Using Principal‐Agent Theory to Deal with Output Slippage in the European Union Set‐Aside Policy

This paper proposes modifications to the existing EU set‐aside policy which are designed to alleviate the problem of output slippage associated with heterogeneous land quality by using “incentive‐compatible” mechanisms drawn from principal‐agent theory. Specifically, it is suggested that there should be differential reference yields based on land quality to discourage the “adverse selection” of lower quality land for set‐aside, and that the scope of set‐aside monitoring should be expanded to include both the quantity and the quality of land set‐aside so as to discourage “moral hazard” problems. The potential of these modifications is illustrated using a numerical analysis, which is also used to evaluate the role of a range of factors which determine the set‐aside decision. Finally, an estimate of the “benefits” from reducing slippage required to justify the costs of including these modifications is provided.     

Food retailing margins in France

Abstract

This paper presents a model of the optimal set‐aside decision of a risk averse producer which takes account of the trade‐off between the certain return to set‐aside land and the higher (in expectation) but more uncertain return to cropping. The model is applied to the case of European wheat production. The ratio of set‐aside premium to expected net revenue per hectare required for producers to find it optimal to set‐aside the qualifying proportion of land is shown to be both very close to unity and relatively insensitive to changes in key parameter values. By contrast, once attractive set‐aside premiums have been established, it is shown that the optimal set‐aside proportion of land is relatively sensitive to these values.     

The Impact of Cereal Prices and Policy on Crop Rotations and Supply Response

The impact of cereal prices on rotational decisions and farm‐level and industry cereal supply is considered. It is argued that with the voluntary 50 per cent set‐aside option for cereal producers, there is a large financial incentive to adopt a 50 per cent set‐aside cropping plan as cereal prices fall below an individual producer's ‘indifference’price. For a typical 210‐hectare UK combinable crop farm, adopting a 50 per cent set‐aside cropping plan is optimal when the price of cereals is below £62/tonne (98.50/tonne). If widely adopted, 50 per cent set‐aside will lead to a substantial fall in the supply of cereals and would lead the industry supply curve for cereals to move leftward and become more elastic over a certain price range. The level of reduced cereal supply will be greater than would be predicted from an estimate of industry level supply response that ignored rotational and farm‐level financial incentives.     

Price-Predicting Ability of Farm Managers: Empirical Findings with Flower Producers in the Netherlands

Differences in income among horticultural growers producing under similar conditions are known to be substantial. Production policy, including cultivar choice, plays an important role. Both price variation over time and price differences among cultivars provide valuable management information to growers to adapt their production policy. This study focuses on price-predicting skills of specialized chrysanthemum growers. The study, based on a survey among 26 participants, shows that growers who predict absolute prices well for one period do not have a higher chance of predicting well for other periods. With respect to predicting relative price positions (relative to other cultivars or other firms), evidence is found, however, that this is a skill, especially for estimating the relative market position. Also, evidence is provided that price differences among cultivars are nonrandom in time, and it is concluded that growers could adapt their production planning and cultivar choice to benefit from expected price variations.     

Why Isn’t More US Farmland Organic?

We develop a theoretical model to assess the dollar compensation required to induce conventional growers to convert to organic. The model incorporates the uncertainty in producers’ expectations about future returns and about the impact of policy changes on these expectations in particular. We demonstrate that a new policy which favours organic can have opposing effects on the rate of conversion. An increase in relative returns to organic today will increase conversion rates. However, if the future of the policy programme is uncertain, its introduction can increase the value of waiting to switch, which will decrease conversion rates. We then develop an empirical switching regression model that enables direct estimation of the value associated with being able to postpone the conversion decision until some of the uncertainty is resolved. The model is applied to data on organic and conventional soybeans before and after major changes in US farm policy toward organic growers. The results suggest that sunk costs associated with conversion to organic coupled with uncertainty about future returns can help to explain why there is so little organic farmland in the USA.     

Contracting for Canola in the Great Plains States

Canola has become an important crop in the last decade in the United States. Production of canola is risky and competes with other crops that have varying risk reduction mechanisms. Processors develop and offer contracts with varying specifications that allow growers to reduce risk and attract canola production. In this study, preplant contracting strategies were evaluated in terms of risk and return for growers and processors. Alternative contracts include fixed‐price‐variety‐specific with and without act‐of‐God provisions, and an oil‐premium contract. Grower returns and processor gross margins were simulated and resulting distributions were evaluated using stochastic efficiency with respect to a function. In the dominant growing region, growers would prefer fixed‐price‐variety‐specific contracts versus contracts with oil premiums. The latter would only be preferred by crushers that are highly risk averse. The results vary regionally suggesting that contract types should vary by region to be acceptable to a broader range of growers and processors.     

