2020

By: Liu, Yong; Ker, Alan P.
Crop insurance is plagued by relatively little historical information but significant spatial information. We investigate the efficacy of using nonparametric Bayesian model averaging (BMA) to incorporate extraneous information into the estimated premium rates. Nonparametric BMA is particularly suited to this application because it does not make any assumptions about parametric form or the extent to which yields are similar. We evaluate the proposed estimator under small-to-medium sample sizes and various geographical restrictions on the distance of spatial smoothing for policy relevance. The nonparametric BMA consistently decreases error and enables statistically significant and economically important rents to be captured.
By: Aderajew, Tamirat S.; Du, Xiaoxue; Pennings, Joost M. E.; Trujillo-Barrera, Andres
The risk-balancing hypothesis (RBH) suggests that farms will take less business risk as their financial risk increases, but existing literature provides empirical evidence that the RBH might be invalid under certain circumstances. We present a unified model that explains the conditions under which the RBH holds or is invalidated by recognizing the role of latent heterogeneity among farms. We generalize the RBH idea and trace the source of credit risk back to latent heterogeneity among farms. We then apply recent literature to longitudinal data from a panel of Dutch farms and classify segments using a finite mixture regression fixed-effects model and find that the RBH may not apply to all groups in the same way.
By: Chaudhry, Muhammad Imran; Miranda, Miranda J.
Increasing levels of concentration in the upstream sector of poultry supply chains have led to concerns about the influence of producers on farm-gate prices. Against this background, we employ threshold cointegration models to study price transmission mechanisms in Pakistan‰Ûªs poultry sector. We do not find evidence of asymmetric price transmission in the chicken supply chain, but evidence of asymmetric price transmission in the egg supply chain points towardsthe exercise of market power by egg producers. Differences in the short-run price transmission mechanisms of eggs and chicken can be traced to the underlying production and marketing activities, particularly degree of product storability.
By: Caracciolo, Francesco; Furno, Marilena
This study extends the classical hedonic price model by taking advantage of the heterogeneity of consumer preferences and testing the existence of different price functions. A finite mixture model identifies consumer segments in the Italian wine market and estimates the hedonic functions within each group. The analysis is extended beyond the mean to the tails of the distribution for each group via quantile regressions. The analysis in classes proves to be more efficient both on average and at the quantiles and presents a more accurate wine market segmentation, unveiling sources of heterogeneity and asymmetry.
By: Bullock, David W.; Wilson, William W.
The response of U.S. soybean export basis (Gulf and Pacific Northwest) to changes in supply and demand (domestic and international), transportation costs, logistics conditions, and export activity variables was examined from both a market-year average and seasonal analog perspective. The market-year average results indicated that basis at both locations were highly correlated and influenced primarily by international and domestic competition. The seasonal analog results indicated a wide variation in seasonality across marketing years for both locations with transportation costs, logistic conditions, and export activity having the greatest influence on the seasonal analog grouping.
By: Ritten, Chian Jones; Bastian, Christopher T.; Gerace, Selena; Phillips, Owen R.; Nagler, Amy
The number of women in agricultural management positions and as business owners is increasing. A critical part of agricultural managers' success is negotiating profitable sales, which depends on negotiation strategy. We use laboratory market experiments to measure gender differences in negotiation strategy and related outcomes in three market contexts common to agricultural product sales. Results show that women tend to choose a negotiation strategy that focuses on trading a higher quantity but at a lower per trade profit than men. Our results further show that women will be disproportionately hurt as agricultural markets move away from traditional market environments toward privately negotiated contracts.
By: Fan, Yubing; McCann, Laura
Water scarcity is becoming more acute, necessitating better understanding of farmer adoption of improved irrigation technologies. Using data from the national 2013 Farm and Ranch Irrigation Survey, this study employs a multilevel modeling approach to analyze irrigation decisions. The variation in pressure irrigation adoption is mainly accounted for by state-level factors, while adoption of scientific scheduling practices is more associated with farm-level factors. Adoption increases with larger acreage, groundwater use, information sources other than neighbors, and recent higher temperatures. Adoption is negatively associated with on-farm surface water and barriers related to increased costs, management time, and time horizon.
By: Atozou, Baoubadi; Tamini, Lota D.; Bergeronm, Stephane; Doyon, Maurice
Using a set of 462 observations from 87 public and private goods economic valuation studies, this study reviews and updates meta-analyses on hypothetical bias using a metaregression hierarchical mixed-effect (MRHME) model that corrects the effects of the unobservable characteristics, within-study error correlation, and potential heteroskedasticity specific to each study. The findings indicate that the MRHME model is more efficient than the log-linear models used in previous meta-analyses. Moreover, this modeling approach and the use of interaction variables by type of goods highlight significant differences relative to previous meta-analyses in the explanatory variablesÕ effects, significance levels, magnitudes, and signs.
By: Connor, Lawson; Katchova, Ani L.
Crop insurance and its related components, such as premium subsidies, have impacts on farm management decisions, production practices, and output. We use county-level USDA survey data combined with instrumental variables analysis to investigate asymmetric impacts of crop insurance on corn and soybean yield variance. Our results indicate an increase in yield downside risk as crop insurance participation rates increase. We also find an increase in drought susceptibility, likely due to expansion to lower-quality farmland and changes in input use. Increased yield variability could have effects on prices, farm income variability and farmer welfare.
