Farm Acreage Shocks and Crop Prices: An SVAR Approach to Understanding the Impacts of Biofuels

The last 10?years have seen tremendous expansion in biofuels production, particularly in corn ethanol in the United States, at the same time that commodity prices (e.g., corn) have experienced significant spikes. While supporters claim that biofuels are renewable and carbon-friendly, concerns have been raised about their impacts on land use and food prices. This paper analyzes how US crop prices have responded to shocks in acreage supply; these shocks can be thought of as a shock to the residual supply of corn for food. Using a structural vector auto-regression framework, we examine shocks to a crop??s own acreage and to total cropland. This allows us to estimate the effect of dedicating cropland or non-crop farmlands to biofuels feedstock production. A negative shock in own acreage leads to an increase in price for soybeans and corn. Our calculations show that increased corn ethanol production during the boom production year 2006/2007 explains approximately 27% of the experienced corn price rise.     

Examining crop price effects on production decision and resource allocation: an ex-ante approach

This article examines the output price effects on the US crop production, employing an ex-ante approach to the differential systems of input demand and output supply. The estimation results of the differential input demand show that the expansion of crop production leads to an increase in acreage (i.e. extensive margin) and a proportional rise in input usage improving yield per acre (i.e. intensive margin). The substitutable relationship between fertilizer and land supports that crop producers have an option to choose either intensive or extensive margin in response to changes in their relative prices. In addition, the estimation results of the differential output supply highlight that the composition of crop supply can be altered by changes in ex-ante crop prices. The estimation results suggest that crop producers substitute corn supply for the supply of cotton, wheat and soybeans or vice versa. Based on the estimated elasticities, the decompositions of profit-maximizing input demand are conducted, which reveals that a change in ex-ante crop prices is associated closely with resource reallocation.     

Biofuels and Land Use Change: Sugarcane and Soybean Acreage Response in Brazil

Scientists and economists are increasingly worried that biofuels production is leading to land use changes in the form of competition with food crops or loss of natural ecosystems. I estimate acreage conversion in response to shocks in sugarcane (a biofuels feedstock) and soybean (thought to be affected by United States corn ethanol production) prices in Brazil at a national and regional level. Using county-level data from 1973 to 2005, I consider a dynamic panel data model of input demand for agricultural land, conditioning on price changes of other commodities. The short-run crop-price elasticity of sugarcane acreage in Brazil is estimated to be approximately zero, whereas the elasticity of soybean acreage is 0.9 when both spot and futures prices change. The regional estimates for soybeans show considerable variation, and are highest in areas of ecological importance, such as the cerrado. Sugarcane estimates are more homogeneous. These results should be taken into account in impact assessments of biofuels.     

Joint production,land allocation,and the effects of the production flexibility program

An empirical land allocation model is developed and fit to production data of the top five crops in the USA and to crop output prices adjusted for direct payments and subsidies. The land allocation model based on the theory of the multiproduct firm allows for jointness in production, and it is extended to handle non-allocable inputs. Specifically, the model is used to analyze whether the Food Security Act of 1985, known as the 1985 Farm Bill, increased flexibility in land allocation decisions by comparing responsiveness of land allocation among the crops, before and after the passage of the 1885 Farm Bill, to changes in total land availability and changes in crop output prices. The results confirm that a structural change in land allocation dynamics took place after the passage of the 1985 Farm Bill. We show that more crops (wheat and soybeans, in particular) become more acreage responsive to the changes in total land available for production after 1985. For example, the results indicate that competition for acreage between corn and wheat is associated with the implementation of the 1985 Farm Bill. The results provide evidence that the onset of the increased acreage allocation flexibility by farmers originated in the policies of the 1985 Farm Bill. The study also demonstrates that a policy targeting a particular crop will inadvertently affect production of other crops. This study quantifies these indirect effects on the five major crops grown in the USA.     

The supply of non‐renewable resources

There exists no formal treatment of non‐renewable resource (NRR) supply, systematically deriving quantity as function of price. We establish instantaneous restricted (fixed reserves) and unrestricted NRR supply functions. The supply of a NRR at any date and location depends not only on the local contemporary price of the resource but also on prices at all other dates and locations. Besides the usual law of supply, which characterizes the own‐price effect, cross‐price effects have their own law. They can be decomposed into a substitution effect and a stock compensation effect. We show that the substitution effect always dominates: a price increase at some point in space and time causes NRR supply to decrease at all other points. Our new—although orthodox—setting takes into account not only NRR supply limitations but also the heterogeneity of NRR deposits, and the endogeneity of their development and opening. Our analysis extends to NRRs the partial‐equilibrium analysis of demand and supply policies. Thereby, it provides a generalization of results about policy‐induced changes on NRR markets.     

An analysis of asymmetric demand response to price changes: The case of local telephone calls

Asymmetric demand responses to price changes are not an observable implication of classical demand theory, which predicts that consumers will react to a small price increase in much the same way as they do to a small price decrease. Yet applied researchers have long speculated that consumers are more sensitive to price increases than they are to price decreases. In addition, recent empirical studies generally support the theory of asymmetric demand responses. We construct a dynamic model based on data gathered from monthly telephone bills for 128 New York Telephone customers over a five-year period. Our results support the conclusion that customers react more quickly and strongly when prices go up than they do when prices go down.We would like to thank Manny Haas and Bernie Reddy for their comments and suggestions.     

