nep-agr New Economics Papers
on Agricultural Economics
Issue of 2008‒03‒08
nineteen papers chosen by
Angelo Zago
University of Verona

  1. Land Allocation Effects of the Global Ethanol Surge: Predictions from the International FAPRI Model By Fabiosa, Jacinto F.; Beghin, John C.; Dong, Fengxia; Elobeid, Amani; Tokgoz, Simla; Yu, Tun-Hsiang (Edward)
  2. Farm Policies and Added Sugars in US Diets By John C. Beghin; Helen H. Jensen
  3. Public–private partnerships in international agricultural research: By Spielman, David J.; Hartwich, Frank; von Grebmer, Klaus
  4. The future of modernized agriculture and the return of traditional techniques By Sortino, Antonio; Chang Ting Fa, Margherita; Piccinini, Livio Clemente
  5. The role of government in agricultural innovation: Lessons from Bolivia By Hartwich, Frank; Jansen, Heinz-Gerhard
  6. Impacts of Reduced Water Availability on Lower Murray Irrigation, Australia By Jeffery Connor; Mac Kirby; Anna Lukasiewicz; David Kaczan
  7. The extent of the market and stages of agricultural specialization By Shilpi, Forhad; Emran, M. Shahe
  8. Heterogeneous technology and panel data : the case of the agricultural production function By Larson, Donald F.; Butzer, Rita; Mundlak, Yair
  9. Iowa's Turkey Industry: An Economic Review By Lawrence, John D.; Bortz, Laura
  10. The Planting Real Option in Cash Rent Valuation By Xiaodong Du; David A. Hennessy
  11. Ethanol, Mandates, and Drought: Insights from a Stochastic Equilibrium Model of the U.S. Corn Market By Lihong Lu McPhail; Bruce A. Babcock
  12. On the Nature of a Cooperative: A System of Attributes Perspective By Feng, L.; Hendrikse, G.W.J.
  13. Modeling Expert Opinions on Food Healthiness: A Nutrition Metric By Jolie Mae Martin; John Leonard Beshears; Katherine Lyford Milkman; Max H. Bazerman; Lisa Sutherland
  14. El rol gubernamental en el proceso de innovación agropecuaria: La experiencia de Bolivia By Hartwich, Frank; Jansen, Heinz-Gerhard
  15. Economic Importance of the Iowa Egg Industry By Lawrence, John D.; Ellis, Shane C.; Otto, Daniel
  16. Valuing access to water - a spatial hedonic approach applied to Indian cities By Lall, Somik; Deichmann, Uwe; Lozano-Gracia, Nancy; Anselin, Luc
  17. Responding to Afghanistan ' s Opium economy challenge : lessons and policy implications from a development perspective By Byrd, William A.
  18. An Economic Model for Bioprospecting Contracts By Paulo A.L.D. Nunes; Helen Ding; Laura Onofri
  19. Collective Reputation, Entry and Minimum Quality Standard By Raphaël Soubeyran; Elodie Rouvière

  1. By: Fabiosa, Jacinto F.; Beghin, John C.; Dong, Fengxia; Elobeid, Amani; Tokgoz, Simla; Yu, Tun-Hsiang (Edward)
    Abstract: We quantify the emergence of biofuel markets and its impact on U.S. and world agriculture for the coming decade using the multi-market multi-commodity international FAPRI model. The model incorporates the tradeoffs between biofuel, feed, and food production and consumption and international feedback effects of the emergence through world commodity prices and trade. We examine land allocation by type of crop, and pasture use for countries growing feedstock for ethanol (corn, sorghum, wheat, sugarcane, and other grains) and major crops competing with feedstock for land resources such as oilseeds. We shock the model with exogenous changes in ethanol demand, first in the United States, then in Brazil, China, EU, and India, and compute shock multipliers for land allocation decisions for crops and countries of interest. The multipliers show at the margin how sensitive land allocation is to the growing demand for ethanol. Land moves away from major crops and pasture competing for resources with feedstock crops. Because of the high U.S. tariff on ethanol, higher U.S. demand for ethanol translates into a U.S. ethanol production expansion. The latter has global effects on land allocation as higher coarse grains prices transmit worldwide. Changes in U.S. coarse grain prices also affect U.S. wheat and oilseeds prices, which are all transmitted to world markets. In contrast, expansion in Brazil ethanol use and production chiefly affects land used for sugarcane production in Brazil and to a lesser extent in other sugar-producing countries, but with small impact on other land uses in most countries. Keywords: Acreage, area, biofuel, corn, crops, ethanol, FAPRI model, feedstock, land, sugar, sugarcane. JEL Code: Q42 Q17 Q15
    Keywords: Acreage, area, biofuel, corn, crops, ethanol, FAPRI model, feedstock, land, sugar, sugarcane.
