Volume 37, Issue 1, April 2012

April, 2012

Japanese Consumers’ Valuation of U.S. Beef and Pork Products after the Beef Trade Ban

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.
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April, 2012

Site-Specific Simulation of Nutrient Control Policies: Integrating Economic and Water Quality Effects

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.
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April, 2012

Measuring the Benefits to Advertising under Monopolistic Competition

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.
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April, 2012

Determinants of Price Differentials in Oklahoma Value-Added Feeder Cattle Auctions

By: Williams, Galen S.; Raper, Kellie Curry; DeVuyst, Eric A.; Peel, Derrell S.; McKinney, Doug
Many value-added practices cannot be observed by feeder cattle buyers. Third-party verification can decrease market inefficiency associated with this asymmetric information. We evaluate the effectiveness of a verification program, the Oklahoma Quality Beef Network, in increasing received prices. We estimate the value of verification, weaning, vaccinating, certification and phenotypic traits of feeder cattle at Oklahoma auctions. Results indicate that the OQBN program adds $2.39 to $5.74/cwt. Vaccinating calves adds $1.44/cwt, and weaning calves adds $2.05/cwt. Differential values for lot size, average weight, hide color, frame size, conditioning, Brahman influence, gender and other characteristics are also reported.
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April, 2012

Spatial Externalities of Pest Control Decisions in the California Citrus Industry

By: Grogan, Kelly A.; Goodhue, Rachael E.
Predaceous and parasitic insects provide control of important citrus pests. However, many pesticides are toxic to these beneficials. Using California citrus grower survey data, this article tests whether landscape-level use of pesticides affects the presence of and reliance on Aphytis melinus, an important beneficial insect. Results show that landscape-level pesticide use decreases the presence of A. melinus and increases reliance on insecticides. Pesticide use on non-citrus crops has a significant negative effect on the presence of Aphytis melinus, suggesting a cross-crop spatial externality. Our findings illustrate that regulations designed to address cross-crop effects on beneficial insects can increase social welfare.
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April, 2012

Fixed Effects Estimation of the Intensive and Extensive Margins of Irrigation Water Demand

By: Hendricks, Nathan P.; Peterson, Jeffrey M.
Irrigation water demand is estimated using field-level panel data from Kansas over 16 years. The cost of pumping varies over time due to changes in energy prices and across space due to differences in the depth to water. Exploiting this variation allows us to estimate the demand elasticity while controlling for field-farmer and year fixed effects. Fixed effects also allow us to control for land use without an instrument or assumptions about the distribution of errors. Our estimates of water demand are used to calculate the cost of reducing irrigation water use through water pricing, irrigation cessation, and intensity-reduction programs.
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April, 2012

A Comprehensive Evaluation of USDA Cotton Forecasts

By: Isengildina-Massa, Olga; MacDonald, Stephen; Xie, Ran
This study evaluates all USDA cotton supply and demand estimates for the United States and China (including unpublished price forecasts) from 1985/86 through 2009/10 for accuracy and efficiency. Results reveal that at every stage of the forecasting cycle forecast smoothing was the most widespread and persistent type of inefficiency observed in most U.S. variables. Correlation with past errors indicated the tendency to repeat past errors in most cases. Tendency to overestimate growth was also found. Bias was uncommon and limited to several cases of overestimation of China’s exports and U.S. price and underestimation of China’s domestic use. While forecasts of China’s imports and endings stocks improved, U.S. price and ending stock forecast errors became larger toward the end of the study period.
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April, 2012

Do USDA Announcements Affect Comovements Across Commodity Futures Returns?

By: Karali, Berna
The value of USDA reports has long been a question of interest for researchers and practitioners. However, the impact of announcements on comovements across related commodity prices has not been explored beyond financial asset markets. This is important because the structure of the relationship between commodities could change depending on the type of information revealed in the announcement, thus affecting price perceptions, hedging ratios, and portfolio return variance. This study simultaneously measures the impact of selected USDA reports on the conditional variances and covariances of returns on corn, lean hogs, soybeans, soybean meal, and soybean oil futures contracts using a multivariate GARCH model. It is shown that the largest movements in covariances are observed on the release days of Feed Outlook, Grain Stocks, and Hogs and Pigs reports.
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April, 2012

“A Definition at Last, But What Does it All Mean?” Newspaper Coverage of Organic Food Production and its Effects on Milk Purchases

By: Kiesel, Kristin
This paper estimates the effects of media coverage of organic food production on food purchases. Information from several data sources links national and local newspaper coverage to fluid milk purchases. An analysis of weekly store-level scanner data in a differences-in-differences approach results in a 5% increase in organic milk sales relative to conventional milk sales. Increases in intensity of news coverage increase this relative difference in sales. Differentiating effects by media context further suggests that product category specific coverage increases sales more than general coverage. Critical coverage does not result in significant effects on organic milk sales.
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April, 2012

The Effect of Value-Added Management on Calf Prices at Superior Livestock Auction Video Markets

By: Zimmerman, Lance C.; Schroeder, Ted C.; Dhuyvetter, Kevin C.; Olson, K.C.; Stokka, Gerald L.; Seeger, Jon T.; Grotelueschen, Dale M.
Value-added management practices for cow-calf producers have become prevalent as feeders have recognized the value of calves raised with certified health and weaning programs. Export markets requiring age and source verification or non-hormone treated cattle and advancement of markets for naturally raised cattle have also presented profit opportunities for cow-calf producers. This study estimates the value of value-added calf production and marketing programs. Weaned steer calves sold with certified health programs realized $7 to $10 per cwt premiums. Age- and sourceverified steers received $1 to $2 per cwt premiums exceeding added costs of about $0.67 per cwt in 2010 despite rapidly expanding supply.
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