Economic Comparison of Alternative Tillage Systems under Risk.

Stochastic dominance efficiency criteria are used to rank the net farm return distributions for four different tillage systems under six different farm scenarios. Pairwise comparisons of tillage systems are carried over incremental upper and lower risk-aversion coefficient (RAC) bounds identified for each farm scenario, based on the size and spread of the outcome distributions to identify regions where dominance may switch between tillage systems. Ridge-till systems are generally the dominant tillage system for all farm scenarios considered. No-till systems on clay loam soils are more dominant in the risk-preferring range and less dominant in the risk-averse range, which relates to the relatively larger range of net return values and smaller mean net return values generated by this tillage system. Conversely, the moldboard plow and chisel plow systems are more dominant in risk-aversion intervals and less dominant in the risk-preferring intervals for clay loam soils. In sandy soil scenarios, the ridge-till and no-till systems are dominant over the two fall tillage systems for all farm sizes, indicating that these tillage systems are more competitive with conventional tillage systems in lighter soil type situations. A sensitivity analysis between moldboard plow and no-till systems indicates that no-till would dominate in risk-preferring intervals, and an increase in no-till net farm returns of 16 per acre would change dominance in favor of no-till in risk-averse interval space. On a utilisé les critères d'efficacitéà dominance stochastique pour classer les divers niveaux de recettes agricoles nettes dans quatre systèmes différents de travail du sol, selon six scénarios d'exploitation. Des comparaisons en paires des systèmes de travail ont été faites en regard de tranches croissantes des limites supérieures et inférieures du coefficient d'aversion du risque (CER), établies pour chaque scénario d'après l'importance et l'étendue des distributions du rendement, dans le but d'identifier les régions où la dominance serait susceptible de passer d'un système de travail à l'autre. Le système de travail sur billons était en général le système dominant dans tous les scénarios d'exploitation examinés. La culture sans travail du sol sur loam argileux était plus dominante dans les intervalles d'acceptation du resque et moins dominante dans les intervalles d'aversion du resque, cequi s'explique au fait que ce système de travail donne lieu à une fourchette relativement plus large, mais aussi à une moyenne plus faible du revenu net. À l'inverse, le labour à la charrue classique et au chisel dominait davantage dans les intervalles d'aversion du risque. Dans les sols sableux, le travail sur billons et la culture sans labour l'emportaient sur les deux autres régimes dans toutes les tailles d'exploitation, ce qui porte à croire que, dans les sols plus légers, ces régimes sont plus concurrentiels avec les systèmes classiques. L'analyse de sensibilité entre le labour à la charrue et les systèmes sans travail du sol montre que ces derniers dominent dans les intervalles d'acceptation du risque et qu'un accroissement du revenu agricole net de 16 /acre ferait glisser la dominance vers les intervalles d'aversion du risque.     

The Growing Heterogeneity in the Farm Sector and Its Implications*

The farm sector has moved from one that was very homogeneous to one with significant differences in size and/or orientation. The decline in the number of “average‐sized” farm and the growth in the number of large farms are due primarily to technological innovations that push operations producing commodities to grow as a means of capturing economies of size. The increase in the relative number of small farms is also due partially to technical advances that allow for the production of food goods with the desired quality attributes to be delivered to the appropriate market. This market is continually being differentiated due to demographic and income shifts. The growing heterogeneity in farm structure complicates the assessment and design of farm policy. The social policy objective of improving the livelihood of farmers and their families could be achieved through farm support and extension programs when the sector was homogeneous. The policy objective has shifted toward improving the competitiveness of the sector, but for which of its components? The trend toward greater heterogeneity is likely to continue and thus so will the internal and external support for any policies targeted toward the farm sector.     

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.     

Endogenous Transport Coefficients: Implications for Improving Water Quality from Multi-Contaminants in an Agricultural Watershed

The effectiveness of imperfect pollution control instruments is examined for a diffuse source, multi-contaminant problem in which the transport coefficients for sediment-bound residuals are endogenous. Similar evaluations fix the percentage of sediment deposited and optimize either for a single firm managing the whole watershed or on a firm by firm basis. This study shows that ignoring the dependence of the transport coefficients on intervening land uses creates a positive externality. The filtering potential of activities conducted by firms close to the receptor permits firms further away to undertake more profitable but erosive practices. Optimizing management choices, and consequently endogenizing the transport coefficients, for all firms simultaneously removes the externality. An empirical application combines hydrological simulation models with an economic optimization model for nutrient pollution of surface and ground water within an agricultural watershed. Although firms are homogeneous in abatement costs, differences in spatial location leave uniform instruments unable to achieve the water quality goal efficiently. An ambient tax/subsidy scheme can achieve the water quality goal efficiently but the informational requirements will be excessive in most situations where the transport mechanisms for residuals are dependent upon the practices of independent decision making units.     

Spatial and Temporal Changes in the U.S. Hog, Dairy, and Fed-Cattle Sectors, 1975–2000

The hog, dairy, and fed-cattle sectors have become more geographically concentrated within states across the country. Hog and dairy inventories increased in nontraditional production regions but fed-cattle inventories increased only in the three major producing states. Regions in the northeastern quadrant of the United States tended to experience an attrition pattern of geographical concentration in livestock production. In contrast, an augmentation pattern is evident in the western regions where absolute inventory numbers increased along with geographical concentration. The patterns are most closely associated with changes in regional processing capacity.