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

Hennessy, David A.; Roosen, Jutta.

Milk production is seasonal in many European countries. While quantity seasonality poses capacity management problems for dairy processors, a European Union policy goal is to reduce price seasonality. After developing a model of endogenous seasonality, we study the effects of three E.U. policies on production decisions. These are private storage subsidies, production removals, and production quotas. When cost functions are seasonal in a specified way, then arbitrage opportunities interact with storage subsidies to reduce both price and consumption seasonality. But production seasonality likely increases because storage subsidies promote temporal market integration. Conditions are identified under which product market interventions increase quantity...

A Crop Yield Expectation Stochastic Process with Beta Distribution as Limit

Palavras-chave: Efficiency; Market intervention; Quota; Stabilization; Storage subsidies; Livestock Production/Industries.

Ano: 2003

URL: http://purl.umn.edu/18587

The modeling of price risk in the theory and practice of commodity risk management has been developed far beyond that of crop yield risk. This is in large part due to the use of plausible stochastic price processes. We use the Pólya urn to identify and develop a model of the crop yield expectation stochastic process over a growing season. The process allows a role for agronomic events, such as growing degree days. The model is internally consistent in adhering to the martingale property. The limiting distribution is the beta, commonly used in yield modeling. By applying binomial tree analysis, we show how to use the framework to study hedging decisions and crop valuation.

A Paradox for Agro-Environmental Land Policy

Palavras-chave: Crop insurance; Growing degree days; Martingale; Pólya urn; Stochastic process.; Risk and Uncertainty.

Ano: 2009

URL: http://purl.umn.edu/54829

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.

AN EQUILIBRIUM ANALYSIS OF ANTIBIOTICS USE AND REPLANTING DECISIONS IN APPLE PRODUCTION

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..

Antibiotics are used in fruit production to control fire blight, a bacterial disease of fruit trees that causes yield losses and eventually tree death. Fearing the development of widespread antibiotic resistance, scientists and public health officials are becoming increasingly concerned about antibiotics use in agriculture. A framework is developed for assessing the impacts of changes in tree damage risk following a ban on antibiotics use in the apple industry. Allowing for entry and exit, a long-run analysis of replanting dates and equilibrium prices is provided, as well as an estimate of the welfare impacts of a ban on antibiotics.

Tipo: Journal Article

Palavras-chave: Crop Production/Industries.

Ano: 2001

URL: http://purl.umn.edu/31042

AN EQUILIBRIUM ANALYSIS OF THE IMPACT OF ANTIBIOTICS BANS ON INVESTMENT IN APPLE ORCHARDS

Hennessy, David A.; Roosen, Jutta.

The decision to replant a fire blight-susceptible apple orchard is analyzed. Embedding the problem into an equilibrium framework facilitates the welfare analysis of changes in orchard survival probabilities arising from a ban on antibiotics use. We estimate the structural impacts and welfare changes of the ban.

Animal Disease and the Industrialization of Agriculture

Palavras-chave: Antibiotics; Apple orchard; Dynamics; Equilibrium; Replanting; Resistance; Truncated Poisson process; Environmental Economics and Policy; Research and Development/Tech Change/Emerging Technologies.

Ano: 1999

URL: http://purl.umn.edu/21698

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...

Are Crop Yield Distributions Negatively Skewed? A Bayesian Examination

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

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

Behavioral Incentives, Equilibrium Endemic Disease, and Health Management Policy for Farmed Animals

Palavras-chave: Crop Production/Industries.

Ano: 2010

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

We develop a dynamic capital valuation model in which each farm can take an action with farm-varying cost to increase the probability of not contracting a disease. In the presence of infection externalities, circumstances are identified under which multiple equilibria exist and where the one involving the most extensive set of action takers is socially optimal. It is suggested that costly capital markets are one factor in determining the extent of endemic disease in a region. The introduction of frictions, such as dealing with a cumbersome veterinary public health bureaucracy, can enhance social welfare by encouraging precautionary biosecurity actions. Some technical innovations can reduce social welfare. The model is also extended to study a voluntary...

