bluuebunny/crossref_metadata_2025 huggingface dataset:
A Quarterly Econometric Model of United States Livestock and Feed Grain Markets and Some of Its Policy Implications
Authors: Arzac Enrique R. , Wilkinson Maurice
Published: July 2006

This paper discusses the structural equations, forecasting properties, dynamic characteristics, and economic policy implications of a quarterly econometric model of U.S. livestock and feedgrain markets. Quarterly, semi‐annual, and annual endogenous variables are incorporated by allowing individual structural equations to be estimated and to enter into the solution of the model with different periodicities. Commodity prices are determined by market equilibrium conditions rather than by autoregressive and other time‐series techniques. Dynamic multipliers give the effect of changes in corn exports, beef imports, government grain stocks, corn yield, consumer income, and the support price for corn on producer and retail prices and acreage planted.
A Multicommodity Analysis of Trade Policy Effects: The Case of Nicaraguan Agriculture
Authors: Fajardo Daniel , McCarl Bruce A. , Thompson Robert L.
Published: July 2006

Agricultural trade policies for a small country are analyzed, using a simple, multicommodity, quadratic programming, agricultural sector model. The policy conditions simulated include (a) quantitative trade restrictions given an uncertain world market, (b) export taxation, and (c) import subsidies. The multicommodity, sectoral‐wide coverage permits analysis of the factor‐product market linkages and enables identification of the distributional consequences.
Market Price Effects of Technological Change on Income Distribution in Semisubsistence Agriculture
Authors: Hayami Yujiro , Herdt Robert W.
Published: July 2006

The impact of a technologically induced rightward shift in the supply function of a commodity grown and partly consumed by semisubsistence farmers is examined. In closed‐economy, free market situations, the distribution of economic gains between consumers and producers depends on the proportional shift of the supply function, proportion of the commodity marketed, and elasticities of demand and supply for the commodity. Differences in adoption and marketable surplus between large and small farmers result in differential benefits, but over a range of parameter values, small farmers gain as much or more than large farmers when supply shifts faster than demand.
Oligopoly Pricing in the World Wheat Market
Authors: Alaouze Chris M. , Watson A. S. , Sturgess N. H.
Published: July 2006

When the residual demand curve for wheat facing the United States and Canada shifts to the left, or when the exportable surplus of Australia is large, market‐shares of these duopolists are reduced. Such circumstances lead to the formation of a market‐share triopoly with Australia. The evidence for this proposition is examined and a model of triopoly pricing in the world wheat market is presented. If major exporters continue to be concerned with relative market‐shares, the triopoly will reform, stocks will accumulate, and lower prices will prevail; however, prices will be more variable, and possibly higher, than before 1972/73.
U.S. Agricultural Policy and Gasohol: A Policy Simulation
Authors: Meekhof Ronald L. , Tyner Wallace E. , Holland Forrest D.
Published: July 2006

This research uses a stochastic simulation model to evaluate the implications of alternative gasohol programs for a large segment of the food and agricultural sector‐corn and soybean producers, consumers, and taxpayers. The impacts on corn and soybean prices, production, acreage planted, carryover stocks, exports, and commodity program expenditures are presented. The research findings indicate that alcohol production levels below 2.0 billion gallons do not result in serious dislocations in the agricultural sector. As the level of alcohol production increases and more grain is required, corn prices rise significantly, stocks fall to extremely low levels, exports decline, and government expenditures increase greatly.
Optimal Policies for Marketing Cull Beef Cows
Authors: Yager William A. , Greer R. Clyde , Burt Oscar R.
Published: July 2006

Feeding and marketing strategies for cull beef cows were analyzed by formulating a stochastic dynamic programming model which allowed simultaneous determination of optimal selling time and feeding levels until sale. The state variables were cow weight and monthly price; the latter was estimated statistically as a first‐order autoregressive process with parameters changing monthly. Results for Montana cow prices at Billings suggested substantial gains to feeding healthy cows through the winter instead of immediate sale after fall culling.
Resource Production Under Uncertainty: A Stochastic Control Approach to Timber Harvest Scheduling
Authors: Dixon Bruce L. , Howitt Richard E.
Published: July 2006

Most empirical natural resource management problems are intertemporal optimization problems under uncertainty. The Linear‐Quadratic‐Gaussian (LQG) method derives an approximate stochastic solution to such problems. The error in modeling resource dynamics and error in observing resource stocks are incorporated explicitly into the LQG problem solution. The LQG is outlined briefly and applied to the harvest‐scheduling problem on the Stanislaus National Forest. The importance of knowing management preferences precisely is shown by stochastic simulations. In particular, harvest levels and the cost of a given source of uncertainty are shown to be quite sensitive to the objective function specification.
Farmers' Subjective Probabilities in Northern Thailand: An Elicitation Analysis
Authors: Grisley William , Kellogg Earl D.
Published: July 2006

