A NOTE ON DISTRIBUTED LAG MODELS OF MAIZE AND WHEAT PRODUCTION RESPONSE: THE KENYAN CASE*

In this note the supply responses in maize and wheat production are estimated from distributed lag models. The Nerlove model and the Fisher distributed lag model fit Kenyan data but more complicated models, like the polynomial lag model, do not. The calculated price elasticities suggest that Kenyan large-scale farmers are highly responsive to price changes. Some policy implications are drawn from the analysis.     

河北省玉米供给反应研究——基于2003～2010年农户层面的动态面板分析

玉米已成为我国播种面积最大的粮食作物,同时玉米在主要粮食作物中比例也不断攀升。文章利用2003～2010年河北省农户玉米种植的动态面板数据,建立了农业供给反应（适应性预期）模型,采用广义矩阵估计方法（GMM）,对影响河北省9个县534户农民的玉米供给和调整的价格、政策以及气候等因素进行了动态面板实证分析和相关探讨。基于农户玉米生产供给反应模型的理论框架,推导出研究所采用的动态面板适应性预期模型。结果表明,首先,河北省农户的玉米种植面积对于价格变化很敏感,玉米种植面积的长期价格弹性较大。其次,补贴政策对于农户种植玉米有一定的积极促进作用,但是农户对于补贴额的反应程度很小。再次,生产成本投入增加会制约河北省农户玉米种植。最后,降水对于保证玉米生产具有重要作用。因此,稳定玉米价格、继续加大政策支持力度、完善水利基础设施补贴力度对于保证河北省玉米生产和供给会产生积极促进作用。     

CANADIAN WHEAT ACREAGE RESPONSE*

In spite of the criticisms which have been levied against statistical estimation of supply response, it is used in this study to determine the factors causing yearly fluctuations in Canadian wheat acreage. The estimates are derived from 1947–1966 time series data. In formulating price expectations, both the traditional and distributed lag models are used.
It was found that wheat acreage response is not a random process. From a statistical standpoint, wheat and flax prices, wheat stocks on farms, and export sales did affect farmers' wheat acreage decisions. Among the elasticities computed, those for wheat prices were the largest but generally less than one. Barley prices, rainfall prior to seeding, and cattle prices were also considered but did not appear to have a serious influence on wheat acreage.     

Inter‐ and intra‐seasonal crop acreage response to international food prices and implications of volatility

Understanding how producers make decisions to allot acreage among crops and how decisions about land use are affected by changes in prices and their volatility is fundamental for predicting the supply of staple crops and, hence, assessing the global food supply situation. This study makes estimations of monthly (i.e., seasonal) versus annual global acreage response models for the world's principal staple food crops: wheat, corn, soybeans, and rice. Primary emphasis is given to the magnitude and speed of the allocation process. Estimation of intra‐annual acreage elasticity is crucial for expected food supply and for input demand, especially in the light of the recent short‐term volatility in food prices. The econometric results indicate that global crop acreage responds to crop prices and price risks, input costs as well as a time trend. Depending on respective crop, short‐run elasticities are about 0.05 to 0.40; price volatility tends to reduce acreage for some of the crops; comparison of the annual and the monthly acreage response elasticities suggests that acreage adjusts seasonally around the globe to new information and expectations. Given the seasonality of agriculture, time is of an essence for acreage response. The analysis indicates that acreage allocation is more sensitive to prices in the northern hemisphere spring than in winter and the response varies across months.     

基于Nerlove模型的玉米供给反应研究*——以吉林省为例

［目的］吉林省是以玉米为主要粮食作物的产量大省，吉林省玉米生产在保障国家粮食安全方面发挥着重要的作用。2016年国家取消玉米临时收储政策，实行“价补分离”政策（既市场化收购+补贴）。在玉米价格逐步市场化的形势下，为探究吉林省玉米种植面积对价格变动的反应程度，［方法］文章利用1985—2015年吉林省玉米种植面积、玉米平均出售价格、玉米的物质成本投入、玉米与大豆的每667m2收益比值、玉米与水稻的每667m2收益比值的时间序列数据，通过运用Nerlove模型，测算吉林省玉米播种面积对价格、物质成本、与大豆和水稻的每667m2收益比值的供给反应。［结果］吉林省玉米的短期供给弹性为049，长期供给弹性为063，短期供给弹性和长期供给弹性均小于1，缺乏弹性，吉林省玉米种植面积对价格变动的反应较为迟钝。［结论］提出完善农业耕作制度，推进玉米目标价格制度改革，优化玉米收购市场结构政策建议。     

SUPPLY RESPONSE OF AUSTRALIAN WHEAT GROWERS

Alternative specifications of models of the supply response of Australian wheat growers and their economic implications are considered in terms of the existence and nature of production lags, and the choice between expected prices and expected gross returns as the preferred explanator of producers' response to changing economic conditions. The analysis indicates that there are lags which are due primarily to the difficulties and costs of rapid adjustment rather than to the time required to revise expectations. The statistical results were similar for the alternative specifications of gross margins and prices as the economic decision variables. However, the price elasticities derived using the gross margins specification were about a third of those using the prices specification. The gross margins specification yielded additional information in the form of yield and input cost elasticities.     

