The Relationship between U.S. and Canadian Wheat Prices

This paper examines the relationship between the price for Canadian wheat and the price for U.S. wheat. While a great deal of the variation in the Canadian series can be attributed to oscillations in either the exchange rate or the U.S. price of wheat, changing technologies, shifting market power, the marketing strategies of major market participants, and domestic market conditions are also seen to play a role in the price determination process and should be considered when making longer-term forecasts. The fact that the most encompassing price linkage specifications identified in this study differ significanty from the specification in a number of forecasting models in use today should be a point of particular concern. Since many of the decision equations (area seeded, inputs purchased, etc.) in place in these models essentially are driven off the Canada U.S. price linkage equation, the observed misspecification may have a detrimental impact on all forecasted series. Les auteurs examinent les rapports existants entre les prix canadiens et les prix américains du blé. Si une grande portion de la variabilité observée dans la série de donnée canadienne peut s'expliquer par les taux de change ou par le prix américain du blé, l'évolution des techniques, les déplacements des marchés, les stratégies de commercialisation des grands intervenants commerciaux et les conditions du marché intérieur jouent apparemment aussi un rôle dans la formation des prix. Ces facteurs devraient done être pris en compte dans les prévisions à long terme. Le fait que les spécifications de liaisons de prix les plus complètes dégagées dans cette étude s'técartent significativement de celles en usage dans plusieurs modèles de prévision mérite qu'on s'y arrête. Comme un bon nombre d'équations de décision (superficies emblavées, agrofournitures, etc.) utilisées dans ces modèles s'éloignent de l'équation de liaison de prix canado-américaine, cet écart pourrait avoir un impact défavorable sur toutes les séries de prévisions.     

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.     

Quantitative Assessment of U.S. Wheat Performance for Quality Characteristics

Quality of U. S. grain exports has been a contentious issue over the past decade. Nowhere is the issue more hotly debated than for wheat. At the core of the debate has been the ability of Canada to command a premium for its wheat in foreign markets. Buyers' perceptions of quality have been suggested as an explanation, but empirical evidence on the quality attributes responsible for this country-of-origin premium has been limited to hedonic pricing studies. This paper quantifies purchasers' perceptions of the relative importance of quality characteristics for the world's major importing countries. This is done by calculating three indices. The attainment index measures how well buyers' perceptions of the importance of the characteristic matches buyers' perceptions of how well it is being supplied. The supply index measures buyers' perceptions on how well a characteristic is being supplied. The demand index measures how important the buyers perceive a particular characteristic to be. Then buyers' perceptions of the performance of U.S. and Canadian wheats are evaluated, given the perceived importance of each characteristic, and related to previous empirical results. Finally, these results are compared for alternative groupings of importing countries.     

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.     

Comparison of Costs of Wheat Production in Saskatchewan and the U.S. Northern Plains

This paper compares I989 average variable costs for U.S. northern plains and Saskatchewan spring wheat producers. Producers are divided into three cost groups. There are more statistically significant differences between cost groups within a country than between the two countries. Relative to other producers within the same country, low-cost producers in both countries had higher yields per bushel, most bud lower variable inputs both per acre and per bushel, and most had lower debt loads. In terms of intercountry comparisons, low-cost producers in Saskatchewan and the U.S. northern plains had nearly identical average variable cash costs. While mid- and high-cost Saskatchewan producers had significantly lower average variable cash costs, they were almost entirely offset by higher fixed costs.     

Quarterly Dynamic Relationships Between the U.S. Wheat Market and Wheat-Related Prices for Products Downstream

Abstract

A quarterly VA R econometric model of the reduced form relationships between the U.S. wheat market and prices of processed wheat-related flour, bread, and other bakery products downstream was estimated. The model then simulated under a rise in production- or import-induced increase in wheat quantity, and a decline in wheat price, to examine the dynamic effects on the U.S. wheat market and on processed wheat-related prices downstream. U.S. trade negotiators at the upcoming WTO agricultural round, Federal policy makers, farmers, and agribusiness agents should be interested in the dynamic patterns with which negotiated trade conditions, farm policy alterations, and climatic variation influence wheat quantity and price, and in turn the price of more highly processed wheat-based products downstream.     

