A CGE analysis of trade costs in the Russian agrofood sector

Ten years after the end of central planning, enormous interregional price differences indicate that Russian food markets are not well integrated spatially. Trade potentials are thus not exploited, most probably because of high trade costs. Besides transport costs, transaction costs seem to play an important role as an impediment to interregional arbitrage. These transaction costs can be very high in transition countries due to underdeveloped market structures and weak public institutions. After subtracting transport costs from interregional price differences, large differences remain, particularly in the case of high‐value products. It is assumed that these residual price differences constitute the transaction cost component of total trade costs. The regional economic impact of different trade cost components is quantified using a bi‐regional computable general equilibrium (CGE) model. Simulations show that the results are quite different between the two stylized regions (East and West), depending on which trade cost component is reduced. While the welfare effects of varying customs tariffs and transport margins are rather limited, lower transaction costs of trade seem to be a promising way to achieve a better functioning food market in Russia.     

From Circle of Poison to Circle of Virtue: Pesticides,Export Standards and Kenya’s Green Bean Farmers

In response to growing consumer concerns, developed‐country governments have reduced permissible pesticide residue levels in food. Many food retailers have developed even more stringent private food safety protocols relating to pesticide use, storage and disposal and passed them on to their suppliers. Exporters in developing countries enforce these developed‐country pesticide standards (DC‐PS) by subjecting farmers to close monitoring. This study explores the effects of enforcing compliance with DC‐PS on smallholder farmers’ pesticide‐related health costs. Results suggest that enforcing DC‐PS encourages farmers to use protection that lowers pesticide‐induced morbidity, hence reducing farmers’ health costs from pesticide exposure. The study concludes that there are health benefits to family farmers from complying with DC‐PS beyond the acknowledged income generation from selling fresh produce in premium export markets.     

More reasons why farmers have so little interest in futures markets

The use by farmers of futures contracts and other hedging instruments has been observed to be low in many situations, and this has sometimes seemed to be considered surprising or even mysterious. We propose that it is, in fact, readily understandable and consistent with rational decision making. Standard models of the decision about optimal hedging show that it is negatively related to basis risk, to quantity risk, and to transaction costs. Farmers who have less uncertainty about prices and those with a diversified portfolio of investments have lower optimal levels of hedging. If a farmer has optimistic price expectations relative to the futures market, the incentive to hedge can be greatly reduced. And finally, farmers who have low levels of risk aversion have little to gain from hedging in terms of risk reduction, in that the certainty‐equivalent payoff at their optimal hedge may be little different than the certainty equivalent under zero hedging. These reasons are additional to the argument of Simmons (2002) who showed that, if capital markets are efficient, farmers can manage their risk exposure through adjusting their leverage, obviating the need for hedging instruments.     

Evolving Marketing Channels for Beef and Lamb in the United Kingdom-

This paper investigates the effects of: (1) recent changes to food safety legislation; (2) increasing consumer concerns over animal welfare; and (3) further market integration in the European Union on British agribusiness firms involved in marketing beef and lamb. It is hypothesized that these changes will alter the transaction costs associated with marketing these products. As a result, there is likely to be a reduction in the number of animals sold for slaughter through traditional auction markets and an increase in direct contracting or strategic alliances between supermarkets and farmers' marketing cooperatives.     

Measuring the impact of road rehabilitation on spatial market efficiency in maize markets in Mozambique

This article analyzes the impact of road rehabilitation on the spatial market efficiency of maize markets in Mozambique. We estimate a modified version of the Parity Bounds Model (PBM) that allows us to test the impact of road rehabilitation on spatial efficiency. This article seeks to contribute to the existing literature in three ways. First, a unique data set, where road rehabilitation episodes between market pairs are identified, is developed. Second, special care is devoted to estimation of transaction costs due to the sensitivity of the PBM model to the quality of transaction costs estimates. Finally, as opposed to most existing literature that focuses on relatively distant markets, the article focuses on spatially closed markets. We find that maize markets tend to be segmented due to high transport costs. Following road rehabilitation, inefficiency and average absolute price differentials tend to decrease, and market pairs have tended to shift toward autarky regimes. Overall, while the results point broadly toward a positive impact of road rehabilitation on spatial efficiency, they are not as strong or as robust as one would like. Large increases in fuel prices likely offset the positive impacts of road rehabilitation on transaction costs, contributing to the increase in the probability of being in an autarky regime.     

