Volume 48, Issue 2, May 2023

May, 2023

Unconventional Oil and Gas Development and Agricultural Land Use in the United States

By: Xu, Yuelu; Elbakidze, Levan; Etienne, Xiaoli
Using county-level data from 1997 to 2018, we examine the effects of unconventional oil and gas (UOG) industry growth on agricultural acreage in the United States. We find that, on average, each active UOG well reduces crop acreage by 3.3 acres in counties with UOG production. However, the impacts vary by region. The relationship is positive in the Southwest, U-shaped in the Great Plains, and negative in Appalachia. Variations of impacts across regions result from differences in geology and historic developments in the energy and agricultural sectors.
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May, 2023

What Determines ChinaÕs Agricultural Nonpoint Source Pollution? An Improved Logarithmic Mean Divisia Index Decomposition Analysis

By: Chen, Yufeng; Miao, Jiafeng
Using the logarithmic mean Divisia index method, this paper decomposes changes in ChinaÕs agricultural nonpoint source pollution into five factors: emission intensity, production scale, labor intensification, urbanization, and population-scale factors. Moreover, we further explore the contribution of each factor at different agricultural policy stages and the impact of subsidies on emissions. Our main findings show that emission intensity is the main restraining factor of pollution, while production scale plays the greatest effect on aggravating loads. The incentive effect of agricultural subsidies reduces emissions, but the expansion of government fiscal expenditures will lead to an increase.
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May, 2023

Decomposing USDA Ending Stocks Forecast Errors

By: Goyal, Raghav; Adjemian, Michael K.; Glauber, Joseph; Meyer, Seth
The USDA publishes monthly ending stocks projections, providing an estimate of the end-of-marketing-year inventory of a particular commodity. By comparing these projections of balance-sheet variables against their realized values from marketing years 1992/3 to 2019/20, we decompose ending stocks forecast errors into errors of the other supply and demand components. Our results indicate that export and production misses are the key contributors to projection errors. We likewise investigate US export errors. Our results make a strong case that better information about production expectations, both domestically and worldwide, will contribute to more efficient agricultural balance-sheet forecasts.
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May, 2023

I Say Milk, You Say Mylk: Substitution Patterns and Separability in a Broadened Milk Category

By: Ghazaryan, Armen; Bonanno, Alessandro; Carlson, Andrea
This study tests the assumption of weak separability between demand for dairy and nondairy milk products by using food scanner data from 2012 to 2017 and estimating linear-approximate EASI demand systems. Our results show that the weak separability structures can be rejected. First, this finding shows that nondairy milk products compete with dairy milk for consumersÕ budget allocated to milk. Second, although milk demand studies often do not include nondairy milk, or assume weak separability, the exclusion of these productsÑor the separability assumptionsÑmay lead to biased estimates.
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May, 2023

Learning about Our Vices from Devices: A Model of Individual Learning with an Application to Consumer Food Waste

By: Qi, Danyi; Roe, Brian E.; Apolzan, John W.; Martin, Corby K.
We formulate an empirical learning model suitable for understanding individual behavioral responses in such environments. We estimate this model using data collected about the joint personal decisions of food selection, intake, and waste during a study in which users photographed their meal selections and plate waste over the course of a week with a cell phone. We found a substantial learning-by-doing effect in plate-waste reduction: Those who document greater plate waste in their captured photographs waste less on subsequent days. Further, we identified that participants reduced plate waste by learning to eat more rather than by learning to reduce the amount of food selected.
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May, 2023

Mitigating Risky Conservation Tenders: Can an Insurance Mechanism Be a Solution?

By: Olita, Harriet Toto; Schilizzi, Steven G. M.; Iftekhar, Md Sayed
The cost of providing environmental goods and services by private landholders is often highly uncertain. However, standard bidding models for conservation tenders often ignore this uncertainty. As a result, they fail to suggest suitable mechanisms to reduce the negative impact of cost uncertainty. We contribute to this knowledge gap by developing an optimal bidding model for a risky and budget-constrained tender in the presence of an embedded insurance mechanism, offering income protection. Results from our analysis show that, relative to uninsured landholders, landholders paying an actuarially fair premium tendered lower bids, potentially improving the cost effectiveness of allocating conservation contracts.
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May, 2023

Effect of Conservation Practice Adoption on Perceived Changes in Farm Outcomes in South Dakota

