Capital Investment under Alternative Marketing Scenarios in the Hog Industry: A Real Option Approach

This paper uses a real option approach to analyze the impact of alternative marketing contracts on the decision to invest in a cooperatively owned hog facility. For the numerical analysis of the impact, this paper uses a simulation method that incorporates early exercise, multiple‐state variables, multi‐choice decisions and temporal optimality. The results show that the option values that stem from the value of waiting to invest and choosing between alternative marketing methods amounts to 20–36% of the initial investment. Further, having an option to choose an alternative marketing method with different risk structure does add to the value of waiting to invest. Having an option to enter a 15‐year marketing contract increases the value of waiting by as much as $117,097 for the pork production example in this paper. Finally, the value of the option to wait is unilaterally lower under a risk‐reducing contract scenario than under a spot market alternative. This could explain the explosion in hog production facility investment during the 1990s when prevalence of contract production increased. Les auteurs ont recouru à l'approche du choix véritable pour analyser l'impact d'autres solutions de mise en marché sur la capacité d'investir ou pas dans un élevage de porcs exploitéà la manière d'une coopérative. Aux fins de l'analyse, on s'est servi d'une méthode de simulation intégrant une brève campagne, de multiples variables d'État, des décisions à choix multiple et des conditions optimales dans le temps. Les résultats indiquent que l'existence d'un choix réel permettant à l'exploitant d'attendre avant d'investir et de sélectionner entre plusieurs méthodes de mise en marché représente 20 à 36 pour cent de l'investissement initial. Par ailleurs, le fait d'avoir accès à une autre méthode de mise en marché, à structure de risque différente, ne donne pas plus de valeur à la capacité d'attendre avant de procéder aux investissements. La possibilité de signer une entente de commercialisation de quinze ans accroît la valeur de l'attente de jusqu'à 117,097 $ pour le type d'élevage porcin retenu comme exemple. Enfin, l'existence d'une entente de commercialisation atténuant les risques réduit unilatéralement la valeur de l'option « attente », comparativement à ce qui se produit quand l'éleveur n'a d'autre choix qu'écouler ses bêtes sur le marché au comptant. Ces résultats pourraient expliquer l'explosion des investissements observée dans le secteur du porc au cours des années 90, où la production sous contrat avait sensiblement augmenté.     

Futures Markets and Spot Price Volatility: A Case Study

Futures markets, where they exist, can play a crucial role in determining the storage decision in the underlying spot (physical) market. The futures market acts as a conduit for market information and is a gatherer of agents' expectations about the future prospects for the spot market. As such, it is able to provide both price insurance and price discovery roles, the latter of which generates information for spot market traders and allows them to make rational storage decisions. If this were to be the case, then the efficiency of storage is improved which can potentially lead to a reduction in the volatility of spot prices over the marketing season. The existing literature is ambiguous as to whether futures markets can help spot markets price more efficiently. This paper seeks to examine whether this is the case in the British maincrop potato market by evaluating the volatility of spot prices over the period 1969–96 in a “before-after” analysis of the impact of the introduction of futures trading in 1980. The results suggest that the introduction of the futures market has led to a reduction in price volatility, despite some problems in the operation of the futures market itself.     

A Case Study in the Marketing of Wolf-Friendly Beef

This study examines an effort in New Mexico to establish a niche within the domestic beef market. The beef was marketed under environmental attributes with the slogan Wolf-Friendly. Two environmental groups, Defenders of Wildlife and Forest Service Employees for Environmental Ethics, endorsed the management practices of the ranch producing the beef. A kick-off event for the Wolf-Friendly Beef was held at the Albuquerque Zoo at the onset of the market test. Two retail grocery stores and the zoo participated in a month-long market test. A survey was conducted at the zoo kick-off to determine participants' views on public land use, riparian protection, and predator preservation issues, and consumer willingness to pay for beef products that foster these environmental attributes. Sales and survey data from the market test were analyzed.     

Case Studies of Direct Marketing Value-Added Pork Products in a Commodity Market

Differentiation and branding of fresh pork products have created interest in the potential for swine producers to invest further up the pork supply chain to capture a greater share of the consumer's dollar. However, the ultimate success of producer-owned ventures will depend on their ability to identify market opportunities and execute merchandising strategies to maintain sales of a perishable and seasonally variable pork product in a commodity market environment. To better understand the competitive issues in pork marketing on a small scale, three firms already engaged in direct marketing of fresh pork products are examined and reported as case studies.     

Cooperatives and the Commodity Political Agenda: A Political Economy Approach

Historically, major agricultural cooperatives in Canada have been intimately involved in commodity policy issues. Large cooperatives were created because farmers were upset about the perceived lack of competition in buying farm inputs or selling farm outputs. Often, the resulting cooperative was the organization farmers saw as the logical organization to represent their view of commodity policy or competition policy. As cooperatives grew and diversified, the ability to represent their members coherently across policy issues was hampered. For processing cooperatives in the supply-managed sector, the requirement that the cooperative be the political arm of industry, process product, and provide maximum returns to producer members made for a complicated objective function. This paper focuses on the twin objectives of providing efficient member services and performing political lobbying in a public choice framework. The results are illustrated by the recent history of a supply-managed further-processing cooperative and a diversified grain cooperative.     