    JEL: Q1
    Date: 2008–03–03
  2. By: John C. Beghin; Helen H. Jensen (Center for Agricultural and Rural Development (CARD); Midwest Agribusiness Trade Research and Information Center (MATRIC))
    Abstract: Major changes in the use of US sweeteners have occurred since 1970, in both the amount and composition. Increased consumption of caloric sweeteners, especially in beverages, has been linked to excess energy intake and lower-quality diets. We examine how US farm policies (specifically agricultural research and development [R&D] expenditures and commodity programs) have affected the consumption and composition of sweeteners in the US diet. R&D expenditures have lowered the unit cost of most commodities and increased their use in food production, ceteris paribus, although corn has benefited more than sugar crops in the technical progress. Commodity programs have raised the price of sugar and decreased the price of corn; high fructose corn syrup (HFCS) became an inexpensive substitute for sugar in food beginning in 1970. However, the effect of this change in the price of ingredients has become less important over time. Today the farm value share in sweetened food is very small (below 5%), and HFCS has become a specialized input in many food items. Countries with different or no commodity programs experience similar increases in consumption of added sugar. We conclude that the current link between the US consumption of caloric sweeteners and farm policy is tenuous, although historically the link was stronger.
    Keywords: added sugar, agricultural policy, caloric, corn, diet, farm policies, HFCS, subsidy, sugar, sweetener. JEL codes: Q18, D12, I18
    Date: 2008–02
  3. By: Spielman, David J.; Hartwich, Frank; von Grebmer, Klaus
    Abstract: "Public-private partnerships (PPPs) in agricultural research and development are increasingly viewed as an effective means of conducting advanced research, developing new technologies, and deploying new products for the benefit of small-scale, resource-poor farmers and other marginalized groups in developing countries. There are, however, few studies that empirically establish whether PPPs fulfill this role in the context of developing-country agriculture. This brief presents the results of a study that examines how PPPs in agricultural research stimulate greater investment in pro-poor innovation in developing country agriculture. The brief provides policymakers, research managers, and business decisionmakers with a better understanding of how such partnerships operate, what types of challenges they face, and how their operation can be improved to make a greater contribution to food security and poverty reduction." from text
    Keywords: Agricultural research, Agricultural development, Research and development, Public-private partnership,
    Date: 2007
  4. By: Sortino, Antonio; Chang Ting Fa, Margherita; Piccinini, Livio Clemente
    Abstract: The industrialization of the agricultural sector has resolved, at least in Europe and in the United States, the thousand year-old problem of the lack of food. Unfortunately, during the last years the limits of such an agriculture clearly exploded. The modernized agriculture, in fact, produces negative externalities and it does not assure food safety. Through our contribution we hypothesize three future scenarios for modernized agriculture. We shall study in particular the one that foresees the conversion to sustainability through the return of traditional techniques. In order to analyze the problem, we shall introduce the Sraffian framework of the “re-switching of techniques”. Finally we shall build an original and new model of “reswitching” for the short period. The aim of our work is to show that, at least theoretically, it is possible that a traditional agricultural technique could be convenient in a context of both low and high profit level.
