Volume 26, Issue 2, December 2001

December, 2001

REGIONAL COST SHARE NECESSARY FOR RANCHER PARTICIPATION IN BRUSH CONTROL

By: Lee, Andrew C.; Conner, J. Richard; Mjelde, James W.; Richardson, James W.; Stuth, Jerry W.
Large-scale brush-control programs are being proposed in Texas to increase off-site water yields. Biophysical and economic simulation models are combined to estimate the effects of brush control on representative ranches in four ecological regions of the Edwards Plateau area of Texas. Net present values of representative ranches in three of four regions decrease with brush control. Cost shares necessary for ranches from the three regions to break even range from 7% to 31% of total brush-control costs. Any large-scale brush-control program will therefore require a substantial investment by the state of Texas.
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December, 2001

ECONOMIC ANALYSIS OF AGRICULTURAL SOIL CARBON SEQUESTRATION: AN INTEGRATED ASSESSMENT APPROACH

By: Antle, John M.; Capalbo, Susan Marie; Mooney, Sian; Elliott, Edward T.; Paustian, Keith H.
This study develops an integrated assessment approach for analysis of the economic potential for carbon sequestration in agricultural soils. By linking a site-specific economic simulation model of agricultural production to a crop ecosystem model, the approach shows the economic efficiency of soil carbon (C) sequestration depends on site-specific opportunity costs of changing production practices and rates of soil C sequestration. An application is made to the dryland grain production systems of the U.S. Northern Plains which illustrates the sensitivity of the sequestration costs to policy design. The marginal cost of soil C ranges from $12 to $500 per metric ton depending upon the type of contract or payment mechanism used, the amount of carbon sequestered, and the site-specific characteristics of the areas.
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December, 2001

THE EFFECT OF E. COLI O157:H7 ON BEEF PRICES

By: McKenzie, Andrew M.; Thomsen, Michael R.
Using an event study, we examine the impact of recalls for E. Coli O157:H7 on wholesale and farm-level beef prices. Prices for boneless beef, a high-volume product primarily used for processing into ground beef, react negatively to recalls, suggesting incentives exist for packing firms to adopt measures that reduce the risk of contamination. However, there is no reaction in live cattle prices and very little reaction in boxed beef prices to recall events. This suggests short-run price responses found at the wholesale level for boneless beef do not transmit back to the farm level.
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December, 2001

ASSESSING CONSUMER PREFERENCES FOR ORGANIC, ECO-LABELED, AND REGULAR APPLES

By: Loureiro, Maria L.; McCluskey, Jill J.; Mittelhammer, Ronald C.
We assess consumer choice of eco-labeled, organic, and regular apples, and identify sociodemographic characteristics affecting the choice among those three alternatives. Eco-labeled apples are less desirable than organic when food safety, the environment, and children's needs are considered. Characteristics that may be expected to positively affect the decision to buy eco-labeled apples relative to regular apples actually have the opposite effect with the inclusion of the organic alternative. When considering all three choices, the eco-labeled product is found to be an intermediate choice among consumers.
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December, 2001

SIMULATED MAXIMUM LIKELIHOOD FOR DOUBLE-BOUNDED REFERENDUM MODELS

By: Riddel, Mary C.
Although joint estimation of referendum-type contingent value (CV) survey responses using maximum-likelihood models is preferred to single-equation estimation, it has been largely disregarded because estimation involves evaluating multivariate normal probabilities. New developments in the construction of probability simulators have addressed this problem, and simulated maximum likelihood (SML) for multiple-good models is now possible. This analysis applies SML for a three-good model under a double-bounded questioning format. Results indicate joint estimation substantially improves the variances of the parameters and willingness-to-pay estimates.
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December, 2001

THE WELFARE SENSITIVITY OF AGRI-ENVIRONMENTAL INSTRUMENTS

By: Horan, Richard D.; Claassen, Roger; Howe, Lance
Most economic studies of pollution control analyze policies that are optimal for a given set of underlying parameters. Less understood is how such policies perform when the underlying parameters change and policies are not adjusted in response, or what the benefits of adjustment are. We construct several measures of welfare sensitivity and use them to analyze the welfare impacts arising in a simulation of second-best, agri-environmental policies.
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December, 2001

