Food Price Pass‐Through and the Role of Domestic Margin Services

The recent volatility in international agricultural markets has drawn attention to the impact of rising international agricultural prices and the induced price‐insulating measures on consumer food prices. Analyses based on simulation models on this topic typically ignore the role of domestic margin services. We extend the standard Global Trade Analysis Project (GTAP) model to allow for variations in the share of domestic margin services in consumed food across countries. This approach enables us to differentiate consumer prices from producer prices. Following the extension, the results show that domestic margin services reduce the consumer food price volatility for all countries, especially in high‐income countries, where the share of domestic margin services in final food consumption is higher. The effect of price‐insulating border policies is also reduced in the extended model. We find that our extension of the GTAP model greatly improves simulations of the 2007 surge in international agricultural prices. We validate our extension of the GTAP model by showing that the econometrically estimated food price pass‐through is decreasing with income and thus, is smaller in high‐income countries.     

Impacts of agricultural price support policy on price variability and welfare: Evidence from China's soybean market

China is a predominant soybean importer; thus, its domestic soybean policies have a large impact on world soybean market dynamics. We develop the first aggregate structural econometric model of China's soybean market and link it to the rest of the world (ROW), which allows us to analyze the impacts of China's soybean price support policy that ran from 2008 to 2013. We investigate the impacts of China's policy on the variability of their domestic and world soybean prices, and adopt a Monte Carlo simulation to evaluate the effects on distributional and aggregate welfare. Our results indicate: (a) after China's soybean price support policy, price transmission elasticity decreases, China's domestic price variability decreases, and world price variability increases; (b) China's producer surplus increases, consumer surplus decreases and the net welfare change in their domestic market is negative; and (c) although soybean exporting countries in the ROW experience significant welfare gains, the world net welfare change is negative.     

Hedonic wine price functions with different prices

This study examines the impact that recommended retail prices, actual market prices and the release of a prominent wine guide have on Australian wine hedonic price estimates, for attributes such as sensory quality, winery reputation and grape region. In general, hedonic price estimates appear to be independent of prices employed. The main identified differences in estimates relate to the size of the producer and some regional impacts. For market prices only, increases in producer size are estimated to reduce prices. This implies the existence of supply chain quantity discounting price practices. The impact of an authoritative wine guide appears to have a negligible influence on prices in Australia. In the absence of market transaction prices, the common practice of employing recommended prices for hedonic wine price estimation is defendable.     

WORLD AGRICULTURAL TRADE AND THE NEW GATT ROUND

World agricultural markets are grossly imbalanced with supplies running well ahead of demand at current depressed world prices. At the heart of the problem is the high protection given to agriculture in many OECD countries. In particular, price supports to farmers are too high and incentives to maintain or expand production too great. The success of the Uruguay Round in achieving greater liberalisation of trade in agriculture will depend on the willingness of participating governments to undertake significant reforms of domestic agricultural policies, with the aim of reducing overall protection to agriculture and switching support measures away from direct producer price support to income aid for specific disadvantaged producers. In some countries, this notion has run up against complex politico-social and structural objectives, which prevent these countries from agreeing to any significant price reduction. Price support policies, however, have been ineffective in the long run in retarding the outmigration of labour from agriculture. Measures involving only quantitative controls on production will be useful in the short run to reduce surpluses but will not solve the underlying problems which the new GATT Round must address.     

Impacts of price and exchange rate policies on pesticide use in the Philippines

Pesticide prices can influence producer decisions to apply pesticides as opposed to nonchemical means of pest control. Those prices are are turn influenced by price and exchange rate policies. The effective rate of protection for nine pesticides commonly applied to vegetables in the Philippines was calculated to determine whether government policies are creating incentives or disincentives to adopt more integrated pest management methods. Calculations found that direct price policies, primarily through an import tariff, tax pesticide use while an overvalued exchange rate subsidizes pesticide use. The net effect is a 6 to 8% pesticide subsidy. This subsidy results in economic surplus gains to vegetable producers and consumers when negative externalities associated with pesticide use are not accounted for. However, recent analysis of human health effects of pesticide use on rice in the Philippines demonstrates that these externalities can be substantial.     

