2003

December, 2003

Improving Extension Effectiveness for Organic Clients: Current Status and Future Directions

By: Lohr, Luanne; Park, Timothy A.
Responses from a national survey of U.S. organic farmers indicated dissatisfaction with the extension service. An ordered probit model was used to identify the factors influencing effectiveness ratings of extension advisors by farmers. Study findings show that part-time, higher income organic farmers who used a variety of highly rated private-sector information sources rated extension providers as more effective. Farmers in the Northeast and West regions rated extension usefulness more highly than in other regions. Not accounting for these demographic components in effectiveness ratings may result in under- or overestimation of results of organic-targeted extension programs. Extension agents can improve their usefulness to organic farmers by complementing educational and technical services offered by the private sector, and by facilitating farmer information exchanges as well as presenting relevant research findings as they have traditionally done.
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December, 2003

Incentives to Advertise and Product Differentiation

By: Hunnicutt, Lynn; Israelsen, L. Dwight
Recent court rulings question the ability of commodity groups to fund generic promotions through mandatory check-off programs. A model examining incentives to fund brand advertisements when both brand and generic advertising exist is presented. Brand advertising expands the market by attracting new consumers to the industry, and allows the advertising firm to take customers from rivals in the industry. Homogeneous products are advertised too little relative to the amount that maximizes total industry profits, and brandable products are advertised too much. The optimal check-off rate is derived, and the Dorfman-Steiner condition is shown to be a special case of this model.
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December, 2003

Estimating Production Risk and Inefficiency Simultaneously: An Application to Cotton Cropping Systems

By: Jaenicke, Edward C.; Frechette, Darren L.; Larson, James A.
By using a stochastic frontier framework, the mutual effect of input use on production risk and inefficiency is investigated. Disentangling this mutual effect proves important for empirical reasons, at least when applied to west Tennessee cotton systems grown after various cover crops. The most striking result is that the stochastic frontier model, when compared with a typical Just-Pope model, reorders the relative riskiness of cover-crop regimes associated with the cotton systems.
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December, 2003

Local Labor Market Conditions and the Jobless Poor: How Much Does Local Job Growth Help in Rural Areas?

By: Davis, Elizabeth E.; Connolly, Laura S.; Weber, Bruce A.
The employment outcomes of a group of jobless poor Oregonians are tracked in order to analyze the relative importance of local labor market conditions on their employment outcomes. Local job growth increases the probability that a jobless poor adult will get a job and shortens the length of time until she finds a job. After accounting for both the effects of personal demographic characteristics and local job growth, there is little evidence that the probability of employment or the duration of joblessness differs in rural compared with urban areas.
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December, 2003

An Empirical Analysis of Market Integration and Efficiency for U.S. Fresh Tomato Markets

By: Padilla-Bernal, Luz E.; McFadden, Dawn Thilmany; Loureiro, Maria L.
Fresh tomato trade between the United States and Mexico grew significantly during the 1990s. Moreover, major structural changes in U.S. produce marketing channels increase the complexity of conducting analyses to delineate the impact of liberalized trade. Following the work of Barrett, Li, and Bailey, this study implements a mixed distribution to examine spatial-price relationships between major shipping points and terminal markets for Mexican imported, and Florida and California tomatoes. Although markets are often efficiently integrated, results suggest strategic pricing and product shipments may exist and vary among terminal markets in Los Angeles, Boston, and Chicago.
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December, 2003

Pesticide Productivity: Of Bugs and Biases

By: Norwood, F. Bailey; Marra, Michele C.
Pesticide productivity is both important and difficult to measure. Typically, pesticide marginal products are estimated without information on the pest pressure. Three theoretical models are developed which suggest absence of such information may cause an underestimation of pesticide productivity. Using application frequency variables as a proxy for pest populations, we show that pesticide marginal products are higher when pest pressure is accounted for.
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December, 2003

