CAP Subsidies and Productivity of the EU Farms

The paper investigates the impact of the Common Agricultural Policy (CAP) subsidies on farm total factor productivity (TFP) in the European Union (EU). We employ a structural semi‐parametric estimation algorithm directly incorporating the effect of subsidies into a model of unobserved productivity. We empirically study the effects using the Farm Accountancy Data Network (FADN) samples for the EU‐15 countries. Our main findings are clear: subsidies impact negatively on farm productivity in the period before the decoupling reform was implemented; after decoupling the effect of subsidies on productivity is more nuanced and in several countries it turned positive.     

Investing Today or Tomorrow? An Experimental Approach to Farmers’ Decision Behaviour

An understanding of farmers’ decision‐making behaviour is important for adequate forecasts as well as policy recommendations regarding structural changes. We experimentally analyse the investment behaviour of real farmers. The observed investment decisions are contrasted with theoretical benchmarks from classical investment theory and the real options approach. Our results show that both theories cannot exactly explain investment behaviour. However, farmers learn from former investment decisions and do consider the value of waiting over time.     

EU‐wide Economic and Environmental Impacts of CAP Greening with High Spatial and Farm‐type Detail

In this paper we analyse the economic and environmental impacts of CAP greening introduced by the 2013 CAP reform using the CAPRI model. CAPRI captures the farm heterogeneity across the EU and it allows to depict the implementation of the greening measures in high detail while integrating the environmental effects and the market feedback of the simulated policy changes. The simulated results reveal that the economic impacts (land use, production, price and income) of CAP greening are rather small, although some farm types, crops (fallow land and pulses) and Member States may be affected more significantly. The CAP greening will lead simultaneously to a small increase in prices and a small decrease in production. Farm income slightly increases because the price effects offset the production decline. Similarly to economic effects, the environmental impacts (GHG emissions, N surplus, ammonia emissions, soil erosion, and biodiversity‐friendly farming practices) of CAP greening are small, although some regions may see greater effects than others. In general, the environmental effects at EU level are positive on a per hectare basis, but the increase in UAA can reverse the sign for total impacts. Overall, simulated GHG and ammonia emissions decrease in the EU, while the total N surplus, soil erosion and biodiversity‐friendly farming practices indicator slightly increase due to the CAP greening.     

The Impact of an EU–US Transatlantic Trade and Investment Partnership Agreement on Biofuel and Feedstock Markets

We assess the impact of a potential TTIP bilateral free trade agreement on the EU and US bio‐economies (feedstock, biofuels, by‐products, and related competing crops) and major trade partners in these markets. The analysis develops a multi‐market model that incorporates bilateral trade flows (US to EU, EU to US, and similarly with third countries) and is calibrated to the OECD‐FAO baseline for 2013–2022 to account for recent policy decisions. The major policy reforms from a TTIP involve tariff and TRQ liberalisation and their direct contractionary impact on US sugar supply, EU biofuel production, and indirect negative effect on US high fructose corn syrup (HFCS) production. EU sugar and isoglucose production expand along with US ethanol and biodiesel and oilseed crushing. EU sugar would flow to the US, US biofuels and vegetable oil to the EU. We further quantify non‐tariff measures (NTM) affecting these trade flows between the EU and the US. EU oilseed production contracts, and EU crushing expands with improving crushing margins following reduced NTM frictions. Our analysis reveals limited net welfare gains with most net benefits reaped by Brazil and not the two trading partners of the TTIP.     

Impact of Genetically Engineered Varieties on the Cost Structure of Corn and Soybean Production in Canada

This paper investigates the impact of genetically engineered (GE) varieties on the cost structure of corn and soybean production in Canada. Employing an adoption index for each farm and a time trend with farm‐level data on production costs of grain corn and soybeans from 2000 to 2007, a translog cost function and the associated input‐share equations are estimated. The use of the adoption index improves the estimates of technological change and multifactor productivity (MFP) growth. The results demonstrate that the adoption of GE corn and soybean reduced the variable costs of production by 0.62% per year. The MFP of corn and soybean grew by 2.0% per year during the study period, and 31% of this growth is attributable to GE varieties of these crops. The results also reveal that the adoption of GE varieties reduced the cost shares of fertilizer, herbicides and pesticides, and machinery in corn and soybean production. While the adoption of GE varieties increased the cost shares of seeds and custom works including labor, only the former was statistically significant.     

