Journal of Agricultural and Applied Economics
Latest Publications

Abstract We assessed hunters’ willingness to participate in a scheme to recover the costs associated with processing diseased game. The results indicated that fifty-one percent of the hunters in a region affected by chronic wasting disease are interested in such a scheme and willing to pay an average of $20 per animal. Their willingness to participate is affected by risk perception, hunting experience, use of processing services, and income. Further, establishing such a market-based scheme would be financially profitable to game processors and helpful to wildlife agencies interested in encouraging hunters’ harvest to reduce herds and facilitate effective disease surveillance.

Abstract The study provides comparative risk analyses of Australia’s three Victorian dairy regions. Historical data were used to identify business risk and financial viability. Multivariate distributions were fitted to the historical price, production, and input costs using copula models, capturing non-linear dependence among the variables. Monte Carlo simulation methods were then used to generate cash flows for a decade. Factors that influenced profitability the most were identified using sensitivity analysis. The dairies in the Northern region have faced water reductions, whereas those of Gippsland and South West have more positive indicators. Our analysis summarizes long-term risks and net farm profits by utilizing survey data in a probabilistic manner.

Abstract This study scrutinizes spatial econometric models and specifications of crop yield response functions to provide a robust evaluation of empirical alternatives available to researchers. We specify 14 competing panel regression models of crop yield response to weather and site characteristics. Using county corn yields in the US, this study implements in-sample, out-of-sample, and bootstrapped out-of-sample prediction performance comparisons. Descriptive propositions and empirical results demonstrate the importance of spatial correlation and empirically support the fixed effects model with spatially dependent error structures. This study also emphasizes the importance of extensive model specification testing and evaluation of selection criteria for prediction.

Abstract Fed cattle profitability is determined by complicated dynamic processes of body growth, carcass development, and seasonal prices. A structural model is constructed to contend with all these dynamic processes to predict optimal market timing. Informed simulations are conducted and compared to those observed in the data, as well as to a previous model ignoring the evolution of carcass value. The results indicate that significant improvements to profitability are attainable with the new method. The results also indicate the opportunity cost of not accounting for carcass value, even with error, is more severe than when these dynamics are ignored.

Abstract Food regulations protect consumer health, mitigate environmental concerns, and promote animal welfare, but they can also hinder innovation, limit entrepreneurship, and generate higher consumer prices. This study examines the number of federal and state regulatory restrictions affecting the beef, pork, poultry, sheep, goat, and seafood industries, including processing, wholesale distribution, and retail sales. We also examine state regulatory heterogeneity associated with animal protein products. Our results suggest that protein supply chains have become subject to tens of thousands of regulatory constraints over the past half-century. We also find substantial heterogeneity in the number of state restrictions associated with animal production, indicative of large differences in the amount of administrative law across states. Results highlight that the patchwork approach of U.S. food policy creates overlapping, cumbersome guidelines for manufacturers, and given the interconnectivity of modern food supply chains, the framework can create additional hurdles for interstate commerce.

Abstract We measure the economic impact of varietal improvement and technological change in flue-cured tobacco across quantity (e.g., yield) and quality dimensions under a voluntary quality constraint. Since 1961, flue-cured tobacco breeders in the United States have been subject to the Minimum Standards Program that sets limits on acceptable quality characteristics for commercial tobacco varieties. We implement a Bayesian hierarchical model to measure the contribution of breeding efforts to changes in tobacco yields and quality between 1954 and 2017. The Bayesian model addresses limited data for varieties in the trials and allows easy generation of the necessary parameters of economic interest.

Abstract Crop revenue insurance is unique, because it involves a guarantee subsuming yield risk and highly systematic price risk. This study examines whether crop insurers could use options instead of, or in addition to, assigning policies to the Commercial Funds of the USDA Federal Crop Insurance Corporation (FCIC) as per the Standard Reinsurance Agreement (SRA) to hedge the price risk of revenue insurance policies. The behavioral model examines the optimal hedge ratio for a crop insurer with a book of business consisting of corn Revenue Protection (RP) policies. Results show that a mix of put and call options can hedge the price risk of the RP policies. The higher optimal hedge ratios of call options as compared to put options imply that the risk of increased liability due to upside price risk can be hedged using options better than downside price risk. This study also analyzed the combination of options with the SRA at 35, 50, and 75% retention levels. The zero optimal hedge ratios at each retention level and the negative correlation between RP indemnities and the option returns when the crop insurer mixed options and SRA suggest that the purchasing of options provides no additional risk protection to crop insurers beyond what is provided by the SRA despite retention limits.

Abstract This study aims to assess the market potential for organically farmed shrimp. The rank-ordered logit model was employed to investigate consumer perceptions; the findings reveal that consumers prefer organic shrimp from mariculture, and inland-farmed shrimp to the coastal version. The willingness to pay (WTP) for conventional shrimp amongst consumers with low knowledge is less than that for organic shrimp amongst highly knowledgeable ones. In addition, the lower WTP for organic shrimp compared with safe shrimp amongst those with a medium knowledge level shows that the organically farmed shrimp market is lagging behind due to limited knowledge and confusion.