    Keywords: Re-switching of techniques; modernized agriculture; sustainable development
    JEL: O1 Q1
    Date: 2008–01
  5. By: Hartwich, Frank; Jansen, Heinz-Gerhard
    Abstract: "Many governments in developing countries attempt to foster agricultural development and innovation by setting up funding facilities, extension programs, and research centers and by subsidizing private-sector and farm activities through fiscal measures. However, when trying to manage complex innovation processes involving many and different actors, governments sometimes find it difficult to design effective interventions and therefore end up supporting and managing only the public research and extension organizations that directly depend upon them. With the aid of various donors, Bolivia introduced a scheme in 2001—the Bolivian Agricultural Technology System (SIBTA)—by which government support to agricultural research and extension was partly delegated to regional semiautonomous foundations. This brief presents the results of a study on the role of the Bolivian government in guiding and managing SIBTA. The study found that despite a number of weaknesses related to the design of the system and the government's limited commitment, the regional foundations have been able to effectively identify the demands of small farmers, set priorities, and provide transparency and accountability with regard to funding and decisionmaking. It suggests that instead of micromanaging such foundations, the government should focus on the big picture and conduct policy analysis and strategic planning to identify opportunities for agricultural innovation and set up incentive mechanisms and information networks that support the many actors involved in innovation processes." from text
    Keywords: Agricultural innovations, Private sector, Technological innovations, Agricultural research, Agricultural development, stakeholders, Farmers, Producer organizations, Extension,
    Date: 2007
  6. By: Jeffery Connor; Mac Kirby; Anna Lukasiewicz; David Kaczan (CSIRO Land and Water, Australia)
    Abstract: This article evaluates irrigated agriculture sector response and resultant economic impacts of climate change for a part of the Murray Darling Basin in Australia. A water balance model is used to predict reduced basin inflows for mild, moderate and severe climate change scenarios involving 10, 20, 40 Celcius warming, and predict 13%, 38% and 63% reduced inflows. Impact on irrigated agricultural production and profitability are estimated with a mathematical programming model using a two-stage approach that simultaneously estimates short and long-run adjustments. The model accounts for a range of adaptive responses including: deficit irrigation, temporarily fallowing some areas, and permanently reducing irrigated area and changing the mix of crops. The results suggest that relatively low cost adaptation strategies are available for moderate reduction in water availability and thus costs of such reduction are likely to be relatively small. In more severe climate change scenarios greater costs are estimated, adaptations predicted include a reduction in total area irrigated, investments in efficient irrigation, and a shift away from perennial to annual crops as the latter can be managed more profitably when water allocations in some years are very low.
    Keywords: water availability, irrigation, Murray Darling Basin, climate change
    JEL: Q1 Q2
    Date: 2008–02
  7. By: Shilpi, Forhad; Emran, M. Shahe
    Abstract: This paper provides empirical evidence of nonlinearity in the relationship between crop specialization in a village economy and the extent of the market (size of the urban market) relevant for the village. The results suggest that the portfolio of crops in a village economy becomes more diversified initially as the extent of the market increases. However, after the market size reaches a threshold, the production structure becomes specialized again. This evidence on the stages of agricultural diversification is consistent with the stages of diversification identified in the recent literature for the economy as a whole and also for the manufacturing sector. The evidence highlights the importance of improving farmers ' access to markets through investment in transport infrastructure and removal of barriers to trading.
    Keywords: Transport Economics Policy & Planning,Markets and Market Access,Political Economy,Debt Markets,Crops & Crop Management Systems
    Date: 2008–02–01
  8. By: Larson, Donald F.; Butzer, Rita; Mundlak, Yair
    Abstract: The paper presents empirical analysis of a panel of countries to estimate an agricultural production function using a measure of capital in agriculture absent from most studies. The authors employ a heterogeneous technology framework where implemented technology is chosen jointly with inputs to interpret information obtained in the empirical analysis of panel data. The paper discuss es the scope for replacing country and time effects by observed variables and the limitations of instrumental variables. The empirical results differ from those reported in the literature for cross-country studies, largely in augmenting the role of capital, in combination with productivity gains, as a driver of agricultural growth. The results indicate that total factor productivity increased at an average rate of 3.2 percent, accounting for 59 percent of overall growth. Most of the remaining gains stem from large inflows of fixed capital into agriculture. The results also suggest possible constraints to fertilizer use.