The potential impact of markets for irrigation water in Italy and Spain: a comparison of two study areas*

The viability of irrigated systems in Southern Europe is closely linked to efficient institutional settings and water‐allocation mechanisms. A significant, although not widely used, mechanism for water allocation is an intra‐sectorial water market. The objective of this paper is to evaluate to what extent water markets may contribute to the improvement of the efficiency of water allocation and to the profitability of irrigated agriculture. The related issues of water allocation among farm types and farm specialisation are also addressed. The analysis is based on a basin‐level linear programming model, comparing the situation with and without a market. It includes both fixed and variable transaction costs and estimates their combined effects on market performances. The model is applied in two areas in Southern Italy and Spain, and simulates the behaviour of different farm types, derived from cluster analysis on a sample of farms in each area. The paper confirms that water markets could potentially improve the economic efficiency of water use, in terms of higher profit per hectare, given limited water availability. The potential improvements are associated with a more intense specialisation of farms and are strongly differentiated among farmers, particularly where significant restrictions to water availability occur. This corroborates the expectations of institutional difficulties in implementing water markets. However, the exchanges, and consequently the potential effects of water markets, are heavily affected by the actual level of water availability, as well as the size and the structure (fixed vs. proportional) of transaction costs. The paper calls for a more in‐depth analysis of the connections between market performances and institutional settings, as related to the issue of water‐agriculture policy design and coordination.     

Raising offtake from cattle grazed on natural rangelands in sub-Saharan Africa: a transaction cost economics approach

Farmers in sub‐Saharan Africa are constrained by large transaction costs associated with marketing of their livestock. However, transaction costs are often not taken into account in the analysis of factors hampering the development of livestock marketing in this region. This article empirically measures the influence of transaction costs on the offtake from cattle grazed on natural rangelands in Uganda. The study is based on the monitoring of 696 cattle transactions in three districts of Uganda from August 2004 to August 2005. The estimated models suggest that proportional transaction costs represented by the state of roads, distance to markets, and time taken to reach the market are important variables constraining market participation. In order to raise offtake from the national herd, it is essential to explicitly address these costs. One potential solution is collective action in marketing of livestock in which proportional and fixed transaction costs are reduced and shared among the group members.     

Intermediaries in environmental offset markets: Actions and incentives

Transaction cost theory and application tells us that when buyers and sellers in a market incur transaction costs, intermediaries may become involved. Specifically, intermediaries influence the cause of the transaction costs to buyers and sellers such that transaction costs are reduced. In this paper we assess if and how this occurs for a number of case study government created and private emergent intermediaries in Australian environmental offset markets. We find that the causes of transaction costs to buyers and sellers in offset markets – asset specificity, uncertainty and transaction frequency are influenced downwards by intermediaries. The degree of influence depends on the nature of the good traded in the offset market. We also assessed if the public intermediaries studied were operating in the offset markets to reduce the incidence of probity hazard (poor transactions) from private intermediaries. We found that this was not the case.     

Politics by Other Means: The Emergence of a New Politics of Food in the United States

A new politics of food has arrived. Interest groups are no longer required to rely on traditional legislative means to achieve their political objectives. Instead, changes in the political economy of the food system and the economic structure of the food system make it possible to practice politics by other means, including the use of the market to achieve political objectives. The increasing transaction costs of legislative decision making, the slow growth in the demand for food in developed country markets, the increasing demand for specific food product attributes, and the highly concentrated state of most food markets can make it advantageous for interest groups to pursue their political objectives through the market rather than through legislative channels. In the new politics of food, the market, the legislature, the bureaucracy, and the judiciary are all arenas within which the art of politics will be practiced.     

Rental markets for cultivated land and agricultural investments in China

The purpose of this paper is to empirically track the progress and consequences of the emergence of cultivated land markets in China since 2000. We draw on a set of nationwide, household‐level panel data (for 2000 and 2008) and find that the markets for cultivated land rental have emerged robustly. According to our data, 19 of China's cultivated land was rented in farm operators in 2008. We also find that the nature of China's cultivated land rental contracts has become more formal and lengthened the period of time that the tenant is able to cultivate the rented‐in plots. While there may be benefits for lessors and tenants, our data show that there are falling rates of investment in organic manure. The farmers in our sample have reduced organic manure use from 13 tons/ha in 2000 to 5 tons/ha in 2008. Part of this fall is due to the rise of cultivated land rental markets. The analysis, however, does not find that improved property rights in cultivated land rental affect investment largely because property rights have largely been established by 2000, the first year of our sample. Our results, however, also show that there are forces that appear to be mitigating the negative consequences of rising cultivated land rental. After holding constant initial rental rates and other factors, we find that the gap between investment in organic manure in own land and rented‐in land is narrowing. One interpretation of our findings is that if policymakers can find ways to even further strengthen the rights of lessors and tenants as well as lengthen contract periods, farmers—even those that rent—will invest more in their land, because they will be able to capture the returns to their investments.     