The Determinants of Firm Profitability Differences in EU Food Processing

This paper decomposes the variance in EU food industry return‐on‐assets into year, country, industry and firm effects using a hierarchical linear model (HLM). The HLM approach accounts for some of the methodological drawbacks of conventional approaches of variance decomposition such as anova and components of variance and additionally allows the estimation of the impact of covariates within each effect level. The results for selected EU countries show that firm effects are far more important than industry structure in determining food industry profitability. In particular, firm size and industry concentration are drivers of profitability while firm risk and age as well as industry growth have a negative influence.     

Impact of trade liberalisation on dairy market price co‐movements between the EU,Oceania, and the United States

This study investigates the impact of trade liberalisation on the spatial price co‐movements between the dairy markets of the EU, Oceania, and the United States. We consider two main dairy products, namely butter and whole milk powder (WMP), and employ R‐Vines to assess the development of the tail dependence between the price series. We split the time span (i.e. 2000‐2017) in December 2007 to capture the change in the tail dependence as well as in the potential of each region to act as the central market. Our findings indicate that the EU acts as the central market for butter in both sub‐periods, whereas the EU succeeds Oceania in acting as the central market for WMP from the first sub‐period to the next. Further findings highlight slightly increasing tail dependence in the butter market and in the WMP market for the EU‐OCE and EU‐US pairs. However, the tail dependence for the WMP prices between Oceania and the United States weakens, in which we attribute to the 2013 Chinese ban on milk powder imports from Oceania.     

Pricing‐To‐Market Analysis: The Case of EU Wheat Exports

The EU is a major player in the global wheat market. This paper examines the pricing behaviour of EU wheat exporters using a pricing‐to‐market (PTM) analysis. Wheat is an exemplary product for testing PTM theories as it is widely and frequently traded, and largely unbranded. We estimate the relationship between export unit values and exchange rates using quarterly panel data for 11 EU export destinations for 2000–2013. Results show that there is a meaningful long‐run relationship between export unit values and exchange rates, but there is little evidence of differential mark‐ups between EU export markets. Belarus and Iceland are exceptions where exporters from the EU appear to exercise local currency price stabilisation.     

The EU’s ecological focus areas – How experts explain farmers’ choices in Germany

Ecological Focus Areas (EFAs) have recently been introduced as key element in the greening of the EU’s Common Agricultural Policy. In 2015, farmers across the EU have implemented EFAs for the first time. Data for German federal states indicate a strong variance in EFA decisions with an overall dominance of catch crops, nitrogen fixing crops and fallow land – two of which bear limited benefits for biodiversity conservation. This article explores how experts explain EFA choices. We conducted 35 qualitative, semi-structured interviews with representatives from the Ministry for Agriculture, farm advisory services, and farmers’ associations in each federal state. Applying content analysis we clustered the factors mentioned as determinants for farmers’ EFA choices into the categories administrative considerations, economic considerations, local factors, ecosystem considerations and policy incentives. According to the interviewed experts, farmers have primarily registered measures that already existed on their farms. Administrative considerations dominate the identified determinants for farmers’ EFA decisions, and together with economic considerations appear to function as a negative incentive for EFA options that are beneficial for biodiversity, such as landscape elements and buffer strips. We conclude that conditions for EFA implementation were found to not effectively incentivise a higher share of biodiversity supporting characteristics in German agricultural landscapes. Based on a detailed discussion we extract recommendations on how to improve EFA implementation.     

Rural non‐farm diversification,agricultural feminisation and women's autonomy in the farm: evidence from India

This study contributes to the literature on the interlinkage between household non‐farm diversification (HND), agricultural feminisation and female autonomy in farming. The study uses unit‐level data from the Indian Human Development Survey for the years 2004 ‐ 2005 and 2011 ‐ 2012. The paper employs instrumental variable regression methods to study such interlinkages. The results show HND to be a significant factor contributing to the feminisation of agriculture. The study finds some evidence that the phenomenon is distress driven. Further, greater participation of women in agriculture, as well as women's access to land rights, significantly contributes to female autonomy in farm decision‐making. The results are robust to the use of alternative indicators of agricultural feminisation.     