The Emergence of Agricultural Marketing Boards Revisited: A Case Study in Canada

Canadian milk marketing boards are agricultural institutions tightly linked to the administration of dairy programs and supply management. Using insights from the New Institutional Economics (NIE) literature this paper investigates the factors influencing the emergence of these self‐regulated, “hybrid” institutions that are managed by producers but necessitate governmental intervention to be operational. Our analysis focuses on the case of the Québec milk marketing board. It shows that the Québec milk board ensured transactional security among trading partners, where neither pure private ordering contract enforcement institutions, nor pure public ordering institutions would have succeeded to do so. The empirical case of the Québec milk board thus suggests that marketing boards in Canada may have historically assumed a broader function than merely increasing producers' rents. Au Canada, les offices de mise en marché du lait sont des institutions agricoles étroitement liées à l'administration de programmes laitiers et à la gestion de l'offre. À l'aide de la documentation sur la nouvelle économie institutionnelle, le présent article examine les facteurs qui influencent l'émergence de ces institutions hybrides et autoréglementées, qui sont administrées par les producteurs mais nécessitent l'intervention gouvernementale pour être opérationnelles. Notre analyse s'est penchée sur le cas de l'office de commercialisation du lait du Québec. Notre analyse a montré que l'office de commercialisation du Québec assurait une sécurité transactionnelle entre les partenaires commerciaux, ce qu'aucune institution privée ou publique n'aurait réussi à faire. Le cas empirique de l'office de commercialisation du lait du Québec autorise à penser que les offices de mise en marché au Canada ont peut‐être assumé une fonction plus large que celle d'avoir accru la rente économique des producteurs.     

A Case Study of Tomato Production and Marketing in Kuwait

No abstract available for this article.     

Hog Industry Structure and the Stringency of Environmental Regulation

The paper develops a comparative statics model of long‐run industry equilibrium in the presence of size‐based environmental regulation stringency and applies the model to the U.S. hog industry. The economic model shows that when size‐based environmental stringency is also size biased, large farms downsize, expand, or do neither depending on how environmental stringency shifts their marginal production cost relative to their average cost. Empirical testing using data from the top‐ten hog‐producing states suggests that environmental regulation stringency has limited impact on small farms and leads to a reduction in the number of large farms. Results cannot reject positive size bias at the farm level due to the stringency of environmental regulation.     

东北玉米主产区农民利用期货市场增收的制约性因素分析

利用期货市场指导生产和销售已成为发达国家现代农业的常态。在我国,由于小农户与大市场矛盾的存在,农民进入或者借助期货市场时还存在着组织、技术、管理上的诸多障碍,对此本文进行了分析和探讨,并提出了相应的对策。     

基于颠覆性创新的中国珍珠产业市场机制研究——以上海市场为例

本文在回顾颠覆性创新理论研究框架的基础上,分析了中国珍珠产业存在的问题与发展机遇,并以上海市的珍珠终端市场格局为例,以全球价值链理论下中国珍珠产业的升级机制为分析构架,初步构建了基于颠覆性创新的中国珍珠产业市场机制,最后提出了相应的措施建议。     

Semi‐parametric Modelling of Investments in Heating Installations: The Case of the Dutch Glasshouse Industry

This paper applies a semi‐parametric approach to estimating a generalised model of investments in heating installations. The results suggest that marginal costs of investments in heating installations increase quickly at small investment levels, whereas the increase slows down at higher investment levels. Therefore, standard parametric adjustment cost models are probably biased such that they underestimate the costs of small investments and overestimate the costs of large investments. Results also show that investments in heating installations are very responsive to changes in energy prices. Therefore, an energy tax may be an effective instrument to encourage investments in new energy‐saving heating installations.     

广东省现代花卉业发展营销策略研究

花卉业作为大农业的重要组成部分,比较效益高,集经济、社会、生态效益于一体。发展花卉业,对统筹城乡协调发展、发展农村经济、增加农民收入、推进社会主义新农村建设、促进人与自然和谐、构建和谐社会,具有十分重大的意义。本文通过对广东省当前花卉产业发展情况的分析,提出推动广东花卉产业现代化可持续性发展的营销对策。     

Bubbles,Froth and Facts: Another Look at the Masters Hypothesis in Commodity Futures Markets

The Masters Hypothesis suggests that long‐only index funds were the main cause of a massive increase in commodity prices in 2007–2008 and 2011–2012. Central to the Masters Hypothesis are three basic tenets: (i) long‐only commodity index funds were directly responsible for driving futures prices higher; (ii) the deviations from fundamental value were economically very large; (iii) the impact was pervasive across commodity futures markets. There has been a great deal of empirical research on the Masters Hypothesis and commodity market bubbles. However, surprisingly few studies have found evidence that directly support the main tenets of the Masters Hypothesis. Some have attributed the lack of supporting evidence to the low‐power of time‐series tests, market efficiency issues and a lack of conditioning variables within models. In this paper, we address each of these issues using updated data and new empirical approaches. Still, price behaviour consistent with the Masters Hypothesis is surprisingly difficult to find in the data. This is an important finding given the on‐going policy debate and regulations proposed or being implemented to limit speculative positions in these markets.     