Economics of Quota Allocation Within Supply Managemnt Analysis of the Present Procedures for Quota Allocation

The institution of supply management has evolved to deal with a farm income problem and to achieve social objectives such as the maintenance of the family farm. In many respects, the institutions have developed in response to significant technological and market development that had potentially profound impacts on the number, size and profitability of farm operations. Supply management has proven successful in transfer— ring income, partially stabilizing prices and production and arresting the spread of vertical integration and maintaining the "family farm." Although the institution has had its failures, more specifically, income transfers have been capitalized into asset values. Second generation farmers will face higher costs and will benefit only if they too can "short the market" and extract monopoly profits from the marketplace. Further, the rigidities in quota allocation methods have inhibited resource allocation, necessary structural adjustments and imposed real costs to consumers. These negative results are incongruent to an otherwise viable and dynamic Canadian agriculture.
Is It North It
One may argue that the consequences of regulation, which are reduced efficiency/competitiveness and lost opportunities, are acceptable if it is felt a transfer of benefits to a disadvantaged group of society is needed. However, can it be held that those farmers operating under supply management remain disadvantaged? If not, regulatory reform and/or adjustments are needed. Otherwise, the tendency towards deregulation in the general economy, widening price gaps, consumer resistance, and the like will lead to imposed changes by regulatory authorities.
Supply management is an acceptable regulatory tool that should be employed to achieve a myriad of policy objectives.     

The Effects of Transaction Costs,Power and Risk on Contractual Arrangements: A Conceptual Framework for Quantitative Analysis

Increased reliance on commercial traders in liberalised agricultural markets poses questions about the nature of contractual relations between traders and farmers; about welfare, efficiency and equity characteristics of these relations; and about conditions necessary for traders to engage in these markets. A new institutional economics analysis seeks to understand the institutions that affect transaction costs and risks for each party, and power relations between them. Transaction cost analysis has not, however, developed a unifying conceptual or quantitative framework to integrate these issues. This paper develops a methodology for modelling negotiated choice of contractual arrangements in buyer/seller relationships, taking account of the socioeconomic characteristics of each party, economic and technical characteristics of the commodity, and the institutional environment. The model is setup as a non‐linear programming problem. The approach provides a framework for the application of transaction cost economics to quantitative empirical study of markets, to individual firms' supply chain decisions, and to the analysis of policy interventions in markets.     

Private Insurance Company Involvement in the U.S. Crop Insurance Program

The participation of intermediaries in either public policy or private markets can be justified on the basis of efficiency gains. With respect to private insurance companies and the crop insurance program, efficiency gains may arise from either decreased transaction costs through better established delivery channels and/or the revelation of asymmetric information. However, anecdotal evidence indicates that delivery costs are excessive and it appears that for political economy reasons, rates have and will not be adjusted in response to new information. In conclusion, the value-added of private insurance companies is questioned in light of the current political economy and thus should serve as a caution to other countries wishing to emulate the U.S. system.     

Land Market Imperfections and Agricultural Policy Impacts in the New EU Member States: A Partial Equilibrium Analysis

This article analyses how transaction costs and imperfect competition in the land market affect the welfare effects of agricultural subsidies in the new Eastern Member States of the European Union. Benefits of land subsidies end up with landowners in new Eastern Member States also with imperfections in the new Eastern Member States land markets. With unequal access to subsidies, small tenant farmers may even lose out from the subsidies. Decoupling of payments shifts policy rents to farmers, but constrains productivity-enhancing restructuring. Using reserve entitlements to mitigate this effect reduces the intended benefits on distortions and target efficiency.     

Private transaction costs of participation in water quality improvement programs for Australia's Great Barrier Reef: Extent,causes and policy implications

The direct private cost to landholders of participating in programs that result in improved farming activities (IFAs) is generally well understood. However, the private indirect or transaction costs, such as the cost of a landholder's time and the expense to learn about IFAs and apply for assistance to implement these changes on‐farm, are not so well understood. Where these have been studied, they have been shown to be extensive. We assess the extent and causes of private transaction costs incurred by sugarcane growers participating in the Australian Government's Reef Rescue scheme which pays farmers to adopt environmentally beneficial farm management practices. Utilising a mail‐out‐mail‐back survey of 110 growers, we found that the average total transaction cost per farm of participating in the program was AU$8389. The average total transaction costs per farm as a percentage of the average funding provided was 38 per cent. We also assessed which type of improved farming activity (soil, nutrient, pest or water management) generated the greatest transaction costs and how landholder characteristics such as bounded rationality, opportunism and social connection impacted on the extent of transaction costs.     