    Keywords: Economic Theory & Research,Labor Policies,Economic Growth,E-Business,Rural Development Knowledge & Information Systems
    Date: 2008–02–01
  9. By: Lawrence, John D.; Bortz, Laura
    Abstract: The Iowa turkey industry is an important agricultural value-added activity providing income and employment opportunities for rural areas in Iowa. The 8.54 million turkeys produced and more than 14 million birds processed in Iowa each year require nearly 2000 full-time equivalent employees. Annual wages and salaries total an estimated $55.6 million of wages and salaries for processing and production. When all direct and secondary effects are considered, the total impacts include $810.7 million of sales, $158.7 million of personal income, $253.3 million of contribution to the gross state product, and about 4,200 jobs.
    Date: 2008–03–05
  10. By: Xiaodong Du; David A. Hennessy (Center for Agricultural and Rural Development (CARD))
    Abstract: After entering into farmland rental contracts in the fall, a tenant farmer has the planting flexibility to choose between corn and soybeans. Failure to account for this switching option will bias estimates of what farmers should pay to rent land. Applying contingent claims analysis methods, this study explicitly derives the real option value function. Comparative statics with respect to the volatilities of underlying state variables and their correlations are derived and discussed. Dynamic hedging deltas in this real option context are also developed. Monte Carlo simulation results show that the average cash rent valuation for the real option approach is 11% higher than that for the conventional net present value (NPV) method. The simulated dynamic hedging deltas are shown to differ from the ones implied by the NPV method.
    Keywords: cash rent, delta hedging, Monte Carlo simulation, multivariate GARCH, real option, Ricardian rent.
    JEL: C5 G1 Q1
    Date: 2008–02
  11. By: Lihong Lu McPhail; Bruce A. Babcock (Center for Agricultural and Rural Development (CARD); Midwest Agribusiness Trade Research and Information Center (MATRIC))
    Abstract: The outlook for U.S. corn markets is inextricably linked to what happens to the U.S. ethanol industry, which depends, in turn, on the level of government subsidies and mandates. We develop a stochastic partial equilibrium model to simulate outcomes for the corn market for the 2008/09 marketing year to gain insight into these linkages. The model includes five stochastic variables that are major contributors to corn price volatility: planted acreage, corn yield, export demand, gasoline prices, and capacity of the ethanol industry. Our results indicate that integration of gasoline and corn markets has increased corn price volatility and that the passage of the expanded ethanol mandates in the Energy Independence and Security Act (EISA) has had modest effects on corn prices. Model results indicate an expected average marketing year price of $4.97 per bushel and a price volatility of 17.5% without the 10 billion gallon EISA mandate but with maintenance of the $0.51-per-gallon tax credit. Imposition of the mandate increases the expected price by 7.1% and price volatility by 12.1%. The effects of the mandate are modest, as ethanol production would average 9.5 billion gallons without the mandate because of high gasoline prices. The mandate is binding with a probability of 37.8%, which indicates that an additional tax or subsidy will be needed to ensure that the mandate is met. High corn prices caused by drought can cause the mandate to bind. Fixing 2008 corn yields at extreme drought levels increases expected corn prices to $6.59 per bushel without a mandate and to $7.99 per bushel with the EISA mandate. An average additional subsidy of $0.73 per gallon of ethanol would be needed to ensure that the mandate is met in this drought scenario. Elimination of the current blenders tax credit would result in the mandate not being met in all cases. On average, a subsidy of $0.41 per gallon would ensure that ethanol production is at least 10 billion gallons in the 2008/09 marketing year.
    Keywords: EISA mandate, ethanol, price volatility of corn, stochastic equilibrium.
    Date: 2008–03
  12. By: Feng, L.; Hendrikse, G.W.J. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: In the 1950s and 1960s there was a debate about the nature of an agricultural cooperative: the cooperative as extension of the farm, the cooperative as vertical integration or the cooperative as a firm. We revisit this debate with various concepts from the theory of the firm that have been formulated since 1990. Two concepts shed light on this debate: the enterprise as a system of attributes and the delineation of a governance structure in terms of ownership rights, control rights and income rights. We argue that viewing the cooperative as a system of attributes integrates these three views. It emphasizes that a cooperative is a firm in itself, with many input suppliers as owners. The feature of many input suppliers as owners implies that the behavioral differences between a cooperative and an investor owned firm have to be addressed by highlighting the unique aspects of the stakeholder owning the enterprise.
