A Review of International Agricultural Supply Response

Existine literature has orovided a wide ranee of estimates for supply elasticities. This study reviews agricultural supply response in developed and developing countries. The main obiective is to provide an understanding of the causal factors accounthg for the diversity of estimates. It is discussed that the estimated elasticities vary depending on the methodology used, the time period the cover, the definition of price variable, and the type of data utilized: The various methodologies employed to estimate supply elasticities are discussed. Finally, some conclusions are derived which are supported by the theory and the weight of the evidence.     

Agricultural Supply Response: A Survey

This paper surveys the literature on agricultural supply response to prices in developing countries. Empirical estimates of elasticities depend both on the methodology adopted and on country-specific factors relating to technology, economic structure and macro constraints. The paper seeks to establish some general conclusions on supply responsiveness within these limitations. Supply response to output prices at the aggregate and at the crop levels is considered first. Crop-specific acreage elasticities range between zero and 0.8 in the short run while long-run elasticities tend to be higher — between 0.3 and 1.2. Yield elasticities are smaller and less stable than acreage elasticities. Clearly, inter-crop pricing can be relied upon to effect shifts in the commodity composition of agricultural output. Evidence also suggests that supply elasticities vary systematically with such factors as price and yield risks, multiple-cropping, the importance of the crop, farm incomes, farm size, tenancy and literacy. The most controversial and important aspect of supply response is the effect on aggregate agricultural output of agriculture's terms of trade. Conventional time-series estimates range from 0.1 to 0.3. A major cross-country study reports an aggregate elasticity as high as 1.66. It is argued that cross-country estimates are apt to exaggerate aggregate responsiveness while time-series studies underestimate it somewhat. For LDCs, a tentative range of 0.4 to 0.5 seems plausible. Hence, the distributive effects of the terms of trade are likely to be more significant than the allocative effects. Asian evidence shows that only a third of the inter-country differences in fertilizer use can be attributed to fertilizer price policies. Provided new technologies and infrastructure are in place, fertilizer subsidies can help in technology diffusion and in overcoming credit constraints. The choice between price supports and input subsidies will depend on a variety of country- or situation-specific factors. Nevertheless, a significant general factor favoring price supports is that they can more easily be coupled with price stabilization goals than input subsidies. Though sparse, the available evidence on the response of marketed surplus suggests that price policy is not a reliable instrument for regulating inter-sectoral trade.     

Canadian Hog Supply Response: A Provincial Level Analysis

Canada's hog sector has faced two decades of tumultuous growth, yet there are no recent estimates of supply response. This study uses state‐space methods to account for a multiplicity of autonomous structural changes impacting the sector and determines if the fundamental relationship between supply response and hog prices has changed from previous estimates. The results are consistent with prior research but offer the reader previously unavailable estimates of supply response with respect to feed prices and the variability of hog and feed prices. Feed price elasticities are somewhat larger than hog price elasticities. The effects of price risk for supply response appear quite muted but the impacts of feed price risk are greater than for hog price risk.     

