SABIIA - Sistema Aberto e Integrado de Informação em Agricultura (Sabiia)

Wang, Tong; Hennessy, David A..

This paper models producers’ interdependent incentives to participate in a voluntary livestock disease control program. Under strategic complementarity among participation decisions, after a slow start momentum can build such that market premium for participation and participation rate increase sequentially. Non-participation, partial participation and full participation can all be Nash equilibria while participation cost heterogeneity will dispose the outcome toward incomplete participation. We find plausible conditions under which temporary government subsidies to the least cost-effective producers causes tipping toward full participation. Applying parameters from the literature on Johnes’ disease, we illustrate factors that may affect participation....

Tipo: Working Paper

Palavras-chave: Incentives; Livestock disease; Momentum theorem; Strategic complementarity; Tipping; Voluntary program.; Food Consumption/Nutrition/Food Safety; Livestock Production/Industries.

Ano: 2012

URL: http://purl.umn.edu/122358

Evaluating the Saskatchewan Short-Term Hog Loan Program

Lien, Donald; Hennessy, David A..

The Saskatchewan short-term hog loan program of 2002 provided a non-market credit line to participating hog producers. The repayment conditions for cash advances committed to by the provincial government depend on later hog prices, and so the program has derivative contract attributes. We model the contracts and use an estimated spot price stochastic process to establish summary statistics for producer benefits from the program.

Animal Disease and the Industrialization of Agriculture

Palavras-chave: Agricultural policy; Derivative contract; Domestic support; International trade agreements; Livestock Production/Industries.

Ano: 2005

URL: http://purl.umn.edu/18571

Hennessy, David A.; Wang, Tong.

The industrialization of animal agriculture has fundamentally transformed animal health markets while animal health innovations have promoted this industrialization. The subtlety of these interactions shows how little we know about agricultural industrialization. To illustrate, we consider three stylized features of industrialized animal agriculture. These are the closing off of production activities from external effects, emphasis on control, and use of biosecurity measures. We find that animal disease externalities should lead to higher stocking on any given farm, and also to deficient entry into animal production. Eradicating the disease in a region increases both the stocking rate per farm and the number of farms. We show that antibiotics as a control...

Investment in Cellulosic Biofuel Refineries: Does the Waivable Mandate Matter?

Palavras-chave: Animal disease; Biosecurity; Biotechnology; Competitiveness; Confined animal agriculture; Economies of scale; Tragedy of the commons; Veterinary inputs.; Agricultural and Food Policy; Livestock Production/Industries; Production Economics; Research and Development/Tech Change/Emerging Technologies.

Ano: 2010

URL: http://purl.umn.edu/93673

Miao, Ruiqing; Babcock, Bruce A.; Hennessy, David A..

Renewable Fuel Standard (RFS) aims to support investment in cellulosic biofuel refineries by mandating a floor on the amount of biofuels being consumed in every calendar year. Tradable Renewable Identification Numbers (RINs) is the market mechanism by which the mandates are to be met. But the RFS allows for a waiver of the mandates. In this paper we construct a conceptual model to study the impact of RINs on stimulating investment in cellulosic biofuel refineries under a waivable mandate. In a two-period framework, we compare the first-period investment level in three scenarios: (1) laissez-faire, (2) non-waivable mandate implemented through RINs, and (3) waivable mandate implemented through RINs. We find that RINs associated with a waivable mandate may or...

Testing Day’s Conjecture that More Nitrogen Decreases Crop Yield Skewness

Palavras-chave: Cellulosic biofuels; Renewable identification numbers; Waivable mandate; Investment; Industrial Organization; Resource /Energy Economics and Policy; Risk and Uncertainty.

Ano: 2010

URL: http://purl.umn.edu/61165

Du, Xiaodong; Hennessy, David A.; Yu, Cindy L..

