THE EFFECTS OF FLEXIBLE EXCHANGE RATES ON AUSTRALIAN WOOL PRICES*

The implication of price stabilisation under a volatile exchange rate is an increasingly volatile price denominated in a foreign currency. Time series analysis is used to model the relationship between exports, prices and AWC stocks. This model is used to assess the distribution of the impact of exchange rate shocks on prices denominated in local and foreign currencies. It is found that the AWC has significantly reduced the impact of exchange rate shocks on domestic prices.     

AN ADAPTIVE CONTROL APPROACH TO AGRICULTURAL POLICY*

It is postulated that some issues of economic policy in general, and of Australian agricultural policy in particular, may be analysed in the framework of an adaptive control model. Policy making is characterized as a rational, sequential decision-making process under conditions of imperfect knowledge in which forthcoming information may be used to learn about the uncertain terms as decision periods pass. Emphasis is given to the linear-quadratic control problem. The paper provides a review of the formulation of a policy problem in the framework of an adaptive control model and of derived policy strategies. An illustrative example is reported.     

FUTURES PRICES AS FORECASTS OF COMMODITY SPOT PRICES: LIVE CATTLE AND WOOL*

In this paper the foundations on which the predictive interpretation of futures prices rests are discussed, and possible reasons for the differential predictive performance of futures prices as between different commodity markets examined. The predictive performances of futures, and spot prices themselves, are tested empirically, using Australian data for wool (a continuous inventory commodity) and finished live beef cattle (virtually a non-storable commodity), by means of instrumental variables estimation.     

AN APPROACH TO THE ECONOMETRIC ESTIMATION OF ATTITUDES TO RISK IN AGRICULTURE*

A simple model is developed relating the debt and asset portfolio of the farm to the production decision, which leads to a small non-linear system of equations. The system is estimated with time-series cross-sectional data from Australian broadacre agriculture using non-linear three-stage least squares. This gives a new method of estimating risk aversion coefficients by using actual behaviour of farmers in a realistic economic environment, rather than games played in artificial situations. Australian farmers are found to be risk averse, and the partial coefficient of risk aversion decreases with wealth and increases with income. The results are consistent with the results of studies by Binswanger in India and elsewhere using a completely different method. This consistency suggests that the partial risk aversion coefficient is a relatively robust measure of attitudes to risk.     

PRODUCT CHARACTERISTICS AND ARBITRAGE IN THE AUSTRALIAN AND NEW ZEALAND WOOL MARKETS*

The physical characteristics of wool are important determinants of its spinning properties, yarn quality and end use. The degree to which wools from different countries of origin may be substituted has important implications for the domestic marketing policies of Australia and New Zealand. The hypothesis examined in this paper is that the differences in wool prices can be explained by differences in the physical characteristics of the wool and that objective measures of these characteristics allow for effective arbitrage between these markets. The alternative hypothesis is that premiums or discounts exist owing to country of origin. A hedonic price analysis was conducted on wool prices in Australia and New Zealand using a balanced sample of sale lot data from the 1986-87 selling season. In the year examined, there was no evidence of any price premiums associated with country of origin.     

THE IMPACT OF FARM AND PROCESSING RESEARCH ON THE AUSTRALIAN WOOL INDUSTRY*

An equilibrium displacement model of the world wool top industry is used to estimate the returns to the Australian wool industry from productivity improvements in farm production, in top making and in textile manufacturing. The returns to the industry from these different types of research and development are sensitive to the extent of substitution possibilities between Australian wool and other inputs used by the wool processing and textile industries but it appears that research resources have to be much more efficient in off-farm activities for the Australian wool industry to receive benefits similar to those from farm research activities.     

THE INVENTORY SCHEME FOR AUSTRALIAN WOOL

A model put forward by the Australian Wool Corporation to simulate the behaviour of the wool market under an inventory scheme is described. Some deficiencies in the model are pointed out and suggestions are made for alterations to improve the model's performance.     

RATIONAL EXPECTATIONS IN THE AUSTRALIAN WOOL INDUSTRY

The process by which producers form expectations has implications for model building and policy analysis. An econometric model of the Australian wool market is estimated. It is shown that the rational expectations hypothesis is not inconsistent with the data for both the period before the floor price scheme was implemented and since that date. This finding has important implications, since it has been shown that the welfare gains from stabilisation are small if producers form rational expectations.     

COMPOSITE FORECASTING METHODS: AN APPLICATION TO SPANISH MAIZE PRICES

This paper investigates alternative forecasting methods when few observations are available. An illustration is provided by Spanish monthly maize prices after Spanish accession into the EC. Sophisticated multiple-equation models are difficult to specify in situations of limited data, and simpler models have to be considered. In this paper, several individual and composite forecasting methods are compared, based on 24 one-period-ahead forecasts generated from these models. Results based on different quantitative and qualitative measures show that composite forecasting methods are more accurate. In situations where severe multicollinearity exists, forecasting performance is improved by modelling this problem explicitly.     

ESTIMATING SOURCES OF FLUCTUATIONS IN THE AUSTRALIAN WOOL MARKET: AN APPLICATION OF VAR METHODS

Vector autoregression (VAR) methods are used to analyse the contribution of supply, demand and policy shocks to unpredictable fluctuations in the market for Australian wool. VAR procedures are compared with conventional structural econometric models as methods for decomposing sources of instability. While each has advantages and disadvantages, VAR procedures might be viewed as preferable when the underlying market structure is complex and uncertain, as it is in the case of wool. Based on the results obtained, demand shocks are the dominant source of uncertainty in the wool market in the absence of Australian Wool Corporation intervention, but intervention has blunted their effects, reducing market uncertainty and increasing the average level of prices and revenues.     