The ability of agricultural decision makers to formulate logical expectations about the outcome of risky events in crop production and marketing is investigated. Measures of Northern Thailand farmers' perceptions of yield, price, and net income are attempted using an elicitation approach which includes a significant monetary reward. This approach is found to be feasible. The expectations derived are logical and consistent when compared to harvest results and farmers' actual production practices. Farmers' expectations about sources of risk and the correlation of socioeconomic characteristics with expectation accuracy are analyzed.
An Economic Model of Soil Conservation
Authors: McConnell Kenneth E.
Published: July 2006

By introducing soil depth and soil loss into a simple model of agricultural production, this paper seeks to determine when the private path of erosion differs from the socially optimal path. Considering the depletion of soil only and abstracting from the environmental disruption caused by erosion, the paper argues that under most institutional arrangements the social and private rates of erosion are the same. The paper concludes that public policy should be directed toward reducing erosion only when it leads to significant pollution externalities.
A Dynamic Plant Location Model: The East Florida Fresh Citrus Packing Industry
Authors: Kilmer Richard L. , Spreen Thomas , Tilley Daniel S.
Published: July 2006

Static location models provide a long‐run solution without the adjustments required over time. Dynamic programming allows incorporation of short‐ and long‐run adjustments in the same plant location model. A standard transshipment model with fixed quantities at supply and demand points is integrated with a dynamic program. Results indicate new large packinghouses are (are not) competitive with existing small (large) packinghouses even though (because) existing plants can forego a return on investment for a finite period.
The Impact of Forced Deliveries on Egyptian Agriculture
Authors: de Janvry Alain , Siam Gamal , Gad Osman
Published: July 2006

The consequences of terminating the current system of forced deliveries of rice for domestic subsidized consumption in Egypt are analyzed with farm‐level data. Under the conditions prevailing in 1979–81, impact on the marketed surplus would have been negligible due to the existence of free sales beyond quota. Producers would benefit marginally from liberalization, and part of the cost of consumer subsidies would be shifted to the government. The key source of financing consumer subsidies is the defense of rice exports and the continued price wedge between domestic and world prices, not the enforcement of deliveries for domestic consumption.
The Effects of Education in Agriculture: Evidence from Nepal
Authors: Pudasaini Som P.
Published: July 2006

The impact of education in modernizing and traditional agricultures of Nepal is investigated by utilizing a production function framework. Education is found to have higher payoff to productivity in a modernizing environment than in traditional agriculture. Higher (college) education has a significant role in a modernizing environment but not in the traditional area. While both worker and allocative effects of education contribute positively to agricultural production, allocative effect surpasses worker effect in both environments. However, only the input‐allocation component of the allocative effect is important in traditional areas, while both input‐allocation and input‐selection components are crucial in a modernizing agriculture.
A Rational Distributed Lag Model of Quarterly Live Cattle Prices
Authors: Marsh John M.
Published: July 2006

Quarterly U.S. feeder cattle and fed cattle prices were estimated within a rational distributed lag framework, utilizing nonstochastic difference equations to minimize problems with specification errors in the disturbance structure. The behavior of certain input and output variables in the beef market explained the price variation in each reduced form equation. The results revealed dynamic stability, with a geometric rational lag structure describing fed cattle prices and a polynomial rational lag structure characterizing feeder cattle prices. These dynamics were found to be better than both static‐serial correlation and purely autoregressive specifications.
Portfolio Theory and the Demand for Futures: The Case of California Cotton
Authors: Berck Peter
Published: July 2006

This paper examines the simultaneous choice of cropping patterns and futures positions. It derives the demand for hedging as a function of the price of a hedge and the crop choice set; it estimates these functions for California cotton farmers. It finds that both the costs of hedging and the opportunity to diversify risk by growing other crops substantially change the optimal hedge for California cotton farmers.
Predicting the Diffusion of Improved Pastures in Uruguay
Authors: Jarvis Lovell S.
Published: July 2006

Research suggests the logistic curve is the characteristic diffusion path for new technologies. Econometric analysis of fertilized grass‐legume pastures in Uruguay indicated that their diffusion during the first years following introduction also followed a logistic path. Some departure from a simple logistic shape was explained by including beef and fertilizer prices within the diffusion framework. Both the rate and limit of diffusion were positively related to changes in the technology's profitability, but the estimated price elasticity of each was low. Extrapolation predicted that a ceiling equal to 12% of Uruguayan pasture area would be reached in 1980.
An Interval Approach to Measuring Decision Maker Preferences
Authors: King Robert P. , Robison Lindon J.
Published: July 2006

A method for constructing interval measurements of decision makers' absolute risk‐aversion functions is presented. Under this new procedure, the form of the absolute risk‐aversion function is not restricted, and the precision of the interval measurement can be determined by the analyst. Interval measurements are used with the criterion of stochastic dominance with respect to a function to order uncertain choices. An empirical test shows that interval measurements exclude preferred choices from consideration less often than do single‐valued utility functions and are more discriminating than first‐ and second‐degree stochastic dominance.
Optimal Allocation of Farm Irrigation Water during Peak Seasons
Authors: Yaron Dan , Dinar Ariel
Published: July 2006

