Crop Price and Risk Effects on Farm Abatement Costs

Potential leaching losses of nitrogen depend in large part on the crops grown. Since crop selection is a major means of abatement for nitrates in groundwater, it follows that the compliance costs to producers for reducing excess nitrogen is influenced by crop prices. This paper demonstrates the role that crop prices play in determining the level of on-farm abatement costs and even the necessity for regulatory policies to deal with the nitrate problem. Government support programs, specifically the Gross Revenue Insurance Program (GRIP), have increased the relative support for corn, which has higher leachate potential than other crops, and thereby requires increased abatement effort. The required level of abatement is less when risk aversion is considered than under risk neutrality, since the variability in returns among rotations is related to the degree of emissions generated. Changes in the mean and variance of relative output prices can significantly alter the optimal crop mix, leachate potential and on-farm abatement efforts. Subsequently, there is an effect on abatement costs associated with alternative environmental control instruments, which in turn affects policy design through issues such as political feasibility and equity considerations.     

Value of Household and Farm Work: Evidence from Alberta Farm Family Data

Estimates of the economic value of unpaid household and farm work of Alberta farm women and men are calculated using two common market alternative cost methods. Time use data for 1984 collected by Doherty and Keating (1985) from 414 Alberta grain farm families as well as Statistics Canada wage data are used. The average annual value of unpaid farm work ranges from $20,647.35 to $29,088.24 for men and from $5,017.54 to $6,604.19 for women. Conversely, unpaid household work performed by women has an average annual value of $17,460.98 to $34,617.66, while the value of men's unpaid household work ranges from $1,943.02 to $3,962.54 annually. When the values of farm and household production and the income generated by off-farm work are accounted for, there is little difference between mend's and womend's total contributions to the economic well-being of the farm family. These estimates illustrate the importance of family membersd' unpaid work to the economic well-being of the family. They also suggest that there is little basis for the historic inequity of legal and other social systems that neglect the economic value of womend's contributions to family welfare. On estime la valeur du travail domestique et agricole non rémunéré des agricultrices et des agriculteurs de l'Alberta au moyen de deux autres méthodes de calcul des coûts, dd'usage courant sur le marché. On se sert pour cela des données de 1984 sur le temps recueillies par Keating and Doherty (1985) auprès de 414 producteurs de céréales de l'Alberta et des données sur les salaires de Statistique Canada. La valeur annuelle moyenne du travail agricole non rémunéré varie de 20 647,35 $ à 29 088,24 $ pour les hommes et de 5 017,54 $ à 6 604,19 $ pour les femmes. Parallèlement, le travail domestique non rémunéré effectuÉ par les femmes vaut de 17 460,98 $ à 34 617,66 $ en moyenne par année, tandis que pour les hommes il varie entre 1 943,02 $ et 3 962,54 $. Lorsqud'on additionne la valeur de la production agricole et domestique et le revenu générÉ par le travail non agricole, on constate qud'il y a peu dd'écart entre la contribution totale de l'homme et celle de la femme au bien-être économique de la famille rurale. Ces estimations prouvent 1d'importance du travail non rémunéré des membres de la famille pour la situation économique de cette derniÈre. Elles suggèrent également qud'il nd'existe pas de véritable fondement à l'injustice historique introduite par les systèmes juridiques et sociaux qui négligent la valeur de la contribution des femmes au bien-être économique de la famille.     

Ranking Crop Yield Models: A Comment

This comment discusses key specification issues that may have affected the performance and, therefore, the ranking of parametric models that were compared in a recent AJAE article. A procedure to obtain the most flexible parametric model specification possible, given the particular probability distribution function on which the model is based is presented. These specifications also allow for standardized and, therefore, more valid comparisons across parametric models that are based on different probability distributions. Finally, the comment cautions against generalization of the rankings in that AJAE article and recommends that these more flexible specifications be adopted in future comparisons and applications.     

Crop Insurance Under Catastrophic Risk

We develop a new insurance model that shows how catastrophic risk affects the nature and existence of a crop insurance market equilibrium. A reservation preference level is used to characterize long-run equilibrium when catastrophic risk makes insurance companies risk responsive. Catastrophic risk is shown to increase premiums, reduce farmer coverage levels and, under some conditions, lead to a complete breakdown of the crop insurance market. Reinsurance can help facilitate an equilibrium and/or increase participation, particularly if the reinsurance is subsidized. The analysis has important implications for the design and management of crop insurance and reinsurance programs.     

The Measurement of Average Farm Size

Comparisons are regularly drawn between the average sizes of farms in particular countries or regions and in different farm-type categories. Indeed average farm size is often considered to explain (or create expectations of) changes or differences in technical or economic efficiency through time or between countries. There are, however, a number of issues involved in specifying what is meant by a farm and in choosing a suitable measure of farm size. These are examined prior to a discussion of various measures of average size, one of which (the mid-aggregate point) is described in some detail. The measures are illustrated with reference to agricultural holdings in England and in the Member States of the European Union.     

Farm Household Production Efficiency: Evidence from The Gambia

This article investigates the economic efficiency of farm households, with an application to The Gambia. The efficiency analysis is conducted not at the farm level but at the household level, thus capturing the importance of off-farm activities. Output-based measures of technical, allocative, and scale efficiency are generated using nonparametric measurements. An econometric analysis of factors affecting the efficiency indexes is then conducted using a Tobit model. Technical efficiency is fairly high indicating that access to technology is not a severe constraint for most farm households. The cost of scale inefficiency is modest. Allocative inefficiency by contrast is found to be important for the majority of farm households. On the basis of the Tobit results, imperfections in markets for financial capital and nonfarm employment contribute to significant allocative inefficiency.     

