Volume 44, Issue 2, May 2019

May, 2019

How High the Hedge: Relationships between Prices and Yields in the Federal Crop Insurance Program

By: Ramsey, A. Ford; Goodwin, Barry K.; Ghosh, Sujit K.
The theory of the natural hedge states that agricultural yields and prices are inversely related. Actuarial rules for U.S. crop revenue insurance assume that dependence between yield and price is constant across all counties within a state and that dependence can be adequately described by the Gaussian copula. We use nonlinear measures of association and a selection of bivariate copulas to empirically characterize spatially-varying dependence between prices and yields and examine premium rate sensitivity for all corn producing counties in the United States. A simulation analysis across copula types and parameter values exposes hypothetical impacts of actuarial changes.
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May, 2019

Animal Welfare, Ideology, and Political Labels: Evidence from California’s Proposition 2 and Massachusetts’s Question 3

By: Bovay, John; Sumner, Daniel A.
This article explains incentives that individuals face when deciding whether to support legislation on farm-animal treatment. We analyze precinct- and town-level voting patterns in two successful referendum votes (California’s Prop 2 and Massachusetts’s Question 3) that restricted animal-housing practices. In both cases, support for the referendum was positively correlated with support for the Democratic candidate for president and negatively correlated with employment in agriculture; support for Question 3 increased with income. We use our regression results to predict how voters in other U.S. states would have voted had they faced similar referendums in 2008 and 2016.
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May, 2019

Trade and Investment Liberalization in the Processed Food Market under the Comprehensive Economic and Trade Agreement

By: Luckstead, Jeff; Devadoss, Stephen
We investigate the impacts of Comprehensive Economic and Trade Agreement (CETA) liberalizations of trade and investment barriers on processed food markets. Using a four-region monopolistic competition model with heterogeneous food-processing firms that incorporates domestically operating, exporting, and multinational enterprise (MNE) firms, we quantify the effects of tariff elimination, fixed trade cost reduction, and foreign direct investment (FDI) cost reduction under CETA on prices, domestic sales, bilateral trade flows, affiliate sales, productivity, number of firms, and aggregate output. Our results highlight that trade liberalization promotes bilateral exports but reduces foreign affiliate sales, and, in contrast, lower FDI costs expand MNE affiliate sales but curtail bilateral exports.
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May, 2019

Impacts of Chinese Tariff on World Soybean Markets

By: Sabala, Ethan; Devadoss, Stephen
China targeted U.S. soybeans, among other commodities, for its recent retaliatory tariff chiefly because of the sheer volume of its imports from the United States. We develop a theoretical and empirical spatial equilibrium trade model to analyze the effects of the 25% Chinese soybean tariff on the United States, China, and nine other major soybean trading regions. Both the United States and China incur welfare losses as a result of the tariff, but Brazil experiences a large net gain. The United States mitigates some of its losses by reallocating trade to other importers, but at a cost to smaller exporters such as Canada.
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May, 2019

To Scan or Not to Scan: The Question of Consumer Behavior and QR Codes on Food Packages

By: Li, Tongzhe; Messer, Kent D.
We conducted a field experiment involving the purchase of oysters to offer market-based evidence on whether consumers will scan quick response (QR) codes on food packages, a new labeling technology proposed by the SmartLabelTM initiative. In an artefactual marketplace selling oysters, only 1.2% participants scanned the QR code labels with their own devices. However, providing free access to a QR-scanning smartphone induced 52.6% of participants to access labeling information—a large improvement even compared to when this information was provided directly on the package. Furthermore, consumers’ responses to the additional information were similar regardless of how the information was delivered.
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May, 2019

Competition in Local Food Markets

By: Connolly, Cristina; Klaiber, H. Allen
While local food production plays an increasingly prominent role in U.S. agriculture, there is growing concern about oversaturation. Using a national dataset, we identify locational attributes that are conducive to the establishment of direct-marketing operations and assess competitive behavior. Our model links firm-entry decisions to market size using reduced-form profit functions, which are characterized by the cost of agricultural land and demand variables. We find significant heterogeneity in the required population to support direct-marketing entrants and show that markets become perfectly competitive upon entry of the third direct-marketing establishment, with heterogeneous market potential for new entrants.
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May, 2019

Is There a “Cage-Free” Lunch in U.S. Egg Production? Public Views of Laying-Hen Housing Attributes