The Use of Composite Price Expectations In Supply Response Models

This paper advocates the use of composite price expectation models in which alternative expectation hypotheses are simultaneously considered in the estimating model. This approach allows flexibility in expectation specification, recognizes that agents may use historical as well as current market information, and provides endogenous weights and testing for alternative expectation specifications within the model being estimated. Data on the northeastern United States' fresh tomato market were used to estimate a simultaneous equation market model under alternative price expectation structures. These included rational expectations hypothesis, Cobweb, and composite price expectation models. Empirical results suggest that a composite expectation model is consistent with data and that they provide significantly more accurate ex ante price forecasts than pure rational expectations or lagged response models. Furthermore, performance of alternative statistical tests on model results indicated that log likelihood tests are not definitive, requiring the use of other statistics to evaluate the expectation models in question. A central conclusion emerging from this paper is the consideration of alternative expectation hypotheses as complementary information sources to decision makers rather than substitute or competing sources as previously postulated. Cette étude préconise l'usage d'un modéle d'expectation composite de prix dans lequel des hypothèses d'expectation alternative sont considérées simultanément dans le modèle d'estimation. Cette approche donne de la flexibilité quant à la spécification des expectations, reconnait que les agents utilisent des informations historiques de même que celles qui proviennent du marché courant, et pourvoie des coefficients endogènes aussi bien que des tests pour les spécifications d'expectation alternative a l'intérieur même du modèle en cours d'estimation. Des données du marché de tomates du nord-est des États-Unis d'Amérique ont éte utilisées pour estimer un modGle de marche avec des hypothesès différentes d'expectation de prix, représenté par un système d‘équations simultanées. Les hypothèses comprennent l'Hypothèse d'Expectation Rationelle, “Cobweb,” et les modèles d'expectations composites de prix. Les résultats empiriques suggèrent que les modèles d'expectations composites de prix sont en accord avec les données et qu'ils pourvoient des prévisions de prix ex ante significativement plus précises que les modèles de pures Expectations Rationelles de même que ceux basés sur la rèponse retardée. En plus, la performance des tests statistiques sur les résultats du modèle indique que les tests de probabilite (“likelihood”) ne sont pas définitives, requérant ainsi l'usage d'autres statistiques pour évaluer les modèles d'expectation en question. Une conclusion centrale émanant de cette étude est la considération des hypothèses d'expectation alternative comme sources complémentaires pour formuler des décisions, plutôt que des sources substitutives ou rivales comme postulé auparavant.     

Supply Response under Risk: Implications for Counter-Cyclical Payments' Production Impact

This study investigates the role of risk in farmers' acreage decisions for major field crops in the North Central region by revisiting an earlier study by Chavas and Holt. The empirical model is forward-looking and reflects better variable measurement. We test the effects of wealth and revenue risk on supply response. Estimated results are also used to examine the production impact of counter-cyclical payments (CCPs). We find that the effects of risk on supply response are not strong. An increase in initial wealth would lead to greater crop acreage, consistent with decreasing absolute risk aversion. The effect of CCPs on production appears to be negligible.     

Nonpecuniary Benefits to Farming: Implications for Supply Response to Decoupled Payments

We develop a household model wherein farmers allocate labor to maximize utility from leisure, consumption, and nonpecuniary benefits from farming. The model shows that farmers with decreasing marginal utility of income respond to higher decoupled payments by decreasing off-farm labor and increasing farm labor, resulting in greater agricultural output. We then estimate the difference between farm and off-farm returns to labor using data from three nationally representative farm household surveys. The finding of a large on-farm/off-farm wage differential provides compelling evidence of substantial nonpecuniary benefits from farming.     

食品产业纵向联合、供给链管理与国际竞争力

我国加入世界贸易组织后 ,食品农产品竞争力面临严峻挑战。食品产业的稳定发展 ,对于拥有 1 3亿人口且其中有 8亿农民的我国来说 ,具有战略性意义。因为它关系到我国粮食安全 ,农村就业与农民收入 ,从而影响到我国的社会稳定。目前 ,我国政府除了积极推动农业结构战略性调整外 ,农业产业化经营与发展现代物流也已作为食品产业创新的重要举措。农业产业化经营和发展现代物流与世界发达国家早已出现的食品产业纵向联合及食品供给链管理是相关的。食品产业纵向联合 (ＶｅｒｔｉｃａｌＣｏｏｒｄｉｎａｔｉｏｎ)是指食品产业中具有投入—产出关…     

The Impact of Cereal Prices and Policy on Crop Rotations and Supply Response

The impact of cereal prices on rotational decisions and farm‐level and industry cereal supply is considered. It is argued that with the voluntary 50 per cent set‐aside option for cereal producers, there is a large financial incentive to adopt a 50 per cent set‐aside cropping plan as cereal prices fall below an individual producer's ‘indifference’price. For a typical 210‐hectare UK combinable crop farm, adopting a 50 per cent set‐aside cropping plan is optimal when the price of cereals is below £62/tonne (98.50/tonne). If widely adopted, 50 per cent set‐aside will lead to a substantial fall in the supply of cereals and would lead the industry supply curve for cereals to move leftward and become more elastic over a certain price range. The level of reduced cereal supply will be greater than would be predicted from an estimate of industry level supply response that ignored rotational and farm‐level financial incentives.     

