Impact of the 2014 Suspension Agreement on sugar between the United States and Mexico

In December 2014, the U.S. and Mexico agreed to a suspension agreement that set a $22.25/cwt import price floor on U.S. sugar imports from Mexico. A partial equilibrium trade model was developed to estimate the economic impact the agreement would have had if it had been in effect from 2008 to 2014. In years when the price floor would have been binding, on average, U.S. producers would have gained $138 million and Mexican producers would have lost $218 million. However, total Mexican welfare would have actually increased by $11.5 million. Furthermore, the average price floor that would have maximized total Mexican welfare over that period is $22.76/cwt. Also, under certain supply and demand elasticity conditions, the average price floor that would have maximized joint U.S. and Mexican producer welfare over that period is $21.91/cwt. The latter two estimates are both close to the actual price floor agreed to in the 2014 Suspension Agreement.     

Demand,challenges, and marketing strategies in the retail promotion of local brand milk

This article addresses the demand and challenges for local brand milk and focuses on the marketing strategies for retail promotion. While federal and state government make efforts to promote local food purchases and consumption at the farm level, local foods face significant distribution challenges in grocers, especially in larger retail stores. Limited shelf space and high pricing by retailers impedes consumers’ purchases and results in weak competitiveness for local brands. Therefore, it is essential for local producers and “buy local” programs to understand what types of promotion and marketing strategies might be more effective in stimulating demand in retail outlets. Using 2010-2011 Nielsen Retail Scanner data in the Northeast region, we estimate a random-coefficient discrete choice model of demand to determine the effects of nutritional characteristics, price, packaging, and distribution strategies on the consumers’ choice to purchase locally branded milk. Results show that local brand milk faces significant demand challenges in addition to high prices and limited outlets in competing with lower-priced products. Marketing strategies, such as price cut, one-gallon package offering, and expanded presence in retail stores, can significantly stimulate the demand for locally branded milk, with one-gallon package offering being the most effective strategy.     

Impact of the Northeast Interstate Dairy Compact on Consumer Prices for Fluid Milk

The objective of this paper is to analyze the impact of the Northeast Compact on retail fluid milk prices in New England. An econometric model was estimated to simulate the farm-to-retail price spread and to analyze the impact of the Northeast Compact on retail milk prices. The results found that retail milk prices rose 30.5 cents per gallon in Boston and 31.4 cents per gallon in Hartford over the Compact period compared with the pre-Compact period. About 70% of this increase was directly attributable to the Northeast Compact.     

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.     

实际价格、粮食可获性与农业生产决策——基于农户模型的分析框架和实证检验

按照市场一价定律的逻辑,所有生产者和消费者在市场上面临同一个价格并据此作出生产或消费决策。然而,农产品生产者和消费者的双重身份却导致农户在同一个农产品市场上得到或付出不同的价格,其差异主要取决于运销成本。因此,影响农户生产或消费决策的是其实际获得或付出的价格而非统一的市场价格。此外,出于对粮食安全的追求,农户所在地区的...     

IMPERFECT COMPETITION AND THE COBWEB THEOREM: A VEGETABLE CASE

Producer price changes are dependent on final demand, marketed volume and marketing cost, but the less than perfect competition which may determine this last is ignored in formulating the cobweb theorem. Attention to monopsonistic buying of farm products has importance in the choice between stabilisation measures directed at producers and marketing firms, and also as regards the need for integration of the theory of imperfect competition and the analysis of agricultural price cycles. Cyclical instability is a serious problem in the New Zealand vegetable industry. The size and inflexibility of retail margins significantly accentuate producer price fluctuations. Auctions are the main mechanism for price formation, and high retail margins appear to be permitted by the non-competitive elements in this marketing system. The most promising avenues for improvement would be in reform of auction procedures and exploration of alternative marketing channels for vegetables.     

The effects of the Food Reserve Agency on maize market prices in Zambia

Over the last decade, governments throughout eastern and southern Africa have increasingly used strategic reserves and/or marketing boards to influence grain market outcomes, yet little is known about how these activities are affecting grain markets. This article estimates the effects of the Food Reserve Agency (FRA) on maize market prices in production and consumption regions in Zambia using a vector autoregression model and monthly data from July 1996 through December 2008. In recent years, FRA has become the dominant buyer of smallholder maize in Zambia. Simulations show that FRA activities stabilized market prices throughout the July 1996–December 2008 study period and raised mean prices between July 2003 and December 2008 by 17–19%. The price raising effects of FRA policies have assisted surplus maize producers but adversely affected net buyers of maize in Zambia, namely urban consumers and the majority of the rural poor. The increase in maize price stability is unlikely to have had substantial welfare effects on poor households. In contrast, relatively wealthy producers are likely to have benefited from the higher average and more stable maize prices resulting from FRA policies.     

