Calibration of agricultural risk programming models using positive mathematical programming

Mathematical programming models of farmers’ cropping decisions must first be calibrated before they can be used to examine agricultural producer responses to policy changes. In this paper, we compare three calibration approaches for disentangling the risk parameter from the parameters of the cost function: one assumes a logarithmic utility function, while the others employ an exponential utility function. Historical crop insurance data for southern Alberta, Canada, are used to assess the calibration performance of the three approaches, and sensitivity analysis is implemented to test whether the changes in the optimal land allocation caused by the changes in the values of the parameters are practically reasonable. Only one of the three models is of practical use for policy analysis because it can recover the true values of the parameters and the results of sensitivity analysis are reasonable.     

A CALIBRATION METHOD FOR AGRICULTURAL ECONOMIC PRODUCTION MODELS

A method for calibrating agricultural production models is presented. The data requirements are those for a linear programming model with the addition of elasticities of substitution. Using these data, production models with a CES production function can be simply and automatically calibrated using small computers. The resulting models are shown to satisfy the standard microeconomic conditions. When used for analysis of policy changes, the CES models are able to respond smoothly to changes in prices or constraints. Prior estimates of elasticities of substitution, supply or demand can be incorporated in the models.     

Chile's agricultural diversification

Chile's fruit sector, both in production and exports, has grown significantly since 1974. At that time, Chile introduced structural reforms in its economy which assured that market principles would operate regarding land ownership. Also, the government began a ‘hands-off’ policy which basically allowed free-market principles to prevail. As a result of these conditions operating in the economy, Chile's agricultural sector diversified from producing largely annual crops and wool to also producing a significant amount of commercial fruit crops. A second round of diversification is currently underway within the fruit industry where pears and peaches are being produced and exported in addition to apples and table grapes. In this paper we derive decision criteria when aggregate performance is evaluated from the perspective of maximizing a risk-averse utility function. Empirical evidence on Chilean fruit exports indicates that, on an aggregate level, Chilean fruit exporters are following the path of utility maximization and validates the sequence by which Chilean producers introduced nontraditional crops over time. While on an individual level there may be complex factors and constraints involved in the planting decisions, the results of this study seem to indicate that the sum of producer behavior satisfies the conditions required for maximizing a risk-averse utility function.     

Impacts of feed ingredient subsidy removal and concurrent trade liberalization in Tunisia

This article summarizes findings from a recent agricultural policy study examining the impacts of trade liberalization and removal of feed ingredient subsidies in Tunisia. A linear programming model was used to simulate private sector response to these policy changes. Increased feedgrain prices result from subsidy removal but effects are lessened if subsidy removal is coupled with trade liberalization. Induced long-term effects are improved efficiency in production of feedgrains, feedgrain substitutes, and livestock.     

Measuring Producers' Risk Preferences: A Global Risk-Attitude Construct

In applied agricultural economic research various risk-attitude elicitation techniques are used. Here, we investigate whether risk-attitude measures rooted in the expected utility framework are related to measures rooted in the multi-item scale framework. Using a second-order factor analytical model, and data obtained from personal computer-guided interviews with 373 farmers, we investigate whether the common variance among the (latent) risk-attitude measures can be accounted for by a global risk-attitude construct. We find that the different risk-attitude measures are related, and that the global risk-attitude construct is significantly related to farmers' intention to use futures contracts. Our research suggests that farmers' risk attitude is a higher-order characteristic that cannot be effectively extracted by a single measure.     

Defining and delivering ‘sustainable’ agriculture in the UK after Brexit: interdisciplinary lessons from experiences of agricultural reform

Defining and achieving sustainability in the context of complex, multi-scale, and constantly changing agricultural systems is a challenge for research and policy. In UK agriculture, the European Union and its Common Agricultural Policy has been a key source of funding for and approaches to sustainability in the agriculture and rural development sectors. The decision to leave the European Union represents a significant moment in UK agriculture and rural development policy, and both an opportunity and responsibility for the UK government to set out and commit towards achieving sustainability goals for the sector. In this study, a combination of ethnographic case study research, focusing on the case of upland farmers in the Yorkshire Dales, policy analysis and national agricultural sector data is referred to in describing experiences of agricultural policy reform over recent decades. From these experiences, lessons for the design and delivery of future agriculture and rural development are drawn out. It is argued that the integrated assessment of multiple sources of knowledge can provide a means to critically reflecting on evidence about sustainability in complex systems, better understanding trade-offs, and creating a more complete and inclusive knowledge base from which to define sustainable agriculture.     