Agriculture's 'multifunctionality' and the WTO

Are the agricultural policy reforms embodied in the Uruguay Round consistent with meeting domestic policy objectives such as providing adequate food security, environmental protection and viability of rural areas? This article examines the claim that agriculture deserves more price support and import protection than other sectors because of the non‐marketed externalities and public goods it produces jointly with marketable food and fibre (agriculture’s so‐called ‘multifunctionality’). Do these unrewarded positive externalities exceed the negative externalities from farming by more than the net positive externalities produced by other sectors? To what extent are those farmer‐produced spillovers under‐supplied, and what are the most efficient ways to boost their production to the socially optimal levels? The article concludes that there is little trade‐off required to meet domestic policy objectives on the one hand and agricultural protection reform objectives as embodied in WTO rules on the other.     

Yield quality and irrigation with saline water under environmental limitations: the case of processing tomatoes in California

Irrigation with saline water has a positive impact on some quality indices of processing tomatoes, but with concomitant reductions in output quantity. This article studies the impact of the trade‐off between these two factors on optimal water management under waterlogging and costly drainage‐disposal conditions. The focus is on the content of total soluble solids as a quality measure affecting prices paid by California processors to tomato growers. A function relating quality to water and salinity applications and a quality hedonic‐price function are estimated and introduced into a static, field‐level mathematical programming model. The model calculates optimal water management under environmental regulations associated with drainage disposal in California. Findings indicate that only when the quality effect is taken into account does blending fresh surface‐water with saline drain‐water become an optimal strategy. Management and policy implications on the regional scale are discussed.     

The financial benefits of forest certification: Case studies of acacia growers and a furniture company in Central Vietnam

The demand for forest products is growing and plantation forests are supplying an increasing proportion of wood to industry. There are also increasing market requirements to demonstrate the sustainability of timber supply. Vietnam has some 3.9 M ha of plantation forests, 44% of which is on short-rotations managed by smallholders. More than 80 percent of the harvested volume from the plantation forests is used for woodchip production to serve domestic and international markets. The Vietnam Government has goals to increase the domestic supply of suitable wood for furniture production to international markets by increasing the supply of larger logs grown in plantations and the supply of certified wood to industry. However, it is not clear that these objectives will necessarily benefit growers and processors. This study compared financial returns from certified and non-certified forest products for: (1) growers with 10-year rotation acacia plantations; and (2) a furniture processing business (battens for chair and table) in Quang Tri Province, Central Vietnam. The data were collected from smallholder tree growers and a sawmilling company, triangulated with and supplemented by formal and informal interviews with other stakeholders. Currently, much of the cost of certification is met by external aid donors. Results showed that net returns from both certified and non-certified timber products are positive for both actors and are higher from certified timber production than non-certified timber production. When the full costs of certification are included, the benefits to growers of certification are much reduced and potentially negative unless the fixed costs can be spread over a large group of growers. A minimum of group with 3000 ha may be required to make certification cost effective. In recent years, the price difference between the certified and non-certified logs is narrowing and this may discourage farmers from attaining certification. For the sawmiller, the benefit of certified timber production is greater. It would be in their interests to increase prices paid to growers for certified logs. Government policy measures to support certification should include consideration of who bears the cost, support for aggregation of smallholder growers and improved communication in timber supply chains.     

森林碳生产的价格补偿分析

通过森林碳生产的经济属性分析表明森林碳生产具有正外部效应,其产品具有公共物品属性,适当的价格补偿能够激励生产行为,通过考察林地、林木的机会成本去设定价格补偿的标准,提出深化林权制度改革,明晰森林碳排放权、完善森林生态补偿法律政策,补充森林碳生产补偿政策、多元化碳生产资金渠道,完善森林碳生产的投融资体制等3方面政策保障森林碳生产的价格补偿。     

Finding optimal price risk management instruments: the case of the Spanish potato sector

