Volume 35, Issue 1, April 2010

April, 2010

Succession Decisions in U.S. Family Farm Businesses

By: Mishra, Ashok K.; El-Osta, Hisham S.; Shaik, Saleem
Farm transfer or succession by the “next generation” holds a place of central importance in the determination of industry structure and total number of farmers and has profound implications for farm families. The family farm sector relies heavily on intergenerational succession. Succession and retirement are linked and reflective of the life cycles of the farm household and the farm business. A large farm-level data set and a logistic regression model were used to examine the determinants of farm succession decisions in the United States, with special emphasis given to the treatment of endogenous wealth and farm size variables. Results point to the importance of farmer’s age, educational attainment of farm operators, off-farm work by the operator or operator and spouse, expected household wealth, and farm business location on the decision to have succession plans.
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April, 2010

U.S. Meat Demand: Household Dynamics and Media Information Impacts

By: Tonsor, Glynn T.; Mintert, James R.; Schroeder, Ted C.
This article uses national, quarterly data to examine U.S. meat demand using the Rotterdam model. We investigate the effect of multiple information indices linking different health concerns with diet, changes in household dynamics, and meat recall information. Medical journal articles linking iron, zinc, and protein with health and diet increase beef and poultry demand, whereas articles dealing with fat, cholesterol, and diet concerns reduce beef demand. Increasing consumption of food away from home enhances pork and poultry demand while reducing beef demand. Combined, these results provide a more complete and current understanding of the impact of multiple information factors faced by U.S. consumers.
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April, 2010

Optimal Length of Moving Average to Forecast Futures Basis

By: Hatchett, Robert B.; Brorsen, B. Wade; Anderson, Kim B.
The question addressed in this study is which length of historical moving average provides the best forecast of futures basis. Differences in observed forecast accuracy among the different moving averages are usually less than a cent per bushel, and most are not statistically significant. Further, the search for an optimal length of moving average may be futile since the optimal length depends on how much structural change has occurred. Our recommendation is to use moving averages when there has been no structural change and to use last year’s basis or an alternative approach if the forecaster perceives that a structural change has occurred.
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April, 2010

The Impact of Changes in Income Distribution on Current and Future Food Demand in Urban China

By: Zheng, Zhihao; Henneberry, Shida Rastegari
The impact of changes in income distribution on food demand in the urban Jiangsu province of China is estimated in this study. Findings suggest that changes in income distribution have a considerable impact on the demand for individual food commodity groups. Therefore, given that a significant change in income distribution has occurred in urban China, food demand projections should account for expected changes in future income distribution.
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April, 2010

A Dynamic Model of Mesh Size Regulatory Compliance

By: Akpalu, Wisdom
This paper employs a dynamic model for crimes that involve time and punishment to analyze the use of a net with illegal mesh size in a management regime where each community claims territorial use right over a fishery but has a discount rate that may differ from the social discount rate. The equilibrium stock and harvest levels are found to be much lower if the regulation is violated. Moreover, the optimal penalty for violation must be decreasing in the shadow cost of taking the risk to fish illegally, and increasing the risk of punishment increases the equilibrium stock level.
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April, 2010

On the (De)Stabilization Effects of Biofuels: Relative Contributions of Policy Instruments and Market Forces

By: Gohin, Alexandre; Treguer, David
Ethanol production has recently surged in response to biofuel policies and increased fossil oil prices. We develop a partial equilibrium model focused on U.S. corn-based ethanol production with downside risk-averse farmers to assess the consequences of ethanol production on agricultural volatility. We report substantial effects on the distribution of corn prices with increases in the variance of prices received by farmers. Risk-averse corn farmers still benefit due to the higher mean price effect. From a methodological perspective, this analysis reveals that downside risk aversion may be important.
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April, 2010

Consumers’ Willingness to Pay for Treatment-Induced Quality Attributes in Anjou Pears

By: Zhang, Huifang; Gallardo, Rosa Karina; McCluskey, Jill J.; Kupferman, Eugene M.
Ethylene treatments provide an effective method for shortening post-harvest ripening periods for winter Anjou pears and allow market availability throughout the year. However, pear quality may vary under different treatments. A sensory experiment and a consumer survey including questions that address valuation, assessments of sensory characteristics, purchasing habits, and demographics were conducted. Analyses indicate that treatment-induced quality losses significantly affect consumers’ willingness to pay (WTP). Mean WTP for each treatment reveals that consumers prefer pears with a six-day ethylene treatment and are willing to pay a premium of $0.25/pound compared to the market price.
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April, 2010

Measuring the Location Value of a Recreation Site

By: Taylor, R. Garth; McKean, John R.; Johnson, Donn M.
The demand for sport fishing on the Snake River reservoirs was estimated using the travel cost method. A short-run demand model was specified with location value for anglers who have the option to access a follow-on site if fishing conditions are poor. Willingness to pay for a fishing trip to the site was $18.52 for anglers who did not have a follow-on site and $43.48 for anglers who did. A location value of $24.96 accrued only to anglers with a follow-on site. Total annual site value was understated by as much as 40% ($0.78 million) if location value for anglers with a follow-on site was excluded from the benefit estimate.
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April, 2010

Are Homeowners Willing to Pay for “Origin-Certified” Plants in Water-Conserving Residential Landscaping?

By: Curtis, Kynda R.; Cowee, Margaret W.
This study investigates the value of local origin-labeling for a nonfood product by evaluating Nevada homeowner purchase propensity for “NevadaGrown” native plants for water-conserving residential landscaping. Homeowner survey results illustrate that homeowners may be willing to pay as much as a 14% premium for origin-certified native plants. WTP estimates are higher when uncertain responses are incorporated into the bidding structure. Preferences for local production and drought resistance in plants are the primary drivers of purchasing decisions in the absence of uncertain responses, while income levels and preferences for natural plant appearance additionally affect purchasing decisions when uncertainty is incorporated.
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April, 2010

Dynamic Relationships Between Farm Real Estate Values and Federal Farm Program Payments

By: Shaik, Saleem; Miljkovic, Dragan
This study examines the dynamic relationships among farm real estate values, farm returns, farm program payments, and real interest rates in an income capitalization model. Endogeneity is assumed among the variables in a dynamic framework because the direction of causality is unclear from a theoretical standpoint. The analysis encompasses the period beginning with the introduction of the first farm bill in 1933 and ending in 2006. Results indicate farm program payments have positive direct impacts in the short run and positive indirect impacts (via farm returns) in the long run on farm real estate values.
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