The estimation of agricultural policy effects on soil erosion—An application for the bio-economic model MODAM

As agricultural policies affect land use, they have effects on the amount of soil erosion in agricultural regions through changes of the economic conditions of agricultural production. Prices of inputs and outputs, regulations and incentives can change, forcing or encouraging farmers to adopt new crop rotations. This paper shows how a bio-economic model can be used to describe and estimate the effects of policies on agricultural production and the risk of soil erosion at the example of a region in North-Eastern Germany. The model uses both an assessment tool that is based on a fuzzy-logic approach for the estimation of soil erosion risk of cropping practices, and a linear programming model, that simulates farmers’ economic behaviour under the assumption of gross margin maximisation being the main goal of farmers’ actions.The analysed policy options were both a targeted and an untargeted incentive programme for reduced tillage, and a restriction option where high erosive crops are not allowed on high erodible field types. The results show that policy changes can have an impact on soil erosion. Furthermore, soil conservation policies are shown to have different levels of efficiency in terms of reduced soil erosion related to the costs of the policy. In the case of this study, a restriction option was more efficient than the incentive options. The results of such simulations can serve as a decision support for the development of soil conservation policies and help to foresee the effects of general changes of agricultural policies.     

UNCERTAINTY,IRREVERSIBILITY AND THE LOSS OF AGRICULTURAL LAND: A RECONSIDERATION

A previous article has discussed how the irreversible transfer of land from agricultural to urban uses should be addressed (Hodge, 1984). If the future value of land in either use is uncertain, some additional value should be placed on a decision which keeps future options open by retaining land in agriculture. It is argued that Hodge's estimates of the value, known as quasi-option value, are unsatisfactory, and revised estimates are provided. More fundamentally, the usefulness of quasi-option value as an operational concept is queried. It is better to solve irreversible decision problems under uncertainty as stochastic dynamic programming problems.     

THE POTENTIAL IMPACT OF ENVIRONMENTAL CROSS-COMPLIANCE ON ARABLE FARMING

It is argued that the ongoing CAP/GATT reforms provide a basis for the introduction of environmental cross-compliance (ECC). ECC enables policymakers to restrict output-related direct support payments to those farmers who comply with specified environmental guidelines aimed at reducing the external damage effects of agricultural production. This paper is an exploratory investigation of ECC and presents the results of a farm-level linear programming analysis of 15 North-West England arable farms. The environmental guidelines, which relate to permanent as opposed to rotational set-aside and to levels of fertiliser use, are widely applicable to the extent that ECC can be implemented as a voluntary policy system. They are clearly effective in achieving policy goals since all but one of the farmers investigated would comply with the full range of restrictions considered. Within this range, gross margins are reduced by up to 10 per cent while area and output of seed crops are reduced by around 22 per cent and 12 per cent respectively. Row crops area and output are more robust, each falling by just under 4 per cent.     

THE WELFARE EFFECTS OF THE NEW CAP CEREALS REGIME: A NOTE

This note considers the impact on the cereals sector of the new arable regime agreed as part of the CAP reforms in May 1992. Starting from the farm-level decision of whether or not to participate in the voluntary set aside scheme, an industry-level supply curve is derived allowing examination of the potential welfare effects of the new policy. The discussion focuses on the cereals market.     

Conversion subsidies for organic production: results from Sweden and lessons for the United States

Organic conversion subsidies used in Europe are less likely to be politically acceptable in the United States, where organic agriculture development is market‐driven. Persistent barriers to conversion in the United States include limited availability of and access to production and market information, training in management systems and cost of conversion‐related investments. By determining whether these factors affect the requirement of a subsidy to convert, we can suggest whether U.S. policy makers need to provide subsidies to encourage conversion and identify policy variables consistent with market‐based approaches that could stimulate conversion. A utility difference model is used with Swedish data to analyze factors that determine whether a subsidy is required to motivate organic conversion. The results show that farmers requiring subsidies manage larger less‐diversified farms and are more concerned with organic inspection, quality, and adequacy of technical advice. Access to more market outlets and information sources substitutes for payment level in the farmer's utility function, indicating that services rather than subsidies may be used to encourage organic agriculture. To the extent that conditions are similar in the U.S. organic sector, market‐based programs such as cost‐sharing for conversion and market access improvement should stimulate growth of this industry.     

