Seasonal variability,land values and willingness–to–pay for a forward wheat contract with protein premiums and discounts

This article investigates the impact of a protein premiums and discounts system on the income stream from growing wheat. Based on a biological relationship between protein and yield in uncertain seasonal conditions, it shows that such a system reduces the expected level and variability of wheat income. It is subsequently argued, using a numerical analysis, that protein payments affect both the attraction to wheat growers of forward contracts and the value of land used for wheat. The nature of both of these impacts is related to the level of seasonal variability affecting the land. Consequently, wheat growers in the more unreliable regions of the wheatbelt may have been particularly disadvantaged by the system.     

The role of expected protein levels in determining the impact of protein premiums and discounts: a note

Fraser (1997) considered the impact of protein premiums and discounts on a grower's income stream and willingness-to-pay for a forward contract where the protein premium and discount system is centred on a grower's existing expected protein level. This article extends these results to consider the impact of a protein premium and discount system which is not centred on a grower's existing expected protein level. The article suggests that the grower's existing expected protein level plays a crucial role in determining the impact of the system.     

Agriculture's Likely Role in Meeting Canada's Kyoto Commitments*

Voluntary adoption of beneficial management practices will be the primary means by which farmers cut net greenhouse gas (GHG) emissions. The offset system will not be a major driver due to (a) the relatively low prices likely to be offered by large final emitters facing an emission cap, (b) discounts applied to those prices for temporary sequestration, (c) the transaction costs and risk premiums associated with signing carbon contracts, and (d) the low elasticity of supply of CO₂ abatement. Although Canadian farmers are likely to participate to only a limited extent in the carbon‐offset market, many will find it profitable to adopt one or more of the BMPs for reducing net GHG emissions. Canadian agriculture is likely to contribute significantly to net emission reductions by voluntarily sequestering carbon due to the adoption of zero till in the last decade, and possibly by cutting fertilizer levels in the next decade. The contribution will be mainly a response to meeting personal economic objectives rather than being induced by direct incentives through the offset program.     

Optimal Input Use When Inputs Affect Price and Yield

Input use has been shown to impact the variance of output and therefore risk. When inputs affect both output level and the price of the output, the variance of revenue and profit depend on each effect and their interactions. We analyze the effect of nitrogen (N) use rate applied to wheat on the variance of yield, revenue, and the price of wheat, when protein premiums (discounts) are applied. We find that N use rate increases the variance of yield, but reduces the variance of price. The net effect of N use rate on revenue and profit is variance increasing, but the variance effect is less than for yield alone. Optimal rates of N are about 60% higher with protein payments compared with a constant wheat price over all protein levels. Risk-averse producers apply less N than risk-neutral producers but, because revenue and profit risk is lower with protein payments, the reduction in N is less than if based on a constant price over all protein levels.     

Modeling winegrape prices in disequilibrium

This article presents an econometric model of winegrape prices which recognizes the existence of demand and supply imbalances in the Australian market. A “markets in disequilibrium” framework is employed to motivate modeling price changes as responding to variations in excess demand/supply. The disequilibrium price equation provides estimates of regional and varietal price discounts/premiums and a measure of the speed of disequilibrium price adjustment. The equilibrium assumption is rejected for the market and substantial differences between equilibrium and disequilibrium estimates point to the inaccuracies of assuming market clearing. Disequilibrium estimates point to significant differences between warm and cool regions and changing speed of disequilibrium adjustment over time.     

Demand for area crop insurance among litchi producers in northern Vietnam

This study examines the need for crop insurance for litchi production in northern Vietnam and how farmers might participate in such a program. Hypothetical insurance programs were developed which proposed all‐risk coverage based on area yields. This coverage was offered to farmers to determine both their interest in the program and how insurance features and farmer characteristics affected their decision to buy insurance. Farmers were also surveyed regarding their production practices, price and yield expectations, and financial and personal characteristics. Even before considering other program costs and government budget constraints, there is not a strong case for establishing a crop insurance program here. Results indicate that while farmer participation would be significant, crop insurance is not needed to achieve policy goals like raising farmer income or guaranteeing subsistence levels of income. Crop insurance is not needed to promote litchi production, which is already expanding rapidly due to its high profitability relative to other farm enterprises. In their choice of coverages, farmers preferred higher yield guarantee levels and lower indemnity prices. Estimated premiums were quite low when expressed as a percent of expected revenue, and farmers were not responsive to changes in premiums. Econometric analysis indicated that high income farmers were more likely to participate, but other farmer characteristics seemed to matter little. Anecdotal evidence suggested that farmers believed the expected area yields used to set insurance coverage levels were too low. Because litchi productivity varies significantly by tree age and the litchi planted area is expanding rapidly, determining appropriate values for expected area yields and insurance coverage levels appeared to be the biggest challenge in program design. It is hypothesized that additional farmer education about the relationship between area and farm yields and other aspects of area insurance could improve such a program's operation. Published by Elsevier Science B.V.     