    Keywords: cooperative;vertical integration;extension of the farm;governance
    Date: 2007–12–19
  13. By: Jolie Mae Martin (Harvard Business School); John Leonard Beshears (Harvard Business School); Katherine Lyford Milkman (Harvard Business School); Max H. Bazerman (Harvard Business School, Negotiation, Organizations & Markets Unit); Lisa Sutherland (Dartmouth Medical School, Department of Pediatrics)
    Abstract: Background Research over the last several decades indicates the failure of existing nutritional labels to substantially improve the healthiness of consumers' food and beverage choices. The difficulty for policy-makers is to encapsulate a wide body of scientific knowledge in a labeling scheme that is comprehensible to the average shopper. Here, we describe our method of developing a nutrition metric to fill this void. Methods We asked leading nutrition experts to rate the healthiness of 205 sample foods and beverages, and after verifying the similarity of their responses, we generated a model that calculates the expected average healthiness rating that experts would give to any other product based on its nutrient content. Results The form of the model is a linear regression that places weights on 12 nutritional components (total fat, saturated fat, cholesterol, sodium, total carbohydrate, dietary fiber, sugars, protein, vitamin A, vitamin C, calcium, and iron) to predict the average healthiness rating that experts would give to any food or beverage. We provide sample predictions for other items in our database. Conclusions Major benefits of the model include its basis in expert judgment, its straightforward application, the flexibility of transforming its output ratings to any linear scale, and its ease of interpretation. This metric serves the purpose of distilling expert knowledge into a form usable by consumers so that they are empowered to make healthier decisions.
    Date: 2008–03
  14. By: Hartwich, Frank; Jansen, Heinz-Gerhard
    Abstract: "Muchos gobiernos en países en desarrollo intentan estimular el crecimiento y la innovación agropecuaria estableciendo entidades de financiamiento, programas de extensión y centros de investigación pública, así como subvencionando actividades agrícolas y al sector privado por medio de medidas fiscales. Sin embargo, al tratar de gestionar procesos complejos de innovación, donde participan múltiples y diversos actores, en ocasiones los gobiernos encuentran difícil definir intervenciones eficaces y, en consecuencia, acaban apoyando y gestionando únicamente las entidades de investigación y extensión públicas que dependen directamente de ellos. Gracias a la colaboración de una diversidad de donantes, en el año 2001 Bolivia introdujo un novedoso sistema —el Sistema Boliviano de Tecnología Agropecuaria (SIBTA) — mediante el cual el apoyo gubernamental a la investigación y la extensión agropecuaria se delegó parcialmente a fundaciones regionales semiautónomas. Esta síntesis presenta los resultados de un estudio sobre el rol desempeñado por el gobierno boliviano en la definición de los lineamientos y la administración del SIBTA. En el estudio se determinó que, a pesar de algunas debilidades en cuanto al diseño del sistema y al limitado compromiso del gobierno, las fundaciones regionales han logrado identificar eficazmente las demandas de los pequeños productores, establecer prioridades y trabajar con transparencia y responsabilidad en los aspectos de financiamiento y toma de decisiones. En consecuencia, se sugiere que, en lugar de microgestionar dichas fundaciones, el gobierno concentre sus esfuerzos en considerar el panorama completo, realizando los análisis de políticas y la planificación estratégica que permitan identificar oportunidades para la innovación agropecuaria, y estableciendo esquemas de incentivos y redes de información que respalden a los muchos actores que toman parte en los procesos de innovación." from text
    Keywords: Agricultural innovations, Private sector, Technological innovations, Agricultural research, Agricultural development, stakeholders, Farmers, Producer organizations, Extension,
    Date: 2007
  15. By: Lawrence, John D.; Ellis, Shane C.; Otto, Daniel
    Abstract: Iowa leads the nation in egg production, producing more than the second and third largest states combined. There were approximately 52.7 million layers in Iowa produced 13.9 billion eggs in 2007. This level of production consumes 50 million bushels of corn and 453,000 tons of soybean meal. In addition, the egg industry is an important value-added activity in Iowa, directly employing an estimated 2,870 hatchery, production, and processing workers in 2007 and generating over $123 million in direct payroll. Adding in the indirect and induced impacts on the Iowa economy brings total labor income to $281.3 million for nearly 7,600 total jobs and value added of $475.7 million attributable to of the egg industry on the Iowa economy.