Short-Run Supply Responses in the U.S. Beef-Cattle Industry

This article investigates the response of beef-cattle producers to changes in the price of cattle. Previous research has suggested that there may be a negative short-run supply response to a permanent increase in the price of cattle. We build a dynamic, rational expectations model that separates the markets for fed and unfed beef. This separation generates predictions that the supply response is generally positive, even for permanent shocks in the short run, and nests the negative supply response as a special case for appropriately restricted demand shocks.     

ASYMMETRIC AGRICULTURAL SUPPLY RESPONSE: EVIDENCE FROM BANGLADESH AGRICULTURE

This paper investigates whether sugar cane supply in the mill zones of Bangladesh responds asymmetrically to a price rise and a price fall by estimating several models suggested in the literature on agricultural supply. It is found that sugar cane area, in the event of a price rise, is more than twice as elastic as in the event of a price fall, and that this is true both in the short run and the long run.     

SUPPLY RESPONSES IN THE SOUTH AUSTRALIAN POTATO INDUSTRY

The potato industry in South Australia is characterised by very unstable prices. One hypothesis for this instability is that potato growers' acreage responses follow a cobweb pattern, that is, a one year lag of acreage to price. This hypothesis is tested, together with a two year lag and a distributed lag. The distributed lag model seems the most satisfactory and gives a short-run elasticity of acreage to price of 0.36 and a long-run elasticity of 1.09. An alternative to the lagged price hypothesis is the "constant cash return" hypothesis which postulates that potatoes are grown to provide a certain cash income to permit farm development. This explanation of acreage response only seems relevant in the dairying and fat lamb areas of the State.     

Tracing the evolution of the aggregate U.S. milk supply elasticity using a herd dynamics model

The U.S. dairy sector is characterized by increasing volatility of milk prices, and consolidation in production as evidenced by declining number of dairy farms with an increasingly larger share of milk supplied from a small number of very large farms. Using aggregate national data, we build a mixed‐frequency herd dynamics econometric model of the U.S. milk supply that updates and substantially amends the model first proposed by Chavas and Klemme. We implement a dynamic residual‐based bootstrap technique that can be used in testing for changes in nonmarginal simulated long‐run supply responsiveness, and trace the evolution of long‐run milk supply elasticity from 1975 through 2010. Several papers in the past have suggested that long‐run supply elasticity increases with dairy farm size, which implies that increased importance of large farms would increase aggregate long‐run supply responsiveness. Contrary to this conclusion, we find a declining trend in long‐run supply elasticity from 1975 through 2005. Persistence of such a decline would be a major cause for worry, as ever larger price swings would be needed to equilibrate the market in face of demand shocks. However, we find that milk supply is becoming more responsive since 2005 both to milk and feed price changes. Increasing responsiveness to feed prices further justifies focusing the next generation of the dairy policy instruments on managing dairy profit margins rather than just revenue streams.     

An Analysis of the Canadian Cattle Supply Using Polynomial Distributed Lags1

In this paper a distributed lag analysis of regional cattle supply is presented. A polynomial lag formulation has been applied. A distributed lag effect of two economic variables—cattle price and feed grain price (or stocks)—was specified, each with a different lag period. The model was estimated using the method of Lagrangian interpolation. An average lag of 11 quarters with respect to slaughter cattle prices was observed. The lag with respect to feed price (or stocks) was found to be relatively shorter. An inelastic response to cattle price, in the short—as well as the long-run, was observed for Eastern Canada. A similar situation for Western Canada with respect to feed grain stocks was observed.
Dans cet essai, nous nous proposons de présenter une analyse de délai distribué dans I'approvisionnement en bétail au niveau régional. Nous nous sommes servis dune formulation de délai polynomial. Nous avons spécifié un effet de délai distribué de deux variables économiques—le prix du bétail et le prix des farines alimentaires (ou des stocks)—toutes deux ayant des délais différents. Le modèle est basé sur la méthode d'interpolation Lagrangienne. Nous avons observé un délai de 11 trimestres pour ce qui concerne le prix du bétail à l'abattoir. Le délai pour le prix des farines alimentaires (ou des stocks) se montre relativement plus court. Pour I'Est du Canada, nous avons observé pour le prix du bétail une réponse inélastique que ce soil à court on long term. Nous avons observé une situation semblable dans I'Ouest du Canada pour les farines alimentaires.     