This article offers a comprehensive analysis of the problem of choosing between alternative market risk management instruments. We model farmers' behavior to optimize the certainty equivalent, formulated by a mean–variance model, by combining instruments with and without basis risk. Results are expressed as the demands for hedging with futures, forward contracts and insurance. Theoretical results are applied to a selection of Spanish producers of fresh potatoes, a sector that is exposed to significant market risks. Amsterdam's Euronext provides potato futures prices, and the recently launched revenue insurance in Spain provides the example for price insurance. Three conclusions summarize the article's main findings. First, we show that Spanish potato revenue insurance subsidies are a factor that determines the instrument rankings and choice. Second, the efficiency of insurance subsidies is generally low. Finally, the Amsterdam potato futures market does not provide a cost‐effective means to manage price risks for Spanish fresh potato growers.     

农户耕地保护补偿意愿及其影响机理研究

研究目的：探讨不同地区农户对耕地保护补偿标准的意愿，并对其影响机理进行理论探讨和实证检验。研究方法：农户调查、计量模型分析。研究结果：农户对耕地保护补偿标准的意愿相对较低，其中经济发达地区的农户对补偿标准的要求要明显高于经济欠发达地区；而在影响农户耕地保护补偿意愿的诸因素中，地区差异、农户受教育水平及农户对征地的意愿发挥着比较显著的作用。研究结论：本研究为推进和落实农户耕地保护的经济补偿机制提供了借鉴与启示。     

水稻规模种植户持续种植意愿影响因素研究

[目的]水稻规模种植户在稳定水稻种植面积中起到关键性的作用,如何扶持和稳定规模种植户的持续种植粮食具有十分重要的战略意义。[方法]文章利用浙江省145户水稻规模种植户的调研数据,采用二元Logistic模型对水稻规模种植户的持续种植意愿进行了实证分析。[结果]单位面积平均土地租金和粮食生产总投入对持续种植意愿呈反向影响,粮食销售收入和田地质量提升的投入对持续种植意愿呈正向影响。高额的土地租金和不断增长的粮食生产投入,使得粮食生产收益不断下降,特别是对于具有一定规模的种植户而言,不得不选择消极的种植意愿;与此同时,较高的销售收入能带来较高的生产收益,使得规模种植户更愿意继续种植,而田地质量提升能带来较高的产出率,规模种植户对持续种植也将更有信心。[结论]据此提出降低水稻种植成本、稳定粮农正常收益、规范土地市场、引导农户提高田地投入等政策建议来稳定和激励水稻规模种植户持续种植,保障国家粮食安全。     

Optimal Protein Segregation Strategies for Wheat Growers

A technology that can measure wheat grain protein concentration and then segregate grain based on measurements during harvesting is on the horizon. This new technology provides wheat growers with opportunities to segregate grain that can be directed to premium markets. In this article, we identify an individual grower's optimal segregation and blending strategies under non‐uniformly curved price schedules. When price schedules are three‐step shaped, we show that the optimal segregation and blending strategies can be obtained by solving a specified non‐linear programming problem. Based on cash price and protein distribution data for wheat in the U.S. Pacific Northwest region over 1991–2011, an application of our theoretical model shows that on average a Hard Red Winter (respectively, Hard Red Spring) wheat grower should be willing to pay about 17.7 (respectively, 30.8) cents for segregating one bushel of wheat. We also study how growers’ net returns would be affected were the technology to be adopted.     

再生水定价的形成机制分析

进一步推进再生水的利用不仅依赖于政策的扶持,也依赖于再生水水价所具有的优势。再生水与自来水之间的价格差是促使用户接受再生水的主要原因之一。在借鉴合理水价定价方法基础上,详细分析再生水合理价格构成与定价机制以及再生水的定价区间,分析常规水价与再生水的比价关系对再生水利用的影响,提出了建立合理的地表水、地下水、自来水、再生水等之间的比价关系,分类制定再生水定价,完善相关配套政策等方面的政策性建议。     

Modelling CAP Decoupling in the EU: A Comparison of Selected Simulation Models and Results

This article reviews ways of representing the effects of decoupling in the European Union (EU) on land allocation and production in eight selected simulation models (AGLINK, AG‐MEMOD, CAPRI, CAPSIM, ESIM, FAPRI, GOAL and GTAP). It then compares the simulated effects of decoupling and traces them back to the model specifications and parameter assumptions. In particular, roughage is not included in most models, so that changes in ruminant production are not necessarily consistent with the changes in fodder area. Models also differ in the extent to which they reflect the substitution possibilities in ruminant feeds. Notwithstanding the considerable differences in model types and specifications, all the studies considered here predict that as a result of decoupling, areas allocated to cereals (and silage maize) and beef and sheep production in the EU‐15 will decline, while fodder area will increase. Differences in the projections about pasture, oilseed and set‐aside areas can be attributed to different model or scenario specifications. The most important factor affecting the results is the extent to which the models assume that the Common Agricultural Policy (CAP) 2003 Reform (regarding Single Farm Payments) involves a substantial decoupling of support compared with the baseline (Agenda 2000) policy.     