Multi-stakeholder platforms for linking small farmers to value chains: evidence from the Andes

Value chains linked to urban markets and agro-industry present new opportunities for adding value and raising rural incomes. Small farmers, who produce small volumes, struggle to enter these markets. A lack of trust among value chain actors increases transaction costs and short-circuits innovation. This paper explores how multi-stakeholder platforms have been used to address these problems in potato-based value chains in Bolivia, Peru and Ecuador. It uses the Institutional Analysis and Development (IAD) framework to understand how platforms work. Differences in characteristics of the value chains, the participating actors and institutional arrangements have led to the emergence of two types of platforms. The first type brings traders, processors, supermarkets and others together with farmer associations and research and development (R&D) organizations to foster the development of new market opportunities through commercial, institutional and technological innovation. The second type is structured around geographically delimited supply areas, meshing farmers and service providers to address market governance issues in assuring volumes, meeting quality and timeliness constraints and empowering farmers. Evidence from these cases indicates that platforms that bring stakeholders together around value chains can result in new products, processes, norms and behaviours that benefit poor farmers, which could not have been achieved otherwise.     

乡村内生型农机服务市场形成机理及其运行机制研究

大国小农是我国的基本农情.未来相当一段时间,小规模兼业农户仍将是我国农业经营的主要微观主体.内生型农机服务市场能够有效连接小农户与农机服务提供者,有助于解决因土地细碎化而产生的高交易成本问题,为此,本文重点揭示了内生型农机服务市场的形成机理,设计了其运行机制.研究发现,小农户分散且多元的农机服务需求是内生型农机服务市场...     

Conditioning trends shaping the agricultural and rural landscape in Africa

African countries continue to face deepening food crises that have been accentuated by the global food, energy, and financial crises. This situation is part of a long‐term structural problem: decades of under‐investments in agricultural sector and poor policies of support for smallholder farmers who form the bulk of the farming population. The inability of these farmers to achieve a supply response when commodity prices were high and market access was less of a problem suggests that there are multiple sets of binding constraints that continue to limit the potential of agricultural growth to reduce food security and poverty on the continent. This article reviews some of the historical trends that have hampered the performance of the agriculture sector. In addition, it reviews the impacts of more positive trends that could stimulate agricultural growth in Africa that could change the African agricultural landscape. The article however warns that there are more recent global developments and some continental challenges that could prevent or slow agricultural growth. These include the global financial crisis, public sector investments, inequities in global agricultural development policies, rush for agricultural lands by foreign investors, domestic commercial financing markets, climate change, and emerging carbon markets. The article argues that while opportunities for accelerated growth exists for African agriculture, new sets of policy instruments will be needed to support smallholder farmers to access new agricultural technologies, finance, reduce impacts of climate change, and adopt sustainable land use practices that can allow them to benefit from emerging global carbon markets.     

交易成本对农户农产品销售方式选择的影响——基于对柑橘种植农户的调查

基于交易成本理论,利用对湖北省宜昌市柑橘种植农户的调查数据,通过建立Logistic模型,本文重点分析了交易成本对农户柑橘销售方式选择的影响。研究结果表明,交易成本是影响农户农产品销售方式选择的重要因素,其中,反映信息成本的是否了解柑橘市场行情变量、反映谈判成本的农户对中间商报价公平程度的看法变量对农户选择自行销售方式有显著的正向影响;反映信息成本的是否通过中间商了解柑橘价格变量、反映谈判成本的自行销售同等级柑橘相比于通过中间商销售的销售价格差异变量、反映执行成本的农户到最近农产品市场的距离变量对农户选择自行销售方式有显著的负向影响;另外,户主受教育程度、家庭是否有成员从事非农产业这两个反映个体特征的变量对农户选择自行销售方式也有显著的影响,且其影响方向为正。     

Supermarkets, wholesalers, and tomato growers in Guatemala

The article shows the asset‐related determinants and the impacts of the participation of small farmers in supermarkets versus traditional market channels in Guatemala. Compared to farmers selling only to the traditional market channels, farmers selling to supermarket channels are larger (but are in the upper tier of the “small farmer” category), have more capital, and are much more specialized in commercial horticulture in general and in tomatoes in particular. While they have higher yields, they also have higher input use, including use of chemicals. In fact, they severely overuse pesticides and fungicides. Moreover, these greater input expenditures mean that their profit rates are roughly similar to those of farmers in the traditional market channel. Supermarket‐channel farmers prefer the more demanding wholesale‐supermarket channel because it offers lower risks and lower transaction costs to market, a variety of quality grades of tomatoes, all year long. In turn, the supermarkets, who do not buy direct but rather source from a few specialized‐dedicated wholesalers, rely on this year‐round supply, lower transaction costs, and consistency of quality.