The paper presents a system analysis approach to the allocation of scarce water during peak seasons to alternative crops and plots, using soil moisture response functions for the key crops. The system contains a linear programming model intended to maximize the farm's income and a dynamic programming model, which generates new irrigation scheduling activities in response to the shadow prices of water given by linear programming solutions. The “generalized Wolfe” LP algorithm is applied. An application to a cotton farm is presented.
An Economic Analysis of Technology in the Meat Products Industry
Authors: Ball V. Eldon , Chambers Robert G.
Published: July 2006

A nonhomothetic cost function allowing for variable elasticities of scale and substitution and neutral, as well as factor‐using, technical change is estimated for the meat products industry. Empirical results suggest that over the period 1972–76 this industry was characterized by increasing returns to scale. The nonhomothetic and nonneutral specification implies that returns to scale and the rate of technical progress are significantly affected by factor price changes and the level of output. Higher labor prices lead to greater scale economies and to greater cost reductions through technological advances.
Stochastic Efficiency, Normality, and Sampling Errors in Agricultural Risk Analysis
Authors: Pope Rulon D. , Ziemer Rod F.
Published: July 2006

This paper examines the power of tests for efficiency. The relationship between sample size, parameter values, and the family of probability distributions is stressed. Some findings are that the probability of correctly ranking distributions is frequently very low regardless of sample size. It is generally lowest as distributional parameters (such as the means) of the two distributions being compared are of similar magnitudes. Further, the empirical distribution function performs extremely well as compared to maximum likelihood estimators.
The Dynamics of Agriculture Supply: A Reconsideration
Authors: Eckstein Zvi
Published: July 2006

This paper presents a dynamic rational expectations equilibrium model for a given crop. The dynamic supply equation is derived from the farmer optimization problem; and the equilibrium movements of commodity price, production, and land allocations are solved analytically. It is shown that the observed dynamics of agriculture supply, which are usually explained and measured with the Nerlovian supply response model, can be explained and measured at least as well by the rational expectations equilibrium model. However, interpretation of the results is different, and the paper defines explicitly the dynamic supply elasticities and presents an econometric method for consistent estimators for the parameters.
Planting and Removal Relationships for Perennial Crops: An Application to Cling Peaches
Authors: French Ben C. , King Gordon A. , Minami Dwight D.
Published: July 2006

Supply response for a perennial crop is influenced by the age composition of existing plant stocks which, in turn, is determined by historical patterns of plantings and removals. This paper develops estimates of functions that relate the planting and removal of cling peach trees to measures of past profitability, potential future production from existing acreage, and structural changes associated with market intervention programs. The analysis also provides indications of useful forms for these functions, patterns of yield variation by age of tree, and the nonlinear relation of removal response to age of tree.
Equivalent Scales, Scale Economies, and Food Stamp Allotments: Estimates from the Nationwide Food Consumption Survey, 1977–78
Authors: Brown Mark G. , Johnson S. R.
Published: July 2006

Allotment and economy‐of‐scale adjustments are important in determining benefit levels for households participating in the Food Stamp Program. Economy‐of‐scale factors adjust levels of benefits based on the sizes of participating households. These economy‐of‐scale factors and the allotment are calculated currently using diet status, income, and household size. This paper shows that food stamp allotments for different household sizes can be determined independent of diet status using standard demand theory and the age‐sex composition of the household. The results indicate that scale adjustments now used are related more to household composition than true economies.
Estimating Substitution and Expansion Effects Using a Profit Function Framework
Authors: Lopez Ramon E.
Published: July 2006

This study reports a first attempt to derive all the relevant information with respect to the structure of production of an industry using knowledge of only a profit function. Using estimates of a profit function for Canadian agriculture, a procedure to separate substitution and expansion effects for both inputs and outputs was implemented. Information concerning net input and output substitution and complementarity possibilities were obtained. The most important empirical results suggest that the hypothesis of nonjoint production of crop and animal outputs in Canadian agriculture cannot be rejected, and that hired and operator labor are complements rather than substitutes.
Confidence Intervals for Elasticities and Flexibilities from Linear Equations
Authors: Miller Stephen E. , Capps Oral , Wells Gary J.
Published: July 2006

Information regarding the precision of elasticity and flexibility estimates from equations linear in original variables is typically missing from empirical studies. A result due to Fieller which allows construction of exact confidence intervals for elasticities and flexibilities from such equations is demonstrated. Exact confidence intervals are not necessarily narrowest at mean levels nor are they symmetric about the point estimates of the elasticities and flexibilities. Empirical examples indicate that exact 95 percent confidence intervals for price flexibilities for food items can be quite wide.
Forward and Futures Contracts as Preharvest Commodity Marketing Instruments
Authors: Nelson Ray D.
Published: July 2006

