RELATIVE PRICE VARIABILITY AMONG AGRICULTURAL COMMODITIES AND MACROECONOMIC INSTABILITY IN THE UNITED KINGDOM

This paper develops measures of relative price variability among agricultural commodities in the UK farm sector for the period 1956-88. Econometric tests of the hypothesis that relative price variability is positively correlated with instability in the macroeconomy are carried out. The results indicate that UK agricultural commodity prices become more volatile relative to one another when the economy-wide inflation rate increases and when aggregate output becomes more variable. These findings suggest that UK producers and consumers of domestically grown farm products experience increased risk and uncertainty in their production and consumption decisions during periods of macroeconomic instability. The effects of UK entry into the European Community are also examined; no evidence is found to suggest that adoption of the Common Agricultural Policy reduced year-to-year relative price variability among agricultural commodities.     

Regional Impacts of a U.S. Hog Slaughter Plant Closing: The Thorn Apple Valley Case

As the 1998 U.S. hog market collapse unfolded, Thorn Apple Valley ceased hog slaughter operations at its Detroit, Michigan plant. We examine the impacts on Michigan live hog prices relative to Eastern Corn Belt hog prices. Results indicate that Michigan producers' relative price advantage diminished after the closure as procurement competition changed. As the impacts of the 1998 hog market collapse were absorbed, Michigan producers' relative price advantage became consistently negative. Examination of Michigan's market hog production distribution indicates postclosure shifts away from production in areas geographically near to Thorn Apple Valley and growth in counties geographically closer to alternative packers.     

An Analysis of Removal of Agricultural Trade Barriers between the United States and Canada with Emphasis on the Southeast

A four-region, 23-commodity small world agricultural trade liberalization model within the SWOPSIM framework is used to measure the impact of tariff removal between the United States and Canada. The tariffs are simply defined as negative import subsidy equivalents in the model and are then removed from the trade prices. The model recalculates domestic supply and demand levels in all regions, rebalancing world trade, production, consumption and prices. In summary, the impacts of the Canada-U.S. Trade Agreement on selected commodity groups are significant. Canadian imports of beef and veal, poultry meat, soybean oil and fresh strawberries increase. Furthermore, the results indicate larger trade flows for selected products and declines in producer and consumer prices in Canada, U.S. and Southeast regions. Since the U.S. share of Canadian agricultural imports averaged 60% in the 1980s, the impact of trade liberalization will be greater in Canada in selected commodities than in the U. S. or the southeastern region, and Canadian dependence on the U.S. market will be increasing in the future. The tariff phaseout, together with a reduction in nontariff barriers and harmonizing of domestic agricultural policies, will create more export opportunities in selected commodities for both the United States and Canada, and will create the world's largest free trade market.     

The consequences of a human food pathogen vaccine on food demand: a calibrated partial‐equilibrium analysis of the U.S. beef market

Human vaccines against several common foodborne pathogens are being developed and could substantially alter consumer and producer behaviour in the markets for foods commonly afflicted by these pathogens. To understand the possible impacts of such an innovation, we derive and calibrate a partial‐equilibrium model using parameters for consumer vaccine uptake from stated‐preference work under an array of assumptions concerning industry moral hazard, consumer awareness and alternative preventive effort exercised by consumers. We simulate three scenarios in the U.S. beef sector: the introduction of a vaccine, the tightening of pathogen standards for beef production and the simultaneous introduction of both vaccinations and tighter standards. Our simulation shows that all policies can increase aggregate surplus given most calibrations; though, the largest effects are attributed to vaccine introductions, which reduce expected damages from foodborne illness among vaccinated consumers without shifting firm costs. However, unaware consumers and aware consumers who choose not to vaccinate experience no change in expected damages when a vaccine is introduced but face a higher price of food because of the stronger demand of food from vaccinated consumers.     

Comparative Advantage Indices of Selected Livestock Production Sectors in Brunei Darussalam

Abstract

This study calculates the protection rates and comparative advantage indices of livestock industry in Brunei from an import substitution perspective. Four livestock sub-sectors were being evaluated: broiler, layer, goat and beef cattle. Two measures of government intervention indices were calculated, namely nominal protection rate (NPR) and effective protection rate (EPR). Domestic resource cost (DRC) and resource cost ratio (RCR) indices were computed to determine the comparative advantages of the livestock industry. In general, the results indicate that the livestock industry in Brunei was heavily protected. The study revealed the existence of comparative advantage only for very large farms producing poultry meat and eggs. Similarly in the ruminant sector, goat production appears to have comparative advantage over beef cattle. Small and medium poultry farms and large non-ruminant farms and cattle beef production possess comparative disadvantage despite being highly protected industries.     