Biosecurity and Infectious Animal Disease

Palavras-chave: Biosecurity; Continuous time; Multiple equilibria; Nash behavior; Reinfection; Livestock Production/Industries.

Ano: 2005

URL: http://purl.umn.edu/18330

The spatial dimension of agricultural production is important when a communicable disease enters a region. This paper considers two sorts of biosecurity risk that producers can seek to protect against. One concerns the risk of spread: that neighboring producers do not take due care in protecting against being infected by a disease already in the region. In this case, producer efforts substitute with those of near neighbors. For representative spatial production structures, we characterize Nash equilibrium protection levels and show how spatial production structure matters. The other sort of risk concerns entry: that producers do not take due care in preventing the disease from entering the region. In this case, producer heterogeneity has subtle effects on...

Buying Ecological Services: Nature’s Harmonies, Fragmented Reserves and the Agricultural Extensification Debate

Palavras-chave: Circle and line topologies; Complements and substitutes; Epidemic; Public good; Livestock Production/Industries.

Ano: 2005

URL: http://purl.umn.edu/18434

Hennessy, David A.; Lapan, Harvey E..

Growing demand for cropland products has placed intense pressure on the ability of land resources to support nature, straining public budgets to purchase environmental goods. Fixing overall agricultural output, two policy options are whether to promote more extensive and nature friendly farming practices or to produce intensively on some land and leave the rest wild. Microeconomic models of the topic have not accommodated widely recognized complementary spatial externalities in providing ecological services. This article does so, identifying also a third policy possibility. This is that environmental services can follow a smoothly varying spatial path characterized by harmonic functions.

CONSUMERS' VALUATION OF INSECTICIDE USE RESTRICTIONS: AN APPLICATION TO APPLES

Palavras-chave: Biofuels; Environmental policy; Spatial externalities; Wirtinger’s inequality.; Resource /Energy Economics and Policy.

Ano: 2008

URL: http://purl.umn.edu/45171

Roosen, Jutta; Fox, John A.; Hennessy, David A.; Schreiber, Alan.

Economic assessments of pesticide regulations typically focus on producer impacts and generally ignore possible changes in product demand. These changes may be nonnegligible if real and/or perceived product attributes change. We measure consumers' willingness to pay (WTP) for the elimination of one insecticide and also a whole group of insecticides in apple production using a multiple-round Vickrey auction. The data are analyzed using nonparametric statistical tests and a double-hurdle model. Our findings show that consumer perceptions of product attributes change if pesticides are removed from production, and this is reflected in WTP changes. WTP is shown to be income elastic.

Tipo: Journal Article

Palavras-chave: Consumer/Household Economics; Crop Production/Industries.

Ano: 1998

URL: http://purl.umn.edu/31196

Contract and Exit Decisions in Finisher Hog Production

Dong, Fengxia; Hennessy, David A.; Jensen, Helen H..

Finisher hog production in North America has seen a shift toward larger production units and contract-organized production since circa 1990. Given the efficiency gains and conversion costs associated with contract production, growers may have to choose between long term commitment through investments and atrophy with intent to exit in the intermediate term. A model is developed to show that growers with any of three efficiency attributes (lower innate hazard of exit, variable costs, or fixed contract adoption costs) are not only more likely to contract but will also produce more and expend more on lowering business survival risks. Using the 2004 U.S. Agricultural Resource Management Survey for hogs, a recursive bivariate probit model is estimated in which...

Contract and Exit Decisions in Finisher Hog Production

Palavras-chave: Agricultural industrialization; Hog production; Occupation choice; Production contracts; Recursive bivariate probit; Relationship-specific investments; Sector dynamics.; Agricultural and Food Policy; Demand and Price Analysis; Production Economics; D23; Q12; J26; J43..

Ano: 2009

URL: http://purl.umn.edu/49343

Dong, Fengxia; Hennessy, David A.; Jensen, Helen H..