An error correction almost ideal demand system for meat in Greece

This paper represents a dynamic specification of the Almost Ideal Demand System (AIDS) based on recent developments on cointegration techniques and error correction models. Based on Greek meat consumption data over the period 1958–1993, it was found that the proposed formulation performs well on both theoretical and statistical grounds, as the theoretical properties of homogeneity and symmetry are supported by the data and the LeChatelier principle holds. Regardless of the time horizon, beef and chicken may be considered as luxuries while mutton‐lamb and pork as necessities. In the short‐run, beef was found to have price elastic demand, pork an almost unitary elasticity, whereas mutton‐lamb, chicken and sausages had inelastic demands; in the long‐run, beef, and pork were found to have a demand elasticity greater than one, whereas mutton‐lamb, chicken, and sausages still had inelastic demands. All meat items are found to be substitutes to each other except chicken and mutton‐lamb, and pork and chicken.     

Estimation of time-varying price elasticity in 1970–1997 Japanese raw milk supply by structural time-series model

The price elasticity of raw milk supply in Japan is estimated over time by a structural time-series model in state space form, and the changes in elasticity are tested by the diagnosing test of de John and Penzer in 1998. The supply function is modeled with a local linear trend and a strictly exogenous autoregressive distributed lag price. The seasonality in the data is adjusted by a structural time-series model. In the 1970–1997 period, there were major dairy policy changes in Japan: a production adjustment, related penalties, and two-tier pricing. Hokkaido is the region that mainly provides the supply of raw milk for milk products, while Tofuken is the region that mainly produces drinking milk. The estimated price elasticity in Hokkaido became stable after imposition of the production adjustment. On the other hand, price elasticity in Tofuken became stable after the inflation of the mid-1970s. Price elasticity is estimated to be more inelastic as well as more likely to converge in inelasticity in Hokkaido than in Tofuken. We discuss the relationship between changes in dairy policy and changes in price elasticity.     

POPULATION DYNAMICS AND MILK SUPPLY RESPONSE IN THE US LAKE STATES

This paper develops a dynamic model of a dairy cow population and of milk supply response. When applied to the US Lake States, the model provides evidence against the Nerlovian model. It suggests that the pattern of dynamic effects of prices on cow numbers varies for different prices. The estimated dynamic supply elasticities provide some useful information on the nature of dairy production adjustments. For example, the response of milk supply to market prices is found to be very inelastic in the short run. It takes at least 7 years of sustained change to obtain an elastic response to milk price. Also, feed price and slaughter cow price are found to have smaller effects on dairy supply than milk price, but larger effects than risk, hay price or capital cost.     

Short and long‐run returns to agricultural R&D in South Africa,or will the real rate of return please stand up?

This paper briefly presents the results of a total factor productivity (TFP) study of South African commercial agriculture, for 1947‐1997, and illustrates some potential pitfalls in rate of return to research (ROR) calculations. The lag between R&D and TFP is analyzed and found to be only 9 years, with a pronounced negative skew, reflecting the adaptive focus of the South African system. The two‐stage approach gives a massive ROR of 170%. The predetermined lag parameters are then used in modeling the knowledge stock, to refine the estimates of the ROR from short‐ and long‐run dual profit functions. In the short run, with the capital inputs treated as fixed, the ROR is a more reasonable 44%. In the long run, with adjustment of the capital stocks, it rises to 113%, which would reflect the fact that new technology is embodied in the capital items. However, the long‐run model raises a new problem since capital stock adjustment takes 11 years, 2 years longer than the lag between R&D and TFP. If this is assumed to be the correct lag, the ROR falls to 58%, a best estimate. The paper draws attention to the possible sensitivity of rate of return calculations to assumed lag structure, particularly when the lag between changes in R&D and TFP is skewed.     

Destabilizing role of futures markets on North American hard red spring wheat spot prices

The objective of the paper is to determine if the futures prices of hard red spring wheat (HRSW) have stabilizing or destabilizing impact on spot HRSW price in North America. Several important results emerge from thorough empirical analysis. First, both Granger causality tests and directed acyclic graph algorithms (DAGs) point to two-way causality between futures and spot HRSW prices and thus endogeneity in both prices formation. To the contrary, both procedures suggest that ending stocks are exogenous to spot and futures HRSW prices. Both vector error correction model and impulse response functions point to a large and long-lasting impact of a shock to futures price on spot price level. Finally, variance decomposition analysis indicates that futures prices are responsible for the bulk of spot price volatility in both short and long run. Our result is consistent with those of theoretical models suggesting that when production (supply side) is the dominant disturbance, spot price is destabilized in both the short and the long run by futures prices. An important implication of this research is the need for alternative market mechanisms or alternative farm policy measures that would mitigate price risk and ensure sustainable farming of American HRSW farmers.     