While controversy surrounds skewness attributes of typical yield distributions, a better understanding is important for agricultural policy assessment and for crop insurance rate setting. Day (1965) conjectured that crop yield skewness declines with an increase in low levels of nitrogen use, but higher levels have no effect. In a theoretical model based on the law of the minimum (von Liebig) technology, we find conditions under which Day’s conjecture applies. Employing four experimental plot datasets, we investigate the conjecture by introducing (a) a flexible Bayesian extension of the Just-Pope technology to incorporate skewness, and (b) a quantile-based measure of skewness shift. For corn yields, the Bayesian estimation provides strong evidence in favor...

A Paradox for Agro-Environmental Land Policy

Palavras-chave: Crop insurance; Gibbs sampler; Just and Pope technology; Negative skewness; Quantile regression.; Crop Production/Industries; Political Economy; Research Methods/ Statistical Methods; Risk and Uncertainty.

Ano: 2010

URL: http://purl.umn.edu/93471

Hennessy, David A.; Feng, Hongli.

A regulator with a fixed budget to spend on securing environmental benefits from farmed land has to choose between how many acres to enroll and the extent of benefits to require of each enrolled acre. Here we consider, given heterogeneous land, what properties of the environmental benefit-to-cost ratio imply for the choice of optimal program as the available budget varies. Conditions are found such that a program of high benefits on few acres is preferred for any budget level. It is also possible that a program delivering low benefits per acre at low cost is preferred on each land type, and yet a high benefit program is optimal policy, a variant of Simpson’s paradox.

TESTS FOR THE ROLE OF RISK AVERSION ON INPUT USE

Palavras-chave: Benefit-to-cost ratio; Environmental policy; Land heterogeneity; Simpson’s paradox.; Environmental Economics and Policy; Land Economics/Use.

Ano: 2009

URL: http://purl.umn.edu/53934

Roosen, Jutta; Hennessy, David A..

Agricultural inputs can create negative externalities. For risk averting agents, risk will alter production decisions while the existence of institutions to insure against adverse states of nature will likely restore decisions toward levels under risk neutrality. In this paper, conditions are identified on a stochastic technology to test that risk averters choose smaller input levels than risk neutral agents, and that an increase in risk aversion reduces input use. A robust statistical method (Klecan, McFadden, and McFadden) to test for dominance is adapted to stochastic production relations. It is found that the first hypothesis is likely true for nitrogen application on Iowa corn. Weaker evidence is found in favor of the second hypothesis.

Investment in Cellulosic Biofuel Refineries: Do Renewable Identification Numbers Matter?

Palavras-chave: Dominance tests; Incomplete risk markets; Ollution; Stochastic technology; Farm Management; Risk and Uncertainty.

Ano: 2001

URL: http://purl.umn.edu/20498

Miao, Ruiqing; Hennessy, David A.; Babcock, Bruce A..

A floor and trade policy in Renewable Identification Numbers (RINs) is the market mechanism by which U.S. biofuel consumption mandates are met. A conceptual model is developed to study the impact of RINs on stimulating investment in cellulosic biofuel refineries. In a two-period framework, we compare the first-period investment level (FIL) in three scenarios: (1) laissez-faire, (2) RINs under a nonwaivable mandate (NWM) policy, and (3) RINs under a waivable mandate (WM) policy. Results show that when firm-level marginal costs are constants, then RINs under WM policy do not stimulate FIL but they do increase the expected profit of more efficient investors. When firm-level marginal costs are not constants, however, RINs under WM policy stimulate FIL. RINs...

Are Crop Yield Distributions Negatively Skewed? A Bayesian Examination

Palavras-chave: Cellulosic biofuels; Investment; Renewable Identification Numbers; Waivable mandate; Crop Production/Industries; Resource /Energy Economics and Policy; Risk and Uncertainty.

Ano: 2010

URL: http://purl.umn.edu/94001

Du, Xiaodong; Hennessy, David A.; Yu, Cindy L..

Determinants of Iowa Cropland Cash Rental Rates: Testing Ricardian Rent Theory

Palavras-chave: Crop Production/Industries.

Ano: 2010

URL: http://purl.umn.edu/60988

Du, Xiaodong; Hennessy, David A.; Edwards, William M..

