Residual demand measures of market power of Russian wheat exporters

Traditionally, the international wheat market has been considered a good example of a market with perfect competition. Yet, several articles provide evidence of imperfect competition and price discrimination in the wheat trade. However, these studies focused on traditional high‐quality wheat exporters such as Canada and the United States. In contrast, this article investigates whether Russian wheat exporters exercise market power in eight selected importing countries using the residual demand elasticity (RDE) model. The article makes two major contributions. First, it focuses on a nontraditional exporter, who exports mainly wheat of mediocre quality to low‐ and middle‐income countries. Second, the RDE model is estimated for the first time using a nonlinear estimator, the instrumental variable Poisson pseudo‐maximum likelihood estimator. This is important because the double logarithmic functional form can provide biased results in the presence of heteroskedasticity. The results indicate that Russian wheat exporters can exercise market power in only a few markets, while they are price takers in the majority of importing countries.     

Protein and the demand for hard wheats*

Wheat protein is one of the most important specifications used in domestic and import purchase contracts and is used partly as a proxy for functional quality. The purpose of this article is to analyse the demand for wheat delineated by protein class. A choice‐based econometric model is specified and estimated using a novel dataset of pooled wheat shipments to individual importing countries. Buyers are importing countries that make purchase decisions among different protein levels. The model frames the choice in terms of attributes of the choice and of the importing countries. Results indicate that there have been shifts over time, and purchase probabilities are highly price elastic and vary across importing regions. Functional characteristics including wet gluten content and extraction rates have significant impacts on purchase probabilities. These results have implications for breeders as it clearly illustrates the role of protein and functional characteristics on demand. The results also have implications for analysts modelling wheat trade in that there are many factors impacting market segments that would not be captured in conventional demand specifications.     

PROBLEMS OF AGRICULTURAL POLICY IN EUROPE–A DANISH POINT OF VIEW

Recent developments in the agricultural situation of Western Europe has led to inceased self-sufficiency in importing countries and stagnation in the world trade of agricultural products. An examination is made of the effects of these developments on Danish agriculture and the Danish economy, which has been subject to a very rapid change of structure. Characteristics of the Danish agricultural support policy are commented upon as well as the issue of price support versus income support in relation to the objectives of greater efficiency and improved farm structure. The importance of other measures is emphasised, including action to impove the mobility of agricultural manpower. On the basis of past experience some comments are finally made about the enlargement of E.E.C. and its possible effects on the world trade, on the situation of overseas producers, including the developing countries, and possible ways of reducing the difficulties.     

Supply Chain Management in Cereal Grains: A Case Study from the U.S. Milling Wheat Industry

This paper studies supply chain management in the grain industry by investigating the effects of wheat quality on marketing arrangements between wheat producers, grain handling companies and processors. Wheat quality is defined by many different characteristics, broadly categorized into physical and intrinsic quality attributes. The complexity of wheat quality places limitations on the effectiveness of industry grading schemes in assuring end-use quality. In the U.S., wheat grading factors mostly reflect physical characteristics. Moreover, the U.S. wheat industry does little to regulate the intrinsic quality of new cultivars. Consequently, there is functional quality uncertainty in the U.S. wheat market, encouraging some individual processors to segregate wheat based on their own quality specifications. The costs and benefits of wheat segregation are illustrated with a case study of wheat procurement taken from the U.S. flour industry. Pendleton Flour Mills Inc. operates a stringent testing program to segregate wheat supplies with specific intrinsic quality attributes from the U.S. wheat market. The paper concludes that the inadequacy of the U.S. grading system in guaranteeing functional quality provides some processors with an incentive to manage the supply chain for milling wheat.     

Are Russian Wheat Exporters Able to Price Discriminate? Empirical Evidence from the Last Decade

Significant changes have taken place in the world wheat market in the last decade. Russia, a former net wheat importer, has become a leading exporter with a world market share of 11.2% in 2009. This increasing importance and the discussion about the establishment of a grain‐OPEC consisting of Ukraine, Kazakhstan and Russia has raised the issue of pricing behaviour of Russian wheat exporters. Although there are several studies on the pricing behaviour of Canadian and US wheat exporters, there is none so far for Russian wheat exporters. This study provides a quantitative analysis of the pricing behaviour of Russian wheat exporters, explicitly taking account of the export tax imposed between 2007 and 2008. We employ a pricing‐to‐market (PTM) model on quarterly Russian wheat‐export data, covering the period from 2002 to 2010 and 25 export destinations. Our findings indicate that (i) Russian wheat exporters exercised PTM in only a few importing countries over the whole time period, and (ii) PTM behaviour was more pronounced in the aftermath of the export tax period (i.e. 2008–2010) than before.     