生产者补贴政策、区域定位差异及大豆种植户行为响应——来自吉林省、山东省6市12县的证据

目的 中国大豆政策几经更迭,截止大豆生产者补贴政策制定实施之前的支持政策均未达成理想的政策目标,而大豆生产者补贴政策已初见成效。为深入探究大豆生产者补贴政策在试点地区与非试点地区、同一地区内区域定位差异对农户大豆种植行为响应的异质性,由此实现对后续大豆生产者补贴政策的完善提供实践参考。方法 农户是政策施行的微观行为主体。文章基于吉林省和山东省农户调研数据,利用倾向得分匹配模型和混合回归模型进行实证分析,借助更换变量法对模型结果进行稳健性检验。结果 大豆生产者补贴政策的实施促进了农户种植行为响应,政策试点地区农户相较于非政策试点地区农户大豆种植行为响应更为积极,且政策试点地区内因资源禀赋差异,不同区域间农户的大豆种植行为存在异质性。结论 政策区与非政策区农户、政策区内因资源禀赋形成的区域差异下的农户对大豆生产者补贴政策行为响应存在异质性。未来政府针对大豆相关政策的修订应着重于政策的精准化实施、调整大豆与同等替代作物比价关系、总结经验并适时推广。     

Estimation of dynamic maize supply response in Zambia

Increased attention on government pricing policies among African nations leads directly to a need for information about producer responses to price adjustments. This is especially true in the case of Zambian maize production. Maize is the most important crop grown in Zambia. It accounts for more than 80% of the value of marketed food crops, is heavily relied on for subsistence consumption, and is a staple food in the diet of all Zambian citizens. This paper analyzes the aggregate price response of maize supply in Zambia using a dynamic regression analysis. As a result, short, intermediate and long-run multipliers/elasticities are measured which can be used to analyze the effect of future price policy changes. It was found that a second-order rational distributed lag model best fits the available data. Estimates of short-run elasticities of supply for maize and fertilizer prices are 0.54 and –0.48, respectively. The corresponding estimated long-run elasticities are 1.57 and – 1.44.     

Impacts of trade liberalizations under the Uruguay Round on the world sugar market

The impacts of the Uruguay Round policy provisions on the world sugar market show that these policies will stabilize the world sugar price at slightly higher levels than in the baseline. Global sugar consumption will increase as a result of the income growth caused by the Uruguay Round. Economic resources will be allocated more efficiently among the sugar industries of the various countries. However, the impacts on the sugar industries in countries with strong producer supports will be rather small because the negotiation process of the Uruguay Round has accommodated the changes in sugar policies already implemented by individual countries in the past few years. Low-cost sugar producing countries will benefit from the higher world sugar price, and consumers in countries with protected markets will benefit from lower domestic prices.     

AN EXAMINATION OF THE TAX SUBSIDIES TO THE DAIRY SECTORS IN CANADA,GERMANY NEW ZEALAND AND THE UNITED STATES

Subsidies to agricultural producers through domestic tax and social programme policies are generally not included in producer subsidy equivalent (PSE) measures. This study examines the price induced distortions of domestic tax policy and social programmes on dairy trade between Canada, New Zealand, Germany, and the United States. The degree of tax subsidisation and the price subsidies needed to offset the tax and social programme advantages enjoyed by each country are estimated using a simulation model. Study findings suggest that current German taxation policy provides a substantial subsidy to dairy producers. Canadian and US farmers also have some trade advantages because of tax policy and social programmes.     

A METHOD FOR EVALUATING SUPPLY RESPONSE TO PRICE UNDERWRITING

In this paper a method for evaluating the supply response of individual producers to a price underwriting scheme is presented. The method includes precise formulae to take account of the impact of price underwriting on the producer's uncertain conditions. The Australian Wheat Board's guaranteed minimum price scheme is taken as a specific example of price underwriting in practice. Results show the scheme to lead to only relatively small supply responses. The impact on producer behaviour of an increase in price uncertainty in the presence of an underwriting scheme is also demonstrated in the paper.     

Livestock pricing policy in sub-Saharan Africa: objectives,instruments and impact in five countries

Livestock pricing policies in many developing countries are often instituted without a good appreciation of the consequences of such policies for allocative efficiency, output and trade. This paper evaluates, in a comparative cross-country context, the objectives and instruments of livestock pricing policy in five sub-Saharan African countries: Ivory Coast, Mali, Nigeria, Sudan and Zimbabwe during the period 1970-86. It assesses the extent to which pricing policy objectives have been attained, and also estimates the effects of price interventions on output, consumption, trade and government revenues in order to draw out lessons for the future. The empirical results indicate that in comparison with real border prices, a certain degree of success was achieved in stabilising real domestic producer prices in the study countries. The results also show that since the early 1980s, there has been a gradual shift away from taxation of producers. However, consumers still appear to gain as much as producers in three of the study countries, with negative consequences for foreign exchange earnings and government revenues. The analysis reveals the importance of domestic inflation and exchange rates as key variables for livestock pricing policies and highlights the need to address the macroeconomic imbalances that cause exchange rate distortions and high domestic inflation at the same time that direct price distortions are being tackled.     