A HEDONIC PRICE FUNCTION FOR AUSTRALIAN PREMIUM TABLE WINE*

A hedonic price function, relating the price of Australian wine to its attributes, is estimated. Six attribute groups are found to be statistically important in explaining deviations from average wine prices, i.e., quality, cellaring potential, grape variety/style, grape region, grape vintage and producer size. Various interaction terms between these variables and the impact of the year of marketing are also modelled. The consequent marketing implications for producers and consumers are discussed.     

Measuring producer welfare under output price uncertainty and risk non-neutrality

Procedures to measure the producer welfare effects of changes in an output price distribution under uncertainty are reviewed. Theory and numerical integration methods are combined to show how for any form of Marshallian risk-responsive supply, compensating variation of a change in higher moments of an output price distribution can be derived numerically. The numerical procedure enables measurement of producer welfare effects in the many circumstances in which risk and uncertainty are important elements. The practical ease and potential usefulness of the procedure is illustrated by measuring the producer welfare effects of USA rice policy.     

Cow‐Calf Producer Preferences for Voluntary Traceability Systems

This article identifies preferences of US cow‐calf producers for voluntary traceability systems to better identify the potential success of alternative voluntary traceability systems. Results suggest that notable heterogeneity exists between cow‐calf producers in their preferences and the welfare effects of mandating traceability adoption. Producers are sensitive to price, managing entity and information requirements. We provide forecasts of voluntary participation rates under different price premium and discount scenarios that producers may face. This analysis has policy implications as success of voluntary traceability systems hinges critically upon cow‐calf producer preferences.     

Collective Marketing Arrangements for Geographically Differentiated Agricultural Products: Welfare Impacts and Policy Implications

We examine the incentives of atomistic producers to differentiate and collectively market products. We analyze market and welfare effects of alternative producer organizations, discuss circumstances under which they will evolve, and describe implications for the ongoing debate between the EU and the United States. As fixed costs of development and marketing increase and the anticipated market size falls, it becomes essential to increase the producer organization's ability to control supply to cover the fixed costs associated with the introduction of differentiated products. Counterintuitively, stronger property right protection for producer organizations may enhance welfare even after a differentiated product has been developed.     

Value‐Chains in the Andes: Upgrading for Ecuador's Blackberry Producers

We apply a value chain approach to examine how blackberry producers in Ecuador can improve production and marketing practices to obtain more favorable prices. Results show that general upgrading actions are associated with improved producer prices, and specific activities, such as seeking information from reputable sources can lead to substantial welfare improvements. The paper goes beyond most value chain studies which treat participation in a ‘modern’ value chain as a discrete state. Ecuador's blackberry industry is evolving incrementally with no clearly discernible ‘modern’ market chains. Instead, producers incrementally make improvements in multiple dimensions. Relatively low‐cost practices, many of which do not imply substantial risk or investment, are associated with price improvements. Obstacles to participation in incremental value chain upgrading activities are not insurmountable. In particular, scale of production is not a limiting factor: small‐scale producers are not precluded from adopting improved practices and they do not suffer in terms of price received.     

Economic Effects of the Consumer‐oriented Genetically Modified Products in Markets with a Labelling Regime

This paper builds on the literature on the economic effects of the second‐generation, consumer‐oriented genetically modified products (GMPs). It analyses the market and welfare impacts of the introduction of these new products in markets, like the EU, that mandate the segregation and labelling of the first‐generation, producer‐oriented GMPs. Developing an empirically relevant model of heterogeneous consumers and producers, the study determines the effects of the consumer‐oriented GMPs on the markets of conventional, GM and organic products, and the welfare of consumers and agricultural producers. Analytical results indicate that the market effects of the new GMPs are case specific and depend on: (i) the consumer valuation of the quality‐enhancing attribute of the new GMP; (ii) the level of consumer aversion to GMOs; (iii) the strength of consumer preference for organic products; and (iv) the production costs and marketing margins in the different supply channels. The policy on the labelling of the first‐generation GMPs does not affect the impacts of the second‐generation GMPs on the quantities and market shares of the different products. However, it does affect their price effects and welfare implications. The introduction of consumer‐oriented GMPs under a mandatory labelling regime can result in losses for some GM consumers and all producers of the conventional product.     