U.S. Farm Safety Nets and the 2000 Agricultural Risk Protection Act

Although crop insurance programs have been an important part of U.S. agricultural policy since the 1930s, the "safety net" matra has taken on new relevance and importance in recent policy deliberations and rhetoric. This paper contains a non technical review of issues underlying the safety net concept in U.S. agricultural policy. We outline recent changes in U.S. crop insurance programs and review provisions of the 2000 Agricultural Risk Protection Act (ARPA), which had a significant impact on U.S. risk management programs by expanding crop and revenue insurance subsidies and stimulating new product development. A simple empirical analysis of how these changes may have affected program participation is considered. We then outline points relevant to 2002 Farm Bill deliberations. As is pointed out, the safety net concept seems pervasive to all policy discussions. Countercylical payments, even when provided on an ad hoc basis, may distort production and trade conditions.     

The law and economics of Canada's WTO litigation contesting U.S. country-of-origin labeling (COOL)

We explain the interplay of law and economics in the successful WTO challenge by Canada of U.S. mandatory country-of-origin labeling (COOL) measures for beef and pork, which hinged on origin of livestock used in U.S. meat production. Canada mounted a successful legal and economic strategy to convince WTO adjudicating bodies that the United States had violated specific WTO provisions. Canada's economic evidence shows that through costs of segregation the COOL measure harmed the competitive position of Canadian cattle and hogs in the U.S. market. Economic evidence was built into the strategy and cited by the WTO Panels in support of their legal findings that the COOL measure violated U.S. obligations under WTO agreements. Canada was awarded rights to more than one billion Canadian dollars in retaliation and the United States responded by eliminating the offending COOL measure. The COOL case demonstrates how economic and econometric evidence can be used in complex dispute settlement proceedings dealing with technical trade barriers. Economics is especially valuable in the initial stage of framing the effects at issue, in the intermediate stages of documenting empirical causation and in the final stage of litigation, which was to calculate and defend the amount of retaliation.     

Modeling differentiated quality standards in the agri-food sector: the case of meat trade in the enlarged EU

Quality standards play an increasingly important role in international agri-food trade, and their functioning as nontariff barriers to trade is widely discussed. We argue that food quality standards imposed by importing countries are more than just border measures and can have profound effects on the market structure of the exporting industry, thereby significantly influencing the supply response. We develop a stylized oligopoly model that accounts for compliance costs (fixed and variable) and investigate alternative policy options to explore different mechanisms an importing county may use to enhance the quality of its imports. The model explicitly recognizes the coexistence of complying and noncomplying firms, which is a situation often found in low-income countries where a small modern export-oriented segment invests in meeting foreign quality standards. We use the adjustment of the Polish meat sector to the tight EU food quality standards as an empirical example. The simulations show that a subsidy scheme can promote compliance with standards and can contribute to an upgrade of the industry in the exporting country, but its marginal effectiveness is diminishing.     

China as a Potential Market for U.S. Pork Exports

This study provides details of emerging opportunities for U.S. pork exporters following the U.S.–China WTO Accession Agreement. The Agreement will enable the United States to gain unprecedented access to the Chinese pork market. The United States enjoys comparative advantages in producing hogs at lower cost, higher quality, and greater efficiency. Moreover, Chinese preference for pork is highly complementary to that of U.S. consumers. Therefore, U.S. pork exporters are expected to target primarily the Chinese variety meats market. Although China is expected to remain a surplus pork production nation, demographic shifts could provide additional opportunities for U.S. pork exporters to increase sales of more premium cuts for urban consumers in China.     

U.S. food aid and American exports to recipient countries during the Cold War

In this article, we test to what extent the food aid granted by the U.S. during the Cold War was strategically motivated and used to promote U.S. interests. Using the data for the period 1971–1990, we investigate whether U.S. wheat aid had an effect on recipient countries’ total import of American products. The evidence we provide suggests a positive and robust relationship and thus it is consistent with the argument that U.S. food aid helped to create larger markets for U.S. producers.     