Grain price stabilization in India: Evaluation of policy alternatives

Stabilization of prices is an important element of food policy in India as in most other countries — both developing and eveloped. However, since the magnitude of grain stocks held for this purpose as well as the costs of physical storage have become prohibitively high, there is now a need for finding cost-effective alternatives including non interventionist and market-oriented methods for price stabilization. In this paper we consider the case of rice and wheat which are staple foodgrains in India. We make a comparison between alternative price stabilization policies including that of holding buffer stocks in terms of their impact on domestic price stability, producer and consumer welfare and government costs. A multi-market equilibrium framework is used where private storage, consumption, supply and prices of rice and wheat are determined simultaneously. Indian exports and imports are assumed to affect world prices. The alternative price stabilizing mechanisms are ranked according to both the criteria, welfare and price stability achieved. The main findings are as follows. The ranking of alternatives varies with the criterion used. Greater price stability need not necessarily imply greater welfare. The option of variable levies on private external trade turns out to be the most inexpensive and that of domestic buffer stocks the costliest in achieving price stability. Further, the efficacy of buffer stocks and subsidy to private storage in stabilizing prices is lower under free trade as compared to the case where the economy is closed to private external trade.     

CPI对地价变化的影响及扣除方法研究

通过分析价格指数的概念及其在价格分析中的作用,探讨了在地价分析中扣除cPl以消除通货膨胀对地价影响的方法。结果发现,与扣除通货膨胀影响之前相比,全国105个主要监测城市2008年各类用途平均地价及2012年住宅用地平均地价不涨反跌;各用途地价的名义增长率和实际增长率峰值出现的时间分别为2010年和2009年。在地价分析中扣除cPl以消除通货膨胀对地价的影响能够更真实地反映地价本身的变动状况以及更直接地显化宏观调控政策等因素对地价变化的影响。     

Effects of an animal disease shock on meat markets and producer income

This paper simulates pig producer and slaughterhouse income losses due to a classical swine fever outbreak in Finland. The analysis explicitly takes into account that an outbreak of a highly contagious animal disease can shrink export demand for pig meat. After having observed the disease and its impact on pig meat price, producers can optimize animal stocks thought insemination decisions, which affects the number of animals in a dynamic manner. The income losses of pig industry were estimated to be less than €30 million. The losses were mainly due to price movements caused by an export demand shock. The results suggest that if the outbreak causes distortions in meat trade, the disease can cause substantial losses to the industry even if it has directly a small impact on the number of animals on farms. We also found that the optimization could reduce disease losses significantly, even more than 50%.     

AN ANALYSIS OF WILLINGNESS-TO-PAY FOR CROP INSURANCE*

In this paper a method for estimating a producer's willingness-to-pay for crop insurance is presented. The method includes formulae to capture the impact of crop insurance on the producer's expected income and variance of income. These impacts are evaluated in the context of a model of producer welfare which features both price and yield uncertainty, as well as risk aversion on the part of the producer. The method is applied to the Australian wheat industry and estimates of willingness-to-pay are shown to be relatively sensitive to the levels of coverage and yield variability.     

食用型野生动物供需的影响因素分析

以经济学中的供求理论为基础,首先从价格、收入水平和消费者偏好等因素对食用型野生动物的市场需求特征进行了分析,研究表明食用型野生动物产品的价格及人们的收入水平是影响大众对其消费欲望的最主要因素;其次,从商品价格、生产者预期、养殖技术、养殖成本、政府政策和气候条件等因素分析了食用型野生动物的市场供给特征,研究表明养殖技术、养殖成本和政府政策是制约食用型野生动物产品供给最为重要的三大影响因素;从供需两个角度看,气候条件的变化、较好的生产者预期和对野生动物产品的偏好等因素一定程度上也影响了食用型野生动物养殖业的顺利发展;然后,运用AD-AS模型对食用型野生动物养殖业的市场发展潜力进行分析;最后提出相应的政策建议。     

