AGRICULTURAL EXPORTS OF DEVELOPING COUNTRIES: ESTIMATES OF INCOME AND PRICE ELASTICITIES OF DEMAND AND SUPPLY

This paper provides new evidence on income and price elasticities of demand and supply of agricultural exports from developing countries, on the basis of (a) a consistent and fully specified supply and demand model, and (b) statistical estimation procedures not frequently used in the estimation of agricultural export functions. Estimates of price and income elasticities of demand for aggregate agricultural exports for all developing countries taken together — as distinct from individual exporting countries — are found to be low; moreover, export price as distinguished from non-price factors plays a relatively insignificant role in increasing export supply. Hence, an attempt by all developing countries to expand traditional agricultural exports with low price elasticity of demand may not yield rising earnings for all; but in fact may result in falling export revenues. Insofar as individual exports of all developing countries (not individual countries) are concerned, income and price elasticities of demand for such tropical commodities as tea, coffee, cocoa and bananas are also found to be low, except for new, non-traditional exports like pineapples. This indicates the importance of diversification of agricultural exports as a vehicle for their future growth.     

Trade and agroindustrialization in developing countries: trends and policy impacts

There have been important changes in the international trade of processed and high-value added food products from developing countries over the past several decades. One of them has been the emergence of oilseeds and fruits and vegetables, replacing traditional products such as sugar, coffee, and cocoa as the main exports from developing countries. Another trend has been the collapse of African agroindustrial exports and the increase of exports from Asia. The paper highlights key trends, and explores possible reasons for the trends, focusing on trade policies in less-developed countries (LDCs) and developed countries (DCs). The paper argues that national trade policies and other economic policies appear to have been relatively supportive of agroindustrial production and exports in Asia. In contrast, policies have had more mixed effects in Latin America and the Caribbean (LAC), and seem to have been just one component in a larger array of forces inhibiting economic development in Africa. The performance of agroindustrial production and exports from LDCs may be now more dependent than ever on the completion of reforms in the agricultural trade policies of DCs. For Africa, however, a more supportive international environment and better macroeconomic and trade policies will not be enough to ensure a thriving agroindustrial sector within a broader process of economic development until military confrontations stop.     

Managing multiple international risks simultaneously with an optimal hedging model

A risk management model based on portfolio theory which accounts jointly for price, quantity, interest rate and exchange rate risks is developed and applied to cocoa and coffee production and exports in the Ivory Coast. Utilizing commodity and financial futures markets jointly, the results show that a government export agency can reduce risks from 27% to 89% by following a multicommodity hedging program which manages several risks simultaneously. The model and technique developed are applicable to many multiproduct firm and international risk management situations.     

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.     

The market efficiency hypothesis: the case of coffee and cocoa futures

This study tests the market efficiency hypothesis for coffee and cocoa futures using daily data for contracts with a maturity of 2 and 6 months. The hypothesis is tested sequentially. The first condition is that future spot and futures prices be cointegraled. If this condition is maintained, market efficiency requires the cointegrating vector to support a (0, 1) restriction that can be likened to an unbiasedness condition. Finally, market efficiency imposes zero restrictions on the parameters of the variables expressed in first differences in the specification of the error-correction representation of the relationship between future spot and futures prices. Brenner and Kroner [Brenner, R., Kroner, K., 1995. Arbitrage, cointegration, and testing the unbiasedness hypothesis in financial markets. Journal of Financial and Quantitative Analysis 30, pp. 23–42] argue that the cointegration condition is rarely met in practice. They attribute this outcome to potentially non-stationary net cost-of-carry which would make the parameters of the cointegration relation unstable. It is for this reason that Hansen's tests [Hansen, B.E., 1992. Tests of parameter instability in regressions with I(1) processes. Journal of Business and Economic Statistics 10] about the stability of the parameters in cointegration regressions were used to supplement more traditional cointegration tests, Johansen and Juselius' cointegration tests [Johansen, S., Juselius, K., 1992. Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK, Journal of Econometrics 53] could not reject cointegration for all four contracts while Hansen's L_C test favored cointegration only for the cocoa contracts. Nested and non-nested testing procedures were used to test the (0, 1) restriction on the cointegration vector. Unbiasedness was found to be robust across testing procedures. However, further testing about the specification of the error-correction representation revealed the existence of important short run deviations from unbiasedness, Even though these results hold strictly for a rather limited number of contracts and commodities, they are encouraging for futures markets advocates in developing countries.     