Variability in wheat export demand elasticity: Policy implications

Agricultural economists and policy makers in the United States believe that the magnitude of the export demand elasticity is one of the most important parameters used in farm policy decisions. However, past empirical estimates show wide variation in the size of the U.S. export demand elasticity. Reasons for this wide variation go beyond differences in model specification, estimation methods, and period of estimation to involve factors such as trade policies and changes in the supply and demand conditions of foreign countries. In view of the continual variation in magnitude, the elasticity of export demand should be viewed as a variable rather than as a parameter. In this study, U.S. wheat export demand elasticities are computed using a world wheat trade model. The estimates show that the elasticities vary significantly over time. They also reveal that elimination of trade barriers would more than double wheat export demand elasticities.     

Price Asymmetry in the International Wheat Market

Most wheat exports are accounted for by a limited number of countries with different policy regimes and specializing, for the most part, in particular classes of wheat. Under these circumstances, there is likely to be considerable interaction among the major exporting countries in the determination of wheat prices. In this paper, price linkages between the U.S. and other exporting countries (Canada, the European Union, Argentina and Australia) in the world wheat market are investigated. After determining that the direction of causality is from U. S. prices to the prices of other exporting countries, the nature of the price linkages is studied. The results suggest that the major exporting countries respond asymmetrically to U.S. price changes. The degree of asymmetry differs from one exporting country to another, Argentina and the European Union show greater response to falling prices than to rising prices, while the opposite is true for Canada and Australia.     

An Examination of the Relationship Between U.S. and Canadian Durum Wheat Prices

Durum wheat is one of the commodities for which there is intense trade competition between the United States and Canada. This article examines the relationship between Canadian and U.S. durum wheat prices using cointegration and an asymmetric error correction approach. The overall results suggest that a long run relation holds between the U.S. and Canadian durum wheat prices. The U.S. price responds to restore the equilibrium relationship with the corresponding Canadian price, while the Canadian price evolves independently. Using tests for structural change it is revealed that changes in Canadian domestic policy (the repeal of the WGTA) had an effect on this long run relation. Since the withdrawal of the WGTA, quality differences in durum wheat for both countries seem to matter in the dynamics and integration of U.S. and Canadian durum wheat prices. Le blé dur est l'une des denrées pour lesquelles les États‐Unis et le Canada se livrent une concurrence féroce. Le présent article examine la relation entre les prix du blé dur américain et canadien en utilisant la cointégration et un modèle à correction d'erreur asymétrique. Les résultats globaux semblent indiquer qu'il existe depuis longtemps une relation entre les prix du blé américain et canadien. Le prix américain réagit pour rétablir la relation d'équilibre avec le prix canadien correspondant, tandis que le prix canadien évolue de façon indépendante. Des tests effectués pour vérifier les répercussions des changements structurels ont indiqué que des changements dans la politique intérieure canadienne (notamment l'abrogation de la Loi sur le transport du grain de l'Ouest ‐ LTGO) ont eu une influence sur cette relation. Depuis l'abolition de la LTGO, des différences de qualité de blé dur dans les deux pays semblent avoir de l'importance dans la dynamique et l'intégration des prix du blé dur canadien et américain.     

Do consumers value hydroponics? Implications for organic certification

Recent controversy about the inclusion of hydroponics in the U.S. Department of Agriculture (USDA) organic program has highlighted uncertainty about marketing hydroponic crops. In a controversial vote in November 2017, the National Organic Standards Board chose not to recommend that hydroponic farms be banned from organic certification. It is still unclear, however, how consumers perceive and value hydroponic production. This study used a nonhypothetical choice experiment to estimate consumers’ willingness to pay for hydroponic and traditional lettuce both with and without organic certification. No hydroponic premium was found, but exposing consumers to different kinds of information about hydroponics significantly affected consumers’ preference formation. Findings generally suggest that the National Organic Program should consider ways to ensure the stability of organic premiums as perceptions about hydroponics evolve.     

The role of intellectual property rights in seed technology transfer through trade: evidence from U.S. field crop seed exports

A panel of 134 countries over the period 1985–2010 is used to evaluate the effect of intellectual property rights (IPRs) on field crop seed imports from the United States. Based on estimating a gravity equation using the Heckman selection and Poisson fixed‐effects panel econometric methods, the results indicate that membership of countries in both the International Union for the Protection of New Varieties of Plants and the Trade‐Related Aspects of Intellectual Property Rights Agreement of the World Trade Organization have a positive and statistically significant effect on their imports of U.S. field crop seeds. These results, however, are also sensitive to both income level of importing countries and better enforcement of IPRs by those countries.     