Based on the Ricardian rent theory, this study employs the variable profit function to analyze the determinants of Iowa cropland cash rental rates using county-level panel data from 1987 to 2005. Accounting for spatial and temporal autocorrelations, responses of local cash rental rates to changes in output prices and other exogenous variables are estimated. We find that Iowa cash rental rates are largely determined by output/input prices, soil quality, relative location, and other county-specific factors. Cash rents go up by $79 for a $1 increase in corn price in the short run. The marginal value of cropland quality, as represented by row-crop corn suitability rating index, is about $1.05. Ethanol plants are not found to have a significant local effect on...

The Impact of Biofuels Policy on Agribusiness Stock Prices

Palavras-chave: Land Economics/Use.

Ano: 2008

URL: http://purl.umn.edu/6355

Tepe, Fatma Sine; Du, Xiaodong; Hennessy, David A..

Corn markets are important for many industries, including the seed, fertilizer, meat production/processing and agricultural machinery sectors, all of which are highly concentrated. Oligopoly theory suggests that corn input and field equipment suppliers likely benefit from policies that support corn markets, such as U.S. biofuels policy, while meat companies are likely adversely affected. Employing a linear two-factor (S&P 500 and corn prices) equilibrium asset pricing model, this study investigates the impact of biofuels policy on U.S. agribusiness and food processing firm stock prices. Conditional heteroskedasticity in stock returns is accounted for using a GARCH(1,1) model. Corn price increases are found to have positive effects on excess stock...

Land Retirement Program Design in the Presence of Crop Insurance Subsidies

Palavras-chave: Biofuels policy; Excess stock returns; GARCH effect; Linear factor model; Agribusiness; Demand and Price Analysis; Resource /Energy Economics and Policy.

Ano: 2009

URL: http://purl.umn.edu/53180

Hennessy, David A..

The U.S. federal government implements environmental, biofuels and crop insurance programs that influence land use. They are not well integrated in that cost savings from crop insurance subsidies are not acknowledged when screening land for retirement or when calculating the cost of land retirement programs. We identify and evaluate an optimal benefit index for enrollment in a land retirement program that includes a sub-index to rank land according to insurance subsidy savings. All else equal, land ranked higher in the Lorenz stochastic order should be retired first.

LEDGER PROVISION IN HOG MARKETING CONTRACTS

Palavras-chave: Agro-environmental policy; Budget; Conservation Reserve Program; Crop failure; Environmental Benefit Index; Lorenz order.; Environmental Economics and Policy; Land Economics/Use; Risk and Uncertainty.

Ano: 2009

URL: http://purl.umn.edu/52236

Hennessy, David A.; Lien, Donald.

Some long-term marketing contracts in the North American hog sector provide for price-dependent loan agreements at low rates. We show that these provisions linking pricing with financing are hybrids between forward rate agreements and commodity options. This observation presents approaches for valuing the stipulations. We suggest that the ledger arrangement is transaction-cost efficient, especially for a packer with a natural partial pass-through hedge from retail market positions.

Land Use Consequences of Crop Insurance Subsidies

Palavras-chave: Commodity option; Contract production; Forward rate agreement; Livestock Production/Industries; Marketing.

Ano: 2003

URL: http://purl.umn.edu/18337

Miao, Ruiqing; Feng, Hongli; Hennessy, David A..

There have long been concerns that federal crop insurance subsidies may significantly impact land use decisions. It is well known that classical insurance market information asymmetry problems can lead to a social excess of risky land entering crop production. Our conceptual model shows that the problem will arise absent any information failures. This is because the subsidy is i) proportional to acres planted, and ii) greatest for the most production risky land. Using farm-level data, we follow this observation through to establish the implications of subsidies for the extent of crop production, with particular emphasis on U.S. regions where the cropland growth is likely to have marked adverse environmental impacts. Simulation results show that when...

THE DESEASONALIZATION OF ANIMAL PRODUCTION

Palavras-chave: Crop insurance; Land use; Crop yields; Yield risk measurement; Agricultural and Food Policy; Crop Production/Industries; Land Economics/Use; Q15; Q18; Q24.

