International Supply Response

Long-run aggregate agricultural supply elasticities obtained from conventional supply functions fitted to time series data tend to be relatively inelastic in the range of 0.1 to 0.4. I argue that these estimates substantially understate the true long-run supply response in agriculture. Because of the lack of international input price data, implicit output/input price ratios are estimated from a production function assuming profit maximization. The estimation of an aggregate supply function utilizing these price ratios yields long run aggregate supply elasticities in the range of 0.90 to 1.19. These figures are substantially larger than those obtained from conventional supply functions fitted to time series data, but correspond closely to estimates reported in an earlier crosscountry study that used different price data for different points in time. The results imply that policies which distort domestic and/or world market prices of agricultural products cause greater output distortions in both the DCs and LDCs than are predicted by the small supply elasticities obtained from conventional supply estimation.     

Combining results of different models: the case of a levy on the Dutch nitrogen surplus

Economic instruments, such as levies are considered by the Dutch government for reducing the harmful effects of the production and application of manure. To analyse these levies a framework which makes it possible to combine and to choose among different types of research is developed. The results are integrated along the line of the marginal abatement cost curve. The problems related to integrating different types of research are taken into account. The method developed allows every farmer to react to a levy differently. A levy turns out to be more effective to reduce the nitrogen surplus on farm level in the pig fattening sector when compared to the pig breeding sector. But even a levy of 2 guilderd/kg of nitrogen does not remove the total manure surplus in the pig sector and results in large profit losses. Further research is needed to underpin the empirical input required by the model.     

ON DECISION-MAKING FOR MAXIMUM PROFIT PER UNIT OF TIME FROM BATCH PRODUCTION

Finding ration sequences which result in maximum profit per day from fattening batches of livestock over successive weight intervals has posed difficulties in earlier studies. Fractional and dynamic programming are considered as solution methods and illustrated for a problem previously solved by total enumeration. Other problems are discussed which would be best solved by a combination of the two methods. A novel proposal is made for using the two methods to maximise the present value of returns from sequencing weight gains over infinite production cycles.     

Relative efficiency of women as farm managers: Profit function analysis in Côte d'Ivoire

The efficiency of women farmers in the agricultural sector of developing countries is passionately debated. Very few studies have examined this issue in African agriculture. All previous studies were based on production functions, but have been criticised as suffering from simultaneous equation bias because the input levels are endogenous. The profit function method avoids these problems. No previous study has used the profit function method to lest for technical, allocative and economic efficiency differences between women and men farmers. The objective of this paper was to determine whether women rice farmers are less efficient than men rice farmers in Côte d'Ivoire using the restricted normalised profit function method. Our results show that the relative degree of efficiency of women is similar to that of men. The paper provides empirical support for efforts to eliminate bias against women farmers in African agriculture.     

Empirical properties of duality theory

This research examines selected empirical properties of duality relationships. Monte Carlo experiments indicate that Hessian matrices estimated from the normalised unrestricted profit, restricted profit and production functions yield conflicting results in the presence of measurement error and low relative price variability. In particular, small amounts of measurement error in quantity variables can translate into large errors in uncompensated estimates calculated via restricted and unrestricted profit and production functions. These results emphasise the need for high quality data when estimating empirical models in order to accurately determine dual relationships implied by economic theory.     

ASSESSMENTS OF THE RELATIVE VALUES OF COMPOUND NITROGEN-PHOSPHORUS FERTILIZERS FOR WHEAT PRODUCTION

A general procedure is developed for calculating optimal rates of application of compound fertilizers, containing several nutrients in fixed composition. The calculations are based on response surface models that have been obtained with single nutrient fertilizers. The relative values of alternative compounds can be assessed from the increases in profit that result from their use at optimal rates and this is preferable to simply comparing fertilizer compositions with that of an ideal mix of single nutrient fertilizers. The relative values of a range of standard nitrogen-phosphorus fertilizers are assessed for wheat production in southern New South Wales. The results indicate the need for a compound with a low nitrogen/phosphorus ratio of about 0.5. For the range of fertilizers considered it is concluded that it will generally be preferable to use superphosphate, supplementing with nitrogen fertilizer where N deficiency is suspected. The assumptions required for the calculation of optimal fertilizer rates are discussed.     