By: Ochs, Daniel; Wolf, Christopher A.; Widmar, Nicole J.; Bir, Courtney
Animal welfare–related production attributes are increasingly considered by U.S. consumers making food purchasing decisions and U.S. voters at the ballot box. This research considers U.S. consumer preferences for egg production attributes. The results reveal preferences for less hen stress, more natural hen behavior, and improved worker health and welfare. We propose an index combining animal welfare scores and consumer preference shares for determining preferred combinations of egg production attributes. When weighting hen housing systems by consumer preference for animal and worker welfare attributes, the preferred system is enriched colony housing, which differs from recent retailer commitments to cage-free aviaries.
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May, 2019

Farmers’ Choice of Credit among the Farm Credit System, Commercial Banks, and Nontraditional Lenders

By: Brewer, Brady E.; Bergtold, Jason S.; Featherstone, Allen M.; Wilson, Christine A.
Understanding the factors that affect a farmer’s credit source is useful for lending institutions to more effectively target customers and provides insight into credit sources that would be affected sooner if a credit crisis would occur and the characteristics that are correlated with a customer using a particular lending institution. Results of this paper suggest that the customers of commercial banks would be the most at risk as they are the most leveraged. Results also show that as conditions deteriorate, farmers add more lending institutions and are also more likely to use a commercial bank or nontraditional lender.
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May, 2019

Effects of Farmers’ Yield-Risk Perceptions on Conservation Practice Adoption in Kansas

By: Ramsey, Steven M.; Bergtold, Jason S.; Canales, Elizabeth; Williams, Jeffery R.
When considering adoption or intensification of existing conservation practices, farmers have unique, subjective views of the associated risks. These individual risk perceptions could have important implications for conservation adoption or intensification. As a result, traditional policy approaches to encourage conservation agriculture may be inefficient. This study examines conservation adoption, with special consideration given to yield-risk perceptions. We present a conceptual model of perceived yield risk and estimate bivariate probit models using survey data. Results indicate that positive practice perceptions, particularly with respect to soil fertility, and opportunities for on-farm trialing may encourage adoption.
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May, 2019

Soil Conservation Practice Adoption in the Northern Great Plains: Economic versus Stewardship Motivations

By: Wang, Tong; Jim, Hailong; Kasu, Bishal B.; Jacquet, Jeffrey; Kumar, Sandeep
By making adoption decisions on soil conservation practices, agricultural producers play a key role in reversing unintended consequences caused by soil degradation. This paper studies two soil conservation practices—diversified crop rotation (DCR) and integrated cropping and livestock system (ICLS)—using survey data collected from Nebraska, South Dakota, and North Dakota producers. We estimate a bivariate probit model to identify factors affecting adoption decisions. Farmers’ requirements for monetary incentives and values on soil health were found to be important determinants of adoption behavior. Geographic location matters, as North Dakota had the highest DCR adoption rate yet the lowest ICLS adoption rate.
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May, 2019

The ISO 14001 Standard and Firms’ Environmental Performance: Evidence from the U.S. Transportation Equipment Manufacturers

By: Nemati, Mehdi; Zheng, Yuqing; Hu, Wuyang
Manufacturers have relied on environmental management systems to meet government environmental regulations, enhance their environmental performance, and reduce their impact on the environment. We investigate the impact of ISO 14001 certification on manufacturers’ toxic release levels. We applied the censored quantile instrumental variable estimator (CQIV) to data on U.S. transportation equipment manufacturing subsector facilities. Results show that for large firms, encouraging voluntary adoption of ISO 14001 might be an effective government strategy to reduce on-site pollution. However, for small firms and for the purpose of reducing off-site pollution, other economic incentives or regulations might be warranted.
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May, 2019

The Effect of Forced Choice with Constant Choice Experiment Complexity

By: Penn, Jerrod M.; Hu, Wuyang; Cox, Linda J.
In a choice experiment, when respondents are not given the opportunity to choose none of the options offered in a choice set, the choices can be considered forced. In this study of visits to Hawaiian beaches, we adopt a dual-response choice experiment that allows a comparison between forced and unforced choices while avoiding the possible confounding effect of choice set complexity found in previous research. The results suggest that individual willingness to pay is different in forced and unforced choice sets. Joint tests for parameter equality provide evidence to support the use of unforced choice designs.
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