Volume 44, Issue 1, January 2019

January, 2019

Innovation of Agricultural Biotechnology with Experimental Use Licensing

By: Jackson, Jeremy; Smith, Jason
Innovation in agricultural biotechnology seed products can be characterized as a non-drastic innovative process with product differentiation. We model this innovation and examine the pricing and purchase decisions for experimental use licensing. In equilibrium, a technologically advantaged firm will purchase a license, while a technologically disadvantaged firm will not. This is the case regardless of the order of pricing decisions.
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January, 2019

The Influence of Genetic Modification Technologies on U.S. and EU Crop Yields

By: Brester, Gary W.; Atwood, Joseph; Watts, Myles J.; Kawalski, Anita
Over 90% of U.S. corn and soybeans are planted with genetically modified (GM) seed varieties. We use a flexible, nonlinear functional form to investigate yield differences for corn, soybeans, and wheat between the United States and the European Union (which bans the use of GM technologies). U.S. corn and soybean yields increased relative to EU yields since the introduction of GM technologies. EU wheat yields (for which GM technologies are not commercially available in either region) continue to increase relative to the United States. Thus, the EU ban on GM technologies has likely increased the difference between corn and soybean yields between the two regions.
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January, 2019

The Bright Side of the Generalized System of (Trade) Preferences: Lessons from Agricultural Trade

By: Sharma, Anupa; Boys, Kathryn; Grant, Jason
Empirical evidence on the Generalized System of Preferences (GSP) for low-income countries generally portrays a rather stark prediction: the program has produced virtually no impact on intended low-income beneficiaries’ exports to high-income countries. This result, based on total merchandise trade, is misleading because it masks three underlying heterogeneities in the program: i) preference structure across countries, ii) pre-existing distortions across sectors, and iii) rules of origin. Using a theoretically consistent gravity equation for sector- and product-level trade over 1962–2010, we illustrate that the GSP has delivered significant positive effects for lowincome countries’ agricultural exports (but not necessarily for their nonagricultural exports) to developed countries.
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January, 2019

The Role of Exchange Rates on Country-Differentiated Demand: The Case of United States Tomatoes

By: Valdez-Lafarga, Octavio; Schmitz, Troy G.; Englin, Jeffrey E.
We develop a framework to incorporate exchange rates into a differential demand system and apply it to U.S. demand for fresh tomatoes by country of origin. We find evidence of incomplete exchange-rate pass-through involving Mexico. Results indicate that accusations of dumping by American agricultural groups in 1995–1996 coincide with the appreciation of the U.S. dollar against the peso in 1994–1995. Traditional modeling approaches that do not account for exchangerate effects would not capture the distinction between dumping and changes in relative prices, leading to the conclusion that too many tomatoes were being imported from Mexico.
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January, 2019

Addressing Pre-Commitment Bias with a Generalized EASI Model: An Application to Food Demand in Russia

By: Hovhannisyan, Vardges; Shanoyan, Aleksan
The Exact Affine Stone Index (EASI) demand model offers distinct advantages over its predecessors. However, it does not account for pre-committed demand. This can bias elasticity estimates when such pre-commitments are present. We derive a generalized EASI model that allows for pre-committed demand. We illustrate the advantage of this model in an empirical analysis of food demand in Russia using provincial-level panel data. The results provide strong empirical evidence for the presence of pre-committed demand for key food commodities. The findings extend the literature on food demand in Russia by estimating elasticities that account for pre-commitments and unobserved regional heterogeneity.
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January, 2019

Eat at Home or Away from Home? The Role of Grocery and Restaurant Food Sales Taxes

By: Zheng, Yuqing; Dong, Diansheng; Burney, Shaheer; Kaiser, Harry M.
Sales taxes on either grocery food or restaurant food exist in almost every U.S. county. By combining county-level sales tax data with the USDA’s recent national household food acquisition and purchase survey, we examine how a food sales tax affects consumers’ expenditures on grocery and restaurant food.We find that a grocery tax reduces consumers’ grocery food expenditures and increases restaurant food expenditure and a restaurant food sales tax increases consumers’ grocery food expenditures. We also find no differential impacts from food sales taxes based on consumers’ income or participation status in the Supplemental Nutrition Assistance Program.
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January, 2019