THE IAC'S APPROACH TO AGRICULTURAL POLICY*

The main recommendations contained in the IAC's reports on rural references are outlined. The Commission's reasoning on four issues that are widely viewed as important to the formulation of rural policy is examined. The four issues are: assistance to industry; terms of trade; uncertainty and instability; and adjustment policy. Criticisms are made of the IAC's argument on these issues, and some inconsistencies between reports are indicated. It is concluded that the IAC has made a valuable contribution to the discussion of rural policy in Australia even though its recommendations are sometimes sounder than the argument offered to support them.     

WOOL IN 1980*

Since the introduction of a reserve price scheme in 1970, the interest in wool marketing previously shown by agricultural economists has not been maintained outside the public service and the wool industry itself. Nor is the subject as divisive amongst wool growers with, in general, 'orderly marketing' now acceptable to all factions of wool growers. The history of wool marketing discussion in Australia is reviewed and some reasons for this changing climate of opinion are discussed. An attempt is made to assess the actual performance of the buffer stock scheme in the light of the academic literature of the 1960s.     

AN APPROACH TO UNIVERSITY TEACHING IN AGRICULTURAL ECONOMICS

In our complex industrialised society there can no longer be a clear cut distinction between education and the training for a profession. Pressure from society for highly specialised knowledge and from students for satisfaction of vocational needs has resulted in the greater development of applied subjects. The aim of teaching in Agricultural Economics is to present a variety of subject matter within the framework of cohesive degree structures consistent with an academic discipline, while as far as possible fitting a student for a professional career in the field of Agricultural Economics. In the ever widening range of professional activity a distinction which has relevance to teaching can be made between the practising agricultural economist and the academic agricultural economist. For the former some professional training has to be incorporated in the first degree scheme. The need in industry and government is for economists who are prepared to make direct economic appraisals and the practising economist will therefore be involved in problem solving in a sphere where non-economic consideration have also to be weighed. He can best be fitted for his environment if he is aware of the interaction between economics and other relevant disciplines.     

SUPPLY RESPONSE IN THE AUSTRALIAN SHEEP INDUSTRY: A PROFIT FUNCTION APPROACH*

Profit function models for the three major regions in which the Australian sheep industry operates are specified and estimated. The supply response elasticity estimates are made using a normalised quadratic functional form and time series cross-sectional data. Elasticity estimates, together with their confidence intervals, are presented for the pastoral, wheat-sheep and high rainfall zones. In general, the supply response elasticity estimates derived in this study are lower than those previously reported for studies in which little or no account has been taken of the multi-product nature of Australian agriculture.     

FARMING SYSTEMS RESEARCH: AN EVOLUTIONARY APPROACH TO IMPLEMENTATION

Evidence suggests that many FSR programmes have faced ‘institutional problems’. We argue that these have arisen largely as a result of the way in which FSR programmes have been planned. Too much emphasis has been attached to developing a methodology for FSR, and too little given to understanding the research environment for which the FSR programme is supposedly designed. An alternative approach to the planning of FSR programmes is proposed: one which is based upon a dialogue between the planners and researchers and which takes explicit account of the needs of the client research institution.     

TOWARDS A MORE DYNAMIC APPROACH TO FARM PLANNING*

The result of an attempt to reconcile practical experience with theoretical production economics, is the development of the view that a more dynamic approach to farm planning may better be achieved by a concentration on data production, rather than on data manipulation. This view is based on the belief that, in practice, the farmer finds himself involved with choice from a relatively narrow, and obvious, set of technically feasible, efficient farm plans. His main problem in the choice of a farm plan is seen as the estimation of the probability that the various possible financial outcomes will be achieved, since the possible effects of the latter on his future list of choices cannot be ignored. The type of data believed to be needed is described, and a line of theoretical analysis followed which is meant to underline the importance of this data, and to develop principles for use in its production.     

AN APPROACH TO THE ECONOMETRIC ESTIMATION OF ATTITUDES TO RISK IN AGRICULTURE: COMMENT

Bardsley and Harris (1987) test empirically the effects of changes In deterministic wealth and random income on the measure partial risk aversion. The paper, which is otherwise well written, failed to impose the relationship between the two effects and estimated them independently. Consequently, inconsistent estimates were derived for the elasticities of the measure of partial risk aversion with respect to wealth and to income. The purpose of this comment is to derive that relationship theoretically and to point out the resulting inconsistencies in the original paper.     

AN ARIMA ANALYSIS OF TEA PRICES

This paper uses seasonal autoregressive integrated moving average modelling techniques in an analysis of monthly tea prices.     

THE AUSTRALIAN AGRICULTURAL ECONOMICS PROFESSION: AN APPRAISAL OF SOME CURRENT TRENDS*

Using the results of the first part of their 1994 membership survey, Ahmadi-Esfahani and Brakey (1996) examined the structure, conduct and performance of the Australian Agricultural and Resource Economics Society qualitatively. This paper extends that analysis by appraising some current trends in the Australian agricultural economics profession quantitatively. It concentrates on the second part of the survey to address a number of fundamental questions. A comparison of the US and Australian agricultural economics professions is made. The implications of the analysis for the product mix of the Society are explored.