AN EQUILIBRIUM ANALYSIS OF ANTIBIOTICS USE AND REPLANTING DECISIONS IN APPLE PRODUCTION

By: Roosen, Jutta; Hennessy, David A.
Antibiotics are used in fruit production to control fire blight, a bacterial disease of fruit trees that causes yield losses and eventually tree death. Fearing the development of widespread antibiotic resistance, scientists and public health officials are becoming increasingly concerned about antibiotics use in agriculture. A framework is developed for assessing the impacts of changes in tree damage risk following a ban on antibiotics use in the apple industry. Allowing for entry and exit, a long-run analysis of replanting dates and equilibrium prices is provided, as well as an estimate of the welfare impacts of a ban on antibiotics.
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December, 2001

THE CHALLENGE TO THINK BIG AS AMERICAN AGRICULTURE SHRINKS

By: Blank, Steven C.
A multi-part test is proposed for the hypothesis that American production agriculture is shrinking. The results of the three tests presented here are consistent with a shrinking American agricultural sector that is on the verge of, but not yet in, the final decline stage of its "life cycle." The sector is clearly shrinking in relative size and importance, and in absolute size, and its economic performance has been weak for decades. These changes in agriculture and their implications for the agricultural economics profession are discussed. Finally, (at least) two challenges to American agriculture and the agricultural economics profession are raised.
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December, 2001

A GLOBAL MODEL OF CLIMATE CHANGE IMPACTS ON TIMBER MARKETS

By: Sohngen, Brent; Mendelsohn, Robert; Sedjo, Roger A.
Several papers have now estimated the impact of climate change on national timber markets, but few studies have measured impacts globally. Further, the literature on impacts has focused heavily on changes in productivity and has not integrated movements of biomes as well. Here, a dynamic model of ecological change and economic change is developed to capture the impact of climate change on world timber markets. Climate change is predicted to increase global timber production as producers in low-mid latitude forests react quickly with more productive short-rotation plantations, driving down timber prices. Producers in mid-high latitude forests, in contrast, are likely to be hurt by the lower prices, dieback, and slower productivity increases because of long-rotation species. Consumers in all regions benefit from the lower prices, and the overall impacts of climate change in timber markets are expected to be beneficial, increasing welfare in those markets from 2% to 8%.
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December, 2001

CONSUMER RESPONSE TO GENETICALLY MODIFIED FOODS: MARKET SEGMENT ANALYSIS AND IMPLICATIONS FOR PRODUCERS AND POLICY MAKERS

By: Baker, Gregory A.; Burnham, Thomas A.
Conjoint analysis is used to elicit consumer preferences for attributes of genetically modified foods. Market segments are identified based on a cluster analysis of respondents' preferences for brand, price, and GMO content. A logit analysis is used to analyze consumer characteristics associated with the acceptance of GMO foods. Those consumers who were most risk averse, most likely to believe that GMOs improved the quality or safety of food, and most knowledgeable about biotechnology were the most likely to be accepting of GMO foods. These findings are used to develop implications for producers and regulators of GMO foods.
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December, 2001

TRUCKING FUEL TAXES AND ECONOMIC EFFICIENCY IN PRIMARY GRAIN TRANSPORTATION

By: Vercammen, James
A tax on fuel is one of the primary mechanisms for reducing truck transport externalities such as greenhouse gas emissions, road damage, congestion, and accidents. The economic efficiency properties of a fuel tax are examined for the farm-to-elevator grain trucking sector--a sector for which the road damage externality is often severe. Because trucking volumes cumulate more rapidly near the delivery points, marginal external cost is generally not proportional to distance. Further, noncompetitive FOB pricing by grain buyers implies that road tax discounts to offset price markups should be independent of location. In both cases, a fuel tax is not capable of efficiently addressing the externality. With discriminatory pricing by buyers, "cross-hauling" emerges and the optimal fuel tax is unexpectedly high because the buyer passes on only a portion of the tax to the farmer. In a simple example with discriminatory pricing, the optimal fuel tax reduces excess average trucking distance by less that 50%.
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December, 2001

