Optimal Collective Investment in Generic Advertising, Export Market Promotion and Cost-of-Production-Reducing Research

Optimal investment rules are developed for a producer agency investing in domestic-market generic advertising, export market promotion, and cost-of-production-reducing research. These rules are derived assuming either maximization of producers' surplus or social surplus. The form of the optimality rules differs according to which objective is pursued. Fixed producer agency budgets are also allowed by incorporating a constraint limiting total expenditure on the three activities. Addition of such a constraint substantially alters the structure of the optimal investment rules. Differences in these rules highlight the importance of accounting for the financing mechanism when modeling optimal checkoff fund investment decisions. Optimality rules are simulated using data for the Canadian beef sector. Results suggest historic underinvestment in domestic-market generic advertising but overinvestment in export market promotion. Sensitivity of simulation results underscores the difficulty in assessing optimality of historic producer investment in cost-of-production-reducing research.     

THE MERINO EXPORT EMBARGO — A COMPARATIVE STATIC ANALYSIS

The genetic changes which would occur in overseas flocks as a result of the export of merino rams from Australia are unknown. Even so, Australia recently relaxed the merino export embargo and may go further. A comparative static model is presented to assess changes in annual wool income resulting from increases in the supply of apparel wool emanating from possible levels of the genetic effect.     

Profitability of incremental generic promotion of Australian dairy products

The motivation for this study rests on two factors. First, Australian dairy farmers spend around $20 million annually on generic promotion and estimates of the returns from this expenditure are required to facilitate efficient investment decisions. Second, while the Australian dairy industry has been highly regulated, there has been a substantial reduction in assistance over the past decade and farm‐gate milk prices were deregulated on 1 July 2000. The profit potential of promotion may vary with the degree of regulation, so past estimates of the returns from promotion may not hold in the competitive environment of the future. Hence, the aim of this study is to examine the effects of government intervention on the profitability for dairy farmers of incremental changes in generic dairy promotion expenditure using a perfectly competitive market as a reference point. Competitive market price and quantity outcomes for the Australian dairy industry are estimated. The impacts of increments in dairy product and competing product generic promotion expenditures on dairy farmers’ profits are assessed using equilibrium displacement modelling. Finally, graphical procedures are used to examine the effects of dairy industry regulation on the profitability of dairy promotion.     

The politics and economics of wool marketing, 1950–2000

The history of marketing, research, development policies and intervention in marketing of the wool clip is reviewed from the perspective of an insider. The overall theme is that politics took over comprehensively from clear economic policy advice on wool marketing in the past 50 years and woolgrowers paid a high price for this. The idea of 'integrated marketing' including an export monopoly, a buffer stock scheme and coordinated promotion and R&D, collectively a strong interventionist philosophy, has waxed and waned. Having borne most of the costs of these failed policies, remaining woolgrowers can now look forward to a market less distorted by political interference.     

Beggar-Thy-Neighbor Advertising: Theory and Application to Generic Commodity Promotion Programs

Profits from generic advertising by a producer group often come partly at the expense of producers of closely related commodities. The resulting tendency toward excessive advertising is exacerbated by check-off funding. To analyze this beggar-thy-neighbor behavior we compare a scenario where different producer groups cooperate and choose their advertising expenditures jointly to maximize the sum of profits across the groups, and a scenario where they optimize independently. In an illustrative example using 1998 data for U.S. beef and pork, the noncooperatively chosen expenditure on beef and pork advertising is more than three times the cooperative optimum.     

Political Market Power Reflected in Milk Pricing Regulations

We investigate revealed political market power reflected in the pattern of price discrimination by end use that is the hallmark of U.S. milk marketing orders. We show that the pattern of prices that would maximize producer profits, if producers operated a cartel with monopoly power in a regional market, is far above actual government-set price differentials between milk used for fluid products and that used for manufactured products. The pattern of actual price differentials is consistent with political welfare weights for producers relative to consumers that are small compared to the weights that would yield maximum producer profits.     

The Value of Dairy Quota under a Commercial Export Milk Program

This paper argues that under a commercial export milk program, the market value of quota will be determined by the spread between the domestic market price and the export price, rather than the conventional wisdom that it is determined by the spread between the domestic milk price and the marginal cost of production. Under this new economy, it is argued that ultimately the market price of dairy quota will be priced independently of firm marginal costs, which implies that low-cost (or high-margin) producers will not hold an economic advantage in bidding for quota over higher-cost producers. Regression results are consistent with the hypothesized positive relationship between quota values and the difference between domestic and export milk price. The average export price has generally increased over time and is approximately equal to the marginal cost for an average producer. The results have implications for a World Trade Organization (WTO) challenge. New Zealand and the United States feel the domestic program acts as an export subsidy by cross-subsidizing production of commercial export milk. The results here suggest that the prices for the filled export contracts are approximately the marginal cost of production for the average producer and not lower, as suggested by the challenge. Export contracts were found to have higher price risk than domestically produced milk. The risk is compounded by the short-term nature of most export contracts. The increase in risk for the commercial export milk program (CEM) implies that it is unlikely many farmers will greatly diversify into CEM contracts unless the uncertainty is reduced.     