Empirically significant differences between forward and futures contracts evidence their imperfect substitutability as preharvest marketing instruments. Certain combinations of market conditions make the two types of contracts complementary rather than interchangeable. Forwards and futures differ conceptually because of lumpiness, marking‐to‐market, and basis. Of these differences, basis constitutes the most important factor. Although lumpiness may affect smaller producers, it represents an inconsequential detail for larger traders. In given years, interest income (cost) resulting from futures margin requirements may reach important absolute amounts. Relative to size of basis and price changes, this factor fails to attain a magnitude of practical significance.
Some Econometric Problems in the Measurement of Utility
Authors: Knowles Glenn J.
Published: July 2006

Econometric problems in the measurement of utility are noted and solutions provided. When lotteries which are used to elicit risk preferences are chained or linked they compound error terms. If a utility index is constructed to estimate the utility function, the estimates will be inefficient and possibly biased. An econometric model that attaches an additive error term to the response of the decision maker and does not require indexing is shown to be a better alternative.
An Econometric Model of Cattle Inventories
Authors: Rucker Randal R. , Burt Oscar R. , LaFrance Jeffrey T.
Published: July 2006

Dynamic regression equations are estimated for each beef cattle breeding herd and beef cattle inventories at two levels of aggregation, the U.S. and Montana. The analysis for Montana was utilized as a guide for specification of the national equation to reduce the inference problem associated with letting the sample data help specify the model. Rational lags on average price received by farmers for calves and the ratio of fed beef to corn prices at Omaha constitute the primary explanatory variables. The equations perform exceedingly well over the sample period ( 1950–80) and in post‐sample forecasts with the sample truncated back to 1970.
A Dynamic Analysis of Marketing Orders, Voting, and Welfare
Authors: Berck Peter , Perloff Jeffrey M.
Published: July 2006

This paper presents a dynamic model of how profit‐maximizing farmers would vote on marketing order rules given that new firms will enter, based on rational expectations (perfect foresight) about the path profits follow. Early entrants make large short‐run gains while, in the long run, marginal firms break even. Welfare analyses under a dynamic model differ substantially from the static analyses normally reported.
Participation in Pest Management Groups
Authors: Rook Sarah P. , Carlson Gerald A.
Published: July 2006

When a group of farmers joins together to jointly control pests, usual marginal conditions for optimal input use are modified. A study of North Carolina farmers vealed that farmer participation in pest management groups is significantly affected by the percentages of their acres planted in a time‐competing crop, farm size, group price, extension service subsidies, expected crop yield, and the deviation between individual and group pest control demand levels. A maximum likelihood logit estimation procedure is used.
Before‐ and After‐Tax Size Economies: An Example for Cash Grain Production in Illinois
Authors: Batte Marvin T. , Sonka Steven T.
Published: July 2006

This article reports the degree to which economies of farm size exist for commercial Illinois cash grain agriculture, both on a before‐ and after‐tax basis. Receipt, expense, and investment data are from the Illinois Farm Business Farm Management Association records, 1975–79. Analysis of covariance techniques were used in the examination of the five‐year time series of cross‐sectional data. Results indicate statistically significant evidence of economies of size, both on a before‐ and after‐tax basis. There was no significant evidence of diseconomies of size for this sample.
Optimal Grain Carryovers in Open Economies: A Graphical Analysis
Authors: Knapp Keith C.
Published: July 2006

Optimal storage, trade, and borrowing policies for grain are analyzed graphically using dynamic programming. World prices and domestic harvests are assumed to be stochastic. Optimal carryovers are generally increasing in supply and decreasing in world prices, while net imports are decreasing in both supply and world prices. Optimal levels of carryovers and net imports are influenced by the opportunity to borrow and save foreign exchange. It is shown that grain reserves and foreign exchange borrowing/saving are alternative inventory systems which both complement and substitute for one another.
Some Emerging Rights in Agricultural Land
Authors: Braden John B.
Published: July 2006

Agricultural land use rights have become increasingly complex fol1owing new policies for soil conservation, nonpoint pol1ution control, wetlands protection, and farmland preservation. When viewed in a framework that distinguishes between ownership and exchange of rights, little change is evident in ownership of rights. The added complexity has come mainly in the rules governing exchanges. Farmers are confronted increasingly with rules which allow specific rights to be limited by government with compensation. These rules retain the flexibility of individual ownership while reflecting a growing awareness that the general welfare depends on wise use of agricultural land.
Disequilibrium Market Analysis: An Application to the U.S. Fed Beef Sector
Authors: Ziemer Rod F. , White Fred C.
Published: July 2006