Market power in the Spanish electricity auction

Hourly data from the Spanish day-ahead electricity auction is used to obtain a lower bound measure of generators’ market power. Our method is not based on cost estimates but rather on the behavioral differences between strategic generators and more competitive producers. The results indicate that, despite the price cap effect of regulation in this market, the larger operators in the day-ahead market are able to increase significantly prices above the competitive benchmark. We also show that the two large generators do not exploit the full potential of their market power.     

Asymmetric responses of house prices to changes in the mortgage interest rate: evidence from the Australian capital cities

We examine the dynamic and asymmetric responses of house prices to changes in mortgage interest rates in Australia from January 1995 to November 2017. We propose a threshold intervention model to distinguish between the effects of positive versus negative changes in the standard variable interest rate. The results indicate that rising interest rates decrease house prices more than falling interest rates increase them. For example, a 1% decrease in interest rates increases Sydney’s house prices by 0.7%, whereas a 1% increase leads to a 1.5% fall. The findings also support the view that when interest rates are on the rise, house prices in larger capital cities such as Sydney and Melbourne fall faster than in their smaller counterparts. Our findings imply that a rise in interest rates may thus lead to sharp, fast and significant falls in house prices, a phenomenon which will not simply be a symmetric unwinding of earlier price increases.     

我国玉米产业技术进步的福利效应分析

在分别构建供给和需求模型对我国玉米生产消费状况进行分析的前提下,运用福利效应模型测算了技术进步对玉米生产者和消费者的福利效应,基本结论为:玉米具有较低的供给弹性和需求弹性,玉米技术进步的福利效应表现为消费者福利增加和生产者福利减少,但消费者福利的增加值大于生产者福利的减少值,使得整个社会的经济福利处于上升趋势。     

Interdependencies in the energy–bioenergy–food price systems: A cointegration analysis

The present paper studies the interdependencies between the energy, bioenergy and food prices. We develop a vertically integrated multi-input, multi-output market model with two channels of price transmission: a direct biofuel channel and an indirect input channel. We test the theoretical hypothesis by applying time-series analytical mechanisms to nine major traded agricultural commodity prices, including corn, wheat, rice, sugar, soybeans, cotton, banana, sorghum and tea, along with one weighted average world crude oil price. The data consists of 783 weekly observations extending from January 1994 to December 2008. The empirical findings confirm the theoretical hypothesis that the prices for crude oil and agricultural commodities are interdependent including also commodities not directly used in bioenergy production: an increase in oil price by 1 $/barrel increases the agricultural commodity prices between 0.10 $/tonne and 1.80 $/tonne. Contrary to the theoretical predictions, the indirect input channel of price transmission is found to be small and statistically insignificant.     

Hidden costs of supply management in a small market

Canada regulates its dairy and poultry industries through supply management. The supply‐management programs use target prices, production quotas and import tariff‐rate quotas to raise domestic prices. Canadian supply‐managed producers cannot export their output to world markets as exports would be considered subsidized under World Trade Organization rules. In this paper, we show that once foregone export opportunities are accounted for, supply management may no longer be beneficial to domestic producers of the supply‐managed commodities. The extent to which foregone profits from exports dominate domestic rents depends on Canada's comparative advantage, domestic market elasticities and the extent of supply management distortion in the domestic market.     

Some Evidence on the Adjustment of Producer Prices*

We document producer price adjustment using a low‐inflation micro price dataset. On average 24% of prices adjust each month, with an average increase/decrease of 6%. Producer prices adjust more frequently than consumer prices, but their size of adjustment is typically smaller. Sectoral heterogeneity in the frequency of price adjustment is strongly related to heterogeneity in the cost structure. Fluctuations in aggregate producer price inflation occur to a large extent through variation in the relative share of upward and downward price adjustment.     

碳交易及补贴机制下供应链差别定价研究

研究了碳交易机制、补贴机制以及碳交易及补贴机制下,一个二级供应链中普通产品和低碳产品竞争的差别定价策略,通过求解Stackelberg博弈模型得出单一的补贴政策并不能激励制造商进行节能减排,应与碳交易机制结合使用,其节能减排效果优于单一的碳交易机制。最后通过一个算例分析验证了碳交易及补贴机制的有效性。研究表明：碳交易价格升高到一定程度时,普通产品的零售价批发价均升高,低碳产品的价格均下降,普通产品的销量下降,低碳产品销量上升,碳排放总量下降;随着低碳补贴的增加,普通产品的零售价,低碳产品的批发价、零售价均降低,普通产品的销量下降,低碳产品的销量上升,其中低碳产品的价格和需求量对低碳补贴的反应更加敏感,使碳排放量降低的同时还提高了制造商和零售商的利润。     

Price convergence in the European Union – What has changed?