    Date: 2008–03–05
  16. By: Lall, Somik; Deichmann, Uwe; Lozano-Gracia, Nancy; Anselin, Luc
    Abstract: An important infrastructure policy issue for rapidly growing cities in developing countries is how to raise fiscal revenues to finance basic services in a fair and efficient manner. This paper applies hedonic analysis that explicitly accounts for spatial spillovers to derive the value of improved access to water in the Indian cities of Bhopal and Bangalore. The findings suggest that by looking at individual or private benefits only, the analysis may underestimate the overall social welfare from investing in service supply especially among the poorest residents. The paper further demonstrates how policy simulations based on these estimates help prioritize spatial targeting of interventions according to efficiency and equity criteria.
    Keywords: Town Water Supply and Sanitation,Housing & Human Habitats,Water Supply and Sanitation Governance and Institutions,Water and Industry,Water Use
    Date: 2008–02–01
  17. By: Byrd, William A.
    Abstract: Opium, Afghanistan ' s leading economic activity, lies at the heart of the challenges the country faces in state building, governance, security, and development. With their narrow law enforcement focus and limited recognition of development, security, and political implications, current global counter-narcotics polices impose a heavy burden on Afghanistan. This paper first provides a summary overview of Afghanistan ' s opium economy and the factors determining rural households ' decisions on cultivating opium poppy. It then discusses the dynamic evolution of the Afghan drug industry in recent years, in particular its consolidation around fewer, powerful, politically-connected actors and the associated compromising of parts of some government agencies by drug industry interests. The paper reviews the experience with different counter-narcotics interventions, analyzes some proposals not yet tried in Afghanistan, and draws lessons and policy implications. Unfortunately there are no " silver bullets " -easy, quick, or one-dimensional solutions, and a longer-term horizon along with sustained commitment and resources will be required in order to phase out the opium economy over time. The paper concludes by putting forward some broad principles and approaches of a " smart strategy " against drugs in Afghanistan.
    Keywords: Rural Poverty Reduction,Alcohol and Substance Abuse,Crops & Crop Management Systems,Economic Theory & Research,Pharmaceuticals Industry
    Date: 2008–03–01
  18. By: Paulo A.L.D. Nunes (University of Venice and Fondazione Eni Enrico Mattei); Helen Ding (Fondazione Eni Enrico Mattei); Laura Onofri (University of Venice)
    Abstract: This paper explores the use of a micro-economic model to analyse the provisions and parties of bioprospecting contracts. It focuses on the pharmaceutical industry as the representative biodiversity buyer, presenting an original theoretical framework that explains the main contract characteristics or stylised facts. Against this background, it considers the main contractors involved in these private contracts, i.e. biodiversity sellers and biodiversity buyers, analysing both the magnitude and distribution of the respective payoffs. Particular attention is devoted to the different, mixed impacts of bioprospecting contracts and patenting on social welfare. The positive welfare impacts delivered by bioprospecting contracts are associated with the potential discovery of a new drug product, i.e. productivity gains, non-monetary benefit-sharing or transfers and royalty revenues. The negative welfare impact results from the legal creation of a monopoly and the related well-known effect on the consumer surplus. Finally, the potential redistribution effects are limited, and a potential enforcement of this objective may jeopardise the desirability of the contracts since this action would lead to a significant increase in the transaction costs.
    Keywords: Bioprospecting Contract, Genetic Resource, Biodiversity Buyer, Biodiversity Seller, Patenting, Welfare Analysis, Benefit Sharing
    JEL: D21 D23 D61 L14 Q57
    Date: 2007–11
  19. By: Raphaël Soubeyran (INRA-MOISA); Elodie Rouvière (INRA-MOISA)
    Abstract: This article deals with the issue of entry into an industry where firms share a collective reputation. First, we show that free entry is not socially optimal; there is a need for regulation through the imposition of a minimum quality standard. Second, we argue that a minimum quality standard can induce firms to enter the market. Contrary to conventional wisdom, a minimum quality standard should not always be considered as a barrier to entry.
    Keywords: Collective Reputation, Entry, Minimum Quality Standard
    JEL: L11 H41 I18 Q18
    Date: 2008–01

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