Evaluating the uncertainty in estimates of the economic impacts of Bovine-Leukosis virus in U.S. dairy cows

An examination of the economic impacts of Bovine‐Leukosis virus indicated that reduced milk production, attributed to the presence of Bovine‐Leukosis virus in dairy cows, reduced consumer surplus by 2.7 ± 2.3 billion US$ (bUS$), and resulted in a total partial equilibrium loss of 720 ± 560 million US$ (mUS$) to the U.S. economy in 1996. Most of the economic surplus lost by consumers was transferred to producers, whose economic surplus increased by 2.0 ± 1.8 bUS$ as a result of reduced milk production attributed to the presence of Bovine‐Leukosis virus in dairy cattle. Uncertainty analysis showed that an estimate of the milk‐production decline per percent increase in the prevalence of Bovine‐Leukosis virus in dairy cows accounted for most of the uncertainty in the economic‐impact estimates. If Bovine‐Leukosis virus had not been present in U.S. dairy cows, then milk production would have increased by 2.0 billion ± 1.5 billion kg, the price would have fallen by 3.8 ± 3.2 cents/kg, and the value of the milk produced would have decreased by 2.1 ± 1.9 bUS$. Guidelines delineated by the International Organization for Standardization, for evaluating and expressing uncertainty in measurement, are discussed and proposed for use in the context of broad national estimates, for which the economic impacts of Bovine‐Leukosis virus serve as an example. The principal advantages of the methodology are the clarity and transparency of results, and the ability clearly to identify major uncertainty contributors.     

Relationships between U.S. and Canadian Wheat Prices: Cointegration and Error Correction Approach

This paper examines relationships between U.S. and Canadian wheat prices using the cointegration and error correction approach. The use of the error correction model is appropriate because U.S. and Canadian wheat prices are first-differenced stationary and cointegrated. The results suggest that both U.S. durum and hard spring wheat prices respond to restore equilibrium relationships with the corresponding Canadian price, while the Canadian prices do not. That is, the structure of the respective policies is such that the Canadian markets are largely insulated from influences flowing directly from the U.S., while U.S. markets are not insulated from Canadian influences. These results could be interpreted to support the contention that Canadian production subsidies and the implicit export subsidies would tend to undermine the U.S. price support program. The results also support the price leadership role for Canada in the durum and hard spring wheat markets. The implication is that with respect to durum and spring wheats, U.S. policies to artificially support domestic prices are not effective over the long run. Les rapports entre les prix de blé canadiens et américains sont étudiés á partir des analyses basées sur la cointégration et la méthode de correction des erreurs. L'emploi de la méthode de correction des erreurs est approprié car les prix de blé canadiens et américains sont cointegres et stationnaires quand Us sont exprimes en changements (first differences). Les résultats montrent que les prix du blé dur (durum) et du blé panifiable du printemps (hard spring) aux États- Unis reagissent à l'évolution des prix canadiens pour retablir le rapport d'équilibre tandis que ceux du Canada ne sont pas influencés par les désequilibres. Ce résultat est explique par les differences entre les structures des politiques agri-coles quifont que les marches canadiens sont largement isoles des influences en provenance des États-Unis, ce qui n'estpas le cas pour les marches américains. Ces résultats pourraient vouloir dire que des subventions canadiennes à la production et à l'exportation ont mine les programmes américains de sou-tien des prix. Us sont également compatible avec l'idée que le Canada établit les prix sur ces marchés.     

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.     

Impacts of the U.S.-Canadian Potash Dispute on the Costs of U.S. Crop Production

The 1987 U.S. antidumping case against Canadian potash producers has had a significant impact on the production costs of major potash-using crops in the United States. This paper examines these impacts for selected U. S. crops by way of a counterfactual analysis. A transfer function is used to model retail potash prices and the change in the series resulting from the case. Results indicate that expenditures on potash by U. S. farmers increased by an average US $ 0.08 per acre for wheat to US $ 1.78 for potatoes during 1988–92 (July-June). Overall, total U.S. potash expenditures increased by an estimated US $ 629.1 million over this period as a result of the antidumping case.
Le cas américain « anti-dumping >> 1987 contre les producteurs canadiens depotasse aeuun effet majeur sur le coût de production des produits agricoles utilisant intensivement de la potasse awe États-Unis. Cet article évalue ces effets pour certains cultures américaines avec une analyse contrefactuel. Un fonction à transfert est développé pour analyser les prix de vente au détail de la potasse et le changement des prix résultant. Les résultats indiquent que les frais d'achats depotasse par les producteurs américains augmentaient d'une moyenne de 0,08 $ E-U par acre pour le bléà une moyenne de 1,78 $ E-Upour les pommes de terres pendant 1988–1992 (juillet-juin). En somme, l'augmentation des dépenses américains totales pour la potasse est estiméà 629,1 millions de $ E-U durant cette période en conséquence de l'affaire >> antidumping «.     