Optimal On-Farm Grain Storage by Risk-Averse Farmers

By: Lai, Jing-Yi; Myers, Robert J.; Hanson, Steven D.
Most previous research on post-harvest grain storage by farmers has assumed risk-neutral behavior and/or made restrictive assumptions about underlying price probability distributions. In this study, we solve the optimal on-farm storage problem for a risk-averse farmer under more general assumptions about underlying price distributions. The resulting model is applied to Michigan corn farmers and findings show, contrary to the "sell all or nothing" risk-neutral rule, risk-averse farmers will spread sales out over the storage season. As farmers become more risk averse, the optimal strategy is to sell more grain at harvest and spread sales over the storage season, even though this practice reduces expected return. This result is more consistent with observed farmer behavior than the "sell all or nothing" risk-neutral rule.
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December, 2003

Do Income Constraints Inhibit Spending on Fruits and Vegetables Among Low-Income Households?

By: Stewart, Hayden; Blisard, Noel; Jolliffe, Dean
This study assesses whether income constraints inhibit spending on fruits and vegetables among low-income households. If this is the case, then it is hypothesized that the distribution of expenditures on fruits and vegetables by low-income households should be stochastically dominated by the distribution of expenditures on these same food items by other households. Moreover, it must be the case that low-income households would increase their spending on fruits and vegetables in response to an increase in their income. Using household data from the 2000 Consumer Expenditure Survey, a test of stochastic dominance is performed. Censored quantile regressions are also estimated at selected points of the conditional expenditure distribution. Low income households are found to spend less on fruits and vegetables than other households, but they are not responsive to changes in income.
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December, 2003

Where Is American Agriculture in Its “Life Cycle”?

By: Blank, Steven C.
The increasing globalization of agricultural markets in recent decades appears to be changing the economics of the American production agriculture sector, reducing its economic importance and raising questions about its life cycle. This study contributes to the product life cycle literature by creating tests of hypotheses about the economic life of American production agriculture. A methodology to test the hypotheses is proposed and then applied in an empirical analysis. In general, it appears that a new stage in American agriculture's life began during the 1973-1983 period. Finally, the results and their implications for the American production agriculture sector are discussed.
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December, 2003

Effects of the GM Controversy on Iowa Corn-Soybean Farmers’ Acreage Allocation Decisions

By: Alexander, Corinne E.; Fernandez-Cornejo, Jorge; Goodhue, Rachael E.
Prior to the 2000 planting season, some industry observers predicted acreage of genetically modified crops would decline dramatically. However, actual 2000 plantings presented a puzzle. Farmers reduced their acreage of genetically modified corn, but concurrently increased their acreage of genetically modified soybeans. We demonstrate that it may be theoretically optimal for risk-averse farmers to reduce their corn acreage but not their soybean acreage. However, past experience, attitudes, and farm size explained planting decisions to a larger degree than did risk preferences.
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December, 2003

Liberalizing Agricultural Trade: Will It Ever Be a Reality?

By: McCalla, Alex F.
The World Trade Organization (WTO) Agreement on Agriculture was signed in June 1994. It accomplished two things: it brought agricultural trade under the rules of WTO, and it set schedules for reducing barriers to trade under the three pillars of liberalization--market access, export assistance, and domestic support. Nine years later there has been precious little liberalization. The new Doha Round has ambitious objectives for agricultural trade liberalization. However, given recent behavior by rich developed countries, it seems unlikely that developing countries will get increased access to Northern markets or reduced competition from subsidized exports, despite their now representing a majority of WTO members.
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December, 2003

Beef Supply Response Under Uncertainty: An Autoregressive Distributed Lag Model

By: Mbaga, Msafiri Daudi; Coyle, Barry T.
This is the first econometric study of dynamic beef supply response to incorporate risk aversion or, more specifically, price variance. Autoregressive distributed lag (ADL) models are estimated for cow-calf and feedlot operations using aggregate data for Alberta. In all cases, output price variance has a negative impact on output supply and investment. Moreover, the impacts of expected price on supply response are greater in magnitude and significance than in risk-neutral models.
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December, 2003