Dynamics of Beef Supply in the Presence of Cointegration: A New Test of the Backward-Bending Hypothesis

Following a general-to-specific strategy of model development, we develop error-correction equations for fed beef supply and feeder cattle demand. Starting with a theoretically acceptable set of variables, preliminary tests for unit roots and cointegrating vectors show stationary quantity variables and cointegrated prices. Simplification of the lag structure leads to equations with considerably richer dynamics than in previous studies. The final model passes several misspecification tests, is robust when estimated on subsamples of data, and makes more accurate out-of-sample forecasts than other models. In beef supply, the estimated error-correction model decomposes the backward-bending supply hypothesis into negative short-run and positive long-run supply elasticities at the monthly frequency.     

Cash crop choice and income dynamics in rural areas: evidence for post‐crisis Indonesia

In this article we investigate the factors affecting levels and growth of incomes in rural Indonesia following the crisis of 1997–1998. In particular, we investigate the relative roles of nonfarm incomes and productivity improvements achieved via changes in crops versus improvements on the same crops on income dynamics. Framing the article in the context of an optimal labor allocation model, relying on unique household panel data from Central Sulawesi, and using advanced panel econometric methods, we find that local innovations related to the adoption and intensification of new cash crop varieties, more specifically the shift from coffee to cocoa production, can explain a substantial part of the observed post‐crisis developments. Causal estimates of the effect of growing cocoa suggest that households were on average able to achieve about 14% higher income levels during the post‐crisis period compared to the planting of other crops, most notably coffee. Also, our results demonstrate the importance of engagement in nonfarm activities for household income growth. Comparative analyses using a nationally representative survey suggest that similar processes are at play in other parts of Indonesia.     

Economic impacts of El Niño southern oscillation: evidence from the Colombian coffee market

El Niño Southern Oscillation (ENSO) is a naturally occurring phenomenon that affects weather around the world. Past ENSO episodes have had severe impacts on the economy of Colombia. We study the influence of ENSO on Colombian coffee production, exports, and price. Our structural econometric specification is consistent with an economic model of the market for Colombian coffee which, in the short run, is characterized by a downward‐sloping demand curve and by a vertical supply curve. We show that El Niño (i.e., positive shocks to ENSO) is beneficial for Colombian production and exports and decreases the real price of Colombian coffee. On the contrary, La Niña (i.e., negative shocks to ENSO) depresses Colombian coffee production and exports and increases price. However, the overall impact of ENSO shocks is small. Both in the short run and in the long run, shocks to international demand for Colombian coffee are more relevant than supply‐side shocks in Colombia in explaining the dynamics of the price of Colombian coffee. Our results suggest that a given coffee price shock can have beneficial, detrimental, or negligible effects on the Colombian economy, depending on its underlying cause. As a consequence, policy responses to coffee price shocks should be designed by looking at the causes of the shocks.     

Analysis of export demand for Ghana's timber products: A multivariate co-integration approach

This study analyzed the factors that affect the export demand for Ghana's timber products. Export demand functions and error correction models for sawnwood, plywood, and veneer using data from 1961 to 2006 were estimated. Six categories of explanatory variables were hypothesized to determine export demand: world price of wood products, income of importing countries, Ghana's external debt, exchange rates, time-related variables, and policy changes (log export ban, reduction in annual allowable cut and the imposition of export levy on air-dried sawnwood). All variables except external debt were determined from augmented Dickey–Fuller unit root tests to be integrated of order one. The Johansen multivariate cointegration test showed that there was only one cointegration relationship in each timber product data. Exchange rates and income were significant determinants of exported timber products and had the theoretically expected positive signs. The three policy initiatives significantly reduced the exports of sawnwood, but increased the exports of plywood and veneer. Price was moderately elastic for sawnwood and plywood and had the expected negative signs in both cases, while it was positive and inelastic for veneer. The error-correction coefficients show that 68% of shocks to veneer exported is corrected in the following year, while only approximately 20% and 19% of this are corrected for sawnwood and plywood, respectively. Sawnwood and plywood face stiff competition in the international market and this has revenue and tax policy implications for Ghana's forestry sector. Policies that encourage domestic processing and restrictions on both legal and illegal harvesting would work to ensure greater value-added benefits to, and sustainable forest management in, Ghana.     