TESTING FOR DIFFERENTIAL EFFECTS OF FOREST FIRES ON HIKING AND MOUNTAIN BIKING DEMAND AND BENEFITS

By: Loomis, John B.; Gonzalez-Caban, Armando; Englin, Jeffrey E.
Surveys of visitors to National Forests in Colorado were conducted to determine whether different fire ages and presence of crown fires have different effects on hiking and mountain biking recreation visits and benefits. Actual and intended behavior data were combined using a count-data travel cost model. The intended behavior trip questions asked about changes in number of trips due to the presence of a high-intensity crown fire, prescribed fire, and a 20-year-old high-intensity fire at the area respondents were visiting. Using the estimated recreation demand function, years since a non-crown fire had statistically significant positive effect on the trip demand of hikers. In contrast, presence of crown fires had no statistically significant effect on the quantity of hiker trips, but had a significant and negative effect on mountain biking trips. Crown fires also had a large effect on the value per trip, with crown fires increasing the value per hiking trip but lowering the value per mountain biking trip.
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December, 2001

END MATERIALS

This section includes: JARE Editor's Report October 2001; Reviewers, April 2000-October 2001; WAEA 2000 Award Winners; WAEA Past Presidents, 1927-2001; Past Editors; Author Guidelines for Submitting Manuscripts to JARE; Membership Information; Back Cover
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December, 2001

THE EFFECTS OF U.S. MEAT PACKING AND LIVESTOCK PRODUCTION TECHNOLOGIES ON MARKETING MARGINS AND PRICES

By: Brester, Gary W.; Marsh, John M.
Real livestock prices and farm-wholesale marketing margins have steadily declined over the past 20 years. Studies examining the causes of these declines have generally failed to account directly for technological change in livestock production and red meat slaughtering. We estimate reduced-form models for beef and pork farm-wholesale marketing margins and cattle and hog prices that include specific measures of technological change. Empirical results indicate cost savings generated by improved meat packing technologies have reduced real margins and positively influenced real cattle and hog prices. However, technological change embodied in cattle production weights has led to substantial declines in real slaughter cattle prices. Nonetheless, the net effect of improved meat packing technology has been to increase cattle price by $1.75/cwt and reduce the farm-wholesale beef marketing margin by 22.8 cents/lb.
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December, 2001

STOCHASTIC EFFICIENCY ANALYSIS OF COMMUNITY-SUPPORTED AGRICULTURE CORE MANAGEMENT OPTIONS

By: Sanneh, Njundu; Moffitt, L. Joe; Lass, Daniel A.
The continued decline in both the number of and the acreage in small-scale farms and rural communities, as well as food safety and environmental concerns, has heightened interest in the community-supported agriculture (CSA) concept. Mean-variance, stochastic dominance, mean-Gini, and exponential utility/moment-generating function approaches to stochastic efficiency are employed to analyze three years of farm survey data on core management options for CSA farms. The core concept yields higher net income per acre than non-core management and, based on the stochastic efficiency analysis, should be regarded as the preferred management option for many CSA operators.
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December, 2001

U.S. FEEDER CATTLE PRICES: EFFECTS OF FINANCE AND RISK, COW-CALF AND FEEDLOT TECHNOLOGIES, AND MEXICAN FEEDER IMPORTS

By: Marsh, John M.
Analysis of U.S. feeder steer prices normally includes fed cattle prices and feed grain costs. An expanded econometric model which investigates finance cost, profit risk, hay cost, technology, and Mexican feeder cattle import shares is estimated. Results indicate statistical significance of nearly all variables. The increase in feeder import shares contributed to $0.60/cwt of the $24.48/cwt decline in real feeder price from 1980-1999. Improved technology in producing feeder calves had reduced feeder prices more substantially, by $4. 86/cwt from 1980-1999. Increased feedlot technology through cost savings has increased feeder price. Feedlot risk management and macro-economic policies affecting the U.S. prime interest rate could continue to affect feeder prices.
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