Volume 41, Issue 2, May 2016

May, 2016

GM Labeling Regulation by Plebiscite: Analysis of Voting on Proposition 37 in California

By: Bovay, John; Alston, Julian M.
Many U.S. states have been considering proposals to introduce mandatory labeling requirements for foods containing GMOs. This paper analyzes precinct-level voting patterns in the case of California’s Proposition 37, which was narrowly defeated in the November 2012 ballot. Those voting patterns can be predicted primarily by support for Democrats, their platforms, and President Obama. Projections using our estimated model imply that a majority of voters in only three of fifty states (Hawaii, Rhode Island, and Vermont) plus the District of Columbia would have passed Proposition 37 had it been on their ballots in 2012.
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May, 2016

Imperfect Competition, Trade Policies, and Technological Changes in the Orange Juice Market

By: Dhamodharan, Mahalingam; Devadoss, Stephen; Luckstead, Jeff
Orange juice processors in Florida face stiff competition from São Paulo processors. The United States imposes a specific import tariff to protect domestic processors. São Paulo processors also export to the European Union, which imposes an ad valorem tariff on orange juice. Under oligopolistic competition with endogenous firm entry and exit, this paper analyzes how the changes in tariff policy and productivity impact the market structure in Florida and São Paulo; prices; quantities; and welfare in the United States, Brazil, and the European Union. Free trade and an increase in São Paulo productivity benefit U.S. and EU consumers and São Paulo processors. In contrast, U.S. tariff reduction adversely impacts Florida processors.
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May, 2016

Agricultural Commodity Prices and Exchange Rates under Structural Change

By: Hatzenbuehler, Patrick L.; Abbott, Philip C.; Foster, Kenneth A.
That exchange rates strongly influence agricultural commodity prices is a widely held belief. Observed divergences in price and exchange rate correspondence over time, however, have occasionally brought this conventional wisdom into doubt. We empirically test and find evidence to support hypotheses that key supply-use factors, such as low stocks and policy shifts, intermittently cause greater responsiveness of agricultural commodity prices to exchange rate changes because they give rise to more inelastic market demand. After accounting for these longrun effects, we also find that short-run price responsiveness to exchange rate changes is sometimes greater due to overshooting factors.
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May, 2016

Environmental Performance and Shadow Value of Polluting on Swiss Dairy Farms

By: Mamardashvili, Phatima; Emvalomatis, Grigorios; Jan, Pierrick
Better understanding the trade-offs/synergies between desirable and environmentally harmful (undesirable) farm outputs is relevant for future targeting and tailoring of agri-environmental policy measures. We use a hyperbolic distance function to represent the production technology employed by Swiss dairy farms in mountainous regions, thus allowing for simultaneous expansion of desirable outputs (milk and non-milk) and contraction of undesirable output (nitrogen surplus). We calculate the farm-specific shadow price of the undesirable output. The obtained shadow prices (mean value with respect to milk output was equal to 28 Swiss francs per kg of nitrogen) provide quantitative information on farmers’ costs of reducing nitrogen pollution.
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May, 2016

The Effects of Crop Insurance Subsidies and Sodsaver on Land-Use Change

By: Miao, Ruiqing; Hennessy, David A.; Feng, Hongli
It is well known that insurance market information asymmetry can cause socially excessive cropping of yield-risky land. We show that crop insurance subsidies can cause the same problem absent information failures. Using field-level yield data, we find an inversed U-shaped relationship between crop prices and crop insurance subsidies’ land-use impacts. For seventeen counties in the U.S. Prairie Pothole Region, simulations show that 0.05% to 3.3% (about 2,600 to 157,900 acres) of land under crop insurance would not have been converted from grassland had premium subsidies not existed. Land-use impacts of Sodsaver in the 2014 Farm Act are also quantified.
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May, 2016

Modeling Field-Level Conservation Tillage Adoption with Aggregate Choice Data

By: Wade, Tara; Kurkalova, Lyubov; Secchi, Silvia
This empirical study of conservation tillage adoption relies on the logit model applied to fieldlevel information on agents’ attributes and county-aggregated measures of agents’ choices. The methodology treats the aggregated data as an expected value—the area-weighted group average of individual probabilities of choosing conservation tillage—subject to a measurement error. Using 2002 and 2004 data for Iowa, we estimate field-level costs of the adoption of conservation tillage. The results indicate that adoption is significantly affected by soil characteristics and crop rotation and highlight the heterogeneity in adoption costs when controlling for these characteristics.
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May, 2016

Using Genetic Testing to Improve Fed Cattle Marketing Decisions

By: Thompson, Nathanael M.; DeVuyst, Eric A.; Brorsen, B. Wade; Lusk, Jayson L.
We estimate the value of using genetic information to make fed cattle marketing decisions. Efficiency gains result from sorting cattle into marketing groups, including more accurate optimal days-on-feed and reduced variability of returns to cattle feeding. The value of using genetic information to selectively market cattle ranged from $1–$13/head depending on how a producer currently markets cattle and the grid structure. Although these values of genetic information were generally higher than those reported in previous research, they were still not enough to offset the current cost of genetic testing (about $40/head).
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May, 2016

Comparing the Value of Soil Test Information Using Deterministic and Stochastic Yield Response Plateau Functions

By: Harmon, Xavier; Boyer, Christopher N.; Lambert, Dayton M.; Larson, James A.; Gwathmey, C. Owen
We determined the value of soil test information for potassium (K) in upland cotton production using the linear response plateau (LRP) and linear response stochastic plateau (LRSP) functions. A stochastic dynamic programming model was used to determine the net present value to K fertilizer when optimal K was applied with knowledge about K carryover. Using K carryover information for K application decisions increased net present value and helped maintain steady levels of soil K. The LRSP function fit the data better than the LRP, and the value of soil testing was $27 ha-1 lower over ten years using the LRSP.
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May, 2016

Do Changing Probabilities or Payoffs in Lottery-Choice Experiments Affect Risk Preference Outcomes? Evidence from Rural Uganda

By: Ihli, Hanna Julia; Chiputwa, Brian; Musshoff, Oliver
This study compares risk preferences elicited from two different methods and the resulting inconsistency rates in response behavior. We also identify and compare how demographic and socioeconomic characteristics influence risk preferences elicited from the two methods. We use experimental and survey data collected from 332 randomly selected smallholder coffee farmers in Uganda. We find relatively low inconsistency rates in the response behavior and that both methods classify most farmers as risk averse. However, a closer inspection reveals significantly different risk results. Specific demographic and socioeconomic characteristics affect farmers’ risk preferences but are not stable across elicitation methods.
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