PROJECTING CANADIAN DAIRY FARM STRUCTURE USING MARKOV PROCESSES

This paper reports on an application of the Markov chain process to an analysis of the size structure of the primary Canadian dairy industry. On the basis of observed changes in the size distribution of "census" farms with milk cows from 1961 to 1966, projections were made of the numbers of these farms by herd size for the years 1971 and 1981. It is projected that by the year 1981 there will be 109,200 farms with milk cows in Canada, a 51 per cent decline from the numbers in 1966. All of the decrease will occur in the smaller size herds of less than 33 cows. Farms with herd sizes larger than this are expected to increase in numbers. Projections were made separately for Ontario and Quebec.     

The Effect of the Northeast Dairy Compact on Producers and Consumers, with Implications of Compact Contagion

We model and measure the effects of the Northeast Dairy Compact on prices, quantities, and producer and consumer welfare, underscoring the distribution of these effects across regions and among producers and buyers. Using 1999 as a base year, simulations show that the Compact raised the farm price of milk in the Northeast by $0.45/cwt, lowered the farm price of milk in the rest of the country by $0.02/cwt, and transferred income from producers outside the Compact region and buyers in the Compact region to producers in the Compact region. Non-Compact producer losses exceeded Compact producer gains. Similar results are found for a scenario of Compact contagion—extension of the Compact to include additional states. In both cases, the Compact changed the distribution of the costs and benefits of price discrimination as practiced by milk marketing orders. The regional distribution of the Compact's welfare effects raises again the question of the organization and stability of the federal milk marketing order system.     

OUTLIERS IN AGRICULTURE: AN INTERVENTION ANALYSIS OF AGRICULTURAL LAND VALUES

Intervention analysis offers a framework for the identification and modelling of outlying observations in empirical time series. Within this framework, there are two types of outlier; an additive outlier, representing a one-period blip in the series, and an innovational outlier, whose effect is spread over many time periods. Intervention analysis is used here to study an agricultural land price boom of the early 1970s that is generally believed to have been caused by speculative activity, and the statistical results are consonant with that view. The procedure detects an innovational outlier in the land price series at 1972 with dynamic effects that resemble the life cycle of a speculative bubble. It is inferred from these results that speculation added 52 per cent to the rate of growth of land prices in 1972, 19 per cent in 1973 and caused a fall in the rate of change in land prices of 19 per cent in 1974 and 17 per cent in 1975.     

Productivity and the Returns to Levy-Funded R&D for Sugar Production in the Eastern Counties of England

Estimates of the rate of return (ROR) to publicly funded-agricultural research are getting lower as private expenditures and spill-overs are more adequately handled. For UK sugar beet there is a pool of technology available and the spill-ins are not measurable. An alternative approach is to assume that the difference between productivity growth in sugar and the rest of UK agriculture is attributable to the Sugar Beet Research and Education Committee's R&D and extension expenditures, funded by the only long-standing producer levy in the UK. These expenditures are used to explain the difference between total factor productivity (TFP) growth in sugar (3.5 per cent per annum) and the rest of UK agriculture (2.0 per cent per annum). The producer's ROR calculated using this approach is 11 per cent and the lower bound on the total return, to producers and consumers is 21 per cent, whereas the conventional methodology gives returns of 87 per cent. Thus, the upward bias in ROR calculations may be removed by changing the approach to the problem.     

LIVESTOCK PRODUCTION POLICIES AND MEAT PROCESSING MARGINS: THE CASE OF NEW ZEALAND, 1967-1988*

The New Zealand export meat industry has been through a considerable number of changes in the 1980s. The deregulation of export slaughter facilities, Supplementary Minimum Prices, Producer Board intervention, declining livestock numbers and domestic cost pressures have all affected the performance of the domestically based processing sector. Major changes in market access and demand have influenced off-shore marketing operations, particularly for sheepmeats. Additionally, there has been a change in the type of meat exported with a greater proportion of further processed product shipped in recent years. As an example of the impact of these developments on livestock producers, the producer share of the United Kingdom wholesale market return for a representative prime lamb carcase has fallen from 40 per cent in 1978 to 25 per cent in 1988. In this article the pattern of intervention in the New Zealand pastoral meat industries from the mid-1960s is detailed, emphasising the different environments of the beef and sheepmeat enterprises. Then the principal factors influencing domestic processing margins for these products are empirically examined. Alternative model specifications and alternative estimation techniques are compared and contrasted. The results of these analyses are discussed in terms of the historical patterns of assistance and structural change, and in terms of current rationalisation pressures on the meat processing sector.     

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.     

Rotational grazing adoption in cattle production under a cost‐share agreement: does uncertainty have a role in conservation technology adoption?