A Maximum Likelihood Cointegration Analysis of Canadian Lumber Exports

Johansen 's cointegration analysis is used to investigate causal relationships between Canadian lumber exports, U.S. lumber price, U.S. housing starts and the Canada-U.S. exchange rate. The results suggest that there is only one stable equilibrium relationship among these variables in the long run. Forecast error variance decomposition and impulse responses from a vector error-correction model are used to examine the short-run dynamic relationships among the variables. The results suggest significant dynamic relationship among the variables. The results also indicate that the pass-through of exchange rate is incomplete in the long run and that the effects of exchange rate on lumber exports vary between the short run and long run L'analyse de cointégration de Johansen est utilisée pour examiner les rapports de cause à effet entre les exportations de bois d'oeuvre canadien, le prix du bois d'oeuvre aux Etats-Unis, les mises en chantier de constructions à usage d'habitation el le taux de change Canada-Etats- Unis. Les résultats semblent montrer qu'il n 'v a à long terme qu'un seul rapport d'équilibre stable entre ces variables. On recourt à la decomposition de la variance de l'erreur de prédiction et aux réponses sur impulsion déhvées à partir d'un modèle de correction d'erreur vectorielpour examiner les rapports dynamiques à court terme entre les variables. Les résultats laissent apparaître un rapport dynamique significatif entre les variables. Ils montrent aussi que la transmission des effets du taux de change canado-américain est incomplète à long terme et que les effets de cette variable sur les exportations canadiennes de bois d'oeuvre ne sont pas les mêmes à court qu'à long terme     

How sensitive is U.S. agricultural trade to the bilateral exchange rate? Evidence from bulk,intermediate, and consumer‐oriented products

This article examines the dynamic effects of changes in bilateral exchange rates on changes in bilateral trade of bulk, intermediate, and consumer‐oriented agricultural products between the United States and its 10 major trading partners. We find that, for consumer‐oriented products, U.S. exports are highly sensitive to bilateral exchange rates in both the short and long run, while U.S. imports are mostly responsive only in the short run. For bulk products, on the other hand, U.S. exports and imports are relatively insensitive to exchange rate changes in both the short and long run. For intermediate products, exports and imports are responsive to exchange rate changes in the short run, but not in the long run. It is also found that income of the United States and its trading partners has a significant effect on U.S. exports and imports of the three types of agricultural products in both the short and long run.     

African indigenous vegetable enterprises and market access for small-scale farmers in East Africa

African indigenous vegetables (AIVs) have been part of the food systems in sub-Saharan Africa for generations. The region is a natural habitat for more than 45,000 species of plants, of which about 1,000 can be eaten as green leafy or fruit vegetables that happen to be the mainstay of traditional diets. During the colonial era, adventurers and slavers sailing in Africa introduced exotic plants such as maize, cassava and beans and, later, commercial crops such as sugarcane, cocoa, coffee and cotton, which began contributing more to life. Farmers integrated these crops into their age-old livelihood strategies at the expense of traditional subsistence crops. AIVs were almost entirely neglected and considered ‘poor people's' plants. To reverse the trend, FARM-Africa and its partners reintroduced AIVs which are now forming part of families’ diets as well as becoming a source of income for smallholder farmers in Arumeru, Tanzania and Kiambu, Kenya. AIVs are robust and productive, and thus well suited to feeding the hungriest and most vulnerable sections of society.     

Contribution to a renewed framework for analysing the interactions between family and capitalist agriculture

We examine whether current assumptions concerning the declining resilience of family farming and the growing influence of capitalist forms of agricultural production are being confirmed in the cocoa sector of Cameroon and the coffee sector of Kenya. This study is based on surveys of 181 family and capitalist farmers. Our results indicate that the capitalist approach is being consolidated on former colonial coffee estates in Kenya and on the cocoa pioneer front in Cameroon. This study also shows that in areas with a long history of family farming, family forms are showing good resilience due to a diversification of activities and sources of income, especially nonagricultural ones, and the patrimonialization of the land. Finally, this study proposes a framework for analysing the interactions between family and capitalist agriculture and their respective multisectorial strategies. For family farming, these strategies are based on work force mobility, whereas for capitalist agriculture, they are based on financial capital mobility.     

Toward a consumer economy in China: implications of changing wage policies for U.S. cotton exports

The effect of a Chinese minimum wage increase on China's textile market as well as on the world cotton market is evaluated. Based on a Nonlinear Quadratic Almost Ideal Demand System (NQAIDS) model of China's textile demand, the results suggest that the income elasticity for textiles is around 0.6 in China, and that apparel is less price responsive than home textiles and other textile products. Simulation results suggest that a minimum wage increase would raise Chinese domestic textile consumption and lower Chinese textile exports. Most of the decline in textile exports by China is offset by expansion in other countries’ domestic textile production and results in a slight increase in world cotton mill utilization and higher clothing prices.     

