Volume 42, Issue 2, May 2017

May, 2017

The Spatial-Dynamic Benefits from Cooperative Disease Control in a Perennial Crop

By: Fuller, Kate Binzen; Sanchirico, James N.; Alston, Julian M.
We develop a novel spatial-dynamic model of landowners managing a disease in a perennial crop. We use the model to investigate the dynamic gains from cooperation to address the spatial externality resulting from disease vector dispersal. We find that solving for the complete time path of control decisions is important; cooperation leads to each landowner investing more in treatment in early years than in cases where one agent free rides on the other’s control. Our model is based on Pierce’s Disease of grapevines in California’s Napa Valley but is applicable to a range of diseases in perennial crops.
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May, 2017

Weather Derivatives and Water Management in Developing Countries: An Application for an Irrigation District in Central Mexico

By: Juárez-Torres, Miriam; Sánchez-Aragón, Leonardo; Vedenov, Dmitry
This paper analyzes possible improvements to water allocation from introducing weather derivatives as an insurance instrument in irrigation districts with no water markets and two cropping seasons. Dry-season production depends completely on irrigation, while wet-season production depends on irrigation as a supplement to naturally occurring precipitation. Using an analytical model of water allocation and historical data from an irrigation district in Central Mexico, simulations show that weather derivatives could encourage interseasonal reallocation of water from wet to dry season, generating new Pareto-optimal water allocations that improve overall welfare among producers.
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May, 2017

Cow Welfare in the U.S. Dairy Industry: Willingness-to-Pay and Willingness-to-Supply

By: Wolf, Christopher A.; Tonsor, Glynn T.
Consumers are increasingly scrutinizing the animal welfare implications of modern agricultural production processes. We used surveys to examine both the U.S. public willingness-to-pay for and dairy farmer willingness-to-supply or change on-farm production practices related to dairy cattle welfare and find that the public has a positive WTP for all practices examined, while most dairy farms already supply those practices (with the exceptions of employee training programs, third-party certification, and outdoor access). Implications for practice verification and premiums are discussed in the context of dairy markets and policy.
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May, 2017

A Method for Evaluating the Economic Contribution of a Local Food System

By: Watson, Philip; Cooke, Stephen; Kay, David; Alward, Greg; Morales, Alfonso
Despite growing interest in local food, modeling the economic contribution of this endogenous system is inherently problematic. We present a combined hypothetical extraction and import-substitution social accounting matrix model that overcomes these problems in a theoretically consistent and computationally feasible manner. The method can be applied broadly to many different definitions of a “local food system” and uses the same underlying method as traditional economic-base contribution models. We apply this model to the state of Idaho and compare the economic contribution of the local food system against the economic contribution of the export food system.
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May, 2017

Valuing Genetically Modified Traits in Canola Using Real Options

By: Wynn, Katherine; Spangenberg, German; Smith, Kevin; Wilson, William
This study specifies a framework to evaluate an investment strategy combining a market assessment with a valuation method using a stochastic binomial real option model. The market assessment uses multi-criteria analysis to determine which markets should be targeted for commercialization of a genetically modified trait in a target crop. The stochastic binomial real option model is developed to determine whether commercialization is financially viable. The framework was applied to canola being developed using gene technology to increase its drought tolerance. Our results showed that drought-tolerant canola would be more profitable than conventional varieties, but it would only be sufficiently profitable to pursue commercialization in targeted regions or countries.
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May, 2017

The Economic and Environmental Benefits of Sheath Blight Resistance in Rice

By: Tsiboe, Francis; Nalley, Lawton Lanier; Durand, Alvaro; Thoma, Greg; Shew, Aaron
The producer, consumer, and environmental impacts of a counterfactual of ShB-resistant rice production were calculated using data from U.S. county-level rice production in the Mid-South and simulated Sheath Blight (ShB) infection and yield-loss rates. Results indicate a $43 million increase in consumer surplus via ShB alleviation, with enough additional rice produced to feed 1.7 million people. A life cycle assessment (LCA) also shows that the counterfactual has lower environmental impacts than the status quo of ShB-prone rice production. These estimates provide important economic and environmental information to donors, policy makers, and breeding programs globally on the importance of increasing and maintaining genetic disease resistance.
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May, 2017

Households’ Adoption of Drought Tolerant Plants: An Adaptation to Climate Change?

By: Fan, Yubing; McCann, Laura; Qin, Hua
Adopting drought tolerant plants (DTPs) to conserve water is a potential adaptation to the predicted effects of climate change in the Midwest. Survey responses from 624 Missouri households were analyzed using a univariate probit model. DTP adoption was positively correlated with both low and high household incomes, living in rural subdivisions, time spent gardening, pro-environment attitudes, and concerns about drought. Policy interventions in newly drought-prone areas might include subsidizing the up-front cost of DTPs, requiring their use in new housing developments so DTPs are the default for buyers, and targeted educational efforts to environmental and gardening groups and rural residents.
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May, 2017

Anchoring, Information, and Fragility of Choice Experiments: An Application to Consumer Willingness to Pay for Rice with Improved Storage Management

By: Su, Lianfan; Adam, Brian D.; Lusk, Jayson L.; Arthur, Frank
This study uses an experimental auction and a discrete choice experiment to determine consumers’ willingness to pay (WTP) for rice with improved insect control and for rice stored using Integrated Pest Management and investigates potential reasons—anchoring and information—why some studies have found inconsistencies between the two methods. Results indicate that WTP estimates from the choice experiment are lower than consumers’ average auction bids. Anchoring in the choice experiment appears to be an explanation for the discrepancy. Providing consumers with additional information about the products improved choice experiment results, producing consistent preference ordering and increasing WTP estimates.
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May, 2017

Emerging Markets for U.S. Pork in China: Experimental Evidence from Mainland and Hong Kong Consumers

By: Ortega, David L.; Chen, Maolong; Wang, H. Holly; Shimokawa, Satoru
A major concern for international marketers is how products will be received by foreign consumers in other markets. This study uses choice modeling to assess Chinese consumer preferences for pork and evaluate the potential demand for U.S. pork in the cities of Guangzhou and Hong Kong. We find that differences in preferences for domestic versus imported pork can be explained, in part, by consumers’ level of patriotism. Marketing pork with a food safety claim can increase market demand for U.S. products, and accounting for differences in nationalistic attitudes can aid marketing efforts.
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