Reconstructing production efficiency,land use and trade for livestock systems in historical perspective. The case of France, 1961–2010

This paper provides an original accounting of changes in livestock production efficiency per livestock category in historical perspective and connects livestock consumption with land requirements and virtual land trade. We use France as a demonstration study and account for productivity changes in terms of energy. Feed rations composition are reconstructed per livestock production and feed crop group over time to account for changes in land use in relation to dietary changes. Land requirements for consumption in France dropped by 28% over the study period besides an increase by 35% of the human population and by 53% of the livestock consumption. The two-fold increase in agricultural productivity is due, for half, to energy conversion efficiency improvements and for half to agricultural yields. Overall, the livestock energy conversion efficiency increased by 45% from 1961 to 2010, poultry gained 84%, pork 17%, sheep&goat 67% and cattle 27%. The feed share of oilcrops and cereals in animal rations doubled against a drop by 35% of feed from pastures. Virtual land imports for oilcrops in relation to livestock consumption in France today amount to 0.9 million ha against a maximum of 1.9 million ha in 1979. Besides its dependence on oilcrops imports, the French livestock sector displays net virtual land exports ranging from about 2.5–5.3 million ha per year over the study period. Gross virtual land trade is today five times higher than the net virtual trade. The difference highlights the share of circular product loops in increasingly integrated agricultural markets at the international scale.     

Linking of U.S. monetary policy and exchange rates to world soybean markets

The linkage between macroeconomic policies and agricultural commodity trade has become an important research issue of agricultural economists. This paper investigates the macroeconomic linkage of soybean trade competition between the exporting countries of the United States, Brazil, and Argentina in the EC-12 and Japan import markets. It is argued that U.S. monetary growth may have important impacts on the competitive position of U.S. soybean exports through exchange rates. Two relationships are investigated: (a) the effects of U.S. monetary growth on the agricultural trade weighted exchange rates, and (b) the responsiveness of agricultural commodity prices and U.S. exports to exchange rate movements. Results indicate that a weak dollar increases imports of soybeans and soymeal significantly which serves to increase the equilibrium world price and increase both U.S. and Brazil/Argentina exports in the long run. However, during periods of more expansionary U.S. monetary policy there is little evidence of significant increases in market share position for U.S. soybeans and soymeal in world markets.     

PORTUGAL ON THE BRINK OF EUROPE: THE CAP AND PORTUGUESE AGRICULTURE

Portuguese policy-makers assumed an active interest in agricultural sector development after the 1974 Revolution. However, the policy instruments used-output price supports, input subsidies, land market regulations, and agricultural credit programmes-have done little to facilitate technical or structural change in much of the sector. This pattern of development may have adverse medium-term impacts on agriculture, because for most commodities, accession to the CAP will substantially reduce farm profitability. If Portugal is to avoid sharp declines in income for a sector that is already relatively low in income terms, reform of factor market policies and investment in research and development are essential.     

The impacts of biofuels targets on land‐use change and food supply: A global CGE assessment

We analyze the long‐term impacts of large‐scale expansion of biofuels on land‐use change, food supply and prices, and the overall economy in various countries or regions using a multi‐country, multi‐sector global computable general equilibrium model augmented with an explicit land‐use module and detailed biofuel sectors. We find that an expansion of biofuel production to meet the existing or even higher targets in various countries would slightly reduce GDP at the global level but with mixed effects across countries or regions. Significant land re‐allocation would take place with notable decreases in forest and pasture lands in a few countries. The expansion of biofuels would cause a moderate decrease in world food supply and more significant decreases in developing countries like India and Sub‐Saharan Africa. Feedstock commodities (sugar, corn and oil seeds) would experience significant increases in their prices in 2020, but other price changes are small.     

Calculating environmental cost indicators of apple farm practices indicates large differences between growers

This study evaluates the environmental impact of current apple cultivation practices in Flanders, Belgium. It evaluates integrated production, the most common practice, and it compares this production method with conventional and organic production. The assessment was based on Farm Accountancy Data Network data from 2010 to 2012 for 64 farms in the region and a life cycle approach was used. The findings showed no significant improvement in environmental impacts for integrated farms compared to conventional farms and, even more, the former showed significantly higher average impacts per hectare for the categories ‘acidification’, and ‘non-renewable energy use’ in comparison with the latter. The organic production group showed higher average impacts per kilogram due to lower yields. Secondly, impacts related to the categories ‘acidification’, ‘eutrophication’ and ‘global warming potential’ were monetized based on the shadow price method in order to obtain external costs. Results show that external costs increase the production costs for integrated farming at least with 5%, both when these costs are expressed per kilogram and per hectare. However, the findings show a large variability in impacts and costs per farm. Farm-specific practices have therefore an important influence on the total environmental cost rather than production group-specific practices.     