The Effect on Farmland Prices of Rural Severances in the Urban Field

The lengthy debate on appropriate public policy for agricultural land planning has had two major components: the regulation of severances of farmland and the orderly expansion of each growing city. Putting aside the latter issue, this paper reports research on the severance issue, which is perhaps the key controllable socio-economic policy variable in rural foodland protection. This paper examines data from one of the most complex areas, the intermediate rural fringe surrounding Toronto. A “severance theory” is presented, based upon a review of theories of externalities and land economics. To test the severance theory, a regression model is used. The research provides what may be the first quantitative information in North America on the extent of the pecuniary externalities alleged to arise from severances, and hence provides some of the information that would be required to evaluate empirically proposed and existing land use policies. The severance theory predicts that severance activity would increase the price of nearby farmland. From the statistical analysis, it is concluded that severances did affect farmland values but that the relationships were more complex than anticipated. Severances influenced farmer buyers to pay higher prices for farmland. However, the predominating nonfarm buyer of farmland in York Region consistently reacted as if there were negative externalities from severances and paid lower prices where severances had an influence. The implications of this study for public policies such as the Ontario Food Land Guidelines are limited by the study area and time period examined. The approach used in this study should be applied to other areas, especially ones less subject to purchases by nonfarmers, in order to define more precisely the impact of severance activity on nearby farmland values.     

Farmers’ constraints,governmental support and climate change adaptation: Evidence from Guangdong Province,China

While climate change is widely acknowledged, the role of government support in adaptation is less understood. We narrow this knowledge gap by modelling adaptation as a three‐stage process where a farmer sequentially decides: (i) whether there is a need for adaptation; (ii) whether there are constraints that prevent adaptation; and (iii) whether such constraints are removed through government support. We develop a triple‐hurdle model to describe this decision‐making process and empirically estimate the impact of government support using a rural household survey from Guangdong Province, China. It is found that government support is positively associated with raising the odds of adaptation by about one quarter. This magnitude is larger than the estimates in recent literature, suggesting government support is more effective for farmers bound by constraints. Therefore, for cost‐effective policy outcomes there is a need to identify the constraints and the farmers facing them.     

Trade policy, biotechnology and grain self-sufficiency in China

Over the past 20 years the growth of China's agricultural economy has been extraordinary. However, it seems unlikely that China will maintain self‐sufficiency in grains by 2005 without substantial intervention. We develop a CGE model to assess the options available to Chinese policy makers. We compare the welfare effects of import tariffs and domestic support, and explore the potential of biotechnology as a means to achieve self‐sufficiency through improvements in agricultural productivity. Our results indicate that the price interventions that would be required to maintain China's desired self‐sufficiency ratios are considerable, and are unlikely to be compatible with WTO accession. The productivity improvements required are also significant, and likely beyond the current potential of biotechnology.     

Managing the energy trilemma of reliability,affordability and renewables: Assessing consumer demands with discrete choice experiments

In response to the looming climate crisis, many countries are adopting technologies to reduce the accumulation of greenhouse gases. However, national energy policies are often multiobjective and resolution deeply divisive. The result is a policy trilemma between the energy mix and the trade-offs with other policy objectives, including cost and reliability. Utilising a discrete choice experiment (DCE), the objective of this study is to explore Australian household preferences for alternative electricity contracts containing features reflecting changes in future energy policy. The first set of features include investments in renewable generation and community-based energy storage. The second set of features reflect demand-side management policies, including installing smart meters and consumption limits being imposed on households during peak demand. Two versions of the DCE were developed to obtain both willingness to pay and willingness to accept estimates for the same features. In line with the literature, differences in the two sets of estimates were observed, with the willingness to accept estimates being statistically larger for some features. These dollar value measures can be used to support public policy decision-making – the choice of which depending on the context of the policy problem being considered.