The Variable Response of Agricultural Supply to World Price Instability in Developing Countries

This paper analyses the effect of world price instability on the agricultural supply from developing countries and determines to what extent this effect is dependent upon the macroeconomic environment. Producers from agricultural commodity‐exporting countries are particularly vulnerable to the fluctuations of world prices: they are widely exposed to price shocks and have little ability to cope with them. Nevertheless, the effectiveness of risk‐coping strategies is conditioned by the influence of macroeconomic factors (infrastructure, inflation and financial deepening). Thus country‐specific price indices are established, and the response of production indices to price instability indices is estimated by using a panel model including macroeconomic variables which interact with price instability. Such analysis is based on a sample of 25 countries between 1961 and 2002. The results highlight a significant negative effect of the world price instability on supply, and further show that high inflation, weak infrastructure and a poorly developed financial system exacerbate this effect.     

Dairy Demand, Supply and Policy in Korea: Potential for International Trade

Korea, like other Asian countries, has relatively low per capita consumption of dairy products and rapid demand growth. Tight import controls limit imports and the internal prices of dairy products are two to three times border prices. We find that dairy product demand (so far primarily fluid milk consumption) is elastic and has been sensitive to income growth and the modernization of the Korean economy represented by increased urbanization. Policy simulations and projections indicate substantial potential for import growth in manufactured dairy products, even if the growing fluid milk market is reserved for domestic producers and domestic milk prices rise somewhat.
Comme les autres pays asiatiques, la Corée consomme relativement peu de produits laitiers par personne et fait face à une croissance rapide de la demande. Les importations sont sévèrement restreintes et les prix intérieurs de ces produits sont deux à trois fois les prix à l'importation. Nous constatons que la demande pour les produits laitiers, encore essentiellement limitée au lait de consommation, est élastique et qu'elle a réagi à la hausse des revenus et à la modernisation de l'économic coréenne, marquée par l'intensification de l'urbanisation. Des études en simulation et les projections des planificateurs font état de possibilités importantes de croissance des importations de produits laitiers transformés, bien que le marché croissant du lait de consommation demeure réservé aux producteurs du pays et que les prix intérieurs manifestent actuellement une certaine hausse.     

土地供应规则的变化对北京市住宅用地市场的影响

研究目的:以2004年8月31日和2005年5月1日为界,将北京市住宅用地市场分为三个阶段,从土地供应量、地价、竞租曲线、土地—资本替代弹性等方面分析土地供应规则的变化对住宅用地招拍挂出让市场的影响。研究方法:定性分析,土地竞租曲线和土地—资本替代弹性分析。研究结论:(1)经营性项目用地招拍挂供应的政策对住宅用地市场的影响胜于“熟地”供应政策;(2)土地竞租曲线的变化反映土地市场在经过较大波动之后正在适应新的土地供应规则;(3)土地—资本替代弹性分析显示北京市住宅用地的市场效率仍然偏低。     

Crop‐Level Supply Response by Agro‐Climatic Region in Ethiopia

Using farm‐level survey data from Ethiopia, this paper estimates a quadratic restricted profit function to assess the supply response of smallholder farmers. All major crops are identified in the analysis and variations in agro‐climatic and farming systems are accounted for. Peasant farmers, at least in the more commercial Central and Southern zones, do respond positively and significantly to price incentives. Farmers in the Northern zone are least commercial and least responsive to prices, and in fact the model based on profit maximisation does not adequately capture their behaviour. In general, non‐price factors, especially rainfall and market access, are more important than prices in affecting poduction, and which factors are most important varies depending on the crop and region in question. We conclude with suggestions regarding which crops appear most suitable to each agro‐climatic region, and identify the most relevant policy interventions in each case.     

