. Buyer earnings increase significantly when demand is random, and also when both supply and demand are random.

December, 1999

By: Karagiannis, Giannis
The impact of proportional profit taxes on input use is analyzed under conditions of production uncertainty and risk aversion. Two kinds of profit taxes are considered: proportional profit taxes with perfect loss offset and revenue-neutral profits taxes. Their impact on optimal input use is examined under various forms of production uncertainty, such as the Just-Pope model and the cases of multiplicative and additive uncertainty. It is shown that the structure of risk attitudes, the form of production uncertainty, the underlying (stochastic) technical interdependencies, and the risk-input relations are crucial features in determining the impact of proportional profit taxes on optimal input use.

December, 1999

By: Muth, Mary K.; Wohlgenant, Michael K.
We develop a model to measure the degree of oligopsony power in the beef packing industry, while accommodating variable proportions technology, that can be estimated with fewer data requirements. In particular, nonspecialized input quantities, which are often not available, are not needed. Through application of the envelope theorem, we show that the relationship between value marginal product and marginal factor cost can be defined over the prices of the nonspecialized inputs rather than their corresponding quantities. When applied to the beef packing industry, we find no evidence of oligopsony power over our 1967-93 sample period.

December, 1999

By: Allen, Douglas W.; Lueck, Dean
In a dynamic contracting environment, increasing standards over time in light of past performance is known as the ratchet effect. Despite the recent theoretical attention given to the ratchet effect, models that include these effects have not been empirically tested against contract data. In this study, we use farm-level data on modern Great Plains agricultural cash rent and cropshare contracts to test for the presence of ratchet effects in the context of a principal-agent model with moral hazard. We find limited evidence for the ratchet effect within share contracts, and no evidence that it is important for the choice of contract between cash rent and cropshare.

December, 1999

By: Pautsch, Gregory R.; Babcock, Bruce A.; Breidt, F. Jay
Studies examining the value of switching to a variable rate technology (VRT) fertilizer program assume producers possess perfect soil nitrate information. In reality, producers estimate soil nitrate levels with soil sampling. The value of switching to a VRT program depends on the quality of the estimates and on how the estimates are used. Larger samples sizes, increased spatial correlation, and decreased variability improve the estimates and increase returns. Fertilizing strictly to the estimated field map fails to account for estimation risk. Returns increase if the soil sample information is used in a Bayesian fashion to update the soil nitrate beliefs in nonsampled sites.

December, 1999

There is concern in the beef industry that present marketing practices may be impending the transmission of economic signals from consumers to producers. Presently, fed cattle may be sold on a show list, pen-by-pen, or on an individual head basis, and may be priced using live weight, dressed weight, or grid or formula pricing. Market signals are more likely to reach producers if cattle are priced individually. Current value-based pricing are discussed. Three grid pricing systems are evaluated over six marketing dates using data from 5,520 head of fed cattle. Each of the grids do send the anticipated pricing signals in that marbling and leanness are rewarded. However, the magnitudes of the price signals vary over time and across grids.