Risk Sharing and Compensation Guides for Managers and Members of Vertical Beef Alliances

Vertical alliances in beef are growing in importance. Alliances struggle with decisions on how to compensate members. Both conceptual development and empirical analysis are needed. A conceptual framework building on transaction cost and principal agent literature is developed and strategies for sharing feeding and packing margins are analyzed. Premiums for high-quality cattle increase revenues to the alliance. Margin and premium sharing interactions are investigated and guidelines are presented. Compensations that provide incentives for improving cattle quality help ensure the success of alliances as vertical coordination and quality control mechanisms.     

Optimal Protein Segregation Strategies for Wheat Growers

A technology that can measure wheat grain protein concentration and then segregate grain based on measurements during harvesting is on the horizon. This new technology provides wheat growers with opportunities to segregate grain that can be directed to premium markets. In this article, we identify an individual grower's optimal segregation and blending strategies under non‐uniformly curved price schedules. When price schedules are three‐step shaped, we show that the optimal segregation and blending strategies can be obtained by solving a specified non‐linear programming problem. Based on cash price and protein distribution data for wheat in the U.S. Pacific Northwest region over 1991–2011, an application of our theoretical model shows that on average a Hard Red Winter (respectively, Hard Red Spring) wheat grower should be willing to pay about 17.7 (respectively, 30.8) cents for segregating one bushel of wheat. We also study how growers’ net returns would be affected were the technology to be adopted.     

Substitution between U.S. and Canadian Wheat by Class

The imports of hard red winter and durum wheat from Canada has been a source of contention among U.S. wheat growers, due to the likeness between domestic and imported Canadian wheat. This has also been investigated as a source of material injury to the U.S. market. We examine the relative substitution between U.S. and Canadian wheat, by class, by treating wheat as an input in flour production. We find that while U.S. hard red spring wheat and U.S. hard red winter wheat are economic substitutes, there is limited price substitution between U.S. and Canadian durum and U.S. and Canadian hard red spring wheat. Quality differences from the millers’ perspective may be the reason driving the import demand for hard red spring and durum wheat from Canada. Les importations de blé de force rouge d'hiver et de blé dur en provenance du Canada sont une source de conflit chez les producteurs de blé des États‐Unis, en raison de la ressemblance entre le blé produit aux États‐Unis et le blé importé du Canada. Ce point, jugé comme une source de préjudice important au marchéétatsunien, a également fait l'objet d'une enquête. Nous avons examiné la substitution relative du bléétatsunien et canadien, selon la classe, en traitant le blé comme un intrant dans la production de farine. Nos résultats ont indiqué que, bien que le blé de force roux de printemps et le blé de force rouge d'hiver soient des substituts économiques, la substitution en raison du prix demeure limitée entre le blé dur étatsunien et canadien et entre le blé de force roux de printemps étatsunien et canadien. Les différences de qualité perçues par les meuniers pourraient être la raison qui stimule la demande d'importation de blé de force roux du printemps et de blé dur en provenance du Canada.     

Long-run impacts of trade shocks and export competitiveness: Evidence from the U.S. BSE event

This paper examines how comparative advantages of major beef exporters changed following the 2003 bovine spongiform encephalopathy (BSE) outbreak, which significantly disrupted the U.S. beef trade until approximately 2007. Using longitudinal data on beef export values and constructed revealed comparative advantage measures, we show that while some measures of the long-run impacts of BSE on U.S. beef export competitiveness have returned to pre-2003 levels, the U.S.’s comparative advantage has not. We also examine a hypothetical scenario of no BSE event in 2003 and predict that in the absence of the BSE outbreak, the U.S. beef sector would have been increasingly more competitive by 2017 than it actually was. Long-term trade competitiveness may not simply return to normal even after a short-term disruption.     

Demand for Domestic and Imported Table Wine in British Columbia: A Source-differentiated Almost Ideal Demand System Approach

The premium quality wine market in British Columbia has grown substantively over the past decade. However, few empirical studies exist to quantify how consumers have responded to these wines. This paper employs a source-differentiated almost ideal demand system (AIDS) model with time-varying parameters to estimate the demand for premium quality wines using scanner sales data from the British Columbia wine market. The empirical findings reveal that consumers' response to foreign-produced wines differs from that for wine produced locally. It is evident that the expenditure elasticities for British Columbia, European and Rest-of-the-World white wines are larger than those for red wines. The high expenditure elasticities associated with British Columbia white wines may suggest that these wines are associated with higher quality. We reject the hypotheses of block separability and product aggregation. There is no evidence of structural change from the tests employed in this paper.