Value Differentiation

By: Goodhue, Rachael E.; Rausser, Gordon C.
American agriculture is shifting from homogeneous commodities to differentiated products. Value differentiation, the process by which agrifood chain actors isolate, match, and exploit heterogeneity in consumer preferences and product attributes, is examined. Value differentiation is characterized by complementarities across four activities at each stage of the production chain: product characteristic measurement, product characteristic production, coordination between stages, and customer preference detection. Complementarities at the firm level are modeled using supermodularity. The model's predictions are discussed, as are potential testing approaches, and implications are presented for agrifood firms, marketing orders, and returns to research.
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December, 2003

Integrative Investment Appraisal of a Lignocellulosic Biomass-to-Ethanol Industry

By: Tembo, Gelson; Epplin, Francis M.; Huhnke, Raymond L.
While theoretically more efficient than starch-based ethanol production systems, conversion of lignocellulosic biomass to ethanol is not without major challenges. A multi-region, multi-period, mixed integer mathematical programming model encompassing alternative feedstocks, feedstock production, delivery, and processing is developed. The model is used to identify key cost components and potential bottlenecks, and to reveal opportunities for reducing costs and prioritizing research. The research objective was to determine for specific regions in Oklahoma the most economical source of lignocellulosic biomass, timing of harvest and storage, inventory management, biorefinery size, and biorefinery location, as well as the breakeven price of ethanol, for a gasification-fermentation process. Given base assumptions, gasification-fermentation of lignocellulosic biomass to ethanol may be more economical than fermentation of corn grain. However, relative to conventional fermentation processes, gasification-fermentation technology is in its infancy. It remains to be seen if the technology will be technically feasible on a commercial scale.
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December, 2003

Consumer Willingness to Pay for Genetically Modified Food Labels in a Market with Diverse Information: Evidence from Experimental Auctions

By: Huffman, Wallace E.; Shogren, Jason F.; Rousu, Matthew C.; Tegene, Abebayehu
With the continuing controversy over genetically modified (GM) foods, some groups advocate mandatory labeling of these products, while other groups oppose labeling. An important issue is how GM labels affect consumers' willingness to pay for these food products in the market. Using a statistically based economics experiment with adult consumers as subjects, we examine how willingness to pay changes for three food products--vegetable oil, tortilla chips, and potatoes--when GM labels are introduced. Participants in the experiments discounted GM-labeled foods by approximately 14% relative to their standard-labeled counterparts. The evidence also showed that sequencing of food labels affects willingness to pay, and that randomizing treatments is an important methodological feature in experiments of willingness to pay.
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December, 2003

End Materials

JARE Editor's Report, December 2003; Reviewers October 2002-April 2003; WAEA 2002 Award Winners; WAEA Past Presidents 1927-2003; Past Editors; Minutes of 2003 WAEA Joint Executive Committee and Executive Council Meeting; JARE Author Index; JARE Key Words Index
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August, 2003

An Ex Post Evaluation of the Conservation Reserve, Federal Crop Insurance, and Other Government Programs: Program Participation and Soil Erosion

By: Smith, Vincent H.; Goodwin, Barry K.
Recent research has questioned the extent to which government policies, including conservation and risk management programs, have influenced environmental indicators. The impacts of income-supporting and risk management programs on soil erosion are considered. An econometric model of the determinants of soil erosion, program participation, conservation effort, and input usage is estimated. While the Conservation Reserve Program has reduced erosion an average of 1.02 tons per acre from 1982 to 1992, approximately half of this reduction has been offset by increased erosion resulting from government programs other than federally subsidized crop insurance.
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August, 2003

Estimating Consumer Willingness to Pay for Country-of-Origin Labeling

By: Loureiro, Maria L.; Umberger, Wendy J.
Consumer willingness to pay for a mandatory country-of-origin labeling program is assessed. A consumer survey was conducted during 2002 in several grocery stores in Boulder, Denver, and Fort Collins, Colorado. Econometric results indicate that surveyed consumers are willing to pay an average of $184 per household annually for a mandatory country-of-origin labeling program. Respondents were also willing to pay an average of $1.53 and $0.70 per pound more for steak and hamburger labeled as "U.S. Certified Steak" and "U.S. Certified Hamburger," which is equivalent to an increase of 38% and 58%, respectively, over the initial given price.
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