Volume 34, Issue 1, April 2009

April, 2009

Techniques for Multivariate Simulation from Mixed Marginal Distributions with Application to Whole-Farm Revenue Simulation

By: Anderson, John D.; Harri, Ardian; Coble, Keith H.
Alternative techniques for representing dependencies among variables in multivariate simulation are discussed and compared in the context of rating a whole-farm insurance product. A procedure by lman and Conover (IC) that is common in actuarial applications is compared to a new technique detailed by Phoon, Quek, and Huang (PQHl. Results suggest that rates derived from the IC procedure may be inaccurate because the procedure produces biased estimates of correlation between simulated variables. This situation is improved with the PQH procedure.
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April, 2009

How Coupled Are Decoupled Farm Payments? A Review of the Evidence

By: Bhaskar, Arathi; Beghin, John C.
This survey paper explores the literature on decoupling of farm programs that has emerged in the last 10 years. The paper identifies and assesses the various channels of potential coupling of decoupled farm payments and provides a taxonomy of coupling mechanisms found in theoretical and empirical papers. Coupling of decoupled payments is pervasive but effects when measurable are small, with the exception of the impact on land values. The paper points to unresolved issues on potential coupling mechanisms for further research.
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April, 2009

Research: Are We Valuing the Right Stuff?

By: Brorsen, B. Wade
The incentives researchers face depend directly upon what we as a profession value. The impacts of research can be either disciplinary by adding to economic knowledge or real world by being useful to economic agents. Various measures of research impact such as publications, citations, and external funding are discussed, and the strengths and weaknesses of each measure are evaluated. Because of the difficulty of accurately measuring research impact, we must depend on internal incentives to motivate researchers to select topics with the most potential impact.
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April, 2009

Inventory and Transformation Hedging Effectiveness in Corn Crushing

By: Dahlgran, Roger A.
Recently developed ethanol futures contracts now allow direct-hedging by ethanol producers. This study examines the effectiveness of one-through eight-week hedges between 2005 and 2008. Our findings show (a) ethanol inventory hedging effectiveness is significant for two-week and longer hedges, and increases with the hedging horizon; (b) ethanol futures are significantly superior to gasoline futures for hedging ethanol price risk for two-week and longer hedges; (c) the corn crushing hedge, utilizing corn and ethanol futures, is effective and provides price risk management capabilities comparable to those provided by the soybean crush hedge.
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April, 2009

A Practical Algorithm for Multiple-Phase Control Systems in Agricultural and Natural Resource Economics

By: Doole, Graeme J.
Many important problems in agricultural and natural resource economics concern an intertemporal choice between alternate dynamic systems. This significance has motivated a theoretical literature generalizing the necessary conditions of Optimal Control Theory to multiple-phase problems. However, gaining detailed insight into their practical management is difficult because general numerical solution methods are not available. This paper resolves this deficiency through the development of a flexible and efficient computational algorithm based on a set of necessary conditions derived for finite-time, multiple-phase systems. Its effectiveness is demonstrated in an application to a nontrivial crop rotation problem.
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April, 2009

Crop Yield Skewness and the Normal Distribution

By: Hennessy, David A.
Empirical studies point to negative crop yield skewness, but the literature provides few clear insights as to why. This paper formalizes three points on the matter. Statistical laws on aggregates do not imply a normal distribution. Whenever the weather-conditioned mean yield has diminishing marginal product with respect to a weather-conditioning index, then there is a disposition toward negative yield skewness. This is because high marginal product in bad weather stretches out the yield distribution's left tail relative to that for weather. For disaggregated yields, unconditional skewness is decomposed into weather-conditioned skewness plus two other terms and each is studied in turn.
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April, 2009

Biosecurity, Terrorism, and Food Consumption Behavior: Using Experimental Psychology to Analyze Choices Involving Fear

By: Just, David R.; Wansink, Brian; Turvey, Calum G.
How would a possible food safety scare influence food consumption? Using techniques from experimental psychology, a study of 103 lunchtime participants suggests that a food scare--avian influenza--would decrease consumption of the affected food by 17% if the subjects believed it was naturally occurring, and by 26% if they believed it was the result of terrorism. While individual consumption decreased, very few eliminated all consumption of the affected food. We argue that experimental psychology is essential when attempting to study behavior in food safety where hypothetical scenarios and surveys would not capture the emotional nature of the response.
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April, 2009

Using a Bundled Amenity Model to Estimate the Value of Cropland Open Space and Determine an Optimal Buffer Zone

By: Kuminoff, Nicolai V.
This study investigates how proximity to cropland influences residential property values and considers the public policy implications. The hedonic model generalizes previous studies by recognizing that the bundle of externalities generated by crop production may increase the price of some homes and decrease the price of others, depending on their respective locations. Using an instrumental variables approach to estimate the model for San Joaquin County, California, suggests that proximity to cropland increases the value of most, but not all, single-family homes near the agricultural-urban edge. The results imply an agricultural buffer zone of 68 meters would mitigate most cropland disamenities.
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April, 2009

Non-tariff Barriers to Trade Caused by SPS Measures and Customs Procedures with Product Quality Changes

By: Liu, Lan; Yue, Chengyan
This study develops a methodology to quantify the combined effects of two major nontariff barriers (NTBs), sanitary and phytosanitary (SPS) measures and customs and administrative procedures. We employ a constant elasticity of substitution (CES) utility function with factor-augmenting technical progress to incorporate changes in the quality of goods. We then estimate the effects of these two NTBs in the Japanese cut flower market. Results show that estimates of SPS are biased without considering product quality changes caused by the customs and administrative procedures for highly perishable agricultural products. If these Japanese NTBs were removed, findings suggest there would be a significant increase in cut flower imports by Japan.
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April, 2009

Tennessee Agriculture and Forestry Industry Clusters and Economic Performance, 2001-2006

By: Stewart, Lance A.; Lambert, Dayton M.; Wilcox, Michael D.; English, Burton C.
Industry cluster identification methods determine linkages between purchasers and suppliers at the county level for 447 economic sectors in Tennessee. Using an econometric model, the cluster analysis is extended to estimate which value chains contributed to economic growth between 2001 and 2006. Businesses making up the agriculture and forestry clusters enjoyed increased output per job in 34% and 32%, respectively, of Tennessee's counties. The spatial pattern of these findings was significant, suggesting that some counties may benefit from regional coordination of projects designed to enhance or retain businesses in these industry clusters.
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April, 2009

Disease and Behavioral Dynamics for Brucellosis Control in Elk and Cattle in the Greater Yellowstone Area

By: Xie, Fang; Horan, Richard D.
This paper investigates private responses and ecological impacts of policies proposed to confront the problem of brucellosis being spread from elk to cattle in Wyoming. The policies consist of combinations of changes in elk feeding and population levels. Farmers' responses to these dynamics are modeled along with the associated impacts to livestock population dynamics. Our findings suggest that feedbacks between jointly determined disease dynamics and decentralized economic behavior matter, and the elk feedgrounds do not actually generate economic harm to the individual farmers.
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