Investing in a new perennial crop variety involves an irreversible commitment of capital and generates an uncertain return stream. As a result, the decision to adopt a new variety includes a significant real option value. Waiting for returns to rise above this real option causes a delay in adoption because of economic hysteresis. This study tests for hysteresis in the adoption of wine grape varieties using a sample of district-level data from the state of California. The empirical results show a significant hysteretic effect in wine grape investment, which might be reduced by activities that smooth earnings over time.

Public health experts are concerned about the diminishing efficacy of antibiotics. Some have called for a ban on growth-promoting antibiotics in animal agriculture. This study identifies the contribution of growth-promoting antibiotics in the grower/finisher phase of U.S. pork production. With National Animal Health Monitoring System swine data, relationships are estimated between growth-promoting antibiotic use and productivity. Results indicate improvements in average daily gain (0.5%), feed conversion ratio (1.1%), and mortality rate (reduced 0.22 percentage points); these productivity improvements translate into a profitability gain of $0.59 per pig marketed, or an improvement of 9% in net profits associated with growth promotion antibiotics.

The 1986 U.S. Grain Quality Improvement Act introduced an explicit, economic purpose for grades—that they transmit information about end use value—but provided little guidance about what factors to include in grades. We determine which quality characteristics best reflect the processed value of U.S. corn in the case of a Japanese wet miller. Foreign material is the only grade factor closely related to processed value, but a large number of nongrade attributes, many of which reflect the intrinsic properties of corn, are found to vary substantially across shipments and to provide extensive information about value. Recommendations for U.S. grades are made.

Predominance of production and marketing contracts in the broiler industry suggests a traditional analysis of price relationships might no longer be appropriate. In this study, markets for broiler cuts are defined as spatial. Results of a vector autoregressive regression analysis of monthly USDA data from 1987 to 2000 verify the price relationship between white meat and whole broiler prices. Price shocks in the boneless skinless breast market have a greater effect than dark meat shocks, suggesting this market is most important in price transmission. These results will assist industry participants to form more effective marketing and pricing strategies, thus adding efficiency to the market.

This study investigated the cost structure of the floriculture industry in the United States. Economies of scale and input elasticities were estimated with a normalized quadratic cost function. Results suggest that economies of scale exist in the floriculture industry. As producers become large and more automated, they have a cost advantage relative to smaller producers who are producing the same output product mix. The existence of economies of scale suggests that average grower size can increase in the future as growers increase in size to take advantage of cost efficiencies.

Dual-purpose winter wheat production is an important economic enterprise in the southern Great Plains of the United States. Because of the complex interactions involved in producing wheat grain and beef gain from a single crop, stocking density is an important decision. The objective of the research is to determine the stocking density that maximizes expected net returns from dual-purpose winter wheat production. Statistical tests rejected a conventional linear-response plateau function in favor of a linear-response stochastic plateau function. The optimal stocking density of 1.48 steers/ha (0.60 steers/acre) is 19% greater with a stochastic than with a nonstochastic plateau.

Increased use of alternative fuels and low commodity prices have contributed to the recent expansion of the U.S. ethanol industry. As with any competitive industry, some level of output price risk exists in the form of volatility; yet, no actively traded ethanol futures market exists to mitigate output price risk. This study reports estimated minimum variance cross-hedge ratios between Detroit spot cash ethanol and the New York Mercantile Exchange unleaded gasoline futures for 1-, 4-, 8-, 12-, 16-, 20-, 24-, and 28-week hedge horizons. The research suggests that a one-to-one cross-hedge ratio is not appropriate for some horizons.

This paper develops and illustrates the application of a procedure to evaluate and compare the cost effectiveness of alternative crop insurance products for cotton in terms of their effect on expected producer net returns and the variation of net returns. Farm unit-level cotton yields and state-level price distributions are estimated by a multivariate nonnormal parametric modeling procedure and used to simulate the net returns to alternative crop insurance products over a 10-year planning horizon. The ranking of alternative insurance products using third-degree stochastic dominance is presented for Texas cotton producers.

The role of farm dependency and size on rural economic growth is examined with data from 2,240 nonmetropolitan U.S. counties for the period 1990–1995. A simple neoclassical model of regional economic growth is set forth with a central question relating to the role of agriculture on rural economic convergence. Traditional neoclassical theory predicts that poor rural areas should grow proportionally faster than rich areas. As interpreted in the academic literature and popular press, a preponderance of small family farms should enhance growth. Results suggest that a higher level of local dependence on production agriculture could lower growth rates.

Questions have been raised regarding the economic costs of a foot-and-mouth disease (FMD) outbreak in the United States. This analysis examines how welfare changes are measured and argues that they must be decomposed by groups. Producers with animals quarantined and slaughtered because of FMD measure their welfare change using lost sales. Producers not quarantined measure their welfare change using producer surplus. The change in national sales revenue is accurate when the supply elasticity is low. Welfare changes for consumers also must be decomposed because the change in aggregate consumer surplus hides important shifts in welfare among groups of consumers.

This study employs correlation relationships to measure the strength of trade-offs between business and financial risks as a representation of the strategic capital adjustment process. Under different business risk measures based on varying lengths of historical farm income data, results suggest that farmers tend to adopt a myopic perspective when contemplating risk-balancing plans. Cross-sectional regression results for two-time period models covering the decade of the 1980s and 1990s yielded important implications. The liquidity-constrained environment of the 1980s emphasizes the combination of risk-balancing plans, specialization, and market revenue-enhancing strategies. In the 1990s, risk balancing becomes compatible with risk-reducing crop diversification and insurance protection plans.

This study investigates a number of factors influencing technical efficiency of Greek farms participating in the 1994 European Union (EU) farm credit program. Technical efficiency measures are obtained within the framework of a parametric stochastic frontier. Factors showing a positive effect on technical efficiency are value of liabilities, number of hours of mechanical operation, large land size, and rental land, whereas those showing a negative effect are value of EU product subsidies, value of off-farm family income, and hired labor. The value of investments incurred by farms because of their participation in the 1994 farm credit program does not show any significant effect on technical efficiency. The predicted levels of technical efficiency indicate that the average technical efficiency of farms 3 years after participating in the 1994 farm credit program is lower than the average technical efficiency of the same farms the year before participating in the program. Thus, the program has failed to increase the efficiency of farms.

Landlord satisfaction levels with agricultural land-leasing agreements are examined with a 1998 sample of Arkansas landowners. Ordered probit models are estimated identifying which factors significantly affect satisfaction levels. Results indicate that the type of lease is not a significant determinant of landlord satisfaction levels. Proportion of landlord's income from leasing, tenant educational background, social capital variables, presence of irrigation equipment, and perceptions about the FAIR Act were found to significantly affect lease satisfaction in at least one of the three satisfaction models estimated. A comparison with an earlier study of Arkansas tenants indicates landlords have generally higher satisfaction levels.