White Bear Lake, Minnesota, has lost a large amount of water due to excessive groundwater extraction. Using a general nested spatial hedonic pricing model, this paper identifies and evaluates the impact of water loss in the lake on lakeshore properties. In addition to providing a quantitative estimate of property value loss, the results show that the marginal loss intensifies as water level persistently declines further. The findings of this study alert emerging urban areas to the negative externalities of failing to balance the tasks of meeting increased water demand as well as achieving sustainable water use.
By: Bergstrom, John C.; Stowers, Matthew; Shonkwiler, J. Scott
Using a first-difference econometric model, we estimate an aggregate demand model for assessing the determinants of the quantity of visits to the 47 national parks in the continental United States. The estimated model was then used to project visitation to these parks from the 2016 base year to 2026. Total visitation could see an average increase of about 1.2 million visitors per year through 2026, suggesting that congestion problems already experienced at many parks may get worse. Congestion and overuse strain already limited operation and maintenance budgets and can lead to environmental damage to park sites and reductions in visitor satisfaction.
By: Holley, Kristen; Jensen, Kimberley L.; Lambert, Dayton M.; Clark, Christopher D.
This study applies a bivariate Multiple Indicator–Multiple Causation model to examine farm and operator characteristics associated with the likelihood of using pasture management (PM) and prescribed grazing (PGR) practices. Data are from a survey of cattle operations. Most commonly used practices included adjusting livestock and pasture fertilization. Least used were geotextiles in trafficked areas and buffering sensitive areas. Use of PM practices was income sensitive. Land stewardship and government conservation incentive views influenced PGR. Results suggest complementarities between most PGR and PM practices. However, those with higher opportunity costs and off-farm benefits (e.g., stream crossings) are not complementary with other practices.
By: Boyer, Christopher N.; Griffith, Andrew P.; DeLong, Karen L.
We determined how reproductive failure impacts the long-term profitability of beef cows in spring- and fall-calving herds. Simulation models were established to generate distributions of net present value, payback periods, and breakeven prices of calves when a dam fails to wean zero, one, or two calves over her life. Results indicate that giving a dam another calving opportunity after failing to wean a calf would likely result in her being unprofitable. A producer would be better off selling the open dam than giving her another chance to breed. This illustrates the value in selecting replacement heifers based on fertility.
By: Moon, Donghyun; Tonsor, Glynn T.
We conducted an event study to examine the effect of E. coli recalls on prices in the vertically connected U.S. beef industry. Our findings show that the resulting price changes of beef products vary across stages in the U.S. beef industry and that the prices of disaggregated beef products are more vulnerable to E. coli recalls than the prices of aggregated products. This suggests that downstream agents transacting specific ground beef products may be more adversely affected by E. coli recalls than upstream agents trading live animals.
By: Yang, Ruoye; Raper, Kellie Curry; Lusk, Jayson L.
U.S. consumers see retail beef products with “no added hormones” (NAH) labels. However, similar labels appear on pork and chicken products, even though hormone use in their production is prohibited. This study assesses consumer perceptions of hormone use in different livestock species. Using choice experiment data, we then examine the impact of these perceptions on preferences for unlabeled meat products and willingness to pay for NAH-labeled meat products. Results suggest that consumer perceptions of hormone use in production are incorrect. Further, perceptions influence consumer preferences and willingness to pay for unlabeled products versus those with NAH labels.
By: Zhao, Shuoli; Yue, Chengyan
Using the framework of cumulative prospect theory (CPT), we investigate consumers’ decision to participate in community-supported agriculture (CSA) under risk and uncertainty. We analyze discrete choice experiment data using a CPT framework that allows for flexible reference points and individual preference heterogeneity. Comparison between model specifications suggests that the CPT model with the control of all risk parameters generates better goodness of fit than the expected utility model. Market sensitivity analysis further indicates that, while CSA operators benefit from transferring production risk partially to consumers, the level of transferred risk has a great impact on market share.
By: Kumar, Anjani; Mishra, Ashok K.; Sonkar, Vinay K.; Saroj, Sunil
We evaluate the impact of access to credit on rural households’ annual income using an endogenous switching regression approach, an increasingly popular method of tackling the selection bias issue in impact analyses. Using a large survey of rural households in eastern India, we find that access to credit is strongly associated with rural households’ socioeconomic and demographic characteristics. Additionally, access to credit increases rural households’ economic well-being; nonborrower rural households would benefit the most from access to credit. Access to credit affects recipients heterogeneously, implying that credit policies should be adaptable to different rural household groups.
By: Devadoss, Stephen; Zhao, Xin; Luckstead, Jeff
We develop a four-sector (labor-intensive agriculture, capital-intensive agriculture, service & construction, and manufacturing) general-equilibrium model of North American countries to analyze the effects of tighter U.S. immigration policies. Results show that these policies erode the comparative advantage of U.S. labor-intensive agriculture, causing U.S. production and exports to fall and other countries to expand their exports to the United States. In Mexico, low-skilled labor demand in labor-intensive agriculture increases as production rises. The effectiveness of U.S. tighter immigration policies depends on the substitutability between U.S. domestic and undocumented workers. Immigration policies exacerbate the wedge between Mexican low-skilled wage rate and the undocumented wage rate, intensifying the underlying cause for unauthorized entry.