Capital accumulation and the growth of aggregate agricultural production

This report empirically examines the role which capital accumulation plays in the growth of agricultural production potential. The report assumes that the degree to which available technology can be implemented in a nation's agricultural sector depends on accumulated investments that have been made in the sector. Results from estimating aggregate agricultural production functions show the primary importance of rural labor in accounting for agricultural gdp and crop production. Capital accumulation is the dominant explainer of livestock production. Estimation results support the conjecture that capital tends to save scarce land resources (substitute relationship) and use rural labor (complementarity relationship). Output supply elasticities derived from the estimated equations tend to be large. The large elasticities imply that price distortions have had large impacts on resource use and production.     

Higher fuel and food prices: impacts and responses for Mozambique

Rising world prices for fuel and food represent a negative terms‐of‐trade shock for Mozambique. The impacts of these price rises are analyzed using various approaches. Detailed price data show that the world price increases are being transmitted to domestic prices. Short‐run net benefit ratio analysis indicates that urban households and households in the southern region are more vulnerable to food price increases. Rural households, particularly in the North and Center, often benefit from being in a net seller position. Longer‐term analysis using a computable general equilibrium (CGE) model of Mozambique indicates that the fuel price shock dominates rising food prices from both macroeconomic and poverty perspectives. Again, negative impacts are larger in urban areas. The importance of agricultural production response in general and export response in particular is highlighted. Policy analysis reveals difficult trade‐offs between short‐run mitigation and long‐run growth. Improved agricultural productivity has powerful positive impacts, but remains difficult to achieve and may not address the immediate impacts of higher prices.     

Spatial allocation and the shadow pricing of product characteristics

The paper considers an industry transforming primary commodities (farm products) into processed commodities (food products). It focuses on the allocation of embedded characteristics (carbohydrate, protein, etc.) both across space and among commodities. The approach generates a spatial competitive market equilibrium of production, consumption, transformation, and trade for both primary and processed commodities, along with the spatial distribution of shadow prices for the product characteristics. The model provides a basis for analyzing the allocation and pricing of agricultural products, food products, and characteristics in spatial markets. The empirical usefulness of the model is illustrated in the context of regional resource allocation in the U.S. dairy sector.     

Agenda 2000 Reform of the CAP and its Impacts on Member Member States: A Note

We evaluate the Agenda 2000 reform of the CAP for each of the 15 member states of the EU, accounting for general equilibrium effects and bilateral trade links. Results reflect the impacts in 2008 projected from a 1997 database. In most member states, output of crops falls and there is a switch in the use of arable land from oilseeds to cereals. Output of cattle also falls, but that of milk, pigs and poultry increases. Total farm income falls in 11 member states, although livestock producers throughout the EU gain. Consumer price indices fall everywhere. In terms of GDP, Luxembourg, Finland, Ireland and Portugal gain the most; Germany, Greece and the UK gain the least; and Spain loses. The net budgetary cost to the EU of the reform package is estimated to be an additional €3,203 million. Thus, further cuts in support are of paramount importance if the EU is to be prepared for the accession of new members.     

PROJECTION MODELS FOR U.K. FOOD AND AGRICULTURE*

Successful policy planning depends to a large extent on being able to predict the consequences of alternative measures. In the case of agriculture, it is important to know how the future pattern of supply and demand in this sector will be affected by government action on specific issues such as farm price support, and by expected trends in macro-economic variables such as national incomes and population. This paper illustrates the application of a model of U.K. agriculture to the projection of changes in the production and consumption of food and agriculture products between now and 1975. The demand projections show the effect of important levies, and of joining the E.E.C, on future expenditure on food, while the supply projections show how the output of a number of agricultural commodities will be affected by adjusting farm prices towards E.E.C. levels.     

Measuring research benefits in an imperfect market

Recent work indicates that the joint effects of intermediate input and final output tariff reforms on equilibrium in the differentiated final products sector are analytically ambiguous. This issue is addressed empirically for disaggregate, imperfectly competitive U.S. food manufacturing industries. The input tariff effect dominates in most industries, leading to increases in the number of U.S. firms and total industry output as a result of tariff reform. This provides evidence that the existing U.S. tariff profile discriminates against domestic food manufacturers as input tariff effects outweigh the protection offered by output tariffs. This conclusion is robust to changes in the degree of interfirm rivalry (monopolistic competition or cournot oligopoly).     