Ano: 2011

URL: http://purl.umn.edu/103891

Roosen, Jutta; Hennessy, David A..

We document the deseasonalization of animal production in the US and Europe. Hypotheses on causes and consequences of this trend are advanced. They pertain to feed costs, changes in animal productivity and cost fixity of the underlying technology, innovations in genetic control and epidemiology, and the capital intensity of production.

Geographic Determinants of Preferences along U.S. Crop Insurance Subsidy Schedule

Palavras-chave: Animal Production; Capital Intensity; Dairy; Industrialization; Seasonality; Livestock Production/Industries.

Ano: 2003

URL: http://purl.umn.edu/22068

Du, Xiaodong; Hennessy, David A.; Feng, Hongli.

Tipo: Presentation

Palavras-chave: Crop Production/Industries; Risk and Uncertainty.

Ano: 2012

URL: http://purl.umn.edu/124190

Coordinating to Eradicate Animal Disease, and the Role of Insurance Markets

Hennessy, David A..

Farmed animal production has traditionally been a dispersed sector. Biosecurity actions relevant to eradicating infectious diseases are generally non-contractible, and might involve inordinately high transactions costs if they were contractible. If an endemic disease is to be eradicated within a region, synchronized actions need to be taken to reduce incidence below a critical mass so that spread can be contained. Using a global game model of coordination under public and private information concerning the critical mass required, this paper characterizes the success probability in an eradication campaign. As is standard in global games, heterogeneity in private signals can support a unique equilibrium. Partly because of strategic interactions, concentrated...

Feeding and the Equilibrium Feeder Animal Price-Weight Schedule

Palavras-chave: Biosecurity; Coordination failure; Disease insurance; Endemic disease; Global games; Market access; Public information; Veterinary public health; Livestock Production/Industries; D8; H4; Q1.

Ano: 2007

URL: http://purl.umn.edu/7702

When Should Uncertain Nonpoint Emissions be Penalized in a Trading Program?

Hennessy, David A..

Feeder animal prices depend on fed animal prices, the biological growth technology, and feed costs. In addition, daily maintenance costs can be avoided through accelerated feeding. These observations allow us to model optimal feeding under equilibrium feeder animal pricing. Our model enables a better understanding of regulation in feedstuff markets. The feeder animal price-weight schedule is likely decreasing and convex in weight. Prices for animals with better growth potential should be less sensitive to feed and fed animal prices. Prices for lighter animals should be more sensitive to these prices. Regression analyses on Southern Great Plains cattle prices provide support for this model.

Tipo: Journal Article

Palavras-chave: Days on feed; Energy use; Feed ban; Growth hormones; Kleiber's law; Ration density; Veal market; Livestock Production/Industries.

Ano: 2006

URL: http://purl.umn.edu/8609

Hennessy, David A.; Feng, Hongli.

When nonpoint source pollution is stochastic and the damage function is convex, intuition might suggest it is more important to control a nonpoint pollution source than a point source. Earlier research has provided sufficient conditions such that the permit price for a unit of ex-ante expected emissions should be higher than the permit price for a unit of certain emissions. Herein we provide a set of necessary and sufficient conditions such that this is the case. An approach to testing for the validity of the condition set is available, and has been applied to a related problem.

TESTING FOR THE MONOTONE LIKELIHOOD RATIO ASSUMPTION

Palavras-chave: Agricultural pollution; Multiple inputs; Permit trading; Social optimality; Trading ratio; Water quality; Environmental Economics and Policy; Q1; Q2; D2; D8.

Ano: 2007

URL: http://purl.umn.edu/9805

Roosen, Jutta; Hennessy, David A..

Monotonicity of the likelihood ratio for conditioned densities is a common technical assumption in economic models. But we have found no empirical tests for its plausibility. This paper develops such a test based on the theory of order-restricted inference, which is robust with respect to the correlation structure of the distributions being compared. We apply the test to study the technology revealed by agricultural production experiments. For the data under scrutiny, the results support the assumption of the monotone likelihood ratio. In a second application, we find some support for the assumption of affiliation among bids cast in a multiple-round Vickrey auction for a consumption good.