New Economics Papers
on Agricultural Economics
Issue of 2011‒01‒23
fourteen papers chosen by

  1. Will Biofuel Mandates Raise Food Prices? By Chakravorty, Ujjayant; Hubert, Marie-Helene; Moreaux, Michel; Nostbakken, Linda
  2. The Impacts of Eliminating the Direct By Pan, S.; Hudson, D.; Mutuc, M.
  3. The Impact of Price Regulations on Regional Welfare and Agricultural Productivity in China By Selim, Sheikh
  4. Biomass Supply from Alternative Cellulosic Crops and Crop Residues: A Preliminary Spatial Bioeconomic Modeling Approach By Egbendewe-Mondzozo, Aklesso; Swinton, Scott M.; Izaurralde, R. César; Manowitz, David H.; Zhang, Xuesong
  5. Obesity and Diabetes, the Built Environment, and the ‘Local’ Food Economy By Matthew, Salois
  6. Trade-off between Bioenergy and Emissions When Land Is Scarce, The By Nathan S. Kauffman; Dermot J. Hayes
  7. Food Prices, Conflict, and Democratic Change By Rabah Arezki; Markus Brückner
  8. Carbon Prices Required to Make Digesters Profitable on U.S. Dairy Farms of Different Sizes By Lazarus, William F.; Goodkind, Andrew; Gallagher, Paul; Conway, Roger
  9. Water Rights and Markets in the U.S. Semi Arid West: Efficiency and Equity Issues By Gary D. Libecap
  10. Pricing Options on Commodity Futures: The Role of Weather and Storage By Marin Bozic
  11. Decision-making and Action Taking: Fisheries Management in a Changing Climate By David Fluharty
  12. Heterogeneity and Risk Sharing in Village Economies By Pierre-André Chiappori; Krislert Samphantharak; Sam Schulhofer-Wohl; Robert M. Townsend
  13. Essays on the Economics of Environmental Management and Green Reputation By Komarek, Timothy
  14. Efficiency Advantages of Grandfathering in Rights-Based Fisheries Management By Gary. D. Libecap; Terry Anderson; Ragnar Arnason

  1. By: Chakravorty, Ujjayant (University of Alberta, Department of Economics); Hubert, Marie-Helene (University of Rennes); Moreaux, Michel (Toulouse School of Economics); Nostbakken, Linda (University of Alberta, School of Business)
    Abstract: Biofuels have received a lot of attention as a substitute for gasoline in transportation. They have also been blamed for recent increases in food prices. Both the United States and the European Union have adopted mandatory blending policies that require a sharp increase in the use of biofuels. In this paper, we examine the effect of these mandates on food prices and carbon emissions. The model we use considers future world population growth and income-driven changes in dietary preferences towards higher meat and dairy consumption as well as heterogenous land quality. We find that food prices increase anyway because of increased demand for food, especially due to the higher consumption of meat products, and scarcity of fertile arable lands. The contribution of the biofuel mandates to food prices is quite small, about 5% at most. However, biofuel mandates actually increase global emissions due to land conversion and terms of trade effects, undermining the main reason for imposing the mandates.
    Keywords: agriculture; energy policy; global warming; land quality; renewable fuel standards
    JEL: Q24 Q32 Q42
    Date: 2011–01–01
  2. By: Pan, S.; Hudson, D.; Mutuc, M.
    Abstract: This study analyzes the effects of eliminating direct payments paid to cotton farmers in the U.S. Our results suggest that while the impact of eliminating direct payments on domestic production is offset to some extent by rising prices, the more ignificant effect is on farmersâ net income.
    Keywords: Agricultural and Food Policy, Production Economics,
    Date: 2011–01
  3. By: Selim, Sheikh (Cardiff Business School)
    Abstract: The nineties' agricultural reform in China that was aimed at deregulating the agricultural market eventually resulted in a huge drop in agricultural production and a high rate of inflation in agricultural prices; this apparently motivated the government to take over the control of agricultural prices in 1998. We examine how and to what extent this reform affected the productivity and welfare of grain farmers in China at the regional level. We find that the price regulation that destroyed the incentive to exert more effort adversely affected the growth in agricultural productivity but contributed to the growth in farmers. welfare. Although the price regulations resulted in short term improvement in welfare across all the regions, for the long run such regulations can result in larger drop in agricultural production because of its negative impact on incentives to produce more.