The welfare implications of Brazil's coffee export price subsidies during the ICA

To increase coffee export revenues during the International Coffee Agreement, Brazil provided selected purchasers with export rebates that could be used to pay for future coffee purchases. This subsidy mutated and grew over time, encouraged by rent seeking. The subsidy had huge cost to the Brazilian Treasury, $9.8 billion in constant 1982 US dollars, or about 13% of coffee export revenues. As exports were usually quota‐constrained, the subsidy increased Brazil's international coffee price, particularly during 1980–1986, absolutely and relative to its competitors’ prices. The unexpected variation in Brazil's price also caused the New York Coffee, Sugar, and Cocoa Exchange to terminate trading in Brazilian coffee futures, making it more costly to hedge Brazilian coffee until today. The econometric evidence is mixed, but it seems likely the subsidy reduced Brazil's net economic welfare and redistributed income from the Treasury to foreign roasters, domestic exporters, and government bureaucrats.     

A structural time series analysis of US broiler exports

A structural time series model is used to determine the dynamic characteristics, forecasting properties, and policy implications of factors affecting the US broiler export market. The emphasis is on international market responsiveness. The analysis indicates that in addition to the explanatory variables a trend component has been vital in the expansion of the broiler industry during the study period. The results indicate that export markets are more price responsive than the domestic markets, that interventions in the Canadian and Mexican markets reduce their imports, and exchange rate changes have significant impacts on US exports.     

A Price Analysis of U.S. Agricultural Exports in East Asian Markets

This paper examines the price competition between U.S. agricultural exports and that of its competitors in East Asia. The results show weak price competition in Japan's corn and soybean markets, and no price competition in the wheat market. U.S. cotton exports to Japan face strong price competition. In Hong Kong, U.S. market shares are low, while the demand for its rice, corn, soybeans and cotton is elastic. For South Korea and Taiwan, improved political relationships between China, South Korea, and Taiwan have caused the U.S. to lose market shares to China.     

Modelling Farmers’ Participation in an Agri‐environmental Scheme using Panel Data: An Application to the Rural Environment Protection Scheme in Ireland

Previous studies that have attempted to model the participation decision of farmers in agri‐environmental schemes have used a static framework where it was not possible to examine changes in the participation decision of farmers over time. This is rectified in this paper by utilising an 11‐year panel that contains information on 300 farmers for each year. The structure of this dataset allows us to employ discrete time duration random effects panel data logit models to model the determinants of entering the Irish Rural Environment Protection Scheme (REPS). We introduce a dynamic element into a number of the models by using the random effects logit model estimator, with lagged dependent variables as additional explanatory variables. The results point to the fact that systems of farming that are more extensive and less environmentally degrading remain those most likely to participate in the REPS. In addition, the results highlight the fact that where no attempt is made to control for unobserved heterogeneity or path dependency the effects of the farm‐ and farmer‐specific characteristics may be overestimated.     

Land distribution and acquisition practices in Ghana's cocoa frontier: The impact of a state-regulated marketing system

Substantial differences in the size of landholdings among cocoa farmers in the Western Region – the last cocoa “frontier” in Ghana – are primarily a result of inheritance practices and the purchase of vast tracts of land by migrants in the initial period of the cocoa boom. Individual accumulation of land over the last decade has mainly taken place via inheritance (among indigenous farmers) without takeovers of land and dispossession of small-scale farmers outside the extended family. Land accumulation among migrant farmers is rare beyond the initial acquisition. Large-scale farmers transfer surplus from their higher volume of cocoa production into investments in non-farm activities and construction of new residential houses—and not in land acquisition based on market transactions. State regulation of the cocoa sector has spurred increased efficiency among private cocoa purchasing companies and thereby reduced the marginalization of farmers with small landholdings by preserving their access to a vital source of income. The unique character of the Ghanaian purchasing system is a major factor behind the relatively stable proportion in the access and control of land for cocoa between extended families.     

Underpayment of Small Producers of Coffee and Cocoa in Sierra Leone

Fieldwork shows that many Sierra Leonean producers do not receive the official producer price for their coffee and cocoa, due to the concentration of buying stations, credit relations, the small quantities offered for sale, and the lack of marketing knowledge of the numerous and unorganized farmers. To the traders underpayment may seem economically justifiable to a certain extent, but to the farmers it means poverty and debt. A new village marketing centre project aims at remedying this situation and has already led to higher prices. Although no longer allowed to take their "just" share from the producers, traders are still willing to deal with the new centres.