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The partial equilibrium model links the infection risk from imported products to a premium, which compensates the importing country for the risk incurred by allowing imports from infected countries. The model is applied to the Porcine Reproductive and Respiratory Syndrome (PRRS) and Mexican live swine imports. The premium is sensitive to the expected loss from a PRRS outbreak and to the magnitude of the risk. As the risk or severity of PRRS rises, so does the level of the barrier. If swine imports are categorized and appropriate restrictions applied, an acceptable level of disease protection can be achieved while improving national welfare.
We evaluate agricultural bank management performance, focusing on the impacts of interstate banking laws on productivity change. The generalized Malmquist productivity index decomposes productivity change into technological change, technical efficiency change, and change in scale economies. While managerial productivity rose from 1982 to 1991, states that adopted the most liberal interstate banking laws experienced the greatest improvement in productivity. Large agricultural banks were more efficient in states that had more liberalized interstate banking laws while small agricultural banks fared better in states with more restrictive laws.
Many agricultural producers face cash price distributions that are effectively truncated at a lower limit through participation in farm programs designed to support farm prices and incomes. For example, the 1996 Federal Agricultural Improvement Act (FAIR) makes many producers eligible to obtain marketing loans which truncate their cash price realization at the loan rate, while allowing market prices to freely equilibrate supply and demand. This paper studies the effects of truncated cash price distributions on the optimal use of futures and options. The results show that truncation in the cash price distribution facing an individual producer provides incentives to trade options as well as futures. We derive optimal futures and options trading rules under a range of different truncation scenarios. Empirical results highlight the impacts of basis risk and yield risk on the optimal futures and options portfolio.
Expected prices for storable commodities often lie below spot prices plus interest and marginal storage charges. Recently this gap has been explained as the value of a call option held by a representative storer whenever a positive probability exists that stocks could dwindle to zero. However, the probability of an aggregate stock-out is effectively zero in most markets most of the time. This paper presents an alternative model that explains the gap as an equilibrium between fundamentals traders and noise traders. Applications of the model suggest that rational agents make up 84 percent of the U.S. copper market, and more than 95 percent of the corn and wheat markets.
The success of the Boll Weevil Eradication (BWE) Program is believed to be one factor underlying the recent increase in cotton acreage in the Southeast. We find weak evidence that the initial, eradication phase of the BWE program decreases cotton acreage, and strong evidence that the second, maintenance phase of the program increases acreage. The full benefits associated with a BWE program may not become apparent until acreage adjustments occur, four to five years after program initiation. Our results indicate that for a representative sample county neglecting acreage effects may lead to underestimation of BWE program net benefits by 9 percent-12 percent.
An adaptive regression model is employed for estimating pre- and post-boll weevil eradication cotton-acreage response. Results indicate cotton acreage becoming more inelastic to own- and cross-price changes. As a result of this shift in acreage response and yield increases from eradication, net producer benefits on average are $88.73 per acre.
Resurgent cotton production compels better acreage forecasts for planning seed, chemical, and other input requirements. Structural models describe leading acreage response indicators, and forecasts are compared to time-series models. Cotton price, loan rate, deficiency payments, lagged corn acreage, the PIK program, and previous cotton yield significantly influence cotton acreage response.
This paper examines the effects of optional subdivision on APHP losses for wheat, corn, and soybeans. Thirty-seven state/crop programs are analyzed and the implications of the results are discussed in relation to newly developed crop and revenue insurance programs. The results illustrate the importance of incorporating actuarial experience into the premium rate structure and contract provisions of an insurance program.
Approximate profit functions are estimated using time-series, cross-sectional, county level data for 12 midwest states. Measures of climate variability are included in the profit functions. Simulated impacts of climate changes on profits are derived. Results show that inclusion of measures of climate variation are important for measuring the impact of changes in mean temperature and precipitation levels. Failure to account for the impact of differences in variability leads to an overestimate of damages. If global warming increases diurnal variation, such increases would have negative impacts on the profitability of midwest agriculture.
The impact of adopting integrated pest management (IPM) techniques is examined for peach producers in eight states accounting for most of the U.S. production. The method accounts for self-selectivity, simultaneity, and the pesticide demand equations are theoretically consistent with a restricted-profit function. Biological pest management techniques tend to reduce pesticide use and pesticide toxicity substantially, while pesticide-efficiency techniques (using scouting and economic thresholds) have an increasing effect on pesticide use and toxicity, and cultural techniques have an insignificant effect on pesticide use and toxicity.
This paper investigates the motivations for local right-to-farm protection ordinances by estimating a logit model relating the adoption of these ordinances to various political, economic and demographic factors previously found to affect the likelihood of passage of farmland preservation policies. Results suggest that the probability of adopting right-to-farm policies increases with the size and political clout of the farm public and with incentives to promote right-to-farm. Adoption is not enhanced by environmental concerns, nor by factors known to encourage adoption of farmland preservation policies. These findings raise serious concerns about the long-run viability of protections afforded agriculture in urbanizing areas.
Thoroughbred incentive programs are subsidy policies funded from state parimutuel tax revenue designed to promote regional race horse breeding and ownership. At issue is an ongoing debate concerning the effectiveness of alternative policies. Empirical results indicate that incentive programs have a positive economic effect, but gains to Thoroughbred breeders can be obtained by reallocating tax revenue to non-restricted purses. A policy allocating tax revenue to non-restricted purses shifts yearling demand and increases prices, while breeder subsidies shift only the supply function and therefore lower prices. Consequently, breeder revenues increase in response to a policy that favors non-restricted purses over subsidies.
The relationship between student achievement and school inputs has long been a subject of academic research. The general conclusion of past research is that school inputs, such as the number of teachers relative to pupils, has little impact on student academic outcomes. This paper provides a fresh look at this issue. Seventeen alternative measures of student performance in North Carolina school districts are related to a wide array of school policy inputs and socioeconomic characteristics of students and their families. Both static and dynamic analyses are performed. The key findings are (1) the school policy inputs significantly related to student achievement vary by the measure of student achievement used, (2) the joint contribution of school policy inputs to student achievement is relatively small, and (3) the results differ between the static and dynamic analyses; in particular, changes in the number of teachers relative to the number of pupils in the district have a much stronger association with student achievement in the dynamic analysis.
Markov chain analysis (one-step and long-run) is applied to the National Resources Inventory (NRI) database to evaluate changes in wind-based soil erosion rates over time. The research compares changes in soil erosion rates between NRI sample sites with and without applied conservation practices for a random sample of Great Plains counties. No significant differences between sites are found for half of the counties evaluated. The effectiveness and efficiency of conservation policies are thus questioned in light of these research results.
The objective of this study was to identify factors which contribute to the earnings' success of cash grain farms in the United States. The study analyzes three measures of success including net farm income per dollar of asset, operators' returns to labor and management, and operators' management income. Logit regression analysis shows that controlling variable costs, ownership, management ability, technology adoption, and diversification are important factors that influence success.