Volume 46, Issue 3, September 2021

September, 2021

Optimal Policy Response to Food Fraud

By: Meerza, Syed Imran Ali ; Giannakas, Konstantinos; Yiannaka, Amalia
We analyze the optimal government response to food adulteration and mislabeling while accounting for heterogeneity in consumer preferences and producer efficiency, endogeneity in producer quality choices, and asymmetries in food fraud detection. When more-efficient producers commit fraud, the optimal policy response is a strict monitoring and enforcement system. For less-efficient producers, both increased certification costs and monitoring and enforcement can deter food fraud. When the government desires to increase average product quality, the optimal policy is strict monitoring and enforcement. Increasing monitoring and enforcement in the presence of corruption provides increased incentives for collusion between dishonest producers and corrupt policy enforcers.
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September, 2021

Divvying Up the Pie: U.S. Adults’ Preferences for USDA Expenditures in 2018

By: Collart, Alba J.; Ishee, Shea G.; Coble, Keith H.
The U.S. Department of Agriculture (USDA) spends roughly U.S.$140 billion yearly in public funds on farm, nutrition, conservation, and other programs, yet scarce research has elicited the preferences of the U.S. public regarding USDA spending. We survey a representative sample of U.S. adults to examine preferences for USDA spending and find respondents would spend less on nutrition, about the same on farm programs, and more on conservation and other programs. However, respondents' allocation toward nutrition increases after receiving information on the USDA's 2018 budget. These results provide insights into the state and malleability of public support for policy options.
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September, 2021

The Impact of the Clean Water Act on Farm Practices: The Case of U.S. Dairy Concentrated Animal Feeding Operations

By: Yu, Charng-Jiun; Du, Xiaodong; Phaneuf, Daniel
We quantify the impact of the Clean Water Act (CWA) on farm waste management practices of U.S. dairy concentrated animal feeding operations (CAFOs), including storage capacity, land application, and manure removal. We employ a double-hurdle model to examine how dairy farmers adjusted their practices in response to a major policy revision of the CWA in 2003. We find that the revision significantly increased the adoption rate of nutrient management plan (NMP) among dairy CAFOs. The results suggest that the CWA had a heterogeneous and limited impact on dairy CAFOs' waste management practices.
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September, 2021

California’s Climate Policy and the Dairy Manufacturing Industry: How Does a Federal Milk Marketing Order Matter?

By: Zhang, Wei
The welfare consequences of any climate program depend on preexisting market and regulatory distortions. This paper examines the impact of California's climate policy on the dairy manufacturing industry with explicit modeling of major milk pricing policies. Numerical simulations indicate that climate policy leads to a diversion of farm milk from manufactured products to fluid products. The establishment of a Federal Milk Marketing Order in California reduces the distorting effect of milk pricing policies. As a consequence, consumers of fluid products would enjoy a bigger welfare gain from climate policy under the Federal Milk Marketing Order.
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September, 2021

Packer Procurement, Structural Change, and Moving Average Basis Forecasts: Lessons from the Fed Dairy Cattle Industry

By: Pudenz, Christopher C.; Schulz, Lee L.
Changing market fundamentals have made fed dairy cattle basis more variable. Our study estimates empirical models of fed dairy basis and utilizes tests that endogenously identify structural breaks following one large packer's decision to exit the fed dairy cattle market. We quantify the impact and find sale type, cattle weight, seasonality, ground beef prices, by-product values, and fed cattle slaughter capacity utilization to be important basis determinants, although the impact of some of these factors has changed over time. Finally, we assess multiyear moving average basis forecast accuracy and draw implications for formulating basis expectations.
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September, 2021

Consumer Preference for Grass-Fed Beef: A Case of Food Safety Halo Effect

By: Lim, Kar H.; Hu, Wuyang; Nayga, Rodolfo M. Jr.
Consumers may perceive grass-fed beef to be superior in terms of food safety due to false impressions and a persistent, unproven narrative. Such misperception can distort the market, which may require policy intervention. Using a discrete choice experiment, results indicate that those who perceive higher food safety risks from consuming beef and those who hold the belief that grass-fed beef is safer than grain-fed have a stronger preference for grass-fed beef. This is an important finding as there is no scientific consensus that grass-fed beef is safer. This potential misperception warrants further scrutiny.
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September, 2021

Single-Commodity versus Joint Hedging in Cattle Feeding Cycle: Is Joint Hedging Always Essential?

By: Fei, Chengcheng J.; Vedenov, Dmitry V.; Stevens, Reid B.; Anderson, David P.
The paper analyzes the effectiveness of joint- versus single-commodity hedging for inputs and outputs of the cattle feeding cycle using the second-order lower partial moment (LPM2) as the risk measure. Joint hedging always results in higher hedging effectiveness than the single-commodity hedging, but the difference is often small. The difference in performance is found to be explained by the commodity price dependence measures (Kendall's _). Ranges of _ leading to substantial improvement in risk reduction due to joint hedging are identified. The joint hedging strategy is worth implementing when the observed price dependence measures fall within the identified ranges.
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September, 2021

The Vanishing U. S. Cattle Cycle: A Stochastic Cycle Approach

By: Li, Yunhan; Shonkwiler, J. Scott
We re-examine the existence of cattle cycles based on U.S. beef cow inventories from 1979 to 2019. Our analysis begins with a basic first-order stochastic cycle model and finds a cattle cycle of 16.54 years, significantly longer than the presumed 10- to 12-year cycle. Typically cycles become longer before they disappear. Upon further investigation, we re-estimate the length of the cycle by applying a second-order stochastic cycle model which improves goodness of fit. Surprisingly, the cycle length is estimated to be infinitely long, implying the complete disappearance of the beef cow cycle.
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September, 2021

Optimal Antimicrobial Use under Countervailing Externalities

By: Delmond, Anthony R.; Ahmed, Haseeb
Over- or underprovision of antimicrobials under free-riding and resistance externalities can be economically important through their impacts on animal health, human health, and food security. This paper models antimicrobial use given disease dynamics with (i) free-riding incentives and (ii) antimicrobial resistance. Our results suggest a strong potential for overprovision of antimicrobials when ignoring resistance dynamics. Numerical simulation indicates an increase in the cost of disease management with increases in resistance levels. Policy implications are discussed in the context of animal health and disease-control subsidy programs in the developing world as well as unregulated sale of antimicrobials.
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September, 2021

How Valuable are Antimicrobials for Pig Production? An Econometric Analysis

By: Jensen, J¿rgen DejgŒrd; Belay, Dagim G.; Olsen, Jakob Vesterlund
This study analyzes the economic consequences of reduced antimicrobial use for Danish pig producers. From estimated profit functions, shadow prices of antimicrobials were derived for different groups of farms. Results suggest that the average pig farmer's access to antimicrobials represents an economic value of around 1.75-4 euro cents for the marginal standard unit dose in the short run on farms with both systematically high and low antimicrobial use but a lower value in the long run, with considerable heterogeneity among farms. Restrictions on antimicrobial use in pig production are likely to imply losses to parts of the Danish pig sector.
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