In this paper current theory and estimation procedures are applied in an analysis of disequilibrium price behavior in the U.S. fed beef sector. Although tests of equilibrium versus disequilibrium hypotheses are not well developed, results indicate the possible presence of disequilibrium prices in the market for fed beef; at least the hypothesis of significant disequilibrium could not be rejected.
Recreational Demands for Maintaining Instream Flows: A Contingent Valuation Approach
Authors: Daubert John T. , Young Robert A.
Published: July 2006

Recreational uses of streams, although nonconsumptive, increasingly conflict with traditional off‐stream uses of water in arid regions. Recreational demands for instream flows have collective good attributes such that the recreationists' preferences may be inadequately reflected in water allocation decisions. The contingent valuation approach was adapted to impute instream flow shadow prices from a sample of recreationists on the Cache la Poudre River in northern Colorado. During periods of relatively low flows, the estimated instream flow marginal value exceeds the marginal value of water in irrigation, suggesting a need for altered water allocation policies.
Hedging with Options under Variance Uncertainty: An Illustration of Pricing New‐Crop Soybeans
Authors: Hauser Robert J. , Andersen Dane K.
Published: July 2006

The behavior of a commodity's price‐return variance over time is critical to both the theory and practice of commodity option valuation. In this paper three models are used to forecast soybean price variance for the period during which a seasonal increase in variance has been found in previous studies. A time‐series model outperforms the ordinary least squares and naive models. The significance of the forecast error levels is then examined in terms of expected deviations above and below a price target for a put hedge. The resulting trade‐off between risk and return is shown by strike price and variance expectation.
Offshore Commodity Hedging under Floating Exchange Rates
Authors: Thompson Stanley R. , Bond Gary E.
Published: July 2006

Exchange rate uncertainty can have significant effects on the optimal hedging behavior of offshore commodity traders. In this paper, the standard commodity hedging framework is extended first to incorporate exchange rate uncertainty and second, to forward cover transactions in the foreign exchange market. The implications of exchange rate movements and forward cover decisions for offshore commodity hedgers are illustrated using data relevant to hedging Australian export wheat on the Chicago Board of Trade.
Toward an Appropriate Measure of Uncertainty in a Risk Programming Model
Authors: McSweeny William T. , Kenyon David E. , Kramer Randall A.
Published: July 2006

The measure of uncertainty in a risk‐programming problem has long posed a dilemma. The use of the variance of realized returns assumes that the distribution of realized returns is the same as the distribution anticipated by the decision maker prior to the start of production. Rejection of this maintained hypothesis requires either direct elicitation of these distributions or construction of another measure from realized data. A mean‐squared forecast error is considered an appropriate measure. Optimal solutions to a quadratic risk‐programming problem are obtained using this measure and compared to those obtained using traditional measures.
Returns to Farm Real Estate Revisited
Authors: Irwin Scott H. , Forster D. Lynn , Sherrick Bruce J.
Published: July 2006

Barry's research on farm real estate returns suggests that when farm assets are viewed as a part of the nation's wealth portfolio, returns are not persistently low, as is commonly asserted in policy debates. This paper extends Barry's research by explicitly accounting for the effects of uncertain inflation, using a broader market proxy, and lengthening the sample period. The results suggest farm real estate offers only slight (not substantial) premiums above those for systematic risk, contributes little systematic risk to a well‐diversified portfolio, and exhibits substantial risk due to uncertain inflation.
Farmers' Stepwise Adoption of Technological Packages: Evidence from the Mexican Altiplano
Authors: Byerlee Derek , de Polanco Edith Hesse
Published: July 2006

Agricultural research and extension programs in developing countries, rather than following the conventional package approach, should be designed to take into account the fact that farmers adopt improved technological components in a stepwise manner. On‐farm experimental and survey data collected from two rainfall zones in a high valley of Mexico are synthesized to show that farmers have rationally followed a stepwise process of adopting improved varieties, fertilizer, and herbicide for barley, reflecting the relative profitability and riskiness of each component in each zone. Despite significant interactions between the components, it was still possible for farmers to adopt individual components in a sequential manner.
Cycles in Agricultural Production: The Case of Aquaculture
Authors: Karp Larry , Sadeh Arye , Griffin Wade L.
Published: July 2006

The problem of determining optimal harvest and restocking time and levels is considered. A continuous time deterministic control problem is used to study the case where production occurs in a controlled environment. A stochastic control problem is then used to determine rules for the cultivation of P. stylirostris which occurs in a stochastic environment. The deterministic analog of the problem is also solved. The two solutions are used to develop a measure for the value of a controlled environment and for the value of information about the stochastic environment.
Theoretical and Empirical Specifications Issues in Travel Cost Demand Studies
Authors: Kealy Mary Jo , Richard C. Bishop
Published: July 2006

A travel cost demand model is derived from a utility function which postulates that individuals choose the optimal total number of site recreation days given by the product of the number and length of their recreation trips. By relaxing the assumption that on‐site time is constant across recreationists, the applicability of the travel cost method is extended. The model is estimated using a maximum likelihood procedure appropriate for the truncated sample data which is characteristic of most user‐specific recreation data. Failure to do so would result in overestimating the value of Great Lakes fishing by 3.5 times.
Rollover Hedging and Missing Long‐Term Futures Markets
Authors: Gardner Bruce L.
Published: July 2006