    Keywords: China; Welfare; TFP; Agriculture; Grain Production
    JEL: N55 O13 O53 Q12
    Date: 2011–01
  4. By: Egbendewe-Mondzozo, Aklesso; Swinton, Scott M.; Izaurralde, R. César; Manowitz, David H.; Zhang, Xuesong
    Abstract: This paper introduces a spatial bioeconomic model for study of potential cellulosic biomass supply at regional scale. By modeling the profitability of alternative crop production practices, it captures the opportunity cost of replacing current crops by cellulosic biomass crops. The model draws upon biophysical crop input-output coefficients, price and cost data, and spatial transportation costs in the context of profit maximization theory. Yields are simulated using temperature, precipitation and soil quality data with various commercial crops and potential new cellulosic biomass crops. Three types of alternative crop management scenarios are simulated by varying crop rotation, fertilization and tillage. The cost of transporting biomass to a specific demand location is obtained using road distances and bulk shipping costs from geographic information systems. The spatial mathematical programming model predicts the supply of biomass and implied environmental consequences for a landscape managed by representative, profit maximizing farmers. The model was applied and validated for simulation of cellulosic biomass supply in a 9-county region of southern Michigan. Results for 74 cropping systems simulated across 39 sub-watersheds show that crop residues are the first types of biomass to be supplied. Corn stover and wheat straw supply start at $21/Mg and $27/Mg delivered prices. Perennial bioenergy crops become profitable to produce when the delivered biomass price reaches $46/Mg for switchgrass, $118/Mg for grass mixes and $154/Mg for Miscanthus giganteus. The predicted effect of the USDA Biomass Conversion Assistance Program is to sharply reduce the minimum biomass price at which miscanthus would become profitable to supply. Compared to conventional crop production practices in the area, the EPIC-simulated environmental outcomes with crop residue removal include increased greenhouse gas emissions and reduced water quality through increased nutrient loss. By contrast, perennial cellulosic biomass crops reduced greenhouse gas emissions and improved water quality compared to current commercial cropping systems.
    Keywords: biomass production, bioenergy supply, biofuel policy, bioenergy, cellulosic ethanol, agro-ecosystem economics, ecosystem services economics, agro-environmental trade-off analysis, mathematical programming, EPIC, Agricultural and Food Policy, Crop Production/Industries, Environmental Economics and Policy, Land Economics/Use, Production Economics, Resource /Energy Economics and Policy, Q16, Q15, Q57, Q18,
    Date: 2010–12
  5. By: Matthew, Salois
    Abstract: Obesity and diabetes are increasingly attributed to environmental factors, however, little attention has been paid to influence of the 'local' food economy. This paper examines the association of measures relating to the built environment and the ‘local’ food economy with county-level prevalence of obesity and diabetes. Key indicators of the ‘local’ food economy include the density of farmers’ markets, volume of direct farm sales, and presence of farm-to-school programs. This paper employs a robust regression estimator to account for non-normality of the data and to accommodate outliers. Overall, the built environment is strongly associated with prevalence of obesity and diabetes and a strong 'local' food economy may play an important role in prevention. Results imply considerable scope for community-level interventions.
    Keywords: community-level intervention; diabetes; food environment; farmers market; leverage points; local food; robust regression; obesity; outliers
    JEL: C10 I12 I10 Q18
    Date: 2010–12–01
  6. By: Nathan S. Kauffman; Dermot J. Hayes (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI))
    Abstract: Agricultural biofuels require the use of scarce land, and this land has opportunity cost. We explore the objective function of a social planner who includes a land constraint in the optimization decision to minimize environmental cost. The results show that emissions should be measured on a per acre basis. Conventional agricultural life cycle assessments for biofuels report carbon emissions on a per gallon basis, thereby ignoring the implications of land scarcity and implicitly assuming an infinite supply of the inputs needed for production. Switchgrass and corn are then modeled as competing alternatives to show how the inclusion of a land constraint can influence life cycle rankings and alter policy conclusions.
    Keywords: biofuels, biomass, energy policy, land use, life cycle analysis. JEL codes: Q16, Q48, Q58
    Date: 2011–01
  7. By: Rabah Arezki (International Monetary Fund (IMF)); Markus Brückner (School of Economics, University of Adelaide)
    Abstract: We examine the effects that variations in the international food prices have on democracy and intra-state conflict using panel data for over 120 countries during the period 1970-2007. Our main finding is that in Low Income Countries increases in the international food prices lead to a significant deterioration of democratic institutions and a significant increase in the incidence of anti-government demonstrations, riots, and civil conflict. In the High Income Countries variations in the international food prices have no significant effects on democratic institutions and measures of intra-state conflict. Our empirical results point to a significant externality of variations in international food prices on Low Income Countries' social and political stability.