Can Futures and Options Markets Hold the Milk Price Safety Net? Policy Conflicts and Market Failures in Dairy Hedging

U.S. Department of Agriculture's Dairy Options Pilot Program promoted hedging by producers, and was a test case for similar programs in other agricultural industries. Rapidly shifting milk pricing policies impeded quantitative hedging evaluations while the program was active. Hedging appears capable of reducing price variance by 50–60% in most regions, and favors large, sophisticated producers in heavy cheese manufacturing regions. Forward contracting or price insurance products may offer lower transaction costs and attract more small-scale producers. Ballooning milk deficiency payments and milk's prominent role in trade-distorting payments suggest an ongoing need to promote private price risk management tools.     

The Evolution and Implications of the U.S. Food Security Act of 1985

The Food Security Act of 1985 sets the United States (U.S.) policy course for the five years, 1986–1990, in the areas of farm product prices and farmer incomes, agricultural production, food aid, and trade in agricultural products. It is clearly an evolution of past policy, deeply rooted in the institutional processes of participatory policymaking. The Act will have important implications for not only domestic producers, consumers, agribusinesses, and taxpayers, but alto product agricultural exporters and importers around the world. Just as it was substantially, affected by the current loss of export markets and the economic crisis in the U.S. agricultural sector, its implementation and impacts will be affected in the future by the unpredictable weather, macroeconomic conditions around the world, and international trading policies. This article examines the development of the policy embodied in the Act and analyzes its primary economic implications. Although most provisions of the U.S. agricultural price and income policy that had evolved over the past half century were continued, important changes were made. The resulting policy closely mirrored the preferences revealed from research concerning farmers and leaders of national agricultural and food interest groups. Primary changes from the previous 1981 Act were: lengthening the duration to five years; substantial lowering of the minimum price support levels; permitting a gradual decline in the minimum target prices; providing for a whole dairy herd buyout program; establishing export enhancement initiatives through credit, promotion, and export payment-in-kind (PIK); and initiating major efforts to increase farmland conservation and withdrawal of fragile lands from production. Likely implications of the new Act include: (1) lower product prices for agricultural producers around the world, and also farmer incomes if there is no income protection from national policies; (2) a similar but a less proportionate impact on consumers; (3) a substantial burden on the U.S. Treasury, and possibly those of the other nations as well, depending upon the type of policies followed; and (4) likely intensification in the immediate future of the economic conflicts and negotiations between major agricultural trading nations of the world. Research played a vital role in the development of the U.S. 1985 Act. Given the turbulent, uncertain, and important nature of the agricultural and food sector in the world, research is challenged to provide more and better knowledge for future policymaking.     

The Dynamic Competitiveness of U.S. Agricultural and Forest Carbon Sequestration

Society is increasingly turning attention toward greenhouse gas emission control with for example the Kyoto Protocol has entered into force. Since many of the emissions come from energy use, high cost strategies might be required until new technological developments reduce fossil fuel dependency or increase energy utilization efficiency. On the other hand biologically based strategies may be used to offset energy related emissions. Agricultural soil and forestry are among the largest carbon reservoirs on the planet; therefore, agricultural and forest activities may help to reduce the costs of greenhouse gas emission mitigation. However, sequestration exhibits permanence related characteristics that may influence this role. We examine the dynamic role of carbon sequestration in the agricultural and forest sectors can play in mitigation. A 100-year mathematical programming model, depicting U.S. agricultural and forest sectoral activities including land transfers and greenhouse gas consequences is applied to simulate potential mitigation response. The results show that at low cost and in the near term agricultural soil and forest management are dominant sectoral responses. At higher prices and in the longer term biofuels and afforestation take over. Our results reveal that the agricultural and forest sector carbon sequestration may serve as an important bridge to the future helping to hold costs down until energy emissions related technology develops.     

Differentiated products and supply controls in the analysis of agricultural policy reform: the case of tobacco

With a multi-market model of the U.S. tobacco and cigarette industries, we analyze the impact of a reduction in the assistance to U.S. tobacco producers by relaxing production quotas with nonbinding price support and by lowering tariffs on tobacco imports. The results show the importance of incorporating differentiated product and supply control assumptions into agricultural policy analysis.