Sequential rollover of annual futures positions provides farmers or others with a means of long‐term hedging. Consequently, the absence of multiyear futures markets may not be a serious problem. However, year‐to‐year basis risk exists which can render rollovers ineffective in hedging. Evidence on soybean, corn, and cotton futures suggests that rollovers would be effective at locking in an initial price for a three‐ to six‐year period but would be ineffective in routine hedging over a series of successive three‐ to six‐year periods.
Subjective Probabilities and Scoring Rules: Experimental Evidence
Authors: Nelson Robert G. , Bessler David A.
Published: July 2006

This paper provides an articulation of the theory of scoring rules that leads to a testable hypothesis about strategic behavior under an improper rule. Subjects in a laboratory setting were first screened for linear utility in the range of rewards. Those that passed this test were used as subjects in a probability forecasting experiment. Results suggest that theory holds when subjects forecast over many periods, although inexperienced subjects may fail to exploit the dominant strategy in the initial periods.
Risk Aversion versus Expected Profit Maximization with a Progressive Income Tax
Authors: Taylor C. Robert
Published: July 2006

This article introduces the terms “apparent,” or “pseudo,” risk aversion to represent those situations where “real” risk aversion is falsely attributed simply because second and higher moments of random variables are arguments in a decision maker's objective function. Apparent risk aversion can occur when stochastic variables nonlinearly enter the objective function. The progressive income tax structure is highlighted as a neglected but important source of apparent risk aversion. Such sources of apparent risk aversion should be recognized, otherwise an incorrect level of risk aversion might be claimed, or risk aversion might be claimed when risk neutrality prevails.
Surplus Disposal in World Markets: An Application to Egyptian Cotton
Authors: Monke Eric A. , Cory Dennis C. , Heckerman Donald G.
Published: July 2006

In many countries, agricultural exports are managed directly by governments. A frequent problem encountered by policy makers involves the accumulation of unwanted surpluses caused by domestic price support programs, unforeseen declines in world demand, or unexpected shifts in the domestic supply‐demand balance. This paper examines the intertemporal use of the world markets as a means to eliminate these surpluses. The analytical results follow directly from the theory of storage. They are applied to an analysis of the Egyptian ELS cotton market, where stock levels in the early 1980s became about six times as large as normal carryout. Estimation results suggest that optimal disposal plans may frequently involve selling surplus stocks in a single year.
The Demand for Varied Diet with Econometric Models for Count Data
Authors: Lee Jonq‐Ying
Published: July 2006

A negative binomial model was used to study the relationships between food expenditures, household characteristics, and the demand for different food items. The results show that increases in food expenditure increase the number of food items consumed at home, and the number of food items consumed at home is positively related to increases in the number of household members. This change in the number of food items consumed at home increases at a decreasing rate as household size increases and becomes negative when household size becomes large.
A Small‐Sample Comparison of Estimators in the EU‐MGF Approach to Decision Making
Authors: Gbur Edward E. , Collins Robert A.
Published: July 2006

Estimation of the moment‐generating function lies at the core of the exponential utility—moment‐generating function approach to decision making. The small sample performances of the nonparametric empirical moment‐generating function and a parametric competitor have been examined under a variety of situations defined by the sample size, the level of risk aversion, and the degree to which the assumed parametric model approximates reality. Conditions under which each estimator would be preferred are obtained. Neither approach can be recommended unequivocally in all situations.
Endogenous Local Public Extension Policy
Authors: Huffman Wallace E. , McNulty Mark
Published: July 2006

A model of competitive pressure groups is proposed for explaining public provision of agricultural extension services and tested against county data from four midwestern U.S. states. The allocation of extension staff time is explained by variables representing the average wealth position and membership size of farm and nonfarm pressure groups. Also, farmers' schooling is shown to have a large negative relationship to the provision of county agricultural extension services, which suggests that they are substitutes.
Land Allocation under Uncertainty for Alternative Specifications of Return Distributions
Authors: Collender Robert N. , Zilberman David
Published: July 2006

Using the expected utility‐moment‐generating function approach, a land allocation rule is derived which is both independent of the nature of the underlying distribution of each element in the choice set and accounts for all moments of that distribution. This decision rule is applied to the choice between cotton and corn in the Mississippi Delta to demonstrate that consideration of just the first two moments of the distribution can often be unjustified and damaging empirically, theoretically, and in terms of the utility of the decision maker.
Analysis of Selected Marketing Strategies: A Whole‐Farm Simulation Approach
Authors: Bailey DeeVon , Richardson James W.
Published: July 2006