Agricultural price transmission elasticity: importance of controlling for unobserved common factors

A voluminous amount of the literature estimates price transmission from world markets to domestic markets ignoring unobserved factors that commonly affect domestic markets. This article reevaluates the long‐run and short‐run transmission elasticity of world food price shocks to domestic markets using a “common factor framework” that takes unobserved common factors that are correlated with regressors into consideration. In the estimation, annual price data for rice, wheat, and maize for a panel of developed and developing countries that are observed over the period of 1960–2007 are used. The results from a common factor framework to those that do not account for common factors are then compared. Our findings suggest that ignorance of common factors is likely to result in upwardly biased elasticity estimates.     

Agricultural Supply Response: A Survey

This paper surveys the literature on agricultural supply response to prices in developing countries. Empirical estimates of elasticities depend both on the methodology adopted and on country-specific factors relating to technology, economic structure and macro constraints. The paper seeks to establish some general conclusions on supply responsiveness within these limitations. Supply response to output prices at the aggregate and at the crop levels is considered first. Crop-specific acreage elasticities range between zero and 0.8 in the short run while long-run elasticities tend to be higher — between 0.3 and 1.2. Yield elasticities are smaller and less stable than acreage elasticities. Clearly, inter-crop pricing can be relied upon to effect shifts in the commodity composition of agricultural output. Evidence also suggests that supply elasticities vary systematically with such factors as price and yield risks, multiple-cropping, the importance of the crop, farm incomes, farm size, tenancy and literacy. The most controversial and important aspect of supply response is the effect on aggregate agricultural output of agriculture's terms of trade. Conventional time-series estimates range from 0.1 to 0.3. A major cross-country study reports an aggregate elasticity as high as 1.66. It is argued that cross-country estimates are apt to exaggerate aggregate responsiveness while time-series studies underestimate it somewhat. For LDCs, a tentative range of 0.4 to 0.5 seems plausible. Hence, the distributive effects of the terms of trade are likely to be more significant than the allocative effects. Asian evidence shows that only a third of the inter-country differences in fertilizer use can be attributed to fertilizer price policies. Provided new technologies and infrastructure are in place, fertilizer subsidies can help in technology diffusion and in overcoming credit constraints. The choice between price supports and input subsidies will depend on a variety of country- or situation-specific factors. Nevertheless, a significant general factor favoring price supports is that they can more easily be coupled with price stabilization goals than input subsidies. Though sparse, the available evidence on the response of marketed surplus suggests that price policy is not a reliable instrument for regulating inter-sectoral trade.     

NEGATIVE SUPPLY RESPONSE AND THE ROLE OF PRICE EXPECTATIONS IN A TWO-PERIOD MODEL OF CATTLE PRODUCTION

This paper incorporates a representation of producers' price expectations (ARIMA) in a two-period production process to characterise short-run cattle supply. The model provides a framework for examining the role of biological factors and changing expectations of future cattle prices in generating a negative short-run supply response. The biological link between cattle generations requires the farmer to make a decision between production today and production tomorrow. This decision is based on a trade-off between the possibilities of increasing current profit levels by increasing current output weighted against the possibilities of increased future profit by maintaining animals in inventory under the expectation of future price increases. Application of the model to Canadian data for the period 1978-81 shows that the necessary condition for a negative supply response exists, but that the total supply elasticity remains positive.     

SUPPLY RESPONSE IN THE AUSTRALIAN EXTENSIVE LIVESTOCK AND CROPPING INDUSTRIES: A STUDY OF INTENTIONS AND EXPECTATIONS*

Most of the supply elasticity estimates reported for Australian agriculture are derived from equations estimated using time series data and incorporating ad hoc assumptions about price expectations. The authors' aim is to compare previously obtained supply elasticity estimates with those derived using theoretically more acceptable survey data on both producers' intentions and price expectations. Surveys were conducted in three regions in N.S.W., namely, the Southern Tablelands, the South-West Slopes and a portion of the Western Division centred on Cobar. The results of the research show that there are no major differences between the supply elasticities derived using the traditional time series approach and those obtained using the survey data. This finding is reassuring, given the cost of collecting survey data.