Spatial price premium transmission for Meat Standards Australia‐graded cattle: the vulnerability of price premiums to outside shocks

Studies of market integration show that price changes are transmitted spatially through arbitrage. Transmission across differentiated agricultural products is important to investigate, but it has not been explored given its complexities for assessment. Using data from Australian cattle markets, we examine the dynamics of Meat Standards Australia price premium transmission between states. An impulse response function analysis using Bayesian vector autoregression with sign restriction identification shows that shocks to prices and price premiums are partially transmitted contemporaneously between markets and it takes several weeks to complete transmission. In addition, we find an asymmetry of price and price premium shocks originating in Southern Queensland that have an inverse immediate impact in New South Wales, and take months to transmit the usual price response. This outcome may be explained by differences in cattle availability in each state, which can be related to forage availability due to weather conditions. Based on these results, producers can forecast fluctuations on price premiums and adjust their cattle supply accordingly.     

A Hedonic Analysis of Fresh Tomato Prices among Regional Markets

This study uses the 2004 ACNielsen Homescan panel data to estimate the price premiums and discounts associated with fresh tomatoes among regional markets, focusing on the organic attribute. The results suggest that consumers paid $0.25/lb more for organic fresh tomatoes in the New York–Philadelphia market. The organic premiums are estimated to be $0.14/lb in the Chicago–Baltimore/Washington and Los Angeles–San Francisco markets and $0.29/lb in the Atlanta–San Antonio market. Furthermore, tomato prices consumers paid in 2004 varied by household characteristics, including income, age, and the race and ethnicity of the head of the household.     

Factors and scenarios affecting a farmer’s grain harvest logistics

This paper explores how changes in Australia’s grain industry supply chains are likely to impact on the nature and profitability of an Australian farmer’s grain harvest logistics. A simulation model is used to show how receival site rationalisation, cheaper on‐farm storage, larger trucks, higher‐yielding crops and new harvest technologies, separately and in combination, affect the nature and profitability of a farmer’s grain harvest logistics. Applying the model to a typical Australian grain farm shows that many of these changes unambiguously advantage the farm business, and often, the combination of these changes increases a farmer’s harvest profits by at least 10 per cent. For many farmers, the task of efficiently designing and managing harvest logistics will be an increasingly difficult yet important series of choices due to the range of storage options, grain pathways, crop portfolios and market opportunities that are arising. A farmer’s decisions about cost‐effective on‐farm storage and transport, and their judicious use, will be a key contributor to additional profit in future years.     

PRODUCT CHARACTERISTICS AND ARBITRAGE IN THE AUSTRALIAN AND NEW ZEALAND WOOL MARKETS*

The physical characteristics of wool are important determinants of its spinning properties, yarn quality and end use. The degree to which wools from different countries of origin may be substituted has important implications for the domestic marketing policies of Australia and New Zealand. The hypothesis examined in this paper is that the differences in wool prices can be explained by differences in the physical characteristics of the wool and that objective measures of these characteristics allow for effective arbitrage between these markets. The alternative hypothesis is that premiums or discounts exist owing to country of origin. A hedonic price analysis was conducted on wool prices in Australia and New Zealand using a balanced sample of sale lot data from the 1986-87 selling season. In the year examined, there was no evidence of any price premiums associated with country of origin.     

Consumer Preferences as Drivers of the Common Bean Trade in Tanzania: A Marketing Perspective

The objective of this study is to determine the impact of bean grain quality characteristics on market price. The data were collected from retail markets in Tanzania. Hedonic pricing provides a statistical estimate of premiums and discounts. Implications for the development of bean markets include the following: (a) extension agents should identify cost-effective ways to educate producers on targeting urban market niches based on consumer preferences for varieties, (b) breeding for bruchid-resistant beans and use of appropriate storage technologies would alleviate the problems of storage damage, and (c) a portfolio of grain quality characteristics to fit consumer preferences in local markets should be required.     

