Volume 26, Issue 1, July 2001

July, 2001

By: Wilson, William W.; Diersen, Matthew A.
A common and noteworthy application of auctions and bidding is that of tendering for imports, used for both price determination and the allocation of purchases among sellers. In this study we develop a model to evaluate bidding strategies and competition and apply it to Egyptian oilseeds imports. Generally, bids could be explained with a relatively high degree of confidence using accessible data. In addition, there appear to be groups of bidders characterized by differences in their bid functions. These statistical results were used to determine optimal bids and evaluate the effects of several critical variables. The results are particularly interesting for understanding sellers' bidding strategies and competition among rivals, as well as impacts of specific variables on optimal bids and payoffs to sellers.

July, 2001

By: DeVuyst, Eric A.; Johnson, D. Demcey; Nganje, William E.
Grain quality is typically measured via several attributes. As these attributes vary across shipments and time, grain quality can be described using multivariate probability or frequency distributions. These distributions are important in modeling blending opportunities inherent in various grain shipments. For computational reasons, it is usually necessary to represent these distributions with a small set of discrete points and probabilities. In this analysis, we suggest a representation method based on Gaussian quadrature. This approach maintains the blending opportunities available by preserving moments of the distribution. The Gaussian quadrature method is compared to a more commonly used representation in a barley blending model.

July, 2001

By: Brorsen, B. Wade; Coulibaly, Nouhoun; Richter, Francisca G.-C.; Bailey, DeeVon
A theoretical model is developed to explain the economics of determining price slides for feeder cattle. The contract is viewed as a dynamic game with continuous strategies where the buyer and seller are the players. The model provides a solution for the price slide that guarantees an unbiased estimate of cattle weight. An empirical model using Superior Livestock Auction (SLA) data shows price slides used are smaller than those needed to cause the producer to give unbiased estimates of weight. Consistent with the model's predictions, producers slightly underestimate cattle weights.

July, 2001

By: Sheldon, Ian M.; Pick, Daniel H.; McCorriston, Steve
This study examines the interaction between export subsidies and profit-shifting in a vertical production system consisting of agricultural commodity production, and intermediate and final good processing, where the latter two stages may be characterized by imperfect competition. Using a model with general functional forms for demand, comparative statics indicate that an export subsidy to an unprocessed agricultural commodity, under certain circumstances, can have greater profit-shifting effects at the final processing stage compared to an export subsidy targeted at the final processed good.

July, 2001

By: Chavas, Jean-Paul; Kim, Kwansoo; Lauer, Joseph G.; Klemme, Richard M.; Bland, William L.
This study investigates the recent evolution of corn yield, with a special focus on the tradeoff between corn profitability and risk. The analysis relies on time-series data from Wisconsin experimental farms at the edge of the Corn Belt. An econometric model of corn yield, corn grain moisture, and corn profitability is specified. Both conditional means and conditional variances are estimated for different sites in Wisconsin. The empirical analysis shows the changes in corn yield and profit over time and across space. The evidence suggests that yield trends are due mostly to technical progress, with smaller effects generated by climate change. On average, corn yield and profitability have improved faster in northern Wisconsin than in the Corn Belt. However, risk has also increased faster. Results show that the choice of corn hybrid maturity makes it easier to manage risk in the Corn Belt than in northern Wisconsin.

July, 2001

By: Bard, Sharon K.; Barry, Peter J.
The 1996 Farm Bill and low commodity prices have regenerated interest in the impact of risk and farmers' risk attitudes on production agriculture. Previous research has used expected utility theory (EUT) and direct elicitation of utility functions (DEU) for eliciting risk attitudes. To overcome the criticism of EUT and DEU, a recently developed technique called the "closing in" method is adapted for eliciting farmers' risk attitudes. This method is applied to Illinois farmers by using a computerized decision procedure, and is validated by comparing the results to the farmers' self-assessment of their risk attitudes and score to a risk attitudinal scale.

July, 2001

By: Barkley, Andrew P.
The need for institutions of higher education to teach students of all ages how to think, synthesize ideas, and assimilate new information has become crucial in the information age. Analytical ability is increasingly important, not only for traditional university clientele of young adult residential learners, but also for productive individuals throughout their lives. Agricultural economics teachers must invest in the acquisition of new skills and knowledge, including a willingness to change traditional teaching structures and institutions, to take full advantage of the huge opportunities and challenges of the massive changes in technology and the economy. This paper considers how well teaching programs in agricultural economics enhance student learning.

July, 2001

By: Martin, Steven W.; Barnett, Barry J.; Coble, Keith H.
Production agriculture and agribusiness are exposed to many weather-related risks. Recent years have seen the emergence of an increased interest in weather-based derivatives as mechanisms for sharing risks due to weather phenomena. In this study, a unique precipitation derivative is proposed that allows the purchaser to specify the parameters of the idemnity function. Pricing methods are presented in the context of a cotton harvest example from Mississippi. Our findings show a potential for weather derivatives to serve niche markets within U.S. agriculture.

July, 2001

By: Hurley, Terrance M.; Babcock, Bruce A.; Hellmich, Richard L.
Genetically engineered crops offer farmers a new option for controlling pests. The high efficacy of these pesticidal crops, combined with the potential for widespread adoption, has raised concerns that pest resistance may prematurely diminish their value. In response to these concerns, the Environmental Protection Agency requires resistance management plans. Current resistance management plans rely on a high-dose refuge strategy. This analysis extends the current framework for evaluating high-dose refuge strategies to include a measure of agricultural productivity and conventional pesticide use. The economic tradeoff relative to agricultural productivity, conventional pesticide use, and pest resistance is assessed when Bt corn is planted to control the European corn borer.