Supply Response to Countercyclical Payments and Base Acre Updating under Uncertainty: An Experimental Study

We design an experiment to simulate how people make agricultural production decisions under three policy scenarios, each incorporating direct payments (DPs): ( a ) price uncertainty without countercyclical payments (CCPs); ( b ) price uncertainty with CCPs; and ( c ) price uncertainty, CCPs, and uncertainty regarding base acreage updating. Results are the CCP program and perceived possibility of future base updating created incentives for subjects to invest more in program (base) crops, despite payments being decoupled from current production decisions. Those choosing to reduce revenue risk by increasing plantings of base crops may face reduced incomes, suggesting the efficiency of crop markets may be diminished.     

On the Use of Price Ratio in Aggregate Supply Response: Some Evidence from the Poultry Industry

The specification of supply/demand relationships has received considerable attention in agricultural economics (Heien 1977). Economic theory has helped provide a basis for the specification of such relationships, one of its contributions being the proposition that prices should be interpreted only in relative terms. This has had a profound influence on model building in agricultural economics, leading a number of researchers to avoid the use of absolute prices in economic analysis. For this reason, numerous market models of the agricultural economy use price ratios as explanatory variables (e.g., Chen; Chen et al.; Heien, 1976; Gerra; Kulshreshtha and Wilson; Rahn; Talpaz; Morzuck et al.; Houck and Gallagher; Wilson et al.); these examples suggest that the use of such ratios is fairly widespread in econometric modeling of the crop and livestock sectors. One of the best examples of price ratios is the "feed cost to price" ratio commonly used in the analysis of livestock supply response. Indeed, since feed cost constitutes a major part of the total production cost in livestock activities, the "feed cost to price" ratio is often considered a proxy for profitability. For this reason, data on such ratios are regularly published for various livestock activities (e.g., USD A). Also, "feed cost to price" ratios are often employed in the specification of models of livestock supply response, (e.g., Chen; Chen et al.; Heien 1976; Gerra; Kulshreshtha and Wilson; Rahn; Talpaz). However, not all models of aggregate supply response follow this approach. For example, Freebairn and Rausser, and Arzac and Wilkinson, use prices as separate variables rather than in ratio forms in their models. In particular, they do not employ price ratios in their livestock and crop supply equations. The existence of these different approaches raises questions about the appropriateness of the use of price ratios in the modeling of aggregate supply.     

Smallholder Supply Response to Marketing Board Activities in a Dual Channel Marketing System: The Case of Zambia

In recent years, parastatal grain marketing boards have re‐emerged as important elements of grain markets in eastern and southern Africa, yet little is known about how farmers are responding to their scaled up activities. This article develops a conceptual model of farmers’ production decisions in the context of dual output marketing channels (government and private sector) when output prices at harvest time and the availability of one of the marketing channels are unknown at planting time. It then applies the model to the case of Zambia and uses nationally representative household‐level panel survey data to estimate the effects of the Food Reserve Agency (FRA), the government parastatal maize marketing board, on smallholder crop production and fallow land. The FRA buys maize from smallholders at a pan‐territorial price that typically exceeds market prices in major maize producing areas. Results suggest that increases in the farmgate FRA maize price raise farmer maize price expectations, which induces a supply response. Smallholders respond to an increase in the FRA price by extensifying their maize production. On average, a 1% increase in the FRA price is associated with 0.06% increases in smallholders’ maize area planted and quantity harvested. There is also some evidence that farmers reduce the area of land under fallow in response to FRA incentives but there is no evidence of reductions in the area planted to other crops.