UNRELIABLE MARKETS AND PERISHABLE PRODUCTS

This paper considers the behaviour of a farmer facing an unreliable market for his perishable product. In the context of a simple model, where unreliability is characterised as demand uncertainty at the going market price, the optimal responses of a risk-averse farmer both to the introduction and to an increase in the level of unreliability are analysed. Conditions determining these responses are described and are shown to contrast markedly with the conditions determining a farmer's responses to uncertainty in other parameters such as price. Finally, the policy implications of the paper are discussed, with particular reference to the problem of unstable supply.     

The determinants of technology adoption by UK farmers using Bayesian model averaging: the cases of organic production and computer usage

We review and implement a reversible jump approach to Bayesian model averaging for the Probit model with uncertain regressors. Two applications are investigated. The first is the adoption of organic systems in UK farming, and the second is the influence of farm and farmer characteristics on the use of a computer on the farm. While there is a correspondence between the conclusions we would obtain with and without model averaging results, we find important differences, particularly in smaller samples. Concerning the adoption of an organic system, we find that attitudes to the sustainability of the current system along with the ability of organic farms alone to satisfy society’s needs for food are influential. Additionally, the source of management information used by the farmer has a significant impact. Regarding the adoption of computers, we confirm the findings of previous work that the level of education affects uptake and that age is a factor determining adoption. We also find that dairy and organic farms are more likely to use a computer. The physical size of the farm is positively associated with the probability of computer use while net farm income has a limited impact.     

Impact of farmer self-identity and attitudes on participation in agri-environment schemes

Influencing farmers to make positive contributions to the environment is one of the goals of agri-environment schemes (AESs). Understanding the drivers of farmer behaviour and the choices they make with regards to AESs is important as this aids policy makers in creating schemes that have a wider scope and are more likely to achieve environmental goals. Past studies have identified the importance of farmer self-identity and attitudes in decisions made on farms. Little emphasis has been put on modelling the relationship between self-identity and attitudes towards schemes and the resulting impact on participation in voluntary AESs. Using Ireland as a case-study, this paper employs a survey of 1000 farms to look at participation in AESs through the lens of farmer perceived self-identity and their attitudes towards schemes. A relatively novel approach of combining factor analysis, to generate a self-identity typology, with an AES participation regression model is implemented. The model results suggest that self-identity and attitudes have a significant impact on AES participation. Neighbouring farmers’ viewpoints also have a significant and positive impact on the participation decision made by farmers.     

NEGATIVE SUPPLY RESPONSE AND THE ROLE OF PRICE EXPECTATIONS IN A TWO-PERIOD MODEL OF CATTLE PRODUCTION

This paper incorporates a representation of producers' price expectations (ARIMA) in a two-period production process to characterise short-run cattle supply. The model provides a framework for examining the role of biological factors and changing expectations of future cattle prices in generating a negative short-run supply response. The biological link between cattle generations requires the farmer to make a decision between production today and production tomorrow. This decision is based on a trade-off between the possibilities of increasing current profit levels by increasing current output weighted against the possibilities of increased future profit by maintaining animals in inventory under the expectation of future price increases. Application of the model to Canadian data for the period 1978-81 shows that the necessary condition for a negative supply response exists, but that the total supply elasticity remains positive.     

Information sharing as a safeguard against the opportunistic behavior of South African Karoo Lamb farmers

Misconduct in global meat supply chains are omnipresent and even more so in differentiated chains where credence attributes such as origin and taste are used to differentiate the product. By definition, these attributes signal asymmetric information which implies that in the presence of bounded rational individuals with conflicting interests, misconduct in the form of opportunistic behavior is bound to prevail. Increased information exchange through farmer networks is, however, expected to reduce opportunistic behavior. In the case of a differentiated meat product, such as Karoo Lamb, the article studies the farmer‐abattoir transaction with the purpose of recommending strategies that can be implemented to reduce the farmer's tendency to behave opportunistically. The article employs the PLS approach to SEM and reveals a significant negative relationship between information shared and opportunistic behavior. The results indicate significant positive relationships between trust in the abattoir and information shared as well as between farmer networks and information shared. These results are indicative of the support provided to the information shared construct by higher levels of trust between farmers and abattoirs and established farmer networks. It is, therefore, recommended that differentiated meat supply chains, through their various associations, concentrate their efforts to promote information sharing by building stronger, trust centered relationships and by supporting farmer networks.     