THE ECONOMICS OF HIGH-CONCENTRATE BEEF PRODUCTION AS AFFECTED BY BREED-TYPE,SEX, SUPPLEMENTARY HAY AND TYPE OF CEREAL

This paper presents the economic implications of an experiment to compare pure Friesian, Welsh Black x Friesian and Charolais x Friesian steers and heifers given high-concentrate diets of protein, mineral, supplemented ground barley, fed with or without a pound of hay daily, or supplemented ground maize fed with a pound of hay. The favourable economic conditions that brought about a rapid spread of high-concentrate feeding and the subsequent development of unfavourable conditions are briefly reviewed. The physical results of the experiment are presented and are followed by the main body of the paper which consists of applying economic data to the results to obtain gross-margin and profit per animal and annual profit per animal space. Besides the experimental treatments, the effects of cereal, carcass and calf prices and the effect of E.E.C. marketing conditions are discussed.     

Re‐examination of production,cost, and restricted profit functions using quantile regression approach

This article estimates quantile regressions of production, cost, and restricted profit functions using a Cobb‐Douglas functional form with non‐Hicks neutral technology change. In contrast to previous studies, quantile regression estimates reveal the relationship between the independent (production, cost, and restricted profit) and dependent (input quantities and prices) variables at each quantile of the distribution. An empirical application using data from 48 states in United States from 1960 to 2004 indicates the returns to scale and aggregate technology not only differ across production, cost, and restricted profit functions but across states in different quantiles of the distribution. This suggests the traditional measures of returns to scale and aggregate technology are under‐ and overestimated in states at upper and lower quantiles, respectively.     

Simulating economic values of a genetic improvement program for Australian farmed saltwater crocodiles*

In genetic improvement programs, candidates for breeders are ranked by the profitability of their offspring, expressed as a weighted sum of the genetic gain from selection. In this paper, we estimate the economic values of a genetic improvement program for Australian farmed saltwater crocodiles. A bioeconomic profit function for a representative breeding pair is used to determine the optimal slaughter age following genetic improvement in each selection objective. The results indicate that estimated farm profitability increases by nearly $A111 for a 1‐week reduction in juvenile slaughter age, $A78 for a 1 per cent increase in the proportion of first‐grade skins produced, and $A33 for an increase in the number of viable hatchlings per clutch. The implications of the analysis for the Australian crocodile industry and the limitations of the research are explored.     

Illegal Landings: An Aggregate Catch Self-Reporting Mechanism

To solve the problem of illegal landings this article proposes a new tax mechanism based on the regulator's own aggregate catch estimates and ex ante self-reports of planned catch by fishermen. We show that the mechanism avoids illegal landings while ensuring (nearly) optimal exploitation and generating (nearly) correct entry and exit incentives. Finally we simulate the mechanism for the Danish cod fishery in Kattegat to obtain a rough indicator of the size of the tax. It turns out that the average tax payment as a percentage of profit is surprisingly low.     

Bt Cotton,Pesticide Use and Environmental Efficiency in Pakistan

There is a broad literature on the impact of Bt cotton adoption in different countries, but few studies have explicitly looked at environmental and health effects from an economic perspective. We analyse the impact of Bt cotton on environmental efficiency in Pakistan, using farm survey data and a doubly heteroskedastic stochastic production function framework. Negative environmental and health effects of chemical pesticide use are quantified with the environmental impact quotient. Bt‐adopting farms have higher cotton yields, while using lower pesticide quantities and causing less environmental damage. Bt farms are both technically and environmentally more efficient than non‐Bt farms. Bt adoption increases environmental efficiency by 37%. Achieving the same reduction in negative environmental and health impact without Bt would cost conventional cotton farmers US$ 54 per acre in terms of foregone yields and revenues (7% of total revenues). Extrapolating this shadow price of the technology's health and environmental benefits to the total Bt cotton area in Pakistan results in an aggregate value of US$ 370 million. These benefits are in addition to the profit gains for Bt‐adopting farmers. Our results suggest that Bt technology can contribute to sustainable agricultural development.     