THE RETURNS TO INVESTMENT IN RESEARCH ON AUSTRALIAN WOOL PRODUCTION*

A production function approach is used to estimate growth in farm productivity in the Australian wool industry from an estimated level of expenditure on wool production R & D. A market equilibrium model of the wool industry is then used to measure the share of total benefits from this productivity growth accruing to Australia and its wool growers. A net return is estimated after allowing for lags in the development and adoption of technology.     

EFFECTS OF NON-PRICE EXPORT PROMOTION: SOME EVIDENCE FOR COTTON*

An Annington-type trade model is estimated to determine the effects of government-subsidized export promotion on the demand for U.S. cotton in the Pacific Rim. Results show a significant relationship between promotion expenditures and U.S. market share in four of the six countries examined. One of the two countries exhibiting a non-significant effect had very low promotion expenditures, suggesting that a minimal level of funding may be necessary to achieve a market response. The hypothesis that export promotion has a carryover period lasting beyond one year in general is supported by the data. The question of the economic impacts of export promotion on domestic producers and taxpayers must await additional research.     

Industrial upgrading and development in Lesotho’s apparel industry: global value chains,foreign direct investment,and market diversification

Many low-income countries are integrated into apparel global value chains through foreign direct investment (FDI), including Lesotho, which has become the largest Sub-Saharan African apparel exporter to the US under the African Growth and Opportunity Act. More recently, South Africa has emerged as a new apparel export market in Lesotho. The two markets are supplied by different types of FDI firms – affiliates of Taiwanese transnational producers and South African manufacturers – which are part of different value chain variants. The paper assesses the implications for industrial upgrading and development of integration into these two value chain variants in Lesotho, drawing on firm-level and institutional interviews. We show that their different characteristics in terms of investors’ motivation, governance structure, end markets, firm set up and most importantly and causally, ownership and embeddedness have crucial impacts on functional, product and process upgrading, local linkages, and skill development.     

THE RELATIONSHIP BETWEEN WORLD PRICE INSTABILITY AND THE PRICES FARMERS RECEIVE IN DEVELOPING COUNTRIES

World prices for agricultural commodities are traditionally unstable, but they were particularly turbulent during the late 1970s and early 1980s. This paper uses available post-War data on individual commodity prices to test whether world price instability is increasing, and to examine its impact on the prices producers receive in developing countries. It is found that the recent turbulence was more a statistical fluke than the beginning of any longer-term increase in market instability. Further, while the variability in world prices has been almost entirely transmitted to developing countries in the dollar value of their export unit values, it has not been fully transmitted to average producer prices. Real exchange rates, domestic marketing arrangements and government intervention have acted to buffer price movements for producers in many developing countries.     

U.S. National Economic Contribution of Generic Food and Agricultural Product Advertising

Agricultural promotion groups (APGs) promote the economic welfare of agricultural producers by financing generic advertising and promotion activities intended to expand demand for their commodities in hopes that the benefits will more than cover the cost. A review of the most recent evaluations of 27 major U.S. APG generic advertising and promotion programs conducted by many different researchers using widely different techniques concludes that that those programs have effectively enhanced the profits of their respective stakeholders and generated high rates of returns to the dollars invested in those programs. Importantly, this study finds that the success of those programs in supporting and growing their respective sectors of agriculture has spilled over to the general economy. The programs have created an important multiplier effect through the economy. In the process, jobs have been created; income has been generated; and economic growth has occurred.     

Elasticity of demand for Australian cotton in Japan

Although a relatively small producer, Australia exports more than 90 per cent of its cotton production, making it the world's third largest cotton exporter in recent years. This means that export performance plays a major role in determining the profitability of the Australian cotton industry. The primary aim of this study was to determine the competitive position of Australian cotton in the Japanese market, based on the original non-linear Almost Ideal Demand System model using data from 1972 to 1998. The main findings are that the USA had a relatively strong market position and that Australia needs to improve its cost competitiveness and quality image to advance its market standing.     

Understanding the Economic Factors Influencing Farm Policy Preferences

A survey conducted in Mississippi, Texas, Indiana, and Nebraska elicited producers' preferences for various farm policy changes. This permitted examination of the diversity of preferences that single-state studies have not allowed. Five policy choices, including deficiency payments, loan programs, crop insurance, export programs, and disaster payments were examined. Logit model results predicting producer preferences for each of the five dichotomous policy choices are reported. Explanatory variables based on expected utility theory such as risk aversion, price and yield variability, and price–yield correlation are significant in various models.     