Commonage land and farmer uptake of the rural environment protection scheme in Ireland

This paper looks at some of the factors which may influence REPS participation among commonage farmers in the west of The Republic of Ireland and on the impact REPS has had on participating farmers’ income and on their environmental practices and attitudes. Commonage is land held in common ownership on which two or more farmers have grazing rights. There are about 4500 commonages in Ireland and they are important to Irish agriculture, to conservation of the uplands, in managing the environment and in sustaining rural livelihoods. The study reveals that sheep farmers are less likely to join REPS than cattle farmers and that being in receipt of other sources of State income acted as a deterrent to participation. REPS appears to have had a positive impact on participants’ income and seems to have been successful in changing farmer practices in a more environmentally benign direction, when doing so imposed no additional costs on the farmer. Environmental awareness among all farmers appears to be poor although REPS farmers display more appreciation of the degraded state of commonage than do non-REPS farmers. Farmers preference for a continuation of the status quo with respect to commonage management and a lack of discontent with respect to the distribution of past commonage rights points to the potential of building on a more co-operative approach to environmental management.     

Self‐protection from weather risk using improved maize varieties or off‐farm income and the propensity for insurance

We investigate how self‐protection from the adoption of Improved Maize Varieties (IMV) and off‐farm income affects risk premiums for smallholder maize producers in Uganda. To unbundle these effects, we specify the cost of risk to explicitly capture four risk components—mean, variance, skewness, and kurtosis. Using unique plot‐level panel data for Uganda, we estimate and test moments of a flexible production function based on an expanded form of the Johnson S_U family distribution and proceed to simulate the degree of responsiveness of risk premiums and welfare estimates to marginal changes in the share of land under IMV and off‐farm income. Scenarios of joint adoption of IMV accompanied with low and high application of inorganic fertilizer, and the effect of off‐farm income when there is high and low supply of farm labor are examined. Results show that the use of IMV and off‐farm income substantially reduces risk premiums and the individual effect is much higher under low fertilizer application and high supply of farm labor, respectively. Thus implying that self‐protection is likely to reduce the propensity for index insurance especially if its design fails to consider the reduction in downside risk.     

制度能力对农户合作供给农田灌溉系统的影响分析——基于黄河灌溉区6省份的调查数据

本文基于黄河灌溉区农户微观调查数据和制度能力三层次分析框架,利用双栏模型分析了知识性资源、关系性资源和动员能力三层次制度能力因素对农户合作供给农田灌溉系统行为的影响。研究表明,黄河灌溉区农户以投资方式合作供给农田灌溉系统的支付意愿水平为每年每户77.6~232.4元,以投工方式合作供给农田灌溉系统的支付意愿水平为每年每户1.8~4.6天;知识性资源、关系性资源和动员能力三层次因素对黄河灌溉区农户合作供给农田灌溉系统的意愿具有显著影响,其中,村庄的灌溉规则执行情况、村委会或水利协会对农户使用灌溉设备的支持力度、对农户参与灌溉系统供给的尊重程度和组织农户学习有关灌溉技术的强度因素显著影响农户投资灌溉系统的合作意愿程度;村庄灌溉设施供给规则、村委会或水利协会对农户使用灌溉设备的支持力度、联户促进灌溉有关的集体行动能力、为灌溉系统供给争取财政补贴的能力、组织农户学习有关农田灌溉技术的强度和农户获取灌溉信息的容易程度因素显著影响农户投工农田灌溉系统的合作意愿程度。     

Estimated Value of Increased Pricing Accuracy for Fed Cattle

To improve vertical market coordination beef packers have introduced fed cattle grid pricing systems that offer premiums or discounts for varying carcass quality and yield grades. This study calculates the value of cattle quality information for producers considering live, dressed, and grid pricing alternatives. The value of fed cattle quality and yield grade information is at least $15/head. When fed cattle are sold on a live weight basis, high-quality cattle subsidize low-quality cattle by an average of $30/head. Price signals that could improve beef market coordination are ignored when fed cattle are marketed using traditional live or dressed weight methods.