A MICRO-ECONOMIC ANALYSIS OF TEA PRODUCTION USING A SEPARABLE RESTRICTED PROFIT FUNCTION

To derive policy-relevant information, the translog form of a separable restricted profit function was used to model empirically estate tea production in Sri Lanka. Data consisted of 87 observations of prices and quantities for various inputs and outputs from 54 different Sri Lankan tea estates. In different tests, the estimated model respected generally the properties implied by underlying assumptions. Results indicated increasing economies of scale in the factory across the sample and optimal field size to be between 300 and 400 hectares. Amongst estimated short-term elasticities, the supply elasticity of made tea was found to be +0.94.     

Eliciting Consumer WTP for Food Characteristics in a Developing Context: Application of Four Valuation Methods in an African Market

We elicit willingness to pay for conventional, organic and/or food‐safety‐inspected tomatoes in a traditional African food market. We identify four elicitation methods that can be conducted with one respondent at a time, and use them in a field setting: the Becker–DeGroot–Marschak mechanism, multiple price lists, multiple price lists with stated quantities, and real‐choice experiments. All four methods give similar results; showing that consumers are willing to pay a premium for organic and food‐safety‐inspected tomatoes. However, the size of the premium is significantly larger when consumers choose between alternatives than when they indicate their reservation price. The new multiple price lists with stated quantities were easy to explain in the busy market setting, gave the respondents the opportunity to determine the amount they wanted to buy, and had valuations in line with the other non‐comparative valuation methods.     

OUTLIERS IN AGRICULTURE: AN INTERVENTION ANALYSIS OF AGRICULTURAL LAND VALUES

Intervention analysis offers a framework for the identification and modelling of outlying observations in empirical time series. Within this framework, there are two types of outlier; an additive outlier, representing a one-period blip in the series, and an innovational outlier, whose effect is spread over many time periods. Intervention analysis is used here to study an agricultural land price boom of the early 1970s that is generally believed to have been caused by speculative activity, and the statistical results are consonant with that view. The procedure detects an innovational outlier in the land price series at 1972 with dynamic effects that resemble the life cycle of a speculative bubble. It is inferred from these results that speculation added 52 per cent to the rate of growth of land prices in 1972, 19 per cent in 1973 and caused a fall in the rate of change in land prices of 19 per cent in 1974 and 17 per cent in 1975.     

Measuring Market Power for Food Retail Activities: French Evidence

In this paper we develop and estimate an empirical model of pricing behaviour for food retail firms in both a quantity‐setting oligopoly engaged in the joint production of demand‐related final goods and a quantity‐setting oligopsony for supply‐unrelated wholesale goods. The procedure consists of estimating an inverse demand system for the final goods, single supply functions for the wholesale goods and the retail industry first‐order profit‐maximisation conditions, from which an estimate of the degree of imperfect competition and of oligopoly‐oligopsony power for the different commodities can be retrieved. The model is applied to the French food retail industry and three commodities are distinguished: dairy products, meat products and other food products. We strongly reject the hypothesis that French food retail firms behave competitively, and more than 20 and 17 per cent of the wholesale‐to‐retail price margins for dairy products and meat products, respectively, can be attributed to oligopoly‐oligopsony distortions.     