Supply Dynamics in the U.S. Hog Industry

A variety of methods and empirical techniques are now available for estimating dynamic economic relationships. Unfortunately, most dynamic modeling procedures rely heavily on the sample data for specification. This is due to a lack of a priori information useful for determining the appropriate lag structure. However, there is frequently a rich source of information that can be used to define lag structures in agricultural supply models. This information is related to the biological and physiological processes characterizing agricultural production. In this paper, a quarterly econometric model of supply response in the U.S. hog industry is specified and estimated. This model incorporates relevant biological features of hog production directly into the specification. The structural integrity of the model is evaluated by examining post-sample predictive ability and mean-path elasticities. The results indicate performance that is consistent with observed behavior in the U.S. hog industry. Nous disposons aujourd'hui de toute une gamme de méthodes et de techniques empiriques pour ?estimation des rapports économiques dynamiques. Malheureusement, la plupart des méthodes de modélisation dynamique dépendent étroitement, pour leurs spécifications, sur des données échantillonnées. Ceci découle ?un manque ?informations a priori utiles pour la détermination de la structure de retard appropriée. Toutefois, on dispose fréquemment ?une riche source ?informations qui peuvent servir à définir les structures de retard dans les modèles de ?offre en agriculture. Cette information est liée aux processus biologiques et physiologiques caractérisant la production agricole. Dans le présent document, nous procédons à la spécification et à ?estimation ?un modèle économétrique trimestriel du comportement de ?offre dans le secteur américain du pore. Ce modèle incorpore directement dans la spécification les caractéristiques biologiques pertinentes de la production porcine. Nous évaluons ?intégrité structurale du modèle en examinant ?aptitude prédictive post-échantillonnage et les valeurs moyennes ?élasticité. Nos résultats laissent conclure à une performance qui vient corroborer le comportement observé dans le secteur américain du porc.     

Efficiency of U.S. conservation-compliance program

Under the conservation-compliance program, most of the individual producers are forced to cut their soil erosion to 7 t per acre annually irrespective of the marginal cost of controlling soil erosion. In a system where coupons to a ton of soil loss were issued to producers and traded, the marginal cost of controlling soil loss within each soil type and across different soil types would be equalized. An instrumental variable procedure was used to determine the effect of soil erosion on net profits. The results for Iowa show that there is considerable difference in the marginal opportunity cost of controlling soil erosion between soil types. By assigning one ton of erosion to Iowa soil type Downs (5-10% slope) instead of Clarion (2-5% slope), there is a savings of $5.00 per acre for the society as a whole. The tradable coupon system is not only efficient, but will also bring in more land under soil conservation.     

U.S. Agricultural Trade with Mexico

Abstract

This study examined the effects of exchange rates, economic growth, trade liberalization, and export assistance programs on U.S. agricultural exports to Mexico. The Commodity Credit Corporation's GSM-102 Export Credit Guarantee Program reduces the risk associated with export financing and payment. The impact of the export credit guarantee program on U.S. agricultural exports to Mexico was estimated in an import demand model using quarterly data from 1980 to 1996. The results indicate that for every $1 of export credit guarantees, Mexican imports of U.S. farm products increased $0.30. Real income growth in Mexico, however, was the most important factor in the expansion of U.S. exports. Trade liberalization under NAFTA also increased U.S. exports to Mexico.     

U.S. Demand for Imported Wines

The U.S. is viewed as a lucrative market outlet for surplus wines produced in the leading wine exporting countries in the world. Structural U.S. import demand functions were estimated for French, Italian, Spanish, Portuguese, and German wines as well as for those that are U.S. produced. The equations were estimated with two-stage least-squares because of simultaneity between quantity demanded and price. Direct price, cross, and income elasticities were calculated to determine the degree of competiveness among the various wines of differing origin. Two separate groups of wine were identified. First, U.S. produced, French, and German wines were in one group. Spanish, Portuguese, and Italian wines comprised the second group. The latter group also encountered competition from the first group of wines.     

Generic Advertising of U.S. Lamb

ABSTRACT

Generic advertising of U.S. lamb by the U.S. sheep and lamb industry is an effort to reverse an almost continual decline in the industry since World War II. This analysis explores the answers to three related questions: (1) What have been the effects of the generic lamb advertising on U.S. and foreign sheep, lamb, and wool markets? (2) Has the generic lamb advertising program effectively increased the consumption of domestically produced lamb as intended rather than imported lamb? (3) What have been the returns to U.S. sheep producers, feeders, and packers who pay for the advertising? Using a 70-equation, non-spatial, price equilibrium, simultaneous econometric simulation model of the world sheep, lamb, and wool markets, the analysis concludes that the U.S. lamb industry’s generic lamb advertising program has positively impacted their markets, enhanced profitability of the industry, and increased the industry’s share of domestic lamb consumption.