Finisher hog production in North America has seen a shift toward larger production units and contract-organized production since around 1990. Given the efficiency gains and conversion costs associated with contract production, growers may have to choose between long-term commitment through investments and atrophy with intent to exit in the intermediate term. A model is developed to show that growers with any of three efficiency attributes (lower innate hazard of exit, variable costs, or fixed contract adoption costs) are not only more likely to contract but will also produce more and expend more on lowering business survival risks. Using the 2004 U.S. Agricultural Resource Management Survey for hogs, a recursive bivariate probit model is estimated in which...

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

Palavras-chave: Agricultural industrialization; Hog production; Occupation choice; Production contracts; Recursive bivariate probit; Relationship-specific investments; Sector dynamics..

Ano: 2008

URL: http://purl.umn.edu/37331

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...

Crop Yield Skewness and the Normal Distribution

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

Crop Yield Skewness under the Law of Minimum Technology

Empirical studies point to negative crop yield skewness, but the literature provides few clear insights as to why. This paper formalizes three points on the matter. Statistical laws on aggregates do not imply a normal distribution. Whenever the weather-conditioned mean yield has diminishing marginal product with respect to a weather-conditioning index, then there is a disposition toward negative yield skewness. This is because high marginal product in bad weather stretches out the yield distribution's left tail relative to that for weather. For disaggregated yields, unconditional skewness is decomposed into weather-conditioned skewness plus two other terms and each is studied in turn.

Tipo: Journal Article

Palavras-chave: Conditional distribution; Crop insurance; Negative skewness; Normal distribution; Statistical laws; Crop Production/Industries; Risk and Uncertainty.

Ano: 2009

URL: http://purl.umn.edu/50084

A large empirical literature exists seeking to identify crop yield distributions. Consensus has not yet formed. This is in part because of data aggregation problems but also in part because no satisfactory motivation has been forwarded in favor of any distribution, including the normal. This article explores the foundations of crop yield distributions for the Law of the Minimum, or weakest-link, resource constraint technology. It is shown that heterogeneity in resource availabilities can increase expected yield. The role of stochastic dependence is studied for the technology. With independent, identical, uniform resource availability distributions the yield skew is positive, whereas it is negative whenever the distributions are normal. Simulations show how...

Decisions and tradable production quota when yield is uncertain

Palavras-chave: Beta-normal distribution; Crop insurance; Extreme value theory; Liebig technology; Limiting factors; Order statistics; Reliability; Weakest link; Crop Production/Industries; Research and Development/Tech Change/Emerging Technologies.

Ano: 2007

URL: http://purl.umn.edu/9238

Hennessy, David A.; Wei, Wei.

This article analyses optimal decisions under regulation by tradable agricultural production/marketing quotas when production is stochastic. For risk‐neutral and risk‐averse producers the fraction of planned production that is covered by quota is separable from input decisions when yield randomness is additive. The role of quota in protecting against the risk of production shortfall is investigated. A producer is shown to benefit from being allowed to treat as one all tranches of production quota under his control. Production decisions are invariant to this amalgamation. But when production randomness is additive normal, the qualitative impact of amalgamation on quota positions depends upon whether the ratio of rental price to the price difference that is...

Tipo: Journal Article

Palavras-chave: Risk and Uncertainty.

Ano: 2000

URL: http://purl.umn.edu/117837

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

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...

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

Palavras-chave: Land Economics/Use.

Ano: 2008

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

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

Does a Rising Biofuels Tide Raise All Boats? A Study of Cash Rent Determinants for Iowa Farmland under Hay and Pasture

Palavras-chave: Bargaining; Basis; Ethanol; Land quality shadow price; Rate of adjustment; Spatial autocorrelation; Land Economics/Use.

Ano: 2007

URL: http://purl.umn.edu/7700

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

Iowa’s farmland consists of over 16% hay crops and pastureland, a significant portion of which is under cash rental contracts. This study investigates the comparative relationships between cash rental rates for cropped land and non-cropped land, where the latter includes hay and pastureland. We find that higher crop prices resulting from biofuel demand induces land use conversion from non-cropped land to crop production and thus bids up non-cropped land rents. Compared with changes in cropped land cash rents, non-cropped farmland rents could increase by a higher percentage. Non-cropped land cash rental rates are largely determined by crop and feeder cattle prices, population density, soil quality, and proportion of non-cropped land in a specific area. A...