ISSUES OF AGRICULTURAL POLICY IN A HISTORICAL PERSPECTIVE

Growth in agricultural productivity and the stimulus of price supports have led to overproduction in Western Europe: in particular, the European Community has become a smaller importer and even a major exporter of several products. But as prices in the EC are usually above world levels, this requires expensive subsidisation and leads to trade conflicts. Adjustments now forced on the CAP mean a greater cost-price squeeze, besides imposing quotas on the dairy sector. Policy aims relating to farm incomes and to market balance have thus become very difficult to reconcile. Future policy will also have to take more account of the impact of farming on the environment and of the role of agricultural activity in rural communities. Are there policy instruments, such as direct aids, which can help to achieve such diverse goals? What are the implications of changing circumstances for farming systems, and in particular can low-input systems offer an alternative to the ‘productivist’ farming model?     

A Simple Method of Incorporating Income Effects into Logit and Nested-Logit Models: Theory and Application

Substantive income effects are incorporated in a logit or nested-logit model by assuming that utility is a piece-wise linear spline function of residual income. Specific income data are not required, only income by category. Expected compensating variation is easily and accurately approximated by the difference between expected maximum utility in the proposed and initial state, multiplied by the inverse of the individual's initial marginal utility of money. This approximation is almost exact because although any policy can, in theory, cause an individual to jump income categories, for most policies this probability will be very small.     

The Need for Comprehensive Climate Change Mitigation Policies in European Agriculture

During the last decade the European Union has shown a firm determination to move to a low carbon economy. Since 2008 the agricultural sector has been part of this strategy and is included in the EU effort sharing decision. Introducing specific GHG mitigation obligations for agriculture could be one option to achieve an overall GHG emission reduction target. One argument for this strategy would be that the agricultural sector is the main contributor of non‐CO₂ greenhouse gases. Nevertheless, a comprehensive EU mitigation policy would most likely have to take into account the particularities of its diverse agricultural sector, reflected by different trends in historical GHG emission reductions, and a varied mitigation cost structure between farming systems. Consequently, using targeted but flexible policy instruments may more equitably distribute the mitigation efforts across Member States and reduce cost inefficiencies. The increased uptake of technological and management emission mitigation measures would be crucial to keep mitigation costs for EU farmers at a minimum. However, while unilateral action would initially signal the EU's commitment to serious GHG mitigation effort in the sector, ultimately a multilateral agreement is needed to minimise emission leakage and to reduce global GHG emissions effectively.     

A strategic environmental assessment method for agricultural policy in the UK

There are a number of significant environmental impacts that arise from agricultural practices that may be influenced by policy. A Strategic Environmental Assessment Method (SEAM) is described which aims to assess the environmental impacts of agricultural policy and aid the development of more sustainable policy formulation. The method addresses the issues of selecting appropriate performance criteria and measurements, and makes use of effect-damage functions and targets to determine the significance of potential impacts in relation to sustainability. A set of profiles is produced, describing the environmental performance of a specific policy. A confidence assessment system (CAS) is also described which provides details about the quality of the assessment and areas of uncertainty. SEAM provides information about impacts in simple format that can be easily used in decision making. It can identify environmental trade-offs and provides a holistic view that is essential when making decisions that affect the environment.     