A detailed whole‐farm simulation model capable of simulating stochastic daily cash and futures prices was used to evaluate alternative marketing strategies for a Texas High Plains cotton farm over a ten‐year planning horizon. Stochastic dominance with respect to a function was used to rank the alternative marketing strategies for risk‐averse and risk‐neutral producers. Results indicated that risk‐averse producers would prefer hedge and hold marketing strategies over discretionary hedging strategies. Sellers' call contracting was not highly preferred by either risk‐neutral or risk‐averse producers.
Risk Modeling Using Direct Solution of Nonlinear Approximations of the Utility Function
Authors: Lambert David K. , McCarl Bruce A.
Published: July 2006

A risk model is developed which involves direct solution of the expected utility maximization problem utilizing nonlinear programming. The model permits the use of utility functions exhibiting increasing, constant, and decreasing absolute risk aversion. Demonstrations are done using functions exhibiting such properties over normal, uniform, and triangular data sets.
Forward Pricing Strategies for the South Central Illinois Corn Producer
Authors: Rich Sharon K.
Published: July 2006

Price volatility and current agricultural economic conditions have induced a need for grain farmers to develop pricing strategies that take advantage of favorable pricing opportunities. This paper identifies eighteen pricing strategies, evaluates them over a four‐year historical optimization period, and compares the average price received to the cash delivery price at harvest. Twelve of the eighteen strategies resulted in an average net price higher than the harvest delivery base. The strategies were then tested with a fifth year of data to evaluate their effectiveness outside the optimization period. Only one of the twelve optimum strategies from the historic period produced a lower net price in the 1984 test period than the harvest delivery price.
Farmers' Choice of Fixed and Adjustable Interest Rate Loans
Authors: Leatham David J. , Baker Timothy G.
Published: July 2006

A discrete stochastic programming model of a midwestern crop‐hog farm was used to investigate farmers' fixed‐rate/adjustable‐rate loan decision. Results show it is optimal for farmers to pay up to 1.5 percentage points above adjustable interest rates to use some fixed‐rate debt. Below a one‐point premium all fixed‐rate debt is chosen. Above 1.5 points all adjustable rate debt is chosen except for more risk‐averse farmers, who choose all adjustable rate debt at 2.25 points or more. The feasibility of using financial options to hedge interest rates was investigated and found to be prohibitively expensive.
Welfare Comparisons of U.S. Dairy Policies with and without Mandatory Supply Control
Authors: Kaiser Harry M. , Streeter Deborah H. , Liu Donald J.
Published: July 2006

The existence of costly dairy surpluses has led some policy makers to argue in favor of mandatory supply controls as an alternative to existing dairy policy. A dynamic econometric model is used to simulate the changes in equilibrium prices, quantities, producer and consumer welfare, and government costs that would occur if mandatory controls were adopted. The results show that while such a change in policy would eliminate the costs associated with current price supports, the benefits accruing to producers would be achieved at the expense of consumers and processors.
A Stochastic Dominance Analysis of Tillage and Crop Insurance Practices in a Semiarid Region
Authors: Williams Jeffery R.
Published: July 2006

Stochastic dominance analysis for tillage systems in the semiarid conditions of the central Great Plains indicates that risk‐averse managers would prefer conservation tillage systems for wheat and grain sorghum with and without the use of crop insurance instead of the traditional conventional dryland wheat‐fallow cropping system. Higher yields in conjunction with reduced fuel, labor, and repair costs more than offset increased chemical costs of the conservation systems. Increased yields generally are attributed to the soil moisture conservation characteristic of the conservation tillage systems.
Stochastic Modeling of Short‐Term Cattle Operations
Authors: Rodriguez Abelardo , Taylor R. G.
Published: July 2006

A risk‐neutral stochastic dynamic programming model was used to test the certainty equivalence (CE) property in sequential decisions over a single season in a northeastern Colorado yearling operation. Stochastic rainfall represented risk in forage production, and stochastic steer prices represented marketing risk. Certainty equivalence held when cattle prices were stochastic and risk was increased as cattle sales were postponed. Intensive forage utilization as the grazing season progressed caused CE rejection at high stocking densities. High stocking densities with flexible marketing strategies had larger expected net present values than low stocking densities with fixed marketing strategies.
Separability Testing in Production Economics
Authors: Pope Rulon D. , Hallam Arne
Published: July 2006

The implications of separability in production are examined using duality. Restrictions on the profit function implied by separability of the production function, and vice versa, are derived in a simple way. These restrictions are then calculated for commonly used classes of functional forms. Then the method is used to test separability of the profit function using experimental production data. The hypothesis that the profit function was separable (plant nutrients from spacing unit costs) could not be rejected. This implies that an aggregate price index for nutrients is appropriate.
Short‐Term Leasing, Resource Allocation, and Crop‐Share Tenancy
Authors: Taslim M. A.
Published: July 2006