Economic Measures of Sustainability

Sustainable Agriculture is a term that has grown out of global call for sustainable development. Unfortunately, the term has been very widely adopted to represent a variety of initiatives. If the term is to retain any meaning it must be refined and defined. In this paper sustainability was defined as: The maintenance of the net benefits agriculture provides to society for present and future generations. This definition is very much a humanist approach, which includes both consumer and producer surplus. The paper identifies the conflict that may occur between consumer surplus, producer surplus and total economic surplus. From a consumer surplus point of view food security, and discounting are major issues. The compensating variation of a famine may be infinite making food security a primary goal of many nations. The maximization of the net returns from agricultural production represents me producer surplus point view. A second, somewhat related concern is the maintenance of minimum level of income in the agricultural sector. Consumer surplus is threatened by food scarcity, and agricultural income is threatened by surpluses. Price is the best measure we have of scarcity. To discuss sufficiency in the absence of price is very misleading. Similarly, describing sustainability in terms of expected output and prices is also misleading. It is unplanned scarcity and abundance that threatens food security and economic viability respectively. It is therefore, the ability of the agricultural system to respond and rule out extreme price that is central to the issue of sustainability. Given the inelastic nature of the demand the ability for sustainable agriculture may largely be a function of the elasticity of supply. The ability of fixed factors such as land to enter and exit a sector may also augment sustainability. A thirdsource, of economic flexibility is alternative technologies that can be applied at very low or high prices. This flexibility has to be valued not at expected prices but rather for the option values at extreme prices. Government has a role in sustainability. Governments should pursue policies which enhance the elasticity of supply. Policies that stabilize income through prices have the opposite effect. These programs should at a minimum be decoupled. Secondly, governments should spend research dollars on technologies that enhance the elasticity of supply. Finally, land set aside programs, add great deal to the elasticity of supply.     

Would Indian farmers benefit from liberalization of world cotton and sugar markets?

Rich-country support programs for cotton and sugar producers are frequently claimed to be detrimental for developing-country farmers. This study investigates whether a reduction in protectionist policies for Organization for Economic Cooperation and Development cotton and sugar producers would have a measurable effect on the welfare of Indian farmers. The fact that these sectors are intensively regulated within India might suggest that any such effect will be small. However, this study shows econometrically that prices in Indian rural markets closely follow world prices, and that Indian farmers are flexible in the medium to long run in changing production according to price signals from these markets. Depending on the crop and the nature of liberalization, producer surplus increases from 4.2% to 22.3% in the long run.     

Decomposing changes in agricultural price gaps: an application to Russia

The article develops a method for decomposing changes in agricultural price gaps, defined as the difference between a commodity's domestic producer and border prices. We use OECD's procedure for decomposing changes in the market price support part of producer support estimates as the starting point for our decomposition method, and our method provides a basis for critiquing OECD's decomposition approach. The transmission of changes in border prices (world prices and the exchange rate) to domestic prices is a key element in the decomposition. The method is demonstrated using Russian agricultural price gaps. The results support the argument that for Russian agriculture during the transition period, the main cause of changes in price gaps has been incomplete transmission of changes in the exchange rate to domestic prices, and where the weak transmission results mainly not from policy intervention, but rather from deficient market conditions, in particular poor market infrastructure. The policy implication is that underdeveloped infrastructure has strongly limited the benefits to the Russian economy from agricultural trade liberalization.     

SOME ESTIMATES OF SUPPLY ELASTICITIES FOR NIGERIA'S CROPS*

The production of export crops or cash crops as they are called in developing countries is subject to various characteristics which affect supply and producer response relationships. For perennials such as cocoa, oil palms, rubber, and coffee which are produced in Nigeria, cultivation involves planting, gestation, removal, yield, replacement, rehabilitation, etc. For annuals such as cotton, groundnuts and soya beans exported from Nigeria, similar situations, excluding gestation and replacement problems, are involved. Models for estimating supply schedules and response must be complex and highly demanding in data in order to encompass these dimensions. The models developed in this study rest on the classical assumption of rational producers who respond positively to producer prices. Because of data limitations ordinary least squares (O.L.S.) regression is employed to develop three types of price elasticities of supply for six commodities - cocoa, palm oil kernel, groundnut, rubber and cotton. The results confirm the response to depressing pricing policies of the Marketing Boards in Nigeria and suggest policy implications of price and production incentives as positive means of enhancing improved production response designed to rejuvenate Nigeria's export crop industry under economic development.