The Impact of Seed Policy Reforms and Intellectual Property Rights on Crop Productivity in India

The growth of private investment in developing‐country agriculture, new advances in the biological sciences, and rapid integration of developing countries into the global trading system has heightened interest in the topic of seed market and intellectual property rights’ (IPRs) policies among public policy‐makers, corporate decision‐makers and other actors in the agricultural sector. But there are still unanswered questions about whether emerging and evolving seed policy reforms and IPR regimes in developing countries will contribute to increasing crop productivity and improving food security. This paper attempts to answer some of these questions by focusing specifically on the case of India, the regional leader in implementing seed policy reforms and IPRs in agriculture. Findings indicate that maize and pearl millet yields grew significantly during the last two decades due partly to the combination of (1) public policies that encouraged private investment in India’s seed industry during the 1980s, and (2) biological IPRs conferred by hybridisation that conveniently married the private sector’s need for appropriability with the nation’s need for productivity growth. Although past lessons are not an indication of future success, this convergence of policy solutions and technology opportunities can be replicated for other crops that are vital to India’s food security.     

地理信息系统在农业决策服务中的应用

[目的]近年来,GIS技术逐渐渗透到农业各环节,在助力提高农业生产效率和经营效益等方面,发挥出越来越重要的作用,为农业现代化发展带来了生机和活力,文章将介绍地理信息系统技术在农业部农业决策服务系统建设过程中的应用,与农业系统从业者分享我们的GIS应用经验。[方法]在构建我国农业决策服务系统过程中,根据我国农业产业特征,选择以Eclipes为开发环境,以Oracle 11gR2为数据库,以SuperMapGIS-T ServerV2.0为服务发布管理平台,以国家测绘局提供的空间地理数据为基础,综合运用WebGIS、REST架构等先进技术,把全国农业生产、经营、流通、管理范围内的地理信息进行分类编制,建成一个功能齐全、应用方便的农业决策服务系统,从而实现了把GIS技术在农业部管理决策层面上的应用。[结果]通过深入调研、走访和分析,迄今历时2年时间,在设计并搭建农业部电子政务内网应用支撑平台的基础上,经研究策划,初步建成了农业部决策服务系统。[结论]GIS技术在农业决策服务中有巨大的应用潜力,不仅可为农业决策服务系统提供空间分析和可视化方法,而且通过该决策服务系统的运行,还能够实现农业部门提供日常监管和应急决策所迫切需要的空间信息。因此,GIS技术在农业决策服务中的应用前景广阔。GIS技术在农业决策服务系统建设过程中的应用,尤其是系统建设思路和架构,对继续探索GIS技术在农业各业务领域中的应用和农业信息平台研发,都将有较大的借鉴作用。     

THE OUTPUT RESPONSE OF THE RISK AVERSE FIRM: SOME COMPARATIVE STATICS FOR AGRICULTURAL POLICY

The policy conclusions which stem from the deterministic theory of the competitive firm are well known and unambiguous. However, once product price is regarded as stochastic, there exist several theories upon which to base an analysis of the impact of agricultural policy on the output response of the firm. The paper considers four models from the safety-first and expected utility frameworks. These models produce a diverse set of comparative statics results which in many instances conflict with those of the deterministic model. Hence, the paper concludes that it is important in agricultural policy analysis that greater consideration by given to the links between risk aversion, policy-induced uncertainty and output response than is conventionally the case.     

A LINEAR PROGRAMMING STUDY OF FAMILY-RUN DAIRY FARMS IN NORTHERN IRELAND

The paper presents the results of a study in which multiperiod linear programming models were used to examine the probable responses of small and medium sized dairy farms in Northern Ireland to various policy, farm indebtedness and development options and to project consequent structural change in the dairy sector. The introduction of quotas has curtailed the considerable potential for expansion of output on these farms while having a less detrimental effect on farm profits and the survival of the smaller dairy herd than the price cut necessary to produce the same reduction in output.     

THE VALUE OF AGRICULTURAL LAND

Ricardo's discovery that the rents of agricultural lands arise essentially out of the differences between them can be restated by saying that the rent of land should depend on its marginal product. In come countries the Ricardian situation persists; where agricultural labour has “nowhere else to go” rents rise as a function of rural population density. The paper reviews the measures of marginal product which have been made using three methods of estimation: the production function (Cobb Douglas): estimates made by precise linear programming; and estimates of the “residual” income to land. The production function technique has been applied in countries at all stages of development ranging from African hand hoe agriculture to Australia and Belgium, and for a range of farm sizes. There are fewer examples of measures made by the other two methods; they are more suitable for use in advanced economics.