The costs of global tariff barriers on wool products: 1997–2005

The Doha round of multilateral trade negotiations commits World Trade Organization (WTO) members to improving market access for both agricultural and nonagricultural goods. Tariff barriers on wool products represent a small but important subset of these negotiations. To inform the debate on the round, we analyze the distortionary effects of recent (1997–2005) tariff barriers on wool products using a model that applies a comprehensive analytical approach with regard to the production, trade, and consumption of wool products. We also account for any indirect effects of wool tariff barriers on the nonwool economy by incorporating the production, trade, and consumption of nonwool products, that is, the framework is a comparative‐static global general equilibrium model with a detailed representation of the world wool market. Changes in wool tariffs over 1997–2005 lead to positive welfare effects for most regions; Italy, China, and the UK are estimated to have gained the most from the changes. The results indicate that the nature of recent wool tariffs severely distort the size of wool industries in different regions. The changes in the output of wool commodities are extreme reflecting the discriminatory nature of the tariffs.     

后危机时代中国木质家具出口影响因素及贸易潜力研究——异质性随机前沿出口模型实证分析

基于2009—2016年中国木质家具出口至105个贸易伙伴国(地区)的面板数据,构建异质性随机前沿出口模型,分析后危机时代中国木质家具出口影响因素及贸易潜力。结果表明:自由贸易协定、海运及港口基础设施和互联网普及率是贸易的促进因素;贸易壁垒、汇率波动、金融服务水平、海关手续负担、贸易自由度、货币自由度和互联网安全性是贸易的阻碍因素;港口基础设施和互联网普及率增加了贸易非效率的波动,加大了出口贸易效率的不确定性;贸易壁垒、汇率波动、金融服务水平、海关手续负担、货币自由度和互联网安全性降低了贸易非效率的波动,减少了出口贸易效率的不确定性。根据贸易潜力分析结果,将中国木质家具出口市场分为4种类型并提出相应的出口贸易布局战略措施。     

Characteristics of Successful Southeastern U.S. Agribusiness Exporters

Abstract

A survey of southeastern U.S. agribusiness exporters showed that export firms had many characteristics in common regardless of commodity category. In general, the profile of a successful southeastern U.S. agribusiness exporter in terms of export sales is one that tends to have higher total sales, foreign and domestic, and more export-market experience though the firm tends to be relatively young. While almost half of the firms engaged in promotion activities, less than a quarter of the respondents availed themselves of federal export promotion/assistance programs because of unfamiliarity or perceived costs. An overwhelming majority considered freight forwarding companies as indispensable parties to all transactions because of the extreme complexity of export-import logistics.     

Promotion and Fast Food Demand

Many believe that fast food promotion is a significant cause of the obesity epidemic in North America. Industry members argue that promotion only reallocates brand shares and does not increase overall demand. We study the effect of fast food promotion on market share and total demand by estimating a discrete / continuous model of fast food restaurant choice and food expenditure that explicitly accounts for both spatial and temporal determinants of demand. Estimates are obtained using a unique panel of Canadian fast food consumers. The results show that promotion primarily increases demand and has a smaller effect on restaurant market shares.     

Optimal Producer Investment in Generic Advertising: The Case of Fluid Milk in Ontario and Quebec

The fluid milk sectors in Ontario and Quebec operate under myriad restrictions reflecting the supply management system in place. Active advertising campaigns for fluid milk are undertaken by producer organizations in each province. In Ontario, the provincial government contributes to the provincial advertising campaign. To investigate the implications of the advertising programs, econometric models of the Ontario and Quebec milk sectors are specified, estimated and simulated. Given the measured responses to advertising, optimal advertising expenditure rules are applied to the Ontario and Quebec milk sectors to evaluate the implications of moving from actual to optimal advertising expenditure for producer welfare. Les secteurs du lait de consommation de l'Ontario et du Québec fonctionnent sous une myriade de restrictions attachees au système actuel de gestion de l'offre. Des campagnes de publicité vigoureuses pour la consommation du lait sont entreprises dans chaque province par les organisations de producteurs et en Ontario le gouvernement provincial donne son appui financier à la campagne de publicité provinciate. Pour scruter les implications des programmes de promotion, les auteurs ont construit, évalué et appliqué en simulation des modèles économiques du secteur du lait de consommation des deux provinces. À la lumière des réactions mesurées à l'égard de la publicité, des règies de dépenses de publicité optimales sont appliquées aux deux secteurs, afin d'évaluer ce que le passage du niveau de promotion actuel à un niveau optimal signifierait pour la situation économique des producteurs.     

中国水产品出口贸易流量与潜力分析——基于引力模型的研究

中国作为世界上最大的水产品生产国,近30年水产品出口一直保持增长,在全球水产品市场中的比重大幅度增加,同时面临着与其他国家同业间的竞争。本文运用拓展的引力模型对1999年～2007年中国水产品出口相关的面板数据进行了实证检验,并对主要出口市场水产品贸易潜力进行了测算与分析。研究表明,引力模型只能对中国水产品出口贸易流量和潜力起到部分的解释作用,虽然中国水产品出口对欧美日等市场呈现出所谓的“过度贸易”,对泰国、印度尼西亚等表现为“贸易不足”,但这一总体趋势不会有太大改变。另外,进出口市场之间的产品竞争程度、进口市场的消费习惯也是进出口贸易可能的影响因素。