Rotational grazing has been promoted as a best management practice with environmental benefits and associated higher revenue. Its adoption rate has been relatively low. This study investigates the role of uncertainty in the adoption of rotational grazing with a cost‐share by cattle producers. Mail survey results indicate that 63–71 per cent of cattle producers are uncertain about adoption with a government cost‐share. The study suggests that the possibility of uncertainty should be considered in cases where willingness‐to‐pay is elicited in the context of adoption of technology.     

Ex Ante Research Evaluation and Regional Trade Flows: Maize in Kenya

Public sector investment in agricultural research is an important component of developing country efforts to bolster staple cereal production in the face of rapid population growth. This paper uses a spatial equilibrium model to evaluate the potential impact of maize research in six regions of Kenya. The application highlights the important role of research in meeting future food needs, as well as the geographic variability of producer and consumer benefits from technology and trade policy options. Despite significant research induced supply shifts, Kenya will require additional production increases of 1.5 to 2 per cent per year to meet stated goals of self-sufficiency in maize production with open markets. Import restrictions can ensure self-sufficiency and generate producer welfare gains at greater expense to the majority of Kenyans who are net consumers of maize. In the debate over trade policy, public sector investments in maize research should be seen as a potential mechanism to compensate producers for welfare losses associated with market liberalisation.     

Structural Change and Policy Reform in the UK Dairy Sector

Estimation of a cost function for a representative sample of UK dairy producers allows future re‐structuring of the industry to be simulated using a model which incorporates producers' differential costs and milk prices. Consideration is also given to reductions in producer prices and to the introduction of an A/B quota system. The results indicate that, despite the history of quota trading in the UK, there is considerable scope for further restructuring in the industry to take advantage of differential incentives between producers. It is also projected that UK milk supply would increase if quota restrictions were removed.     

A MODIFIED LEONTIEF MODEL FOR ANALYSING THE IMPACT OF MILK QUOTAS ON THE WIDER ECONOMY

The paper estimates the impact of milk quotas on the UK economy using a modified SAM-based Leontief model. Since milk quotas involve the control of gross output as opposed to final demand, it is argued that the traditional form of a Leontief model needs to be adapted so as to make the output of dairy producers exogenous to the system. Modifications to both the demand-driven and supply-driven Leontief model are suggested thus allowing the estimation of both the backward and forward linkage effects of quotas. The results suggest that, in total, the backward linkage effects of milk quotas are more significant than the forward linkage effects, with the magnitude of the latter constrained by the pattern of milk marketing. Taking both types of linkages into account, it is estimated that the potential 3 per cent further reduction in quota levels being discussed in the context of CAP reform threatens a total of 11,000 jobs in the economy.     

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.     

THE SHORT-TERM EFFECT OF DOMESTIC OIL PRICE INCREASES ON THE AUSTRALIAN ECONOMY WITH SPECIAL REFERENCE TO THE AGRICULTURAL SECTOR

The rise in the domestic price of oil products implied by the new import parity pricing policy for domestic crude oil is likely to pose some problems for macroeconomic management. In this paper an attempt has been made to quantify the short-run adjustment problems involved, using the ORANI 78 model of the Australian economy. Results are presented for a range of variables of interest, including macroeconomic variables, industrial and workforce composition and farm incomes. With fixed real wages, farm incomes are projected to decline by between 6 and 8 per cent.     

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.     

Health and environmental impacts of pesticide use practices: a case study of farmers in Ekiti State,Nigeria

Commonly used pesticides and handling practices which might expose farmers and their environment to chemical hazards were investigated in the Irepodun/Ifelodun local government area of Ekiti State, Nigeria. Direct field observations and answers to a structured questionnaire from a random sample of 150 farming households showed that commonly used pesticides comprised herbicides (48.3 per cent), fungicides (28.2 per cent) and insecticides (23.5 per cent). Of these, 86.7 per cent are classified as ‘highly’ hazardous by the World Health Organization (WHO) and have been banned or restricted in many developed countries. Nearly all of the farmers (94.7 per cent) had received no formal training in safe pesticide use and mixed different products. Farmers suffered from discomforts ranging from eye irritation (91.3 per cent), skin problems (87.3 per cent), nausea (86.0 per cent), headache (83.3 per cent) and vomiting (58.0 per cent). More than half of the pesticide applicators (61.3 per cent) sprayed pesticides near water bodies. Only a few farmers reported decreasing trends in numbers of beneficial insects (27.3 per cent) and other animals (29.3 per cent). The results showed that the awareness of farmers and authorities needs to be raised regarding the use of protective equipment and correct procedures when handling pesticides and, also, that there should be stricter enforcement of existing pesticide regulation and monitoring policies to minimize the threats that the farmers' current practices pose to their health and to the environment.     