The effects of fair trade on coffee growers: a framework and analysis

The world coffee market has undergone a significant transformation in the past couple of decades resulting in declining farm prices despite the fact that coffee demand has been strong and consumer prices have been soaring. Fair Trade organizations have tried to address this price imbalance by providing an alternative method of trading aimed at increasing the prices received by coffee growers. Despite their noble objectives, Fair Trade movements have had limited success in improving coffee growers’ welfare, however. This paper utilizes a novel framework of heterogeneous producers and relevant market information to provide insights on the market and welfare impacts of the Fair Trade regime when important idiosyncrasies of Fair Trade production and marketing are included in the analysis.     

Abstracts of Second- and Third-Place Undergraduate Papers

Bulls account for half of the genetic input when making improvements in cattle herds. Changing bulls is less costly than changing cows; therefore it is often the case bulls account for more rapid improvements in heritable traits. One of the problems that breeders who supply bulls face is that the attributes of bulls come bundled together so that it is difficult to determine what the value of improvements in a bull might be worth. This research estimates what values beef producers implicitly place on particular characteristics when deciding which bull will best fit the needs of their farm. A hedonic pricing model was estimated using ordinary least squares on actual transaction data and reveals the value buyers of bulls implicitly place on specific traits. For example, a ribeye area of 12.8 in² at the mean sale price reveals a buyer would be willing to pay an additional $80.39 for a bull with an additional square inch. Likewise, a bull with a 1242 lb. 365-day weight at the mean sale price reveals a buyer would be willing to pay an additional $1.83 for an additional pound. Therefore, this research reveals an incentive for producers of bulls to focus on improving the genetic make-up of their bulls they offer for sale.     

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.     

WELFARE IMPLICATIONS OF MORE ACCURATE RATIONAL FORECAST PRICES

Models are constructed to assess the welfare effects for producers, consumers and society of producers using forecast prices based on more accurate estimates of variables causing shifts in the demand for and supply of commodities. The basic model is a stochastic cobweb model in which producers' forecast price is the rational forecast price. The model is extended for many commodities, for partial producer response to more accurate forecast prices, and to include stock holding. In terms of economic surplus, producers and consumers gain from more accurate estimates of demand shift variables, producers gain and consumers lose from more accurate estimates of supply shift variables, and in both cases there is a net society gain.     

Process Innovation Activity in a Mixed Oligopoly: The Role of Cooperatives

This article develops a sequential game-theoretic model of heterogeneous producers to examine the market and welfare effects of cooperative involvement in process innovation activity in the agricultural sector. The analysis examines an open-membership, input-supplying cooperative (co-op) that maximizes member welfare and finances its innovation activity through retained earnings. Analytical results show that the presence of the co-op can increase the arrival rate of innovations while reducing the price of agricultural inputs. Cooperative involvement in innovation activity can thus be welfare enhancing and socially desirable with its effectiveness being determined by the degree of producer heterogeneity and the size of innovation costs.     

Mobile money,agricultural marketing,and off‐farm income in Uganda

Mobile money (MM) services can contribute to welfare gains in smallholder farm households. Previous research showed that one important pathway for these MM‐related welfare gains is through higher remittances received from relatives and friends. Here, the role of other impact pathways is examined, especially focusing on agricultural marketing and off‐farm economic activities. The analysis builds on panel data from smallholder coffee farmers in Uganda. Regression models show that the adoption of MM technology has contributed to higher household incomes and consumption levels. Off‐farm income gains are identified to be an important pathway, also beyond remittances. Typical off‐farm income sources are small businesses in trade, transport, and handicrafts, which benefit from novel savings and money transfer opportunities through MM. In terms of agricultural marketing, MM users sell a larger proportion of their coffee as shelled beans to buyers in high‐value markets, instead of selling to local traders immediately after harvest. MM services help to reduce cash constraints and facilitate transactions with buyers from outside local regions. In conclusion, MM can contribute to rural development through various important pathways. Analysis of adoption patterns suggests that MM services are socially inclusive.     

Production technology option value: the case of rbST in Michigan

Agricultural producers are increasingly required to adjust production practices to satisfy retailer, and ultimately consumer, preferences. This article highlights the option value that underlies decisions related to production technologies using the case of Michigan dairy farmers and recombinant bovine somatotropin (rbST). Welfare impacts were calculated for dairy producers when milk production systems which allowed the use of rbST were eliminated from the producer choice set. Those dairy producers using rbST just before its elimination realized a higher welfare loss than those not using the technology. However, significant welfare impacts were found for all dairy producers indicating that all producers valued the option to use this production technology.