2012

August, 2012

By: Colino, Evelyn V.; Irwin, Scott H.; Garcia, Philip; Etienne, Xiaoli
This paper investigates whether the accuracy of outlook hog price forecasts can be improved using composite forecasts in an out-of-sample context. Price forecasts from four widely-recognized outlook programs are combined with futures-based forecasts, ARMA, and unrestricted Vector Autoregressive (VAR) models. Quarterly data are available from 1975.I through 2007.IV for Illinois/Purdue and 1975.I-2010.IV for Iowa, Missouri, and USDA forecasts, which allow for a relatively long out-of-sample evaluation after permitting model specification and appropriate composite-weight training periods. Results show that futures and numerous composite procedures outperform outlook forecasts, but no-change forecasts are inferior to outlook forecasts. At intermediate horizons, OLS composite procedures perform well. The superiority of futures and composite forecasts decreases at longer horizons except for an equal-weighted approach. Importantly, with few exceptions, nothing outperforms the equal-weight approach significantly in any program or horizon. In addition, the equal-weight approach as well as other composite approaches can generally produce larger trading profits compared to outlook forecasts. Overall, findings favor the use of equal-weighted composites, consistent with previous empirical findings and recent theoretical papers.

August, 2012

By: Trujillo-Barrera, Andres; Mallory, Mindy L.; Garcia, Philip
This article analyzes recent volatility spillovers in the United States from crude oil using futures prices. Crude oil spillovers to both corn and ethanol markets are somewhat similar in timing and magnitude, but moderately stronger to the ethanol market. The shares of corn and ethanol price variability directly attributed to volatility in the crude oil market are generally between 10%- 20%, but reached nearly 45% during the financial crisis, when world demand for oil changed dramatically. Volatility transmission is also found from the corn to the ethanol market, but not the opposite. The findings provide insights into the extent of volatility linkages among energy and agricultural markets in a period characterized by strong price variability and significant production of corn-based ethanol.

August, 2012

By: Yu, Li; Hurley, Terrance M.; Kliebenstein, James B.; Orazem, Peter F.
This study investigates worker shares of the returns to scale and returns to technology adoption on U.S. hog farms. The wage analysis controls for a matching process by which workers are linked to farms of different sizes and technology uses. Using four surveys of employees on hog farms collected in 1990, 1995, 2000, and 2005, we find persistent large wage premiums are paid to workers on larger farms and on technologically advanced farms that remain large and statistically significant even after controlling for differences in observable worker attributes and in the observed sorting process of workers across farms.

August, 2012

By: Nastis, Stefanos A.; Papanagiotou, Evangelos; Zamanidis, Savvas
This paper assesses the efficiency and performance of organic alfalfa farms. Data were obtained from questionnaires collected from forty farms participating in an EU-subsidized program promoting the switch to organic farming. Results obtained using the bootstrap Data Envelopment Analysis methodology show that larger farms had lower yields and lower efficiency scores and more experienced farmers had higher efficiency scores. A Tobit analysis of the impact of environmental factors and subsidies on farm efficiency demonstrates that CAP subsidies cause perverse incentives, raising questions about the efficiency of such policies for sustainable agricultural development.

August, 2012

By: Kim, GwanSeon; Petrolia, Daniel R.; Interis, Matthew G.
This paper introduces an alternative non-market value elicitation method—the “quasi-doublereferendum” (QDR)—applied to barrier island restoration in Mississippi. It is appropriate for surveys that elicit willingness-to-pay responses to multiple projects differing in scale only and can be used to increase efficiency while mitigating bias. We compare results to the more commonly used single-referendum (SR) method under two admissible ranges of willingness to pay: negative to positive infinity, and zero to income. The confidence intervals of the QDR models were narrower. We argue that the QDR approach should be less subject to bias than the commonly used double-referendum approach.

August, 2012

By: Walters, Cory G.; Shumway, C. Richard; Chouinard, Hayley H.; Wandschneider, Philip R.
Government programs that help agricultural producers manage risk may have environmental consequences. In recent years, premium subsidies for crop insurance have been increased substantially to encourage greater producer participation. Using detailed, producer-level crop insurance contract data in four regions, we investigate whether adverse environmental effects have resulted from these increased subsidies. We find some association between environmental effects and insurance contracts. On average, however, we find that environmental effects are generally small and as often beneficial as adverse. More importantly, we find that results are specific to local conditions and to particular environmental indicators and may be hidden in aggregate analysis.

August, 2012

By: Wong, Linda; van Kooten, G. Cornelis; Clarke, Judith A.
Because there are potential externality benefits, it is important to specify an appropriate statistical model when analyzing the conflict between agriculture and migratory waterfowl in Canada’s pothole region. Unlike non-spatial panel models, our use of a spatial autoregressive panel model identifies indirect impacts of agricultural activities on wetlands and waterfowl. In particular, we find that programs to restore wetlands in one location will result in enhanced duck productivity of wetlands and habitat in other locations within the study region. Even so, costs of protecting ducks could range from $107 to $204 per bird.

April, 2012

By: Peterson, Hikaru Hanawa; Burbidge, Linda D.
Analysis of survey data indicates that Japanese consumers discount their willingness to pay for U.S. beef and pork relative to that of domestic products, but that the discounts have declined from 2006 to 2009. The discounts for U.S. products were greater than those imported from other countries in 2006, but the 2009 discounts were statistically indistinguishable across origins. Our findings also suggest than Japan is a receptive market for meat produced with GM-free feed and for meat products meeting full organic standards.

April, 2012

By: Burkhart, Christopher S.; Jha, Manoj K.
A watershed-based modeling system is developed to assess alternative nutrient abatement policies, including fertilizer taxes, application caps, and uniform reductions. A microeconometric model of nutrient use is estimated using farm-level data, prices, and spatially detailed soil and land characteristics. Results are interfaced with a physical watershed model to predict water quality changes. Simulations demonstrate differences in water quality effects across policies. For nitrate loads at the watershed outlet, an application cap provides slightly superior performance for small reductions, but a tax is more efficient under larger reductions. Phosphorus reductions at the subwatershed level vary but provide information about policy tradeoffs.

April, 2012

By: Boland, Michael A.; Crespi, John M.; Silva, Jena; Xia, Tian
This paper determines the benefits and costs of firm-level advertising in a monopolistically competitive industry. The model is useful in an environment in which firm-level costs may be absent or imprecise. The empirical example uses data on the advertising for a new line of prune snacks by Sunsweet Growers between 2008 and 2010, revealing average benefit-cost estimates from $1.26 to $4.35 for every dollar allocated to the new product line.