    Keywords: food prices, conflict, political institutions
    JEL: F34 H63 O13 P16 Q33 Q38
    Date: 2011–01
  8. By: Lazarus, William F.; Goodkind, Andrew; Gallagher, Paul; Conway, Roger
    Abstract: The objective of this analysis is to evaluate the impacts of three factors: 1) methane emission differences related to climate and manure storage type, 2) digester economies of size, and 3) electricity values on the minimum breakeven carbon dioxide (CO2) âequivalent methane (CH4) destruction prices that differentâsized dairy farms in different U.S. states would require to make anaerobic digester installation profitable. The number of digesters that would be installed at different prices, and the resulting emission reductions and electrical generation are also estimated. Dairy cows are a significant source of the greenhouse gas methane, so anaerobic digesters are receiving policy attention as a climate change mitigation strategy. Dairy farm methane emissions by state are calculated in this study using the methods used in the U.S. Environmental Protection Agencyâs annual greenhouse gas inventories. While all of the farms with 2,500âplus cows would install digesters at prices of less than $6 per metric tonne, prices of $39â55 would be required to justify digesters on the 100â199âcow farms. Supply curves are generated empirically for number of digesters, CH4 emission reductions, and digesterâgenerated electricity as a function of a carbon dioxide (CO2)âequivalent CH4 destruction prices ranging from zero to $100/metric tonne. Modeled electricity generation and CH4 destruction are complementary goods in that higher values on the destroyed CH4 encourage generation of more electricity. For example, a price of $40 would encourage as many as 4,138 digester installations with 24 teragrams of CO2âequivalent methane reductions and 468 megawatts of electrical generation. Digester CH4 destruction revenues may exacerbate consolidation in the dairy industry somewhat because digesters are not financially feasible below around 200 cows in most states. Methane destruction revenues under a $40 CO2 price will reduce the milk production cost by between $2.19 and $2.83 per 100 kilograms ($0.99 and $1.28 per 100) pounds on farms of 2,500 cows or more. On farms of 200 to 499 cows, CH4 destruction revenues would have less impact on milk production costs, from 70 cents to $1.32 per 100 kilograms (32 to 60 cents per 100 pounds).
    Keywords: anaerobic digester, biogas plant, livestock manure, electricity, methane, carbon offset value, Environmental Economics and Policy, Livestock Production/Industries,
    Date: 2011–01
  9. By: Gary D. Libecap
    Abstract: There are both high resource and political costs in defining and enforcing property rights to water and in managing it with markets. In this paper, I examine these issues in the semi-arid U.S. West where many of the intensifying demand and supply problems regarding fresh water are playing out. I begin by illustrating the current state of water markets in 12 western U.S. states. There are major differences in water prices across uses (agriculture, urban, environmental) and these differences appear to persist, suggesting that water markets have not developed fully enough to narrow the gaps. Moreover, there is considerable difference in the extent and nature of water trading across the western states, suggesting that water values and transaction costs of trade vary considerably across jurisdictions. I then turn to the resource and political costs of defining water rights and expanding the use of markets. In this discussion, efficiency and equity objectives play important, often conflicting, roles. This tension reflects the very social nature of the water resource.
    Date: 2010–12
  10. By: Marin Bozic (The Institute of Economics, Zagreb)
    Abstract: Options on agricultural futures are popular financial instruments used for agricultural price risk management and to speculate on future price movements. Poor performance of Black’s classical option pricing model has stimulated many researchers to introduce pricing models that are more consistent with observed option premiums. However, most models are motivated solely from the standpoint of the time series properties of futures prices and need for improvements in forecasting and hedging performance. In this paper I propose a novel arbitrage pricing model motivated from the economic theory of optimal storage and consistent with implications of plant physiology on the importance of weather stress. I introduce a pricing model for options on futures based on a generalized lambda distribution (GLD) that allows greater flexibility in higher moments of the expected terminal distribution of futures price. I use times and sales data for corn futures and options for the period 1995-2009 to estimate the implied skewness parameter separately for each trading day. An economic explanation is then presented for inter-year variations in implied skewness based on the theory of storage. After controlling for changes in planned acreage, I find a statistically significant negative relationship between ending stocks-to-use and implied skewness, as predicted by the theory of storage. Furthermore, intra-year dynamics of implied skewness reflect the fact that uncertainty in corn supply is resolved between late June and early October, i.e., during corn growth phases that encompass corn silking and grain maturity. Impacts of storage and weather on the distribution of terminal futures price jointly explain upward-sloping implied volatility curves.