Spatial Organization of Marketing Facilities in Developing Countries: A Case Study of Oilseeds in Sudan

Little attention has been devoted to the study of spatial organization of marketing facilities in developing countries, even though such studies would be most useful for a wide range of marketing problems. The results of such studies could be valuable to private and public decision-makers in developing countries whose policies and decisions determine the number, size and location of marketing facilities. The spatial organization model developed in this paper for application to the oilseeds industry in Sudan demonstrates the relevance of this research technique for developing country studies of marketing facilities. A linear programming transshipment model is utilized to determine the optimal spatial organization of oilseeds in Sudan when the costs of oilseed assembly, processing and distribution of oil and cake to final destinations are considered simultaneously. The optimal spatial organization of oilseed processing plants was determined for six alternative solutions. Model results indicate that the optimal organization of processing plants would be obtained with fewer and larger plants, resulting in lower transportation costs.     

A Cost Function Approach to Dynamic Duality: An Application to the US Cigarette Manufacturing Industry

The dynamic duality econometric approach with the case of multiple outputs is applied to the US cigarette manufacturing industry to test for the presence of adjustment costs and quasifixed inputs with regard to stocks of capital and tobacco. Capital and tobacco stocks are found to be quasi-fixed inputs and the empirical results indicate that there are significant adjustment costs associated with adjusting these inputs. Short- and long-run own- and cross-price elasticities of factor demands are estimated for domestic and imported tobaccoes, materials, tobacco stocks, and capital. Output demand elasticities are also estimated. The two outputs, cigarettes produced for export and for the US market, are examined for equality of marginal costs. No evidence of differences in marginal costs was found. There is evidence that government restrictions on advertising have negative effects on output demand.     

A Case Study Approach to Comparing Weed Management Strategies under Alternative Farming Systems in Ontario

When research was initiated into comparing alternative method's of managing weeds in Ontario's major field cash crops, no field trial data existed. Twenty-five farmers were therefore surveyed for their production data on corn, beans and fall-seeded cereal grains, including weed management practices, input costs and wage rates, yields and product prices. Nine farmers were classified "conventional" because of their heavy dependence on synthetic herbicides, which were routinely broadcast on the three focus crops. Nine farmers were classified as "reduced input" if they placed reduce dependence on herbicides for at least one of the focus crops. Seven organic farmers placed zero reliance on herbicides, using instead substitutes such as crop rotations, smother crops, soil tillage and timeliness of field operations. Although organic farmers spent the most time and money on weed control, their overall direct costs of production were lowest for all three focus crops. Crop gross margins were highest on organic farms, partly because of lower production costs, but also because of higher product prices along with comparable crop yields. Linear programming model results for whole-farm analyses revealed highest net farm incomes on organic farms and lowest on conventional farms, in part due to lower overhead costs on organic farms, and in part due to greater enterprise diversification and to greater self-sufficiency in material inputs. These case study results need broader-scale testing to verify the conclusion that organic or reduced-input methods of weed management offer viable alternatives to conventional approaches.     

Smallholder Supply Response to Marketing Board Activities in a Dual Channel Marketing System: The Case of Zambia

In recent years, parastatal grain marketing boards have re‐emerged as important elements of grain markets in eastern and southern Africa, yet little is known about how farmers are responding to their scaled up activities. This article develops a conceptual model of farmers’ production decisions in the context of dual output marketing channels (government and private sector) when output prices at harvest time and the availability of one of the marketing channels are unknown at planting time. It then applies the model to the case of Zambia and uses nationally representative household‐level panel survey data to estimate the effects of the Food Reserve Agency (FRA), the government parastatal maize marketing board, on smallholder crop production and fallow land. The FRA buys maize from smallholders at a pan‐territorial price that typically exceeds market prices in major maize producing areas. Results suggest that increases in the farmgate FRA maize price raise farmer maize price expectations, which induces a supply response. Smallholders respond to an increase in the FRA price by extensifying their maize production. On average, a 1% increase in the FRA price is associated with 0.06% increases in smallholders’ maize area planted and quantity harvested. There is also some evidence that farmers reduce the area of land under fallow in response to FRA incentives but there is no evidence of reductions in the area planted to other crops.