This paper develops a model of crop‐share tenancy to demonstrate that a policy of short‐term leasing which enables the landlord to evict a tenant whose performance is not satisfactory may ensure a desired intensity of cultivation of crop‐share land even when the tenant is free to choose the amounts of both crop‐share land and nonland inputs.
Food Processor Price Behavior: Firm‐Level Evidence of Sticky Prices
Authors: Shonkwiler J. S. , Taylor T. G.
Published: July 2006

Firms in imperfectly competitive markets face direct and indirect costs when changing product prices. The latter costs reflect uncertain changes in revenue and market share resulting from the actions of rival firms. Rosett's friction model is applied to firm‐level data to provide estimates of the indirect costs of changing prices for a major processor of frozen concentrated orange juice. Results indicate that indirect costs cause significant price rigidity. Additionally the hypothesis that prices are equally rigid for upward and downward changes could not be rejected.
A Model of Production with Supply Management for the Canadian Agricultural Sector
Authors: Moschini Giancarlo
Published: July 2006

The production structure of the Canadian agricultural sector is modeled by an output‐constrained multiproduct profit function to account for the existence of supply management policies. The le Chatelier effects of supply constraints are illustrated, and the comparative statics of supply management is shown to depend, under input normality, on the type of jointness. Convexity is tested and accepted, and nonjointness is rejected by the estimated normalized quadratic profit function. The results support the hypothesis of nonjointness due to allocatable fixed factors. Decreasing the supply of managed commodities will increase the supply of unrestricted commodities, while total input use is reduced.
The Effects of Tax Policy on Aggregate Agricultural Investment
Authors: LeBlanc Michael , Hrubovcak James
Published: July 2006

The effects of tax policies on aggregate agricultural investment are examined. Results from this analysis suggest that tax policies are effective in promoting agricultural investment. Nearly 20 percent of net investment in agricultural equipment during the period 1956 through 1978 is attributed to tax policy. From 1956 to 1978, tax policy has stimulated, in real dollars, over $@@‐@@5 billion in net investment in equipment and in excess of $@@‐@@1 billion in structures.
Farm Debt, Default, and Foreclosure: An Economic Rationale for Policy Action
Authors: Leathers Howard D. , Chavas Jean‐Paul
Published: July 2006

Economic analysis of farm programs typically focusses on economic costs. Here we show that, because of market failures and imperfections, there are possible economic benefits to be derived from programs which reduce or eliminate the threat of default and foreclosure. A production model of an indebted firm is developed and serves as a basis for an aggregate model which identifies possible costs and benefits from a program of transfers to indebted farmers. The challenge facing policy makers is to design programs which capture the benefits of reducing the probability of default while minimizing perverse incentive effects of such programs.
Investment in U.S. Agriculture
Authors: Vasavada Utpal , Chambers Robert G.
Published: July 2006

Resource adjustment problems in U.S. agriculture are motivated against the background of the farm problem. The adjustment cost hypothesis is invoked to specify and estimate consistently a system of dynamic investment demand and output supply equations by utilizing recent advances in dynamic duality theory. The investment demand equations assume the form of a multivariate flexible accelerator. Results indicate that labor, capital services, and land exhibited quasi‐fixity while intermediate materials were a variable factor. This can be construed as a form of asset fixity within aggregate U.S. agriculture. The univariate flexible accelerator hypothesis is rejected.
Risk Attitudes Measured by the Interval Approach: A Case Study of Kansas Farmers
Authors: Thomas Arthur C.
Published: July 2006

Risk attitudes of farmers are of major importance to agricultural economists. This study utilizes a questionnaire designed to determine risk aversion levels. Risk aversion intervals are elicited using generalized stochastic dominance for thirty northeastern Kansas farmers in order to investigate the relationship between age and level of risk aversion, the consistency of risk aversion over five income ranges, and the accuracy of farmers self‐assessments of risk aversion. Results indicate no statistically significant difference between the risk aversion levels of younger and older farmers. The majority of farmers expressed fairly consistent risk attitudes over different income ranges. Finally, farmers show some ability to assess their own risk attitudes.
Potential Benefits of Agricultural Research and Extension in Peru
Authors: Norton George W. , Ganoza Victor G. , Pomareda Carlos
Published: July 2006

The benefits of agricultural research and extension are examined in an ex ante consumer‐producer surplus framework for five commodities in Peru. The effects of demand shifts over time and government pricing policies on research and extension benefits are considered. Data for the analysis include the results of research and extension questionnaires administered at seven sites in Peru. The projected rates of return to research and extension indicate substantial returns to public investments.
Bootstrapping Confidence Intervals: An Application to Forecasting the Supply of Pork
Authors: Prescott David M. , Stengos Thanasis
Published: July 2006

The article demonstrates how the distribution‐free method of bootstrapping can be applied to the construction of confidence intervals for forecasts generated by a dynamic econometric model. Because the exogenous variables must be forecast, the forecasts of the dependent variable are functions of stochastic forecast‐period exogenous variables. A dynamic model of pork supply is used to illustrate the procedure.