A Comparison of Food Demand Estimation from Homescan and Consumer Expenditure Survey Data

By: Boonsaeng, Tullaya; Carpio, Carlos E.
This study evaluates the differences between the Exact Affine Stone Index (EASI) demand model estimates obtained using Consumer Expenditure Survey (CEX) data and Nielsen Homescan data. Results indicated that elasticities obtained from CEX and Homescan data–based demand models differ not only statistically but also economically. Own-price elasticities obtained from the CEX data–based demand model were more inelastic than those obtained from the demand model estimated using Homescan data. Further, differences between expenditure elasticities did not follow a specific pattern. We found evidence suggesting that the main source of differences is the price index used for the estimation.
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January, 2019

Excess Competition among Food Hubs

By: Cleary, Rebecca; Goetz, Stephan J.; McFadden, Dawn Thilmany; Ge, Houtian
Food hubs offer a novel solution to connect small and mid-sized local farms, which individually lack the scale to profitably market their products. Because many food hubs rely on grants and philanthropy to provide services and are not necessarily profit-driven, markets may unintentionally oversaturate due to overinvestment.We use a firm-entry model to estimate the average U.S. county population necessary for one, two, and three food hubs to break even. Our findings suggest that policy makers and philanthropists need to consider the carrying capacity of the local food environment and population prior to supporting additional food hubs.
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January, 2019

Beef Producer Alliance Preferences for Vertical Coordination: A Bivariate Nested Panel Probit Approach

By: Sall, Ibrahima; Tronstad, Russell; Aradhyula, Satheesh
Using a nested bivariate panel probit model, we quantify the perceived attribute values (PAV) that beef producers place on different information flows and alliance attributes. Our framework allows us to quantify the monetary value of individual rather than fixed sets of attributes. Results indicate that young producers are most likely to join an alliance, and high participation fees are a significant deterrent to joining an alliance. A PAV of $12.64/head is attached to an alliance that enforces restrictions on vaccinations and antibiotic use. For small producers, not having a required minimum number of animals has a PAV of $9.65/head.
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January, 2019

Estimating the Basis Risk of Rainfall Index Insurance for Pasture, Rangeland, and Forage

By: Yu, Jisang; Vandeveer, Monte; Volesky, Jerry D.; Harmoney, Keith
Using historical yield and rainfall data from three university-managed ranches in Kansas and Nebraska, we measure basis risk of Rainfall Index Insurance for Pasture, Rangeland, and Forage (PRF-RI). We investigate the relationship between forage yield and monthly precipitation and estimate the relationship between forage yield and PRF-RI indices. Finally, we estimate basis risk of PRF-RI. Our estimates suggest that using actual site-level precipitation values would reduce basis risk by only 5%–9%, indicating that basis risk stems mostly from nonprecipitation factors. Using more flexible contract forms with site-level precipitation would have little impact on decreasing the degree of basis risk.
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January, 2019

Production Externalities and the Gains from Management in a Spatially-Explicit Aquifer

By: Manning, Dale T.; Suter, Jordan F.
Groundwater is a valuable input to agricultural production in many areas, but its use imposes external costs on nearby producers. Little attention has been given to externalities that directly affect groundwater productivity. We develop a dynamic, spatially-explicit model of groundwater use that allows changes in saturated thickness to affect both the pumping cost and productivity of nearby wells.We compare gains from coordinated, socially optimal groundwater use to those that result from a user pursuing unilateral optimization. For wells with average saturated thickness, both unilateral and coordinated optimization can moderately increase the net present value of resource rents.
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January, 2019

Impact of Extension Education on Kansas Producers’ 2014 Farm Bill Enrollment Decisions

By: Taylor, Mykel R.; Tonsor, Glynn T.
The 2014 Farm Bill offered producers a choice of programs to assist in risk management. Helping producers understand their choices among three programs, all with uncertain payouts determined by different factors, was a sizable challenge to extension economists tasked with providing Farm Bill education. Survey data collected at extension meetings were analyzed, and findings suggest that in-person extension education influences people’s decisions, especially with regard to uncertain outcomes like commodity prices, yields, and program payments. The finding that more experienced producers consistently chose one of the programs may have implications for policy impacts that differ across producer demographic groups.
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