On the Segregation of Genetically Modified,Conventional and Organic Products in European Agriculture: A Multi‐market Equilibrium Analysis

Evaluating the possible benefits of the introduction of genetically modified (GM) crops must address the issue of consumer resistance as well as the complex regulation that has ensued. In the European Union (EU), this regulation envisions the co‐existence of GM food with conventional and quality‐enhanced products, mandates the labelling and traceability of GM products and allows only a stringent adventitious presence of GM content in other products. All these elements are brought together within a partial equilibrium model of the EU agricultural food sector. The model comprises conventional, GM and organic food. Demand is modelled in a novel fashion, whereby organic and conventional products are treated as horizontally differentiated but GM products are vertically differentiated (weakly inferior) relative to conventional ones. Supply accounts explicitly for the land constraint at the sector level and for the need for additional resources to produce organic food. Model calibration and simulation allow insights into the qualitative and quantitative effects of the large‐scale introduction of GM products in the EU market. We find that the introduction of GM food reduces overall EU welfare, mostly because of the associated need for costly segregation of non‐GM products, but the producers of quality‐enhanced products actually benefit.     

Fertiliser Subsidies and Smallholder Commercial Fertiliser Purchases: Crowding Out,Leakage and Policy Implications for Zambia

Fertiliser intended for government subsidy programmes is sometimes diverted and sold to farmers at or near market prices. Failure to account for such ‘leakage’ can upwardly bias econometric estimates of the effect of government fertiliser subsidy programmes on total fertiliser use. This paper extends the framework used in earlier studies on the crowding in/crowding out effects of subsidised fertiliser on commercial fertiliser purchases to account for leakage, and then applies it to the case of Zambia. Results suggest that each additional kg of subsidised fertiliser injected into the system increases total fertiliser use by 0.54 kg. Without controlling for leakage, the estimate would have been 0.87, an overestimate of 61%.     

Food Demand in Russia: Heterogeneous Consumer Segments over Time

The Russian food system has undergone substantial changes. However, knowledge on how economic transition has affected the structural parameters of food demand is lacking. Based on a two‐stage LES‐LA/AIDS model and annual panel data from the Russia Longitudinal Monitoring Survey (1995–2010), we provide a comprehensive set of food demand elasticities for Russia along two dimensions. First, we estimate demand parameters for three characteristic time periods in order to trace changes during transition. Second, to account for the Russian population's diversity, we derive elasticities for five different consumer segments. These groups are established by a cluster analysis based on households' food purchases. Our findings suggest that demand for food is far from satiated in Russia. We find generally high unconditional expenditure and own‐price elasticities for food. Both expenditure and own‐price elasticities show slight decreases in absolute terms over time. Low expenditure elasticities for staple foods like bread or cereals and high values for luxury goods such as meat, alcohol and tobacco suggest considerable changes in the composition of food baskets with further income growth. Results indicate that food production at home loses in importance while more affluent households in particular increase their demand for food consumption away from home.     

The End of a Romance? A Note on the Quantitative Impacts of a ‘Brexit’ from the EU

This study suggests UK equivalent variation (EV) gains of €8.9 billion on withdrawal from the EU budget. Factoring in associated trade facilitation costs from the loss of UK access to the single market, annual UK EV losses could be as high as €14.0 billion, with the EU‐28 facing a corresponding loss of €40.4 billion. Interestingly, the extrapolated UK gain arising from withdrawal from the ‘CAP’ component of the EU budget exceeds estimated lower and upper bound trade facilitation costs exclusively on EU agrofood trade. Accordingly, the UK should realistically remain as an EU member, although continue to lobby for reductions in the CAP budget.     

Measuring managerial efficiency: the case of commercial greenhouse growers

Recently the managerial decision making process has been given new attention, both in theoretical studies as well as in empirical research explaining differences in farm results. However, while critical to explaining efficiency, managerial ability has been difficult to measure and therefore often ignored. This study attempts to measure managerial ability. It divides the decision making process into four steps: goal formulation, planning, monitoring and evaluation. The quality of each step is measured in a panel of 26 specialised flower producers, The impact of decision making on the firms' efficiencies is measured by means of a stochastic frontier production function. A one‐step procedure is used in which technical and decision making parameters are jointly estimated. The results show positive associations between firm efficiency and the quality of decision making (especially monitoring and firm evaluation), indicating that this procedure has been potentially successful and is a move towards successfully measuring a critical input.     