By: Obembe, Oladipo S.; Wang, Tong; Shew, Aaron M.
This paper uses farm survey data from the western margin of the Corn Belt to estimate the causal effects of adopting different conservation practices---conservation tillage (CT), cover cropping (CC), and diversified crop rotation (DCR)---on perceived changes in yield, production cost, and profit among farmers in South Dakota. We use propensity score kernel matching to correct the sample selection bias induced by nonrandom adoption of different conservation practices. We find that compared with non-adopters, farmers who adopt CT and DCR are more likely to perceive an increase in profit and yield and CC adopters are less likely to perceive a production cost increase.
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May, 2023

Beer Excise Taxes and the Craft Beverage and Modernization Tax Reform Act

By: Brester, Gary; McCullough, Michael; Atwood, Joseph; Austin, Caroline Graham
In December 2017, the Craft Beverage and Modernization Tax Reform Act (CBMTRA) lowered federal beer excise taxes for a period of 2 years, and the Taxpayer Certainty and Disaster Tax Act of 2020 made the reduction permanent. We evaluate the ramifications of the CBMTRA on producers, consumers, and tax receipts and quantify potential differential effects among the micro, regional, and macro brewing sectors. Although the excise tax reduction was supposed to primarily support the micro brewing sector, we find that the CBMTRA provided a larger combined benefit to the regional and macro brewing sectors.
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May, 2023

Disentangling Short-Run COVID-19 Price Impact Pathways in the US Corn Market

By: Gao, Yixuan; Malone, Trey; Schaefer, K. Aleks; Myers, Robert J.
Using a data-modified version of the relative-price-of-a-substitute method, we distinguish the consequences of the sharp decline in US automotive fuel demand from the consequences of nonethanol demand changes in the US corn market. Our results suggest thatÑdue to the renewable fuel standard and ethanol-gas price linkagesÑthe COVID-19 pandemic affected corn markets more than it affected other agricultural commodities. The onset of the pandemic reduced Illinois cash prices for corn by approximately 18%. The majority of this impact (approximately 16%) was driven by pandemic-induced reductions in ethanol demand. Ethanol-driven and total impacts were greater in locations farther from terminal markets.
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May, 2023

Carbon and Timber Management in Western Oregon under Tax-Financed Investments in Wildfire Risk Mitigation

By: Rossi, David; Kuusela, Olli-Pekka
We examine how forest taxation should be designed when tax revenues are used to finance expenditures on wildfire risk mitigation and when forest carbon storage has value. A model is solved sequentially in two stages by a forest tax planner and a representative private landowner. The planner considers two forest tax instruments currently used by state agencies in Oregon: 1) a per acre land tax, and 2) a unit tax on timber harvest. A numerical representation of the model shows that the optimal tax rates depend on whether private landowners are compensated for stored carbon. Our results show that neither the acre-based fee or a harvest tax is able to incentivize the same levels of sequestration as a carbon price. However, a neutral tax like the acre-based fee is preferred when the external benefits of carbon sequestration are captured by the private landowner.
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May, 2023

The Role of Risk in Farmland Contract Choices

By: Arnold, Chelsea; Yu, Jisang; Taylor, Mykel; Palm-Forster, Leah H.; Banerjee, Simanti
Understanding the role of risk in farmland leasing contract choices is important to assess the welfare consequences of farm policies or environmental changes that affect production risk. We use a unique dataset of landowners and tenants in Kansas to examine the role of risk in their farmland leasing contract choices. We find that greater production risk and more risk-averse landowners encourage fixed cash rent contracts. As many variables can potentially affect contract choices, we use a penalized regression to show that the inclusion of relationship variables leads to little change in the main results.
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May, 2023

Implicit Market Segmentation and Valuation of Angus Bull Attributes

By: Tang, Minfeng; Thompson, Nathanael M.; Boyer, Christopher N.; Olynk Widmar, Nicole J.; Lusk, Jayson L.; Stewart, Terry S.; Lofgren, Donna L.; Minton, Nick
Previous hedonic assessments have largely relied on the assumption that bull buyers have homogeneous demands for bull attributes. However, quality differentiations and heterogeneous demands support the existence of submarkets. This analysis investigates market segments using a finite mixture model and 13 years of bull auction data. Results indicate that valuations of bull attributes vary across implicit buyer segments. Differences in demand may be influenced by a variety of factors, includingÑbut not limited toÑfarm goals, labor availability, and end-use marketing arrangements for calves. Results have important implications for signaling quality cues throughout the industryÕs breeding sectors.
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