This paper investigates price convergence in European Union countries using disaggregated price level indices in the period 1999–2016. Our results show that prices of both tradable and nontradable goods had a significantly lower dispersion in 2016 than in 1999. The convergence was faster in the case of countries with price level below the average, which can be interpreted as catching-up. However, further analysis shows that most prices converged only up to 2008. While prices of transport equipment continue to converge across the European Union, several durable consumption categories show price divergence after 2008. We attribute this to the drop in international trade of durable products due to increasing inflation and exchange rates volatility following the global financial crisis. From the monetary policy perspective, the existing price-level gaps, shown in our study, may pose a risk of higher inflation, especially in catching-up economies.     

Volatility transmission between oil prices and banks' stock prices as a new source of instability: Lessons from the United States experience

This paper examines whether American banks' exposure to the oil industry could lead to instability in both oil and financial markets. To address this issue, we investigate volatility spillovers between oil prices and the stock prices of the four major American banks involved in the oil industry by employing the vector autoregressive fractionally integrated moving average framework. We use high-frequency data from January 3, 2006, to June 30, 2016. Our results support the existence of such volatility spillovers, as evidenced by the significant volatility responses of oil price (banks' stock price) to a shock in banks' stock price (oil price). These responses, more pronounced following the banks' exposure to the shale industry, mainly reflect the financial fragility of shale companies and their high indebtedness levels. Thus, this paper emphasises how the shale oil industry could trigger turmoil in both oil and financial markets.     

Responses of Economic Activity to Global Oil Market Shocks: A Comparative Analysis of Major Net Oil‐Producing and ‐Consuming Countries

We argue that four channels drive oil price shocks during 1986M5–2013M1, namely the oil supply, aggregate demand, oil‐specific demand and real exchange rates. Our findings are that oil price shocks driven by oil supply positively affect net oil‐consumer countries faster than net oil‐producer countries. Oil price shocks driven by aggregate demand are largely country‐specific. Oil shocks driven by other demands influence net oil‐producers faster than net oil‐consumers negatively, and persistently mostly among net oil‐producers. Other shocks have large negative effects on the industrial production of all countries, with responses appearing very quickly and persisting for at least a year.     

Supply response of farm program in rice-growing states

This study aims to develop an acreage response model for rice-growing states using a policy-inducing variable. The single equation regression model for each rice-producing state is estimated by using the ordinary least square multiple regression procedure after log transformation. Data for the period 1959 to 1988 for acreage plantation, market price, target price, loan rate, and acreage reduction rate are used in designing the policy-inducing price. The estimated parameter shows a significant inverse relationship between the rice acreage planted and policy-inducing prices in all of the rice-growing states, with the exception of Louisiana. The estimated short-run elasticities for Arkansas, California, Louisiana, Mississippi, and Texas are -0.36, -0.68, 0.30, -0.37, and -0.59, respectively. The heterogeneity in the magnitude of the elasticities suggests the need for redesigning the rice programs to generate desirable acreage responses from all of the rice-growing states.     

产需双重不确定情形下绿色农产品供应链的协调研究

为解决产需不确定性给绿色农产品供应链运营带来的复杂影响,寻求绿色农产品生产商和销售商面对产需双重不确定情形下各自的最优决策,研究从农产品产出和市场需求双重不确定性视角出发,结合目前消费者对绿色农产品的需求偏好,构建由生产商和销售商组成的Stackelberg博弈模型,探究收益共享契约能否有效协调产需都不确定的绿色农产品供应链。研究结果表明:分散决策时的批发价契约无法协调此供应链。引入收益共享契约后,在合适的共享系数范围内,生产商的农资投入量会增加,农产品的绿色度会比分散决策时高,同时销售商的销售价格降低;当农产品订购量变大后,引入契约后的生产商和销售商各自的利润相较于分散决策时更高。     

Export price adjustments under financial constraints

Exploiting data on the product‐destination‐level transactions of a large panel of Italian firms, we provide evidence that financial constraints affect price variation across exporters. Constrained exporters charge higher prices than do unconstrained firms that export to the same product‐destination market. This pattern is the result of a two‐fold effect. Distressed firms pass on their higher production costs through prices. However, they also charge higher mark‐ups. We explain this evidence referring to models in which rival firms produce different brands of the same product for customers with significant switching costs and producers face capital market imperfections when they need external financing. Our empirical investigations corroborate this explanation: price gaps are higher when switching costs or other forms of demand rigidity are expected to be more relevant.     

THE IMPACT OF FOOD PRICE SHOCK ON HETEROGENEOUS CREDIT CONSTRAINED FIRMS

ABSTRACT 1 : The paper analyzes how rising food and energy prices affect heterogeneous firm access to inputs and production under credit market imperfections. We estimate a firm credit constraint equation using a unique firm level panel data and find that, on average, small individual firms (IF) are more credit constrained than large corporate firms (CF). Using the estimated parameters, we simulate the effect of the recent food price shock on the world markets. Our results suggest that in the presence of credit market imperfections, the less credit constrained CF benefit relatively more from food price increase than IF, as they are able to expand their production more flexibly. These findings have important policy implications for countries with significant market imperfections. In the case of the food price shock, not only consumers but also producers, which on average are more credit constrained than producers in developed countries, may lose their market shares and hence their income in the long run.