How U.S. Farm Programs and Crop Revenue Insurance Affect Returns to Farm Land

A simulation model incorporating price and yield variability is used to examine the impact of government farm program and crop revenue coverage (CRC) insurance payments on the probability distribution of returns to land. Results indicate that Marketing Loan Program payments have the greatest impact on both the mean and standard deviation of returns. Agricultural Market Transition Act payments shift the distribution of returns without changing the variability, creating a reduction in relative risk. Market loss assistance payments increase the mean, reduce variability, and increase skewness. When combined, farm programs substantially increase the value that risk-averse producers place on the residual returns to land and substantially reduce the certainty equivalent value of CRC.     

The Simultaneous Hedging of Price Risk, Crop Yield Risk and Currency Risk

This study analyzes the joint hedging decision of a Canadian firm in U S. based price and yield futures. The key results of this study are that jointly hedging price and yield can reduce more revenue risk than hedging only with price futures. For offshore hedgers, the evidence shows that foreign exchange risk is important and can be reduced by jointly hedging in the currency futures markets.
Nous analysons les décisions de couverture multiple d'une entreprise canadienne contre les risques afférents aux prix et aux rendement à terme. Les conclusions clés de l'étude sont qu'une couverture simultanée contre ces deux risques peut accorder une meilleure protection qu'une couverture établie seulement contre les risques des prix à terme. Pour ceux qui font affaire avec un pays étranger, l'expérience montre que le risque afférent au taux de change est important et qu'il est possible de le réduire en se couvrant en měme temps contre les risques affectant la valeur à terme de l'argent.     

An Economic View of the Debate on Farm Size in Saskatchewan: A Comment

In a recent paper in this Journal, Jensen (1984) continues the debate on farm size in Saskatchewan. In particular, he considers the relationship between farm size and efficiency "… to determine if it is necessary to have fewer and larger farms in order to gain cost efficiency …" Attention is focused on the notion of returns to size and the vehicle for analysis is estimates of long-run average cost (LAC) curves. Individual farm data are used for different farm types in the two years, 1977 and 1980. Equations are fitted to each farm type in each year. Hence, each estimated equation is based on cross-section data. The conclusion drawn from this analysis is that, "… at the frontier, constant returns to size are the norm in Saskatchewan agriculture" (p. 199). Moreover, "Governments could consider removing policies which favor large units …" (p. 198).     

A Note on the Profitability of Wheat-ethanol-feedlot Production in Alberta

A risk analysis of the economics of alternative wheat supplies to a small ethanol-beef feedlot facility was conducted, based on historical data from an 18-year period (1978–96). Alternatives simulated were Black, Dark Brown and Brown soil zone locations in Alberta growing either Hard Red Spring (HRS) wheat, Canadian Prairie Spring (CPS) wheat or irrigated Soft White (SWW) wheat to supply a 10 ML per year ethanol plant. The plant would use the coproduct of wet distillers grains in the finishing of approximately 14,000 steer calves per year. Three valuation scenarios were considered: selling ethanol at its market price, inclusion of current Alberta tax incentive levels for ethanol sale, and sale of wheat to the Canadian Wheat Board as opposed to sale to an ethanol plant. Ethanol facility and total net revenues were highest for the CPS-Dark Brown soil scenario due to its relatively high ethanol yields per tonne of feedstock, and high grain yields per hectare. An integrated feedstock-ethanol-livestock operation selling ethanol at current subsidy (tax incentives) levels will lose money approximately half to two-thirds of the time over the long run. Without subsidies, an integrated facility would lose money two-thirds to three-quarters of the time. Nous avons réalisé, à partir de données recueillies durant une période de 18 ans (1978 à 1996), une analyse de risque des aspects économiques de diverses provenances de blé pour une petite exploitation éthanol-parc d'engraissement. Les options simulées consistaient en emplacements situés dans les zones de sols noirs, brunfoncé et bruns de I'Alberta, produisant soil du blé roux vitreux deprintemps (BRVP), du blé de printemps des Prairies canadiennes (BPPC) ou du blé blanc tendre (BBT) sous irrigation pour alimenter un atelier d'éthanol d'un volume de fabrication de 10 millions de litres par année. L'atelier hypothétique utiliserait le co-produit des drêches de distillerie humides pour engraisser quelque 14 OOOjeunes bouvillons par année. Trois scénarios de valorisation étaient envisagés: vente de I'éthanol au prix de marché, inclusion des incitatifs fiscaux actuels de I'Alberta pour la vente de I'éthanol et vente du bléà la Commission canadienne du blé par opposition à la vente à un atelier de production d'éthanol. Les revenus nets tirés de I'atelieret les revenus nets totaux les plus élevés de l'exploitation étaient obtenus dans le scénario BPPC-sol brunfoncé en raison des rendements d'éthanol relativement élevés par tonne de blé et des bons rendements grainiers par hectare obtenus dans cette combinaison. Selon les résultats obtenus, un atelier intégré blé-éthanol-parc d'engraissement écoulant son éthanol au niveau de subvention actuel (incitatifs fiscaux), perdrait de I'argen d'environ la moitié aux deux tiers du temps. Sans ces subventions, il ne rentrerait dans ses dépenses qu'unefois sur trois ou unefois sur quatre seulement.