Household behavior with respect to meat consumption in the presence of BSE and CWD

In this study, Canadian household meat consumption behavior in exotic (deer and elk meat) and traditional meats (beef, pork, chicken, turkey, bison, and seafood) is examined. This research introduces some differences in public response to transmissible spongiform encephalopathies (TSE) risks across consumer segments from different sources of meat supply, including hunted meat. The analysis uses a combination of survey and household meat purchase data that include a balanced household panel of 2,393 households per year across time. A two-step estimation procedure is used with a probit model in the first step (consume or not) and a doublelog–translog two-stage demand system in the second step (level of consumption). It is assumed and tested that household sociodemographics, consumers’ risk perceptions/attitudes, and media coverage of bovine spongiform encephalopathy (BSE) and chronic wasting disease (CWD) are underlying demand shifters in consumers’ daily meat purchase decision. The results suggest that households who obtain venison from hunting show the highest confidence in venison safety. Exotic meat preferences negatively affect traditional meat consumption in the daily diets of households who purchase traditional meats from stores and obtain venison from hunting. In response to the media coverage of BSE and CWD, exotic meat eaters are less sensitive to animal disease media information than the general population.     

Spatial optimization of nutrient reduction measures on agricultural land to improve water quality: A coupled modeling approach

The objective of this study is to identify the optimal spatial distribution of Best Management Practices (BMPs) to reduce total phosphorus (TP) runoff from agricultural land in the largest Canadian watershed draining into Lake Erie, the Great Lake most vulnerable to eutrophication. BMP measures include reduced fertilizer application, cover crops, buffer strips, and the restoration of wetlands. Environmental SWAT model results feed into a spatial optimization procedure using two separate objective functions to distinguish between public BMP program implementation costs (PIC) on the one hand and farmers’ private pollution abatement costs (PAC) on the other hand. The latter account for the opportunity costs of land retirement and changing land productivity. PAC are initially lower than PIC but exceed the latter after 30% of the annual TP baseline load is eliminated. This suggests that under optimal conditions existing grant and incentive payments cover the economic costs farmers face up to a maximum of 30% of the baseline load reduction. Imposing further reductions of up to 40% results in a cost to farmers of almost $52 million per year. This is 45% higher than the optimal solution based on PIC and therefore not deemed incentive-compatible under the watershed's existing cost-sharing scheme.     

Effects of EU dairy policy reform for Dutch dairy farming: a primal approach using GMM estimation

This paper estimates a production function for milk using ageneralised method of moments estimator to avoid the endogeneityproblem. Using the first-order conditions for profit maximisation,the economic effects for individual Dutch dairy farms of the2003 EU dairy policy reform are analysed. With an expected milkprice decrease of 21 per cent, profit decreases on average by22 per cent. EU direct payments compensate for roughly 53 percent of this fall in profit. The profit reduction means that69 per cent of all small farms have negative income from farming,compared with 15 per cent in the initial situation.     

DEVELOPMENT AND ANALYSIS OF INPUT-OUTPUT RELATIONS FOR IRRIGATION WATER

Recent developments in climatology mean that economists now have a highly acceptable physical theory which can underlie their analysis of the economic aspects of water as an input to the production process, as a source of production instability, and as a major component of error in their estimated crop production functions. This paper presents a model and a procedure for synthesising and analysing irrigation water crop input output relations based on this theory. The importance of time of application of water as well as quantity is shown. Different frequencies of irrigation are optimal at different times of the growing season.     

Faustmann and the climate

The paper presents an adjusted Faustmann Rule for optimal harvest of a forest when there is a social cost of carbon emissions. The theoretical framework takes account of the dynamics and interactions of forests’ multiple carbon pools and assumes an infinite time horizon. Our paper provides a theoretical foundation for numerical model studies that have found that a social cost of carbon implies longer optimal rotation periods and that if the social cost of carbon exceeds a certain threshold value the forest should not be harvested. At the same time we show that it could be a net social benefit from harvesting even if the commercial profit from harvest is negative. If that is the case, the optimal harvest age is decreasing in the social cost of carbon.