A portfolio analysis of incentive programmes for conservation,restoration and timber plantations in Southern Ecuador

This paper uses portfolio analysis to study how the Ecuadorian incentive programme for forest conservation and restoration (Socio Bosque), and an incentive programme for timber plantations, may reduce income risk and/or maximise returns for a given level of risk for farmers in the municipality of Loja. The main existing land use in the research area is milk production on pasture, with some farmers having forest land. Our results suggest that most farmers would significantly increase the area under conservation and/or restoration as part of their risk reduction strategies, compared to a decision based solely on expected returns. However, in land use allocations that maximise the return per unit of risk, a small group of milk producers without forest would continue milk production on most of their land. In addition, milk producers with forest would significantly decrease deforestation under the land use allocations made when conservation incentives are available. Against this we also identify a likely shift of milk production from existing pasture to new pasture established on deforested land, which provides evidence of a potential ‘leakage effect’. In addition, the incentive programmes would only lead to small areas of tree plantations being established. None of the land use combinations (portfolios) analysed would increase the income of all households to above the poverty line, as the monetary incentives are too low and many farms are too small. For forest holders all the land use combinations we studied would have a positive impact on income, but we observed a negative impact on household income for milk producers without forest. For producers without any forest, there seems to be a trade-off between maximising household income and risk reduction through combining incentives for restoration and tree plantations.     

OPERATIONS AND COSTS OF EGG PACKING STATIONS

The egg industry accounts for some 9 per cent of the total output of British agriculture and about 60 per cent of this production is marketed through the British Egg Marketing Board registered packing stations. This inquiry examines the costs and methods employed in packing station operations (up to the point of wholesale distribution) relating them to the needs of producers and consumers. Due to the lack of published data a series of case studies was made.     

不同规模淡水鱼养殖投入产出比较分析——基于淡水鱼养殖成本收益面板数据的实证研究

淡水鱼养殖在我国水产业中占有非常重要的地位,深人研究淡水鱼养殖的投人产出情况具有重要意义。本文利用历年全国农产品成本收益资料汇编数据对不同规模养殖户——规模户和一般户的投入产出进行比较和经验验证,分析结果表明：淡水鱼单位面积养殖产值由资本、劳动力和技术进步决定;资本和技术对规模户的促进作用要高于一般户,而劳动力对一般户的单位面积产值具有明显的正面影响。     

Excerpts from the EU‐integration Story of Hungarian Agriculture: Heading Where?

Cereal production in Hungary doubled in 2004/2005 over the previous year and was 4 per cent lower in 2005/2006. There were 3.9 million tones of cereals taken into intervention in the 2004/2005 season, while until January 8, 2006, an additional 3.7 million tonnes of new crop were offered. High transport cost is a serious drawback for wheat and maize, produced under otherwise good natural conditions in the CEE region, in competing within the EU or in third country markets. The combined effects of an intervention price above ε90 a tonne, the implementation of the SPS and the decoupling of the national 'top-up' for arable crops together with the introduction of compulsory set-aside are unlikely to reduce cereal production in Hungary. Under normal conditions, 14.5–15 million tonnes of cereal stocks could be accumulated by 2010. In the pre-accession years livestock producers in Hungary enjoyed some direct subsidies but they had almost no access to investment and capital aids. This and the late approval of rural development programmes contributed largely to the decline in production. Despite huge excess stocks of cereals, the prospects for these major feed grain consuming sectors to expand look rather slim in the mid-term, due mainly to structural problems and the lack of capital for modernisation. Taken together these factors are likely to keep cereal market prices in Hungary under pressure in the next few years, despite the implementation of the SPS.     

Choice of Coordination Mechanism in the Kenyan Fresh Milk Supply Chain

This paper examines the nature and determinants of coordination mechanisms used in the Kenyan fresh milk supply chains, using recent survey data of market participants from Nakuru and Nyandarua districts in Kenya. Three main contractual arrangements are observed in the fresh milk supply chain. These include spot markets, verbal contracts and written contracts. The empirical results indicate that though written contracts are sparingly used in the milk transactions, milk producers are more likely to adopt such contracts compared to traders. The results also show that location of producer, source of market information, distance to markets, travel time to buyers or suppliers, gender of operator, and presence or absence of enforceable contracts significantly influence the type of coordination mechanism used in both producer–buyer and retailer–seller transactions and travel time to milk suppliers.     

PRODUCER COOPERATIVES,INPUT PRICING AND LAND ALLOCATION

This paper considers input pricing rules for a producer cooperative which supplies its members with two inputs: a publicly provided private input (water), and a local public input (road services). An Israeli Moshav which allocates land equally among producers is a good example. The cooperative uses a two-part pricing rule: a product-dependent uniform fee (head tax) and a user charge per unit of the private input. Discrimination of head tax among the producer groups is shown to dominate that of user charge in the short run. However, land reallocation among producers can result in a Pareto-superior pricing rule and the Henry George theorem emerges in the long run. Thus, allowing land leasing while maintaining equal rights to land increases producer welfare.