Sources of Firm Performance Differences in the US Food Economy

Researchers in economics and strategy have long been interested in understanding the determinants of firm performance. We apply the relatively novel approach of hierarchical linear modelling (HLM) to a large panel of food economy firms to shed new light on the long‐standing debate about the relative importance of industry, corporate parent and business unit effects on firm profits. Our results suggest that business unit and corporate effects are more relevant than industry effects in explaining firm performance differences in the food economy. In addition, we also explore the effect of specific strategic factors on performance within each level of analysis. In particular, we find that business‐segment size, industry barriers to entry, corporate diversification, R&D intensity, capital intensity and resource availability are significant predictor variables that explain firm performance differences. Given the relatively important role of corporate effects and the positive influence of corporate strategic variables on business unit performance, our findings suggest that the environment provided by corporate parents significantly affects business unit profitability. In other words, corporate strategy does matter and thus should continue to draw attention from scholars interested in explaining profitability in the food economy.     

Adoption of Multiple Sustainable Agricultural Practices in Rural Ethiopia

The adoption and diffusion of sustainable agricultural practices (SAPs) has become an important issue in the development‐policy agenda for sub‐Saharan Africa, especially as a way to tackle land degradation, low agricultural productivity and poverty. However, the adoption rates of SAPs remain below expected levels. This study analyses the factors that facilitate or impede the probability and level of adoption of interrelated SAPs, using recent data from multiple plot‐level observations in rural Ethiopia. Multivariate and ordered probit models are applied to the modelling of adoption decisions by farm households facing multiple SAPs, which can be adopted in various combinations. The results show that there is a significant correlation between SAPs, suggesting that adoptions of SAPs are interrelated. The analysis further shows that both the probability and the extent of adoption of SAPs are influenced by many factors: a household’s trust in government support, credit constraints, spouse education, rainfall and plot‐level disturbances, household wealth, social capital and networks, labour availability, plot and market access. These results imply that policy‐makers and development practitioners should seek to strengthen local institutions and service providers, maintain or increase household asset bases and establish and strengthen social protection schemes in order to improve the adoption of SAPs.     

Nonparametric estimates of productivity and efficiency change in Australian Broadacre Agriculture

This paper computes and decomposes Färe‐Primont indexes of total factor productivity of Australian broadacre agriculture by estimating distance functions. Using state‐level data from 1990 to 2011, the empirical results show that TFP grew at an average rate of 1.36 per cent per annum in the broadacre agriculture over the period 1990–2011. There are variations of total factor productivity (TFP) growth across states and fluctuations over time within each state and territory. However, overall, there is a clear movement towards slower TFP growth across the sample period. Further decomposition of TFP growth shows that it is declining growth in technical possibilities (technological progress) that is the main driver of the declining trend in productivity growth in broadacre agriculture in Australia.     

Consumers’ Preferences for Bread: Transgenic,Cisgenic, Organic or Pesticide‐free?

Consumers are apprehensive about transgenic technologies, so cisgenics, which limit gene transfers to sexually compatible organisms, have been suggested to address consumer concerns. We study consumer preferences for rye bread alternatives based on transgenic or cisgenic rye, grown conventionally or without the use of pesticides, relative to traditionally bred rye, grown with conventional or organic farming methods. Stated preference (SP) data from a choice experiment are combined with revealed preference (RP) data from market purchases from the same respondents. Results show that respondents prefer pesticide‐free production methods, and that while cisgenics is preferred over transgenics, the majority of respondents favour traditional breeding methods. The distribution in preferences suggests that some respondents prefer bread from cisgenic crops produced without pesticides over traditional crops produced using pesticides. Preferences for organic bread are stronger than for pesticide‐free products. From a policy perspective results suggest that excluding cisgenics from mandatory labeling in the EU, or including it in the voluntary non‐GM labelling in the US, would cause welfare losses for consumers.     

Potential Conflict and Inefficiencies Arising in Agri‐environmental Management

We characterise the welfare implications of uncoordinated policy decisions in the presence of multiple externalities, illustrated with an aquifer. We concentrate on the problem of coordination that can occur when distinct agricultural and water authorities implement their respective policies (to optimise food production and groundwater use) with environmental concerns in mind. We represent this problem as an open‐loop Nash game, which compares the game‐theoretical solution to a centrally planned solution. We show that the inefficiencies arise from differences in the account taken of relevant costs by different authorities. We demonstrate that the magnitude of the inefficiency generated by the absence of coordination of our authorities varies depending on the weights put on environmental benefits by each authority, and discuss the implications of analysis for future research and policy.