    Keywords: arbitrage pricing model, options on futures, generalized lambda distribution, theory of storage, skewness
    JEL: G13 Q11 Q14
    Date: 2010–12
  11. By: David Fluharty
    Abstract: Decision-makers in fisheries management are confronted with the challenge of how to respond to existing and predicted changes in ocean conditions that are likely to affect the stocks of fish they manage. In order to address climate change most research and thinking advises decision-makers to ensure that fisheries are well-managed and abundant in an ecosystem context. These policies can best allow fisheries to adapt to changing climate. To address climate change, decision-makers should carefully monitor changing conditions and potential changes in factors affecting fish stock abundance. An adaptive approach to fisheries management under conditions of climate change requires that decision-makers engage with fishing interests in a transparent manner and in ways that respect the input of fishing interests and in ways that acknowledge the levels of uncertainty. This approach implies a governance approach to management that is closer to co-management or shared management responsibility than in most hierarchical processes that characterize fishery management to date. The answer to the question of when fishery decision-makers should begin to incorporate climate change into decision making processes is that they should have started yesterday. The justification for this is that even today, climate variability can affect fishery management decisions and the sooner this is understood and incorporated into the management process the better. In economic terms, a conservative decision relative to fisheries management is likely to produce a positive long term benefit whereas the failure to recognize the need to act in time may have serious immediate negative consequences especially when compounded by inadequate management. While climate change can also produce positive consequences for some species a note of caution is still advised in anticipating and responding to such opportunities.
    Keywords: governance, climate change, global warming, fishery policy, international fisheries, Fisheries management
    JEL: Q22 Q54 Q58
    Date: 2011–01
  12. By: Pierre-André Chiappori; Krislert Samphantharak; Sam Schulhofer-Wohl; Robert M. Townsend
    Abstract: We measure heterogeneity in risk aversion among households in Thai villages using a full risk-sharing model and complement the results with a measure based on optimal portfolio choice. Among households with relatives living in the same village, full insurance cannot be rejected, suggesting that relatives provide something close to a complete-markets consumption allocation. There is substantial heterogeneity in risk preferences estimated from the full-insurance model, positively correlated in most villages with portfolio-choice estimates. The heterogeneity matters for policy: Although the average household would benefit from eliminating village-level risk, less-risk-averse households who are paid to absorb that risk would be worse off.
    JEL: D12 D14 D53 D81 D91 G11 O16
    Date: 2011–01
  13. By: Komarek, Timothy
    Abstract: Many governments, firms, institutions and individuals have become increasingly cognizant of their impact on the environment, most notably with respect to global climate change. This coupled with a threat of future regulation and a desire for a âgreenâ image, among other reasons, has led firms and institutions to begin critically evaluating and managing their own âcarbon footprintâ. Effective programs to manage greenhouse gas emissions (GHG) benefit from understanding the preferences of the constituents the program intends to serve. This study uses a survey at Michigan State University to examine the preferences of constituents (students, faculty and staff) for attributes of alternative greenhouse gas (GHG) reduction strategies. The first essay examines how much respondents were willing to pay for GHG reduction program attributes and the welfare implications of several alternative policies. The second essay examines how the attributes of alternative GHG management plans influence the universityâs âgreenâ reputation.
    Keywords: 'Green' reputation, pro-environmental behavior, conjoint analysis, climate change policy, choice experiment, institution, Environmental Economics and Policy, Resource /Energy Economics and Policy, Q40, Q42, Q51,
    Date: 2010
  14. By: Gary. D. Libecap; Terry Anderson; Ragnar Arnason
    Abstract: We show that grandfathering fishing rights to local users or recognizing first possessions is more dynamically efficient than auctions of such rights. It is often argued that auctions allocate rights to the highest-valued users and thereby maximize resource rents. We counter that rents are not fixed in situ, but rather depend additionally upon the innovation, investment, and collective actions of fishers, who discover and enhance stocks and convert them into valuable goods and services. Our analysis shows how grandfathering increases rents by raising expected rates of return for investment, lowering the cost of capital, and providing incentives for collective action.
    Keywords: Fishing rights, property rights, allocating fishing rights, grandfathering fishing rights, auctions of fishing rights, fisheries rent